New Vatican court filings show that the pope’s chief advisor decided not to report suspected criminal activity connected to the Vatican’s London property deal, because a criminal report would be bad publicity.

Archbishop Edgar Peña Parra, sostituto at the Secretariat of State, wrote to Pope Francis on May 2, 2019, saying that he had decided to “enter into negotiations” with the businessman Gianluigi Torzi, who had allegedly attempted to extort the Vatican for control of a building at 60 Sloane Ave. which the Secretariat of State had purchased for some 350 million euros.

Peña Parra wrote that he did not want to risk “unpredictable reputational damage” by reporting the alleged extortion to financial authorities. 

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The 2019 letter was filed as evidence Wednesday in a criminal case against 10 defendants connected to the Vatican Secretariat of State. The letter was first reported Sunday in Italian media. 

Torzi had been appointed in 2018 to act as the secretariat’s broker for the purchase, despite his numerous business connections with the building’s owner, Raffaele Mincione, in 2018. 

As the sale was completed, Torzi restructured the ownership of the Luxembourg holding company which controlled the building, granting himself a minority of shares but with full control of the company, leaving the Vatican with paper ownership but no control.

Msgr. Alberto Perlasca, the former head of the secretariat’s administrative office has told prosecutors that he repeatedly flagged Torzi’s actions to Peña Parra and recommended reporting the situation to financial authorities. 

Perlasca claims the archbishop sidelined him from the project, and blamed Perlasca for arranging the terms of the deal in the first place.

According to the letter filed as evidence with the court, Peña Parra informed Pope Francis that he “decided to enter into negotiations with Torzi and the people connected to him” instead of pursuing a “legal initiative” because alerting authorities would have “given publicity to the whole operation" and risked “unpredictable reputational damage.” 

Peña Parra wrote the letter to the pope to inform him of the “success” of those negotiations, which required the secretariat to pay Torzi an additional 15 million euros for control of a building the Vatican had already bought for 350 million. 

The archbishop predicted the outlay would be recapped through future “savings” made on the deal. The building was sold last year for a loss of 100 million euros.

Pope Francis’ role in approving the final “negotiations” and payment to Torzi has been much scrutinized in court proceedings. Peña Parra thanked the pope in his May 2 letter for his “trust” in allowing him to deal with Torzi.

Two months after Peña Parra wrote to Francis confirming the “success” of his “negotiations” with Torzi, the pope authorized a criminal investigation into the London deal, which led to charges against Peña Parra’s predecessor, Becciu, and nine others, including Peña Parra’s secretary, Msgr. Mauro Carlino, who gave evidence to the court last week.

Both Torzi and Mincione are also facing charges in the Vatican case.

The May 2 letter from Peña Parra is not the first piece of evidence from the sostituto to be presented in the trial. In a 20-page memo to prosecutors, sent in April last year, the archbishop offered a withering account of his department’s business office.

“The overall management [of departmental assets] was aimed at financial speculation and not at the conservative and safe preservation of the assets of the Secretariat of State,” he told prosecutors, with officials stone-walling financial oversight, blind-siding superiors with last minute decisions, and deploying accounting sleight-of-hand to cover the true state of the department’s financial affairs.

Pointing to “serious errors” in the secretariat’s administrative office, overseen by Perlasca until early 2019, Peña Parra described accounting measures which “unjustifiably inflated the value of the assets managed by the Secretariat of State” by nearly a third, and showed a clear pattern of contracts unreasonably favoring the secretariat’s outside partners over Vatican interests.

Despite this assessment, Peña Parra opposed any move to alert the Vatican’s Financial Information Authority.

The head of that agency, The Pillar first reported, was on the Secretariat of State’s payroll, making hundreds of thousands of euros a year for part-time “consultancy” work alongside his full time job overseeing Vatican financial affairs.

René Brülhart, who served as president of the Financial Information Authority until November 2019, was a paid a sum equal to that of his AIF salary as a part time consultant to the Secretariat of State, an arrangement which Vatican officials have previously told The Pillar appeared to be a clear conflict of interest.

Brülhart is scheduled to answer questions in court this week, he is charged with abuse of office. 

Some Vatican commentators tried to defend Brülhart this week, claiming his prosecution raises “the most critical questions about the procedure’s integrity,” and calling the decision to charge him “inexplicable” because the AIF did not have direct oversight of the Secretariat of State.

But the AIF, led by Brülhart, had direct oversight of the IOR, the Vatican bank pressured by the Secretariat of State to authorize a 150 million euro loan to finance the London property deal. Pressure to approve the loan triggered the investigation leading to the current trial. 

After interventions by the Secretariat of State’s senior officials, Cardinal Pietro Parolin and Archbishop Peña Parra, the bank’s president and director general rejected the loan application and flagged the deal as suspicious to Vatican authorities in July 2019, beginning with Brülhart’s department. 

According to a letter dated later that month and reported by the Italian newspaper il Fatto Quotidiano, Peña Parra was “outraged” by the bank’s actions and wrote "At this point I wonder: today, who is the IOR at the service of?"

Pope Francis subsequently authorized an investigation into possible criminal activity related to the London deal, dispensing prosecutors from the requirement to report on their progress to the officials under investigation, including at the AIF and the Secretariat of State.

Last week, Msgr. Carlino, Peña Parra’s former secretary who is also facing charges of abuse of office, confirmed to the court that the sostituto ordered an investigation into the IOR’s director general, Gianfranco Mammì, after Mammì denied the loan request. Also in court last week, the IOR filed documents which it said demonstrated that the Secretariat of State under Peña Parra had also contracted work to Italian intelligence officers, but paid for it under an invoice with what the bank called “imaginative contents.”

It has previously been reported that Carlino passed on Mammì’s cell phone number to a “security expert,” with a former senior secretariat official suggesting the phone was subsequently hacked.

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