Italian court backs Vatican’s Torzi charges, excuses senior clerics

News: Vatican finances

What happened: An Italian court has reviewed and confirmed sanctions placed last month on Gianluigi Torzi, the businessman at the center of the Vatican’s London property scandal.

What’s new: The court substantially backed charges brought by Vatican prosecutors alleging fraud, embezzlement, money laundering and other crimes by Torzi in relation to his role brokering the final sale of a London building to the Secretariat of State in 2018.

Why it matters: While the court found Torzi’s alleged fraud and blackmail was substantially aided by individuals acting from within the Vatican department, it said senior figures like Cardinal Pietro Parolin had been given misleading advice to get them to agree to the deal.

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Gianluigi Torzi, the broker at the center of the Vatican property scandal, acted with insider help in his attempt to defraud the Secretariat of State, judges at Rome’s Court of Review concluded on Tuesday. The court also said Torzi relied on inside assistance at the Vatican department, but that senior clerics had been misled about Torzi’s schemes.

In an opinion issued June 15 confirming precautionary court sanctions placed against Torzi in April, Italian judges found a fumo boni iuris, or reasonable grounds of suspicion, to support charges made against Torzi by Vatican prosecutors, who have charged the businessman with fraud, money-laundering, extortion, and embezzlement.

Torzi was hired by the Secretariat of State to act as the Vatican’s broker in acquiring full ownership of a London building at 60 Sloane Avenue from investment manager Raffaele Mincione in 2018.

The plan structured by Torzi for the Vatican to take control of the London building was complicated: The Vatican would pay Torzi, who would pay Mincione. Ownership of the off-shore holding company which owned the building would then be transferred to Torzi’s Luxembourg-based holding company Gutt SA. 

Once Gutt SA controlled the building, Torzi was supposed to hand over all shares of Gutt to the Vatican, and with the shares, ownership of the building. Instead, corporate documents show that after Gutt took ownership of the building, Torzi restructured Gutt’s share structure. He created a small class of voting shares which controlled the company. 

According to prosecutors, Torzi kept those voting shares while giving the Vatican all the general shares in the company. He attempted to extort the secretariat by making them pay millions more for those voting shares.

On Tuesday, the Italian court concluded that Torzi “openly blackmailed” the Vatican for escalating sums of money for control of Gutt, and therefore the London building, asking for as much as 20 million euros before receiving 15 million.

Torzi was arrested by Vatican authorities in June, 2020. He was released after ten days, but then defaulted on a bond he agreed to pay and fled to London. He was arrested in London in May after a court in Rome issued an arrest warrant for Torzi on similar crimes in Italy. He is currently awaiting extradition.

Court documents from a related case in London, published earlier this year, included details of how the Secretariat of State came to approve the complicated arrangement proposed by Torzi. Submissions to the High Court of England and Wales by Vatican prosecutors showed that Cardinal Pietro Parolin, the Secretary of State, had personally authorized the terms of the deal, which saw the department pay Mincione a total of more than 200 million euros for control of the building while also assuming a 150 million euro mortgage attached to the property. 

Parolin subsequently pressured the president of the IOR, a Vatican bank, to approve a loan of 150 million euros to refinance the mortgage. That request was flagged by the bank to Vatican financial authorities in July 2019, triggering the now-sprawling investigation into the department’s financial affairs.

In its June 15 ruling, the Italian court found that the terms of the deal structured by Torzi had clear “fraudulent intent,” and that "the blackmailing methods and the injustice of the sum obtained by Torzi, after a long tug-of-war with the Vatican... can be inferred, in the complex reconstruction carried out by [the Vatican Promoter of Justice] in the supplementary report filed April 20, 2021, from the exponential rise in Torzi's demands.”

The court also found that Torazi benefited from “internal complicity” by individuals acting for the Secretariat of State, finding that there is evidence of “the concurrence of insiders in the fraud, without which, as will be seen, the gullibility [of the secretariat] would be inexplicable.” 

However, the judges excused the two most senior officials, Cardinal Parolin and sostituto Archbishop Edgar Peña Para, from responsibility.

Parolin, the court said, was “certainly not an expert in corporate mechanisms” and relied upon advice from a lawyer, Nicola Squillace, to approve the deal. Following a request for his advice from the secretariat, the court said, Squillace submitted a memorandum to Parolin “describing the statutory modification [of the Gutt share structure] in a clearly deceptive way” to convince the cardinal to approve the deal.

Squillace has previously been identified as one of a group of Vatican advisors who recommended Torzi to the Secretariat of State in 2018, together with another lawyer, Manuele Intendente. 

In February 2019, Squillace was convicted by an Italian court for his role in the bankruptcy of another company, Novaceta, and sentenced to six and a half years in prison. He is currently appealing that decision and remains free pending that appeal.

Corporate records examined by The Pillar show that Intendente became a board member of Gutt, the company through which Torzi acquired and controlled the London building, on Christmas Eve, 2018, during the same period that Torzi is accused of extorting the Vatican.

The Italian court also found that the secretariat’s second most senior official, Archbishop Edgar Peña Parra, had expressed doubts about the structure of the deal but had received “equally misleading answers provided by Squillace.”

The court also named Fabrizio Tirabassi, a layman and former official at the secretariat, as having sent misleading messages about the deal to Msgr. Alberto Perlasca, who served as head of the Administrative Office of the Secretariat of State until 2019, working under the supervision of first Cardinal Angelo Becciu and later Archbishop Peña Parra.

Tirabassi worked until October 2019, in the administrative office of the Secretariat of State, overseeing investments. Tirabassi was suspended from his job in 2019, and the Vatican has not confirmed his current status. 

In November last year, it was reported that during a search of two of his homes, Italian financial police and Vatican gendarmes found hundreds of thousands of euros in cash, stored in shoe boxes, as well as coins, gold, jewelry, and other valuables worth more than 2 million euros hidden in a wardrobe. The valuables were initially seized, then returned to Tirabassi, after an Italian court ruled they did not fall under the terms of the warrant being served.

In November 2018, during the weeks Tori was working to finalize the transfer of ownership of the London property to his Luxembourg holding company, Gutt SA, Triabassi was made a director of Gutt by Torzi for several weeks, before being removed again when the building was fully acquired by Gutt. Company records examined by The Pillar show Tirabassi used his address at the Secretariat of State on corporate filings.

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Arguing before a U.K. court last year, Torzi accused Tirabassi of threatening his life, and the safety of his family if he did not turn over control of Gutt to him and Enrico Crasso, the Secretariat of State’s investment manager. 

Torzi also claimed to the UK court that Tirabassi offered him prostitutes, and boasted of blackmailing senior clergy at the Secretariat of State, including Peña Parra and Cardinal Angelo Becciu, Peña Parra’s predecessor as sostituto at the department.

Italian newspaper Corriere della Sera reported last year on a recording of a private meeting between Torzi, Tirabassi, and Crasso at a Rome hotel. During the conversation, Torzi can be heard saying he needed to realize at least 10 million euros for his role in brokering the final sale of the London building, and appearing to solicit Vatican investment in the Augusto bond, another of his business dealings, before handing over control of Gutt.

An investigation by The Pillar found that Torzi urgently needed the Vatican investment in Augusto to repay an insurance company from which his companies were accused of misappropriating millions of euros in government bonds.