News from Rome on Friday spotlighted Vatican Msgr. Nunzio Scarano’s alleged scheme to spirit 20 million euro cash out of Switzerland into Italy, evading currency laws, with help from a financial broker and an Italian secret service agent.
The plot tanked when the broker, Giovanni Carenzio, got cold feet. Msgr. Scarano had already paid the intelligence agent, Giovanni Maria Zito, 200,000 euro as 50 percent on his full due. Zito had an Italian government airline at the ready. Instead all three men got arrested.
The bizarre plot, reminiscent of a crime comedy, was foiled Wednesday, the very day the Vatican announced that Pope Francis named a five-member commission to dig into the murky dealings of the Vatican Bank.
Italy’s use of wiretaps and tracking technology on bank accounts took time in laying the groundwork on Scarano and his pals.
And, Italy being Italy, no matter the damning information, these three operators could in fact walk. Look at ex-Prime Minister Silvio Berlusconi. How many convictions does a nation need to nail someone?
If authorities were embarrassed to have a secret service agent with perspiring palms, they had in Scarano a bigger mark, a priest in the office of the Vatican city-state, himself a former banker and account holder at the Vatican Bank, where 560,000 euro in his account was put to questionable use.
The Vatican Bank, known as IOR by its Italian acronym for Institute of Religious Works, is an escalating scandal because of the balkanized culture of the Roman curia, a deeply Italian institution that looks to a world of baronies and fiefdoms that make it easier for the money to move. Earlier today, two top figures at the IOR resigned, Director Paolo Cipriani and deputy-director Massimo Tulli, in response to the Scarano case. The German president of the bank appointed by former Pope Benedict, Ernst von Freyberg, will temporarily assume the top duties of day-to-day management, according to the Vatican.
John Paul and Benedict had no interest in the grind of daily bureaucracy; the bank under a board of five cardinals, its numbers “off the books,” stayed apart from the Holy See’s financial statement, even as IOR stanched operating deficits and gave funds for papal philanthropy.
That cozy relationship went tilt in September 2010 when Italian authorities flagged a $26 million IOR wire transfer to JP Morgan Frankfurt, and a $4 million wire to an Italian bank. Italy impounded $30 million because of IOR’s failure to report account origins, as required under European law. IOR chairman Ettore Gotti Tedeschi (an Opus Dei member) said he was “perplexed and astonished.”
We all were. As Tedeschi began negotiations with authorities for return of the funds, IOR agreed to an audit by an outside regulator. That was radical.
Authorities in Sicily, meanwhile, arrested six people working with a priest who used the IOR to help his father launder $350,000 obtained from the EU for a fish farm project that became a charity donation that, somehow, migrated to an uncle once convicted for mafia ties.
“IOR cannot work like this anymore,” an Italian official told Guy Dinmore of the Financial Times in 2010. “What is behind the screen? That is the mechanism we are trying to dismantle.”
IOR has 40,000 accounts from global religious congregations, bishops, charities and a small number of Vatican personnel. It is not a lending bank to its account holders but it makes investments. It has about $8 billion in assets, which is petite for a national bank. The figure comes from a 2012 report by Moneyval, the Council of Europe’s oversight group that deals with money laundering issues.
The Moneyval report happened because Pope Benedict on Dec. 30, 2010, named a Financial Information Authority as part of a new law to put the Holy See in line with international bank regulations on money laundering, to thwart financing terrorism. The Council of Europe wanted probity by the Vatican. Thus came Moneyval.
IOR’s core problem is privileged account holders who used it like an offshore bank, moving funds for themselves and others. Layered over that is a laissez-faire view of clerical fiefdoms, like the priest in Sicily accused of using IOR for pass-through services, or Msgr. Scarano’s 560,000 euros — that’s $729,000 — withdrawn from his personal IOR bank account “to help pay off a mortgage on his Salerno home,” reports Nicole Winfield of AP.
Those funds went into an Italian bank “to prevent family members from finding out he had such a large chunk of cash.” Thus, reports AP, “he asked 56 close friends to accept 10,000 euros apiece in cash in exchange for a check or money transfer in the same amount [his attorney said.] Scarano was then able to deposit the amounts in his Italian account.”
Reuters obtained a report by Judge Barbara Callari that approved the investigating magistrates' request for surveillance technology in the case. Scarano as a senior accountant with the Administration of the Patrimony of the Apostolic believed that "thanks to his relations with the Vatican bank," he had in the IOR "the only safe and rapid instrument for financial and banking operations that could evade — if not outright violate — laws against money laundering and tax evasion," reports Phil Pullella.
In 2012, JP Morgan Chase severed its ties to IOR, which put $1.5 billion through the German branch, because the Vatican was mum on where the impounded millions began. The State Department included the Holy See on a list of “jurisdictions of concern” including Angola, Sierra Leone and Honduras, where drug cartels run rampant. In fairness to the Vatican, many countries make these lists as banks emulate Wall Street in shifting shady gains.
The 240-page Moneyval report on IOR, redundant and slowed by turgid prose, has its pearls: “There are no requirements to examine the background and purpose of those [transactions] that have no apparent economic or visible purpose, as far as possible and to have respective written findings which shall assist competent authorities (e.g. supervisors, law enforcement agencies...) and auditors.”
Translation: Moneyval could not get access to all IOR accounts to pinpoint where huge transfers were coming from.
Benedict rebuffed a 2009 request by high-ranking cardinals to fire Secretary of State Cardinal Tarcisio Bertone, who blocked an internal move toward transparency at the Vatican Bank. Bertone held his ground as Tedeschi was fired as CEO of the bank, after a no-confidence vote by the board.
Bertone was a major target of the Vatileaks documents that Pope Benedict’s butler, Paolo Gabriele, provided to investigative journalist Gianluigi Nuzzi, for TV reports and a book.
Bertone’s reputation was in tatters by the time Pope Benedict realized he had been betrayed by the butler with whom he had informal lunches in the tiny closed society of the Apostolic Palace.
The Vatican’s archaic court system moved swiftly to convict Gabriele with judges excluding key information from the record. Gabriele spent several weeks in confinement, and now works in a hospital job arranged by the Vatican predicated on his silence.
These events upset many cardinals at the conclave who voted for Cardinal Jorge Mario Bergoglio of Buenos Aires, now Pope Francis. They wanted the Curia and bank cleaned up.
Francis has made global poverty his signature issue, while criticizing the international banking culture for ignoring human beings. But he has his own bank now, and has taken cautious steps toward reform. Two of the people he has assigned to the five-member board of inquiry raise questions.
Francis selected Msgr. Peter Wells, the third-ranking American in the Secretariat of State, to drill down for IOR information.
Questions for Wells include whether he will have subpoena power and get access to all accounts, and whether he willing to make enemies of brokers for big IOR customers.
Francis also chose Mary Ann Glendon, a former US Ambassador to the Vatican, and a professor of law at Harvard, to root out IOR wrongdoing. Glendon, a pro-life advocate, made headlines by refusing to accept an award from University of Notre Dame because President Obama, who is pro-choice, gave the commencement address that year.
Glendon has the dubious distinction, in 2002, of defending a long-accused pedophile, Father Marcial Maciel, founder of the Legionaries of Christ. Maciel’s past shadowed him into a 1998 case brought by ex-seminarians seeking justice in the tribunal of Cardinal Joseph Ratzinger.
Glendon praised Maciel’s “radiant holiness” and scoffed at “old slanders.” Nine men gave graphic accounts of their abuse as boys.
In 2005 Ratzinger, as Benedict, dismissed Maciel from ministry. In 2009, after Maciel’s death, the Legion revealed he had a grown daughter and apologized to his seminary victims. Glendon kept mum.
She also kept mum in 2010 when the Vatican took the Legion into receivership and pronounced Maciel’s “a life devoid of authentic scruples and authentic religious sentiment.” No apology from Glendon to Maciel’s dozens of victims, violated as teenage boys. Now she turns her moral probity to the problems of the Vatican Bank.
GlobalPost religion correspondent Jason Berry is author of “Render Unto Rome: The Secret Life of Money in the Catholic Church,” which won the Investigative Reporters and Editors 2011 Book Award.