The European Union provided a subsidy of 40,000 euros for the modernization of a holiday pension on the German-Czech border, which is now used as a brothel, German Exact magazine reported.

It said €40,000 in EU funds was earmarked for the modernization of a guesthouse on a former farm in Pomezí, a small village 140 km east of Prague. But, according to MDR, the building is now being used as a brothel.

The so-called “nightclub” is located in a peasant’s yard in the Czech town of Pomezí.

The case is reportedly being investigated by the European Commission, and the owner of the building has been asked to refund all the money.

If the situation turns out to be serious, the anti-corruption unit Olaf could also the join the inquiry. The purpose is to find out whether the local officials had supported the alleged subsidy fraud.

German conservative MEP Peter Jahr criticized the way EU regional development cash is used in the Czech Republic: “This case shows that checks will have to take place immediately, to prevent crucial mistakes and opportunities to cheat,” he said.

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Dave Patterson is a content marketer. A writer by day and a reader by night. Coffee addict.