Parolin pressured Vatican bank over London building deal

News: Vatican Finances

What’s new: New reporting shows Cardinal Pietro Parolin pressured the president of a Vatican bank to fund a refinance of the Vatican’s investment in a London property development.

Why it matters: Vatican Secretary of State Cardinal Parolin has mostly distanced himself from the Vatican financial scandal, whose epicenter is his own Vatican department. But new reporting suggests Parolin has been much more involved in matters than he’s previously indicated.

What’s the whole story? Keep reading.

The Vatican Secretary of State was involved directly in efforts to get Vatican Bank funding for the mortgage of a London building at the center of the Vatican financial scandal.

New reporting shows that Cardinal Pietro Parolin was involved in attempts to force through a €150 million loan from the Institute for Works of Religious (IOR), commonly called the Vatican Bank, in order to cover the mortgage of 60 Sloane Avenue, for which the Secretariat of State paid hundreds of millions of euros.

The official request for funding was made by the Secretariat of State’s deputy head, or sostituto, to the director general of the bank. But Cardinal Parolin wrote directly to the bank’s president, pressuring him to support the application which, he said, represented high-priority “needs of the Holy See.” 

Parolin was a member of the bank’s supervisory board at the time he sent the letter. 

The letter was leaked to Italian journalist Emiliano Fittipaldi who reported on Sunday that it had been signed by Parolin in March 2019, and addressed to Jean Baptiste de Frannsu, the president of the IOR. 

According to that report, Parolin told de Frannsu that the secretariat had made “some valid investments” overseas which were not “easy to liquidate with profit in the medium term.” 

Saying that “market trends suggest” the secretariat arrange for more “liquidity,” the cardinal asked the bank “to provide a loan of 150 million euros, to be obtained in a short time.”

The cardinal told the bank’s president that “I will be grateful if you would be pleased to give a positive reply to this request, which responds to the superior needs of the Holy See.”

Parolin served on the bank’s supervisory board until last year, when he was removed by Pope Francis.

Parolin’s role in pushing for the IOR to refinance the Secretariat of State’s stake in the London development is a significant development. After initial reporting on the deal began in October 2019, Parolin distanced himself from the deal, insisting that he did not know the details. 

“We are working to clear up everything. This deal was rather opaque and now we are trying to clear it up,” Parolin said at the time, according to Reuters.

Vatican authorities have been investigating the financial affairs of the secretariat since July 2019, when Gianfranco Mammì, the IOR director general, complained to Vatican financial watchdogs about the “opacity” of the formal request for funds. Part of the investigation includes a review of the Vatican’s purchase of the London building, which was bought for roughly €200 million, plus an additional €150 million mortgage.

The scandal surrounding the building has already led to the suspension of six senior officials or former officials at the secretariat, and triggered the forced resignation of Cardinal Angelo Becciu, who served as sostituto, or deputy, at the secretariat from 2011 until 2018.

The Vatican bought the building in stages, from Italian businessman Raffaele Mincione, who was also responsible for investing hundreds of millions in Vatican assets, starting in 2014. 

The Vatican intended to finalize its purchase of the building in November 2018, but was delayed after Italian businessman Gianluigi Torzi - commissioned to act as a broker in the sale on behalf of the Vatican - allegedly attempted to extort the Secretariat for control of the building.

The alleged extortion seems to have worked like this: 

Full ownership of the London building was acquired by Torzi in November, 2018, through his Luxembourg holding company Gutt SA. 

Torzi was supposed to transfer control of the company to the secretariat but, instead, he restructured the company in order to pass the Vatican the majority of the shares but retain control of the company for himself. He then, allegedly, attempted to extort the secretariat for millions in exchange for control of the holding company and the building.

Torzi made additional demands of the Vatican: Last week, The Pillar reported that a conversation recorded in December 2018, between Torzi and two Vatican investment managers, one of whom was an official at the secretariat, appears to show Torzi demanding an additional €10 million euros from the Vatican in order to bail him out of a legal settlement with an Italian insurance company. Torzi has been accused of a “sophisticated fraud” involving the misappropriation of more than €25 million in government bonds from Net Insurance.

Torzi was arrested in Vatican City in June, 2020, and charged with extortion, embezzlement, self-laundering, and aggravated fraud.

Also under investigation is Mincione’s management of Vatican investments between 2014 and 2018. Vatican Media has described investments made by Mincione as “speculative,” and “a conflict of interest.”

Mincione invested millions of Vatican funds in debt products sold by companies belonging to Torzi in the months before Torzi was appointed to represent the Vatican in purchasing the London building from Mincione. At the same time, companies belonging to Torzi lent another of Mincione’s companies millions of euros.  

Mincione has twice been served with search and seizure warrants by Vatican investigators acting through Italian courts. He is suing the Secretariat of State in the High Court of England and Wales, claiming he acted in good faith in his dealings with the Vatican.

Becciu has repeatedly defended the investment in the London building, describing it as “regular” and “accepted practice,” and Italian media have reported that he continued to lobby for the deal even after his transfer out of the Secretariat of State.

In September 2020, Pope Francis ordered Becciu to resign his curial position and his rights as a cardinal after Vatican prosecutors presented a dossier of information to the pope relating to Becciu’s handling of Vatican finances.