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Vatican finances: What if it all was ‘legal’?

After the opening day of the Vatican financial trial on July 27, lawyers for the prosecution and the 10 defendants have several months to evaluate their cases and prepare for when the court begins to meet in earnest, beginning the first week of October.

Pictured: Gianluigi Torzi and the Vatican’s London property at 60 Sloane Ave.

Many on the defense’s legal team, including lawyers for Cardinal Angelo Becciu, will be focusing their attention on several hours of recorded testimony given by former Secretariat of State official and star prosecution witness Msgr. Alberto Perlasca.

While we do not know everything Perslaca has said about the financial affairs of his old department — yet — we do know that many of those facing charges of fraud, embezzlement, abuse of office, and a range of other crimes, will argue in court that everything they did was approved by the Vatican’s own authorities.

It is a reasonable assumption that Vatican prosecutors would not bring such an historic case to trial unless they were confident they could secure convictions. But it cannot be ruled out that some defendants may argue convincingly in court that however questionable their financial arrangements were, they were technically approved.

If they defend themselves successfully, what would that mean for the Vatican’s financial credibility, and for a prosecution team which has invested two years and nearly all of its public credibility in bringing these cases to trial?

The Vatican investigation was triggered by the sale of a London building to the Secretariat of State by Raffaele Mincione, one of its former investment managers. The first man to be arrested, back in June, 2020, was Gianluigi Torzi, who was hired by the Secretariat of State to broker the final stage of the building’s sale, despite his business connections to Mincione.

Torzi is accused of passing ownership of the building through his own Luxembourg-based company, Gutt SA, and restructuring Gutt’s shares to retain control of the building even after passing technical ownership of the building to the Vatican.

He was not in court on July 27 to answer charges of fraud, embezzlement, extortion, and money laundering in relation to that move. Torzi remains in London, pending an extradition request from an Italian court on similar charges.

But in an earlier UK court case, Torzi successfully persuaded a judge that, however aggrieved the Vatican may feel about the terms of the deal he structured, each step of it was approved by the Secretariat of State, including Cardinal Pietro Parolin. The Vatican has countered that Parolin’s approval was secured with willfully misleading legal advice, but his signature remains a powerful argument in Torzi’s defense.

Similarly, Fabrizio Tirabassi, the former lay official at the Secretariat of State in charge of administering its investments, has been reported to have had a lucrative side deal with a Swiss bank, paying him a percentage commission on Vatican business he steered the bank’s way.

Tirabassi is charged with corruption and abuse of office, among other crimes, but he has defended his contract with UBS as a “fringe benefit” of his Vatican job, and said that his superiors at the Secretariat of State were aware and approved of the arrangement.

Meanwhile, the former president of the Vatican financial intelligence watchdog, René Brülhart, has met similar reports with a similar defense. Last month, The Pillar reported that while Brülhart was leading the Financial Intelligence Authority, he had a second contract with the Secretariat of State, earning him hundreds of thousands of euros to act as a consultant on the department’s financial affairs.

The AIF had oversight of the IOR, the Vatican bank whose complaint about the Secretariat of State triggered the initial investigation which led to the current trial. Despite the appearance of a possible conflict of interest between the two roles, Brülhart’s lawyers told The Pillar it was all above board and had been personally approved by Cardinal Parolin.

While a similar fact pattern involving senior government officials in virtually any other jurisdiction would likely be treated as clear indications of corrupt practices and possible criminal behavior, in the Vatican, it may not be so clear.

Similar defenses have been mounted by other former investment advisors for the Secretariat of State, like Enrico Crasso, who all claim everything they did was signed off by the highest-ranking departmental officials.

Prosecutors will argue in their turn that, where permission was given, it was given without proper knowledge or understanding, and perhaps even under fraudulent advice. And whatever the gray area around some of the charges, others will likely prove far easier to present in court.

But, given a raft of new financial legislation issued by Pope Francis in recent months, there seems to be at least some recognition of huge gaps in the Vatican’s laws.

In April, the pope approved a sweeping new set of norms for Vatican officials working on financial affairs and dealt explicitly with the kinds of conflicts of interest apparent among the 10 people currently on trial.

Those new laws came just ahead of a long-awaited report from Moneyval, the Council of Europe’s anti-money laundering watchdog, which flagged internal corruption as the biggest risk to Vatican financial institutions — a risk, Moneyval inspectors found, Vatican officials failed to take seriously.

While it is clear that Vatican prosecutors are taking these matters seriously, and the new laws suggest that lessons have been learned, it leaves open the question of how much scope there is to prosecute cases which may show clear conflicts of interest, even possibly corrupt practices, but which may not have been explicitly illegal at the time.

Some Vatican insiders, and a few Vatican watchers, have insisted for months, even years, that the whole Vatican financial scandal is a tempest in a teacup, a kind of scandal without sin; that external assessments of the various shady dealings to have come out of the Secretariat of State simply failed to grasp the Vatican’s own cultural way of doing things, and that expectations of a trial or convictions for senior officials like Cardinal Becciu were fanciful.

It will be grand irony for the Vatican if prosecutors find they cannot convict clear cases of abuse of office because of previous gaps in the law, but manage to expose and convict a curial culture of indifference to corruption — the very culture their efforts were meant to disprove existed in the first place.