ANTI-FRAUD officials are launching an investigation into claims that MEPs embezzled taxpayers' cash intended for staff allowances.
The allegations emerged after a confidential audit was believed to have found £100 million unaccounted for.
Franz Bruner, director-general of Olaf, the EU's internal anti-fraud squad, has demanded to see the audit report by the end of this week.
But Scots MEPs hit back at the claims, insisting that new rules had been brought in since the reported breach that made it much tougher to misuse allowances.
The details of the alleged fraud are secret because the report is only available to MEPs who sit on the European Parliament's budget control committee.
Chris Davies, a Liberal Democrat MEP, who is a member of the committee, said he was only allowed to view the report in a locked room and was banned from taking notes or photocopies.
He said it was "dynamite" and called for MEPs who committed fraud to be thrown in jail.
The report is believed to say that unnamed MEPs had taken money meant for staff without employing anyone, while others had donated it to their political parties.
The alleged breaches were made during the 2004-5 financial year.
"I think the allegations within this report from our own auditors should lead to the imprisonment of a number of MEPs," he said.
Mr Davies added that he did not believe the fraud would have been committed by UK or Scandinavian MEPs as their domestic parliaments operated to tighter rules.
Alyn Smith, an SNP MEP, said Mr Davies had exaggerated the extent of the supposed "gravy train".
"If anyone wants to look at my expenses, I am perfectly happy to show them. If MEPs are found to have broken the law then we should throw the book at them," he said.
Mr Smith added that the rules had since been tightened. "The idea that we turn up and get a fistful of euros is not true. Westminster is much more prone to fraud than the European Parliament and less transparent."
Elspeth Attwooll, a Scottish Lib Dem MEP, said she thought the vast majority of MEPs were "entirely honourable" in their dealings.
