Investigation points to Parolin and Becciu in Vatican financial scandal

News: Vatican

Italian authorities announced on Monday that an arrest warrant has been issued for Gianluigi Torzi, who brokered the Vatican’s 2018 purchase of a London property.

The Italian court order raises a startling assertion from Vatican authorities: that the Secretariat of State acted outside its legal authority when it invested hundreds of millions of euros of Church funds, and when it put Peter’s Pence funds up as collateral for high risk investments. 

The charge could render the transactions void, and implicate Cardinals Pietro Parolin and Angelo Becciu with final legal responsibility for the scandal.

The 14-page court order noted that Vatican prosecutors contend that the secretariat’s entire investment into a London property — an investment of hundreds of millions —  was made outside of the department’s authority, opening up the possibility that senior curial figures, including Parolin, could be held responsible for illegal expenditures.

“From the investigations carried out by the IOR [the Vatican bank whose initial complaint against the secretariat triggered the Vatican investigation] and the office of the [Vatican] Auditor, it emerged that the acquisitions of properties for investment purposes cannot be carried out by the Secretariat of State, being reserved for the Administration of the Patrimony of the Apostolic See,” Roman magistrate Corrado Cappiello wrote on Monday.

“Furthermore,” Cappiello wrote, “the investment in question does not appear in any official document sent by the Secretariat of State to the Council of the Economy and, in any case, the Secretariat of State cannot use funds received for charitable purposes in operations with a high financial risk.”

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The arrest warrant, issued by Italian authorities for crimes under Italian jurisdiction, builds on information shared by the Vatican City’s promoter of justice and the investigation of the now sprawling financial scandal centered on the dealings of the Secretariat of State over a period of years.

Cappiello, in issuing the warrant, noted that Torzi now faces multiple charges of tax evasion and fraud in Italy, “in addition to the criminal proceedings pending at the Vatican City State in which he was recently arrested."

Previous reporting has established that the Secretariat of State used Peter’s Pence money and other charitable funds on deposit with two Swiss banks as collateral for 200 million euro loans. Those loans staked the secretariat’s investment in the property, through businessman Raffaele Mincione’s Athena Global Opportunities Fund.

The Secretariat of State allegedly failed to receive legally required authorization for the loan and the investment from the Vatican Council for the Economy. According to previous news reports, the then-second-in-command at the Secretariat of State, Cardinal Angelo Becciu, tried to keep the loans and investments off of Vatican ledgers, and away from scrutiny from the Secretariat for the Economy, which was then led by Cardinal George Pell.

Pell’s department, together with the Vatican’s first Auditor General, Libero Milone, detected the loans and flagged them to the Council for the Economy where they were “noted, but no action was taken,” according to a senior source at Pell’s old department.

The court order comes a month after a U.K. judge threw out an injunction freezing Torzi’s assets, which was filed on behalf of Vatican prosecutors. 

The U.K ruling found that Torzi’s actions in the London property deal had been specifically authorized by senior officials at the Secretariat of State and, thus, Torzi could not be proven to have acted to defraud the Vatican. 

Documents submitted by Vatican prosecutors to the U.K. court also appear to show that the entire deal was personally authorized by Cardinal Pietro Parolin, the Secretary of State.

In his decision, Judge Tony Baumgartner found that Torzi produced documents proving that his management of the purchase of a London building for the Secretariat of State, including the altering of the share structure of a holding company which effectively left him in control of the building after the sale, had been specifically reviewed and approved by senior officials at the Vatican Secretariat of State.

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Torzi was hired by the secretariat to act as a broker for the final sale of the London building at 60 Sloane Avenue in 2018. 

Vatican prosecutors allege that Torzi, together with several curial officials and investment advisors, is part of a conspiracy to defraud the Vatican that began in 2014, when the Secretariat of State was first introduced to the investment manager Raffaele Mincione, with whom the secretariat invested hundreds of millions of euros borrowed from Swiss banks, and from whom they eventually bought the London building.

The Pillar has previously reported that Mincione invested Vatican money in debt products marketed by Torzi, some with links to mafia-affiliated companies. Mincione invested Vatican money into one such debt product called Sierra One bond, which was managed by a Torzi associate, Giacomo Capizzi, who was also included in the Italian court order on Monday. 

Torzi, in turn, used his companies to lend Mincione tens of millions of euros during the same period.

In 2017, Pell had to take a leave of absence from his role to return to Australia, where he was subsequently convicted and then exonerated on charges of sexual abuse. That same year, Milone was forced to resign by Cardinal Becciu, under threat of prosecution. Becciu alleged Milone was “spying” on the private finances of officials, including Becciu, at the Secretariat of State. Milone has said he was forced out for doing his job. Becciu was sacked from his curial position, and made to resign the rights of a cardinal by Pope Francis in September last year.

Torzi was hired by the Secretariat in 2018 to broker the final purchase of the London building from Mincione, which he did using his own Luxembourg holding company, Gutt SA, as a pass through for ownership of the building. 

The charges against Torzi allege that he restructured Gutt to strong-arm the Vatican, creating 1,000 voting shares in addition to the 30,000 general shares in the company, effectively separating control of the company from majority ownership. Torzi passed on the 30,000 general shares to the Secretariat of State while retaining the 1,000 voting shares, which Vatican prosecutors allege was “secretive and dishonest,” and amounted to fraud.

However, Torzi produced documents for the U.K. court apparently proving that his actions, including the share restructurings, were specifically approved by several senior officials at the secretariat, including Msgr. Alberto Perlasca, who was acting with the express authority of Archbishop Edgar Peña Parra, the substitute for general affairs at the secretariat since August 2018. 

Both Cardinal Parolin and Cardinal Becciu have sought to distance themselves from the London scandal. Becciu told reporters in 2019 that the deal was “accepted practice,” while a senior official at the Secretariat for the Economy said that “it may have been accepted, but that does not mean it is acceptable.”

Despite apparently authorizing Torzi’s plan for the purchase of the London building in writing, and personally intervening to pressure the IOR president to authorize a 150 million euro loan from the bank to underwrite the deal, Cardinal Parolin has said publicly that he was unaware of the details of the investments. 

“The deal was rather opaque and now we are trying to clear it up,” Parolin said in October 2019.

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The London deal is not the first time Cardinals Becciu and Parolin have been accused of violating Vatican financial laws to fund investments at the Secretariat of State. 

In November 2019, Parolin admitted responsibility for arranging a loan of 50 million euros from APSA, the Vatican’s central bank, in 2014. The funds were used to partially finance the purchase of a bankrupt hospital, the Istituto Dermopatico dell’Immacolata (IDI). 

The hospital collapsed in 2012 with debts of more than 800 million euros. Several members of the hospital’s administration, including its president, Fr. Franco Decaminada, were prosecuted on charges of fraud and embezzlement by Italian authorities and jailed. 

Before the hospital’s collapse, Decaminada approached Cardinal Becciu in July 2011, shortly after the cardinal was made sostituto at the Secretariat of State, and solicited an investment of 200 million euros in the hospital. The hospital collapsed months later, and Becciu has said he does not recall Deciminada’s proposal, documentation of which has been published in the Italian press, though two months later Deciminada hired Becciu’s niece, Maria Piera Becciu, as his personal secretary.

After the hospital collapsed, and its administrators were prosecuted, the Secretariat of State worked with the religious order which previously ran the hospital to create a for-profit entity, the Luigi Maria Monti Foundation, to buy the hospital out of government-controlled insolvency, paying some 150 million euros.

The Secretariat of State, under Becciu and Parolin, initially sought a loan of 50 million euros to finance its stake in the hospital from the IOR, but that loan was denied after the intervention of Cardinal Pell. 

Parolin subsequently secured the loan from APSA, the Holy See’s central bank, despite a 2012 rule agreed with Moneyval, the European anti-money laundering watchdog, that APSA would no longer provide loans for commercial ventures. 

Parolin also took responsibility for attempting to secure a donation from the Papal Foundation, an American-based charity, to help cover the loan at APSA. After that grant became mired in controversy, APSA was forced to write off some 30 million euros of the loan to the secretariat, wiping out its profits for the fiscal year 2018.

While the APSA loan appeared to violate Vatican financial laws, no one was prosecuted over the affair. 

If, as seems likely from the Italian court order released on Monday, Vatican prosecutors are now treating the Secretariat of State’s investments with Mincione as illegitimate, it could leave Parolin and Becciu open to charges of financial misconduct.