The Vatican Bank (again, sigh)

‘Everything’s up to date in Vatican City

they gone about as fer as they can go’

(apologies to Rodgers and Hammerstein)

 

[9.30.2013]

 

Foreword

 

Remember when your mom took you to the dentist who said, this is not going to hurt?

And then it hurt a lot, but when you squawked the dentist said, it’s necessary!

 

This blogpost is about the Vatican’s financial institutions, and ‘it’s not going to hurt’.  But it’s essential for an understanding of what will be happening this week in Rome when recommendations come to Papa Francesco from the Gang of Eight Cardinals; and later this fall from two ad hoc commissions tasked to review the bank (IOR) and the Vatican’s accounting practices – bringing onto center stage the financial institutions of the Vatican.

 

Overview

 

“If you cannot be trusted in handling worldly wealth, who will trust you with true riches?”  (Luke, Chapter 16 Verse 11)

 

Today’s Italian media report that the financial results of the Istituto per le Opere di Religione (IOR) will be released for the first time ever, tomorrow.  As a teaser, it is mentioned that a profit of €87 million (almost $120 million) will have been realized for the 12 months ending on July 31, 2013. 

 

That is warp speed for reporting financial results, two months after the books closed.  For context, the Archdiocese of Boston releases its audited financials 7-9 months after the fact, usually on a quiet Friday afternoon.

 

This noteworthy development is a first-ever, not only for the fact of reporting and the detail expected from an audited set of statements, but also because:

 

  • It comes literally on the day before the Pope is to meet with the Gang of Eight Cardinals who are to deliver their recommendations for reform of the Curia (of which the IOR, technically, is not a part);
  • It was acknowledged by the Pope during his summer Brazil trip that he had not planned to concentrate on the IOR at the outset, “I thought I would first first deal with other questions, but one cannot postpone this [the IOR];
  • A senior Vatican finance official Monsignor Nunzio Scarano, has spent the summer in Rome’s prison, Regina Coeli, where he remains to this day; when arrested he was carrying the €23 million (about $30 million) in cash; tic toc.

 

It is also reported that the papal commission looking into the IOR is reviewing every one of the thousands of banking accounts held at the IOR.  Again, the context matters:

 

  • It is at least possible that the €23 million carried in the suitcase of Monsignor Scarano involved IOR accounts; and
  • Very shortly after the Monsignor’s arrest, the IOR’s general manager and his deputy resigned.

 

Since the mantras of Vatican spokespersons on financial issues are transparency and bureaucratic reform, it is probable that the restructuring to place in the months to come will involve rearranging the architecture of the financial institutions discussed below, notably:

 

  • Strengthening of the regulatory arm of the Vatican, the Financial Intelligence Authority, to bring the Holy See into compliance with European Union directives;
  • Merging the separate real estate empires now held by two separate entities (APSA and the Congregation for the Evangelization of Peoples – aka Propaganda Fide);
  • Clamping down on IOR’s deposit-taking and funds transfers, probably limiting these activities to bona fide customers (Vatican employees, religious orders, charitable enterprises);  and maybe
  • Reducing the IOR to its role as a credit union, leaving the more speculative investments to APSA and perhaps to a network of international money managers.

The discussion below of Vatican financial institutions is to give readers a map for the organizational recommendations likely to be rolled out in the near future.  The focus is on the following:

 

The Vatican Bank, aka IOR;

APSA, the holding entity for most of the Vatican’s real estate and securities;

The Financial Intelligence Authority, regulator of the Vatican Bank;

The Prefecture for Economic Affairs, a central financial and budgetary control agency.

 

The essential point regarding money laundering through the IOR is that only “clergy, religious institutions and Vatican citizens” may open an account with the IOR; but these persons (actual or legal) may give a delega [power of attorney with rights to transact] to anyone “to operate the accounts as they wish, without limit on the number of deleghe and without there being a register [list] of who has the deleghe.”  Which means that any one of 25,000 eligible Vatican individuals may give account-signing authority to an unlimited number of delegati.

 

One of the prelates now under investigation by the Italian regulators is Don Evaldo Biasini known as ‘Don ATM’ through whose IOR account some €30 million (about $40 million) moved over a 12-month period.  On the salary of a monsignore.

 

Proceed at your own risk.

 

Financial Institutions of the Holy See

 

The IOR

 

The Istituto per le Opere di Religione is a teenager in the context of the centuries-old history of many Vatican institutions.  It was established in June of 1942, via a papal ‘chirografo’ (a sort of personal decree, not a canonical one) of Pope Pius XII, (a) giving the IOR legal expression; (b) establishing it separately from the traditional Vatican bureaucracy (Curia Romana); and (c) giving it the mandate to manage assets, whether securities or liquid funds, “destined for the works of religion and Christian piety.”

 

The timing of the IOR’s creation should be kept in mind, because this was the high-water mark of Nazi ascendancy in Continental Europe.  The Turn of the Tide (in Churchill’s resonant phrase) came later, towards the end of 1942.

 

In mid-1942 the European war had been going on for almost three years, and conventional wisdom considered the Nazis to be invincible as the Wehrmacht raced towards the Volga and beyond it, to the strategic oilfields of the Caucasus.

 

The creation of the IOR also occurred as European financial institutions in neutral countries (Switzerland, Sweden and Spain, to name a few) were doing a land-office business in foreign exchange operations, asset custody, and fund transfers, involving: 

 

Jews from many Nazi-occupied countries who were being dispossessed;

‘Aryans’ who grabbed Jewish property for a few pfennigs on the Reichsmark;

Industrialists from neutral countries trading lucratively with belligerent nations on both sides; and

Wealthy families in occupied Europe worried about the dominant German influence over their own countries’ banks.

 

The timing of the IOR’s origins and its autonomy from traditional Curia Romana oversight go a long way in explaining the bank’s propensity to erupt periodically into scandal over its seven decades, as outlined in more detail in the “Past Eff-ups” section below.

 

APSA  

 

This is the Vatican’s ‘Administration for the Patrimony of the Holy See’.  It is the holding entity for Vatican assets, organized into two sections:  one for fixed assets (real estate), and one for liquid assets (negotiable instruments).  It was established by Pope Paul VI in 1967.  (The Congregation for the Evangelization of Peoples, formerly Propaganda Fide, also has a very sizable real estate portfolio.)

 

APSA is often confused with the IOR, but think of APSA as the custodian of the papal family’s real estate and financial investments, while the IOR functions as a credit union (not really a ‘bank’) for financial operations involving deposit-taking, and for direct investments in complex financial instruments (derivates, anyone?).

 

Financial Intelligence Authority

 

This regulatory entity was established in 2010 by Pope Benedict XVI “for the prevention and the countering of illegal activities in the monetary and financial fields;” and “to supervise obligations undertaken to prevent and to counter recycling and the financing of terrorism” [Annuario Pontificio, 2012].

 

The initiative was in response to post 9/11 pressure from U.S. and European Union regulatory authorities.  And it brings us back to the IOR, which until 2010 was the only bank of any size completely beyond the jurisdiction of the regulators.  Most of the ‘safe banking havens’ beyond the reach of the U.S. and the EU, notably Switzerland, had reached bilateral agreements with the U.S. and the EU to clamp down on money laundering transactions.  But the IOR was completely ‘extra-territorial’.

 

With the creation of the Vatican’s Financial Intelligence Authority, a regulatory entity something like Washington’s SEC and Comptroller of the Currency, one might have thought that the Vatican State had met the requirements of Good Conduct set out in the EU’s White List of virtuous cooperating banks. Not so, the issue of compliance with the EU is still under negotiation between the EU and the Holy See.

 

Prefecture of Economic Affairs

 

This is the entity that exercises administration oversight and budgetary control over the Curia Romana; by definition this authority does not reach the IOR.  Think of the prefecture as Washington’s Office of Management and Budget, sort of.  So the Vatican has its’ own OMB…OMG!

 

The IOR’s Past Eff-ups

 

The IOR has been beyond adult supervision for most of its 71-year history.  Past scandals tend to be quickly forgotten, but the recurrence of spectacular eff-ups shows clearly that something is systemically flawed:

 

  • Let’s leave aside the bank’s role as a conduit for U.S. funds pouring into postwar Italy to keep the most geo-strategic country in the Mediterranean out of the reach of Italy’s communist party, the largest one in Western Europe, by nurturing instead Italy’s postwar Christian Democratic Party;

 

  • And let’s not niggle over the funds that moved during the 1980s from Langley, VA through the IOR into Poland, and then distributed via the widespread networks of Catholic dioceses and parishes, and Solidarność.

 

  • Not a coincidence that the Reagan Administration in its early days included some fiercely anti-Soviet Catholics, at ease with the complicated ways of the Holy See:

 

  • Secretary of State Al Haig; National-security Advisers Dick Allen and Bill Clark; Director of Central Intelligence Bill Casey; ‘Silent Missions’ specialist Lt. Gen. Dick Walters.

 

  • Also not a coincidence that the U.S. established full diplomatic relations with the Holy See during President Reagan’s first term in 1984, for the first time in the history of the Republic:

 

  • Something that JFK could not have done, given the widespread anti-Catholic feeling that was very much a political factor in the very tight 1960 election (JFK’s popular vote count exceeded Nixon’s by a fraction of one percent).

 

However, with a bow to The Godfather: Part III, The Sopranos and history, a brief mention of one of the IOR’s most spectacular past eff-ups is in order.

 

Blackfriar’s Bridge in London

 

The Blackfriar’s Bridge scandal involves a prominent Italian banker, Roberto Calvi, found hanging from London’s Blackfriar’s Bridge in June, 1982.  This story is generally known, but the key points are now fading from public awareness.

 

Calvi through his Milan bank, Banco Ambrosiano, had entered into a network of transactions with the IOR then in the firm grip of Archbishop Paul Marcinkus (“you can’t run the Church on Hail Marys”). 

 

Monies flowed through the IOR into various schemes promoted by Calvi with the promise of great returns; but in the way of all Ponzi schemes (btw, Charles Ponzi was a Boston homey) inflows eventually dried up and investors scrambled to cash out.

 

Calvi had secured so-called comfort letters from the IOR, indicating in carefully crafted legal language that the IOR supported the investments of Calvi’s Banco Ambrosiano.  Initially, this appears to have reassured many of Calvi’s investors.

 

After Calvi’s death and the almost-simultaneous apparent suicide of his personal assistant, the Banco Ambrosiano collapsed, and the investors lined up at the IOR to recoup their capital, based on the IOR comfort letters.  Keep in mind that virtually all of these investors had probably moved their funds into and through the IOR to avoid annoying details such as taxes and disclosure of the origins of their funds.  And some of these investors probably had extra-large neck sizes, and sported pinkie rings.  But for a few years after Calvi’s death, the IOR did not feel obliged to oblige the Ambrosiano investors.

 

Following some years of wrangling (including tens of thousands of attorneys’ billable hours), in May of 1984 “in recognition of moral involvement” the IOR settled with Banco Ambrosiano creditors with a “voluntary contribution” of approximately $240 million. 

 

Sound familiar?  An American bishop blasting lawyers for claimants, and then after a few years of wrangling, settling for a very tidy sum without admitting culpability: 

 

In 2003 the Archdiocese of Boston settled 500+ claims of clergy sexual abuse for $85 million;

In 2007 the Archdiocese of Los Angeles settled almost the same number of claims for $660 million.  (Who says that Franciscans are no good with money?)

 

In early June of 1984, the Vatican’s official daily, L’Osservatore Romano, wrote that the IOR agreement was intended to  “[translated from the Italian] facilitate a global solution for the consolidation of relationships of an international character.”  Hmmm, a quarter of a billion dollars.  Financial press commentary at the time indicated that, against outstanding claims of around $1 billion, claimants recovered about one-fourth of their invested capital.

 

At the time of his demise in 1982, Calvi’s death it was ruled a suicide by the British authorities.  But a forensic analysis commissioned by Italian media almost two decades after the fact concluded that the cause of Calvi’s death was strangulation in a nearby dump-site, with the body then moved to BlackfriarsBridge which spans the Thames. 

 

Why the move?  Perhaps a subtle message by choreographing Calvi’s death scene just a short distance from Blackfriars Monastery, which is run by the ultra-loyal Dominican Order, at the edge of London’s financial district. 

 

Another lethal message was probably delivered to the Vatican almost exactly one year after Calvi’s death, on June 22, 1983 when a 15-year old girl, Emanuela Orlandi, disappeared in broad daylight from a busy Rome street on her way to a music school located in an ‘extra-territorial’ Vatican building, i.e. beyond the Vatican City but technically within the Holy See.  Over the intervening 30 years she has never been found. 

 

  The link of this tragedy to the Vatican is two-fold:

 

Emanuela was a Vatican State citizen by virtue of her father’s employment inside the Vatican, a tradition in the Orlandi family’s history of service to the Vatican going back one century;

 

On July 3, less than two weeks after her disappearance, Pope John Paul the Great in his Sunday Angelus homily said,

 

“[translated from the Italian]…I am close to the Orlandi family, which is saddened for their daughter Emanuela who since June 22 has not returned home, without losing the hope in the sense of humanity of whoever has responsibility in this case…”   

 

There are other IOR dramas, going back a few decades and involving spectacular Act Four death finales:

 

  • The Michele Sindona affair, involving the collapse of a prominent U.S. bank, Franklin National of Long Island; Sindona, an adviser to the IOR, was in a maximum-security Italian prison, sipped his morning espresso, and then keeled over, morto;
  • The so-called ‘maxi-bribe’ affair of the mid-1990s where the IOR was the transfer mechanism for at least $1 billion in bribes involving Italy’s biggest political parties; and – yes – a couple of suicides, one of them in a maximum-security Italian prison.

 

What Lies Ahead for Papa Francesco

(intentional double entendre for the word ‘lies’)

 

The principal financial entities, IOR and APSA, are like a couple of cluster bombs:  this ordnance sprays its target area with several lethal bomblets, timed to detonate at unpredictable intervals.

 

One predictable explosion may involve outgoing Secretary of State Cardinal Tarcisio Bertone.  During the self-imposed lame-duck period of Pope Benedict’s papacy, from February 11, 2013, when he announced his intention to resign, until February 28 when his resignation become effective, there were some very peculiar maneuvers involving the IOR:

 

In mid-February, less than a week after Benedict’s bolt-out-of-the-blue announcement, but while he still reigned supreme, several high-level moves were made within the IOR:

 

  • A new IOR president was announced after a nine-month vacancy, Herr Ernst Von Freyberg, a German national and head of Hamburg ship-builder Blohm & Voss;
  • Pope Benedict reconfirmed the five-year mandate of the IOR’s supervisory board of cardinals, including its’ chair, Cardinal Bertone;
  • One member of the supervisory board of cardinals, Attilio Nicola, was substituted with Cardinal Domenico Calcagno, controversially elevated to cardinal a year ago and a close associate of Cardinal Bertone;
  • The Vatican official in the Secretariat of State responsible for monitoring the IOR – 46-year old Monsignor Ettore Balestrero – was promoted to archbishop, and sent to Bogotà, Colombia as papal nuncio with diplomatic immunity; as ‘under secretary of state’, Monsignor Balestrero had been the eyes and ears of Cardinal Bertone, tasked with monitoring the IOR.

 

Cardinal Bertone’s five-year term as the IOR’s supervisor means that his mandate runs until 2018, extending well into the pontificate of Benedict’s successor(s); unless this were to be modified.  It will be interesting to see what happens during the inevitable reshuffle of the IOR.  Any continuing influence of Bertone on the IOR could trigger more Vatileaks.

 

The road ahead is pretty bumpy for Pope Francis.  Those who suffered through a political science course in college may remember some of the wisdom of Alexis de Tocqueville who wrote perceptively about the young American republic in the first half of the 19th century.  He also had something to say about authoritarian regimes:

 

The most dangerous moment for a regime is when it begins to reform itself.

 

 

 

 

‘Everything’s up to date in Vatican City
they gone about as fer as they can go’
(apologies to Rodgers and Hammerstein)

[9.30.2013]

Foreword

Remember when your mom took you to the dentist who said, this is not going to hurt?
And then it hurt a lot, but when you squawked the dentist said, it’s necessary!

This blogpost is about the Vatican’s financial institutions, and ‘it’s not going to hurt’. But it’s essential for an understanding of what will be happening this week in Rome when recommendations come to Papa Francesco from the Gang of Eight Cardinals; and later this fall from two ad hoc commissions tasked to review the bank (IOR) and the Vatican’s accounting practices – bringing onto center stage the financial institutions of the Vatican.

Overview

“If you cannot be trusted in handling worldly wealth, who will trust you with true riches?” (Luke, Chapter 16 Verse 11)

Today’s Italian media report that the financial results of the Istituto per le Opere di Religione (IOR) will be released for the first time ever, tomorrow. As a teaser, it is mentioned that a profit of €87 million (almost $120 million) will have been realized for the 12 months ending on July 31, 2013.

That is warp speed for reporting financial results, two months after the books closed. For context, the Archdiocese of Boston releases its audited financials 7-9 months after the fact, usually on a quiet Friday afternoon.

This noteworthy development is a first-ever, not only for the fact of reporting and the detail expected from an audited set of statements, but also because:

 It comes literally on the day before the Pope is to meet with the Gang of Eight Cardinals who are to deliver their recommendations for reform of the Curia (of which the IOR, technically, is not a part);
 It was acknowledged by the Pope during his summer Brazil trip that he had not planned to concentrate on the IOR at the outset, “I thought I would first first deal with other questions, but one cannot postpone this [the IOR];
 A senior Vatican finance official Monsignor Nunzio Scarano, has spent the summer in Rome’s prison, Regina Coeli, where he remains to this day; when arrested he was carrying the €23 million (about $30 million) in cash; tic toc.

It is also reported that the papal commission looking into the IOR is reviewing every one of the thousands of banking accounts held at the IOR. Again, the context matters:

 It is at least possible that the €23 million carried in the suitcase of Monsignor Scarano involved IOR accounts; and
 Very shortly after the Monsignor’s arrest, the IOR’s general manager and his deputy resigned.

Since the mantras of Vatican spokespersons on financial issues are transparency and bureaucratic reform, it is probable that the restructuring to place in the months to come will involve rearranging the architecture of the financial institutions discussed below, notably:

 Strengthening of the regulatory arm of the Vatican, the Financial Intelligence Authority, to bring the Holy See into compliance with European Union directives;
 Merging the separate real estate empires now held by two separate entities (APSA and the Congregation for the Evangelization of Peoples – aka Propaganda Fide);
 Clamping down on IOR’s deposit-taking and funds transfers, probably limiting these activities to bona fide customers (Vatican employees, religious orders, charitable enterprises); and maybe
 Reducing the IOR to its role as a credit union, leaving the more speculative investments to APSA and perhaps to a network of international money managers.

The discussion below of Vatican financial institutions is to give readers a map for the organizational recommendations likely to be rolled out in the near future. The focus is on the following:

The Vatican Bank, aka IOR;
APSA, the holding entity for most of the Vatican’s real estate and securities;
The Financial Intelligence Authority, regulator of the Vatican Bank;
The Prefecture for Economic Affairs, a central financial and budgetary control agency.

The essential point regarding money laundering through the IOR is that only “clergy, religious institutions and Vatican citizens” may open an account with the IOR; but these persons (actual or legal) may give a delega [power of attorney with rights to transact] to anyone “to operate the accounts as they wish, without limit on the number of deleghe and without there being a register [list] of who has the deleghe.” Which means that any one of 25,000 eligible Vatican individuals may give account-signing authority to an unlimited number of delegati.

One of the prelates now under investigation by the Italian regulators is Don Evaldo Biasini known as ‘Don ATM’ through whose IOR account some €30 million (about $40 million) moved over a 12-month period. On the salary of a monsignore.

Proceed at your own risk.

Financial Institutions of the Holy See

The IOR

The Istituto per le Opere di Religione is a teenager in the context of the centuries-old history of many Vatican institutions. It was established in June of 1942, via a papal ‘chirografo’ (a sort of personal decree, not a canonical one) of Pope Pius XII, (a) giving the IOR legal expression; (b) establishing it separately from the traditional Vatican bureaucracy (Curia Romana); and (c) giving it the mandate to manage assets, whether securities or liquid funds, “destined for the works of religion and Christian piety.”

The timing of the IOR’s creation should be kept in mind, because this was the high-water mark of Nazi ascendancy in Continental Europe. The Turn of the Tide (in Churchill’s resonant phrase) came later, towards the end of 1942.

In mid-1942 the European war had been going on for almost three years, and conventional wisdom considered the Nazis to be invincible as the Wehrmacht raced towards the Volga and beyond it, to the strategic oilfields of the Caucasus.

The creation of the IOR also occurred as European financial institutions in neutral countries (Switzerland, Sweden and Spain, to name a few) were doing a land-office business in foreign exchange operations, asset custody, and fund transfers, involving:

Jews from many Nazi-occupied countries who were being dispossessed;
‘Aryans’ who grabbed Jewish property for a few pfennigs on the Reichsmark;
Industrialists from neutral countries trading lucratively with belligerent nations on both sides; and
Wealthy families in occupied Europe worried about the dominant German influence over their own countries’ banks.

The timing of the IOR’s origins and its autonomy from traditional Curia Romana oversight go a long way in explaining the bank’s propensity to erupt periodically into scandal over its seven decades, as outlined in more detail in the “Past Eff-ups” section below.

APSA

This is the Vatican’s ‘Administration for the Patrimony of the Holy See’. It is the holding entity for Vatican assets, organized into two sections: one for fixed assets (real estate), and one for liquid assets (negotiable instruments). It was established by Pope Paul VI in 1967. (The Congregation for the Evangelization of Peoples, formerly Propaganda Fide, also has a very sizable real estate portfolio.)

APSA is often confused with the IOR, but think of APSA as the custodian of the papal family’s real estate and financial investments, while the IOR functions as a credit union (not really a ‘bank’) for financial operations involving deposit-taking, and for direct investments in complex financial instruments (derivates, anyone?).

Financial Intelligence Authority

This regulatory entity was established in 2010 by Pope Benedict XVI “for the prevention and the countering of illegal activities in the monetary and financial fields;” and “to supervise obligations undertaken to prevent and to counter recycling and the financing of terrorism” [Annuario Pontificio, 2012].

The initiative was in response to post 9/11 pressure from U.S. and European Union regulatory authorities. And it brings us back to the IOR, which until 2010 was the only bank of any size completely beyond the jurisdiction of the regulators. Most of the ‘safe banking havens’ beyond the reach of the U.S. and the EU, notably Switzerland, had reached bilateral agreements with the U.S. and the EU to clamp down on money laundering transactions. But the IOR was completely ‘extra-territorial’.

With the creation of the Vatican’s Financial Intelligence Authority, a regulatory entity something like Washington’s SEC and Comptroller of the Currency, one might have thought that the Vatican State had met the requirements of Good Conduct set out in the EU’s White List of virtuous cooperating banks. Not so, the issue of compliance with the EU is still under negotiation between the EU and the Holy See.

Prefecture of Economic Affairs

This is the entity that exercises administration oversight and budgetary control over the Curia Romana; by definition this authority does not reach the IOR. Think of the prefecture as Washington’s Office of Management and Budget, sort of. So the Vatican has its’ own OMB…OMG!

The IOR’s Past Eff-ups

The IOR has been beyond adult supervision for most of its 71-year history. Past scandals tend to be quickly forgotten, but the recurrence of spectacular eff-ups shows clearly that something is systemically flawed:

 Let’s leave aside the bank’s role as a conduit for U.S. funds pouring into postwar Italy to keep the most geo-strategic country in the Mediterranean out of the reach of Italy’s communist party, the largest one in Western Europe, by nurturing instead Italy’s postwar Christian Democratic Party;

 And let’s not niggle over the funds that moved during the 1980s from Langley, VA through the IOR into Poland, and then distributed via the widespread networks of Catholic dioceses and parishes, and Solidarność.

o Not a coincidence that the Reagan Administration in its early days included some fiercely anti-Soviet Catholics, at ease with the complicated ways of the Holy See:

 Secretary of State Al Haig; National-security Advisers Dick Allen and Bill Clark; Director of Central Intelligence Bill Casey; ‘Silent Missions’ specialist Lt. Gen. Dick Walters.

o Also not a coincidence that the U.S. established full diplomatic relations with the Holy See during President Reagan’s first term in 1984, for the first time in the history of the Republic:

 Something that JFK could not have done, given the widespread anti-Catholic feeling that was very much a political factor in the very tight 1960 election (JFK’s popular vote count exceeded Nixon’s by a fraction of one percent).

However, with a bow to The Godfather: Part III, The Sopranos and history, a brief mention of one of the IOR’s most spectacular past eff-ups is in order.

Blackfriar’s Bridge in London

The Blackfriar’s Bridge scandal involves a prominent Italian banker, Roberto Calvi, found hanging from London’s Blackfriar’s Bridge in June, 1982. This story is generally known, but the key points are now fading from public awareness.

Calvi through his Milan bank, Banco Ambrosiano, had entered into a network of transactions with the IOR then in the firm grip of Archbishop Paul Marcinkus (“you can’t run the Church on Hail Marys”).

Monies flowed through the IOR into various schemes promoted by Calvi with the promise of great returns; but in the way of all Ponzi schemes (btw, Charles Ponzi was a Boston homey) inflows eventually dried up and investors scrambled to cash out.

Calvi had secured so-called comfort letters from the IOR, indicating in carefully crafted legal language that the IOR supported the investments of Calvi’s Banco Ambrosiano. Initially, this appears to have reassured many of Calvi’s investors.

After Calvi’s death and the almost-simultaneous apparent suicide of his personal assistant, the Banco Ambrosiano collapsed, and the investors lined up at the IOR to recoup their capital, based on the IOR comfort letters. Keep in mind that virtually all of these investors had probably moved their funds into and through the IOR to avoid annoying details such as taxes and disclosure of the origins of their funds. And some of these investors probably had extra-large neck sizes, and sported pinkie rings. But for a few years after Calvi’s death, the IOR did not feel obliged to oblige the Ambrosiano investors.

Following some years of wrangling (including tens of thousands of attorneys’ billable hours), in May of 1984 “in recognition of moral involvement” the IOR settled with Banco Ambrosiano creditors with a “voluntary contribution” of approximately $240 million.

Sound familiar? An American bishop blasting lawyers for claimants, and then after a few years of wrangling, settling for a very tidy sum without admitting culpability:

In 2003 the Archdiocese of Boston settled 500+ claims of clergy sexual abuse for $85 million;
In 2007 the Archdiocese of Los Angeles settled almost the same number of claims for $660 million. (Who says that Franciscans are no good with money?)

In early June of 1984, the Vatican’s official daily, L’Osservatore Romano, wrote that the IOR agreement was intended to “[translated from the Italian] facilitate a global solution for the consolidation of relationships of an international character.” Hmmm, a quarter of a billion dollars. Financial press commentary at the time indicated that, against outstanding claims of around $1 billion, claimants recovered about one-fourth of their invested capital.

At the time of his demise in 1982, Calvi’s death it was ruled a suicide by the British authorities. But a forensic analysis commissioned by Italian media almost two decades after the fact concluded that the cause of Calvi’s death was strangulation in a nearby dump-site, with the body then moved to Blackfriars Bridge which spans the Thames.

Why the move? Perhaps a subtle message by choreographing Calvi’s death scene just a short distance from Blackfriars Monastery, which is run by the ultra-loyal Dominican Order, at the edge of London’s financial district.

Another lethal message was probably delivered to the Vatican almost exactly one year after Calvi’s death, on June 22, 1983 when a 15-year old girl, Emanuela Orlandi, disappeared in broad daylight from a busy Rome street on her way to a music school located in an ‘extra-territorial’ Vatican building, i.e. beyond the Vatican City but technically within the Holy See. Over the intervening 30 years she has never been found.

The link of this tragedy to the Vatican is two-fold:

Emanuela was a Vatican State citizen by virtue of her father’s employment inside the Vatican, a tradition in the Orlandi family’s history of service to the Vatican going back one century;

On July 3, less than two weeks after her disappearance, Pope John Paul the Great in his Sunday Angelus homily said,

“[translated from the Italian]…I am close to the Orlandi family, which is saddened for their daughter Emanuela who since June 22 has not returned home, without losing the hope in the sense of humanity of whoever has responsibility in this case…”

There are other IOR dramas, going back a few decades and involving spectacular Act Four death finales:

 The Michele Sindona affair, involving the collapse of a prominent U.S. bank, Franklin National of Long Island; Sindona, an adviser to the IOR, was in a maximum-security Italian prison, sipped his morning espresso, and then keeled over, morto;
 The so-called ‘maxi-bribe’ affair of the mid-1990s where the IOR was the transfer mechanism for at least $1 billion in bribes involving Italy’s biggest political parties; and – yes – a couple of suicides, one of them in a maximum-security Italian prison.

What Lies Ahead for Papa Francesco
(intentional double entendre for the word ‘lies’)

The principal financial entities, IOR and APSA, are like a couple of cluster bombs: this ordnance sprays its target area with several lethal bomblets, timed to detonate at unpredictable intervals.

One predictable explosion may involve outgoing Secretary of State Cardinal Tarcisio Bertone. During the self-imposed lame-duck period of Pope Benedict’s papacy, from February 11, 2013, when he announced his intention to resign, until February 28 when his resignation become effective, there were some very peculiar maneuvers involving the IOR:

In mid-February, less than a week after Benedict’s bolt-out-of-the-blue announcement, but while he still reigned supreme, several high-level moves were made within the IOR:

o A new IOR president was announced after a nine-month vacancy, Herr Ernst Von Freyberg, a German national and head of Hamburg ship-builder Blohm & Voss;
o Pope Benedict reconfirmed the five-year mandate of the IOR’s supervisory board of cardinals, including its’ chair, Cardinal Bertone;
o One member of the supervisory board of cardinals, Attilio Nicola, was substituted with Cardinal Domenico Calcagno, controversially elevated to cardinal a year ago and a close associate of Cardinal Bertone;
o The Vatican official in the Secretariat of State responsible for monitoring the IOR – 46-year old Monsignor Ettore Balestrero – was promoted to archbishop, and sent to Bogotà, Colombia as papal nuncio with diplomatic immunity; as ‘under secretary of state’, Monsignor Balestrero had been the eyes and ears of Cardinal Bertone, tasked with monitoring the IOR.

Cardinal Bertone’s five-year term as the IOR’s supervisor means that his mandate runs until 2018, extending well into the pontificate of Benedict’s successor(s); unless this were to be modified. It will be interesting to see what happens during the inevitable reshuffle of the IOR. Any continuing influence of Bertone on the IOR could trigger more Vatileaks.

The road ahead is pretty bumpy for Pope Francis. Those who suffered through a political science course in college may remember some of the wisdom of Alexis de Tocqueville who wrote perceptively about the young American republic in the first half of the 19th century. He also had something to say about authoritarian regimes:

The most dangerous moment for a regime is when it begins to reform itself.

 

 

 

 

 

  

 

 

 

 

 

 

Aside

 

Pope to (many American) Bishops:

Paradigm Lost

[9.20.2013]

 

The world media are giving considerable play to Papa Francesco’s series of interviews (12,000 words) now running simultaneously in several Jesuit-order publications (16?), including the prestigious bi-monthly La Civilta’ Cattolica, which began publishing in 1850 in Naples.  Link to English-language version in America magazine:

 

            http://www.thinkingfaith.org/articles/20130919_1.htm

 

It will take some time to analyze and digest what the Pope has said.  The lede from today’s New York Times is a useful encapsulation, 52 words instead of 12,000:

 

Six months into his papacy, Pope Francis sent shock waves through the Roman Catholic church on Thursday [September 19] with the publication of his remarks that the church had grown ‘obsessed’ with abortion, gay marriage and contraception, and that he had chosen not to talk about those issues despite recriminations from critics.”

 

Btw…One of the prominent recriminators is the bishop of a very small New England state who echoed New York’s ordinary in expressing disappointment vis-à-vis the Pope.

 

Context is important:

 

  • The papal interviews were held over several days during the Roman August,  when “Mad dogs and Englishmen go out in the midday sun,” and the Curia Romana is on a prolonged summer break.  But not this Pope.
  • The venue was the ‘cardinals hotel’, Casa Santa Marta where the Pope has chosen to live; not in his formal apartment suite in the Vatican’s White House, Il Palazzo Apostolico.
  • The first Jesuit ever to be elected pope chose the heavy artillery of his own religious order’s media to broadcast his message; The Guns of August.
  • Perhaps most importantly, until the roll-out of the Pope’s carefully considered and edited views in La Civilta’ Cattolica, the Next Big Thing on the Vatican horizon was the report from the Gang of Eight Cardinals, expected in the course of their upcoming meetings with the Pope in early October.

 

This last point is worth bearing in mind:  the Pope has put on the table for discussion many of the vexing issues that to date have been ruled out-of-the-bounds of licit discourse within the Church. 

 

The Gang of Eight and the two ad hoc commissions tasked with looking at the Vatican’s financial activities are conducting Management 101 exercises, the analysis of secular issues…organization charts, mission statements, finance and accounting.  That is where the media attention has been concentrated.  But the risk in making organizational issues the focus of this fall’s discussion was that doctrinal content would have been overlooked, or subordinated to modifications of organization charts.  Form without content.  [Brings to mind Henry Kissinger’s masterful way of neutralizing the Washington bureaucracies by giving them make-work tasks.]  

 

A few weeks ago, the incoming secretary of state of the Vatican, Archbishop Pietro Parolin, brought several jaws to the floor by putting in play the issue of priestly celibacy, when he casually mentioned that this was a matter of tradition, not dogma.  The last time a ranking prelate tried to open up this topic, Brazilian Cardinal Claudio Hummes in 2006, he was slapped down with indecent haste by Secretary of State Cardinal Tarcisio Bertone, and forced to recant in the style of the Stalin trials of the late 1930s.  Detail from the March conclave:  Cardinal Bergoglio sat next to his friend, Cardinal Hummes.   

 

The Pope has bypassed all of the traditional consultative entities in bring forward his views:  the Synod of Bishops, the Curia Romana, the national Episcopal conferences.

 

The American conference, the U.S. Conference of Catholic Bishops, has by any reasonable assessment been very rigid on the issues most widely reported in the Pope’s interview:  “Gays, Abortion and Birth Control.”

 

Expect the usual crew of right-winger bloggers (one guy, one laptop) to come crawling into the sunlight rubbing their eyes with disbelief (John Le Carré, “We fear most in others that which we cannot accept within ourselves”).

 

The American vescovi have much more at stake than their laptops and a pirouette on cable news.  Their paradigm continues to be:  pray and obey; Father knows best.  But now, the prospect that emerges into their view from the swamp of Catholic America is Paradigm Lost.  Of course, this is only the beginning.  And no one can foretell what the outcome of this process will be.  However, the American bishops’ comfortable status quo has been disrupted. 

 

The dilemma that the Pope confronted over the summer might be illustrated by a metaphor borrowed from another Italian disaster.  There has been extensive media coverage of the extraordinary salvage operation involving the mega-cruise ship Costa Concordia, stranded off Tuscany’s Giglio Island.  For perspective, the ship is almost 1,000 feet long, and is 50% bigger than a Nimitz-class super aircraft carrier as measured by its 135,000 dead-weight tonnage. 

 

This might be a metaphor of what the Pope faces in right-sizing the Catholic Church, namely a behemoth which has been…

 

  • Immobilized for some time, apparently stable but at considerable risk;
  • Impaled precariously on underwater rocks;
  • Poised between the possibility of recovery and further catastrophic damage if it slides down to the seabed;
  • Steered into this predicament by a feckless captain with absolute authority, who scampered to safety as the real extent of the damage became clear; and
  • Faced now with an uncertain future – literally which port to head for – as the scope of its structural damage comes to light. 

 

The Pope states that the “Church is likely to fall like a house of cards’ as it plods along its current course.  Can you imagine how Pope Benedict and Cardinal Bertone might have dealt with an interview by Cardinal Bergoglio along those lines?

 

Franklin Delano Bergoglio

Franklin Delano Bergoglio
[9.12.2013]

Summary

The sign of a truly inferior mind is thinking by analogy. As the six-month anniversary of Pope Francis’ election approaches, Sept. 13, it strikes me that there are similarities between the situation facing FDR post-inauguration in March, 1933 (not January 20th, check out the 20th amendment), and what the Pope now faces:

 Taking office after the eight-year administration of an unlamented predecessor, who is fading into history’s mists;
 Chaos in the nation-city’s banking sector; and
 The imperative to circumvent an arthritic bureaucracy by creating parallel structures of governance.

According to my Rome contacts it is too soon to draw conclusions about the Pope’s approach to the many doctrinal issues facing the Catholic Church, most of which fall into the category of ‘pelvic issues’, those pesky complexities stemming from the human Eros impulse.

But there are some straws in the winds, namely the New Look in the Vatican; some key personnel moves (personnel is policy); and very high stakes for Catholics and non-Catholics alike, given the Church’s global reach, and its grassroots presence in many parts of the Middle East. Perhaps time for a Vatican Spring?

The New Look in the Vatican

The Pope’s actions to date are a laudable effort to create an entirely New Look, drawing a sharp contract with His predecessor’s lavish display of luxury.

Nothing as yet on the doctrinal front, where the media don’t know whether to categorize Pope Francis as progressive, moderate or conservative. However, the New Look is much more than cosmetic:

It involves sharply increased emphasis on social justice, reaching out to the marginalized in society, and
Peace, the theme of the Pope’s very recent letter to the G-20 world leaders on the ‘futility of war’.

Concerning this New Look, one of Cardinal Timothy Dolan’s more counter-intuitive comments reported from Brazil was his ‘irritation’ at the media’s contrast between the opulence of Benedict and the sober style of Francis. Dolan considered this coverage to be “hurtful” and “not accurate.” Well, then, how would His Eminence contrast custom-made Prada shoes with thick-soled black shoes; or compare a solid-gold pectoral cross centered with a large ruby to a pewter cross? Try spotting a prelate in Rome wearing a gold pectoral these days; word gets around rapidamente.

The Pope’s Predecessor

Regarding the Pope Emeritus, it is precisely seven years to the day when Benedict made his first significant post-installation entrance onto the world stage, with his September 12, 2006 address at the University of Regensburg in Bavaria where he had taught theology decades ago. The speech was advanced as a major event, but it turned into a disaster. It also contained the ingredients of what would bedevil (apt word?) his papacy:

 A scholarly address touching on a hot-button topic, Islam, but crafted in private without vetting by experts;
 Obscure references to an “erudite Byzantine emperor” in the late 14th century, citing an incendiary quote from the emperor about the Prophet;
 Genuine surprise at the vehemence (and the violence) of the reaction;
 A very lame effort at damage control, by spinning that these were not Benedict’s own words, ‘just a quotation’.

Substitute for the Pope Emeritus’ Regensburg address (a) the lifting of the excommunication on the four Lefebvrist bishops, or (b) his condoms quote, “they make the problem worse,” and you have repeat performances of Regensburg in the later years of Benedict’s reign, in a familiar cadence – one step forward, then two steps back.

The Holy See’s Banking Crisis

Concerning the looming disaster now ticking away at the Holy See’s Istituto per le Opere di Religione (‘Ior’), unless this is handled carefully it could dominate the recommendations for reform entrusted by the Pope to three separate ad hoc groups:

The “Group of Eight” cardinals announced in April, one month after his election, and scheduled to make recommendations to Francis for reform of the Curia at the beginning of October;
A “Pontifical Commission” announced in June, to review the Ior; and
Another “Pontifical Commission” announced in July, to review ‘accounting practices’ across all Vatican financial institutions (plural).

The mandate of the G-8 is quite broad, i.e. recommendations for general structural reform of the Curia Romana, while the tasks of the two commissions are narrower but more focused, with mandates to go into all aspects of finance and administration.

Concerning the third ad hoc group, it cannot be a complete coincidence that this was launched in July, a few weeks after Monsignor Nunzio Scarano, the former chief accountant of APSA (the Holy See’s financial holding entity), was arrested and tossed into Rome’s Regina Coeli jail, where he has been languishing ever since.

Parallel Structures

This is where things get interesting. As noted above, the first of the three parallel groups may be thought of as horizontal (the G-8, ranging widely across the Curia), while the two commissions are vertical – drilling deep into the specialized areas of finance and accounting (two distinct areas, but let’s not belabor this just yet).

And not to be forgotten, there is still a permanent bureaucracy, the Curia, where the Pope has reached into the ranks of the Vatican’s diplomatic system to name a new secretary of state, essentially the Holy See’s prime minister and chief operating officer. The nominee, scheduled to take over from Cardinal Tarcisio Bertone in mid-October, is Archbishop Pietro Parolin from the Vatican’s diplomatic service, with a lot of experience in the Secretariat of State, the Holy See’s coordinating center.

More on Archbishop Parolin in a later blogpost. From my own dealings, he is an interesting prelate who has considerable real world experience in the rough-and-tumble of high-level diplomacy in tough arenas such as Rwanda, Venezuela and China where a Roman collar is not a guarantee of anything. The Vatican’s diplomatic service can be thought of as the USSR’s KGB: the tightly controlled interface with external reality.

Just today, The Tablet, an authoritative weekly covering the English-speaking Catholic world since 1840 (!), reports something remarkable: that on the issue of priestly celibacy the Archbishop “is open to argument because it’s not a dogma but a tradition.” OMG!

Cardinal Tarcisio Bertone

The imminent change of the leadership at the top of the Secretariat of State is very significant:

 It comes after years of criticism directed against Cardinal Bertone, the incumbent since 2006 widely viewed within the Curia as lacking the diplomatic skills required to operate the delicate machinery of government within the Holy See, and

 The cardinal’s failure to achieve the badly needed coordination among the Vatican’s 21 top agencies: the nine congregations and twelve pontifical councils, somewhat analogous to Washington’s departments and agencies

To continue the Washington analogy, the Curia suffers from the ‘stove-piping’ endemic across Washington’s intelligence community of 16 statutory entities:

The deep reluctance within the Vatican to share information ‘horizontally’, but reporting only vertically to hierarchical superiors might put one in mind of the pre-9/11 botched coordination between CIA and FBI.

Throughout his stormy seven-year tenure, Cardinal Bertone did have the advantage of one dedicated supporter, Benedict himself who is reported to have said, after yet another suggestion that Bertone be replaced,

“Der Mann bleibt wo er ist, und basta” [the guy stays where he is, enough]

However, Cardinal Bertone also had dedicated enemies (not just ‘adversaries’). It is believed that the Vatileaks scandal – the flood of sensitive documents which hit the press beginning in the spring of 2012 – was a stealthy and wide-ranging Curia revolt against the cardinal, involving several high-ranking prelates and not just the ‘butler’ and the IT specialist who were found guilty in a Vatican trial.

Forty years ago, the later phases of Washington’s Watergate scandal showed that this was much more than a third-rate burglary, as first described by the Nixon White House. Watergate led to the Oval Office. Vatileaks reaches well into the West Wing of the Vatican’s White House, the Palazzo Apostolico.

What is ahead for Papa Francesco?

In early October he is to meet with the Group of Eight cardinals. The two commissions on finance and accounting will probably be reporting in, but not through the G-8. And Archbishop Parolin, who will soon be taking over the Secretariat of State, will be an attentive onlooker since he is to execute the recommendations of the G-8, but has not had a hand in developing them.

Management theoreticians might throw up their hands at this diffusion of authority. But realists will probably note that what helped bring about Vatileaks, and then brought down the papacy of Benedict, was precisely the absolute centralization of authority in the hands of Cardinal Bertone. So checks and balances are needed, even in an absolute monarchy with a divine mandate.

The collegiality on display by the Pope does not signal a “Vatican spring” of democracy, but it does indicate clearly a willingness to open up channels of communication. Perhaps this is the most lasting contribution of the Pope Emeritus and of Cardinal Bertone, intentional or otherwise.

What are the stakes?

Those not familiar with the Holy See’s global reach might think that all of this is rather quaint, a made-for-TV drama involving grown men (entirely) who wear long cassocks and jostle for position at the court of a monarch whose ‘nation’ totals 105 acres.

There is much more here. For all of its woes and dysfunction, the Catholic Church is the second largest religious denomination in the world, with more than 1.2 billion adherents organized into some 3,000 ‘Ecclesiastical Territories” of which 10% are Eastern Rite territories in the Middle East and North Africa, a very significant geo-strategic area in the today’s quest for global sanity.

One level beneath these 3,000 territories there are about 220,000 parishes (think of them as local franchises), clusters of sacred and profane buildings. This is the spiritual and material infrastructure of Catholicism’s ability to project global influence. And it is also, perhaps, the most valuable real estate portfolio in the world today, although it does not include Fenway Park and the Boston Garden.

Closer to home there are approximately 70 million self-described Catholics in the U.S., the largest single religious denomination in America, organized into 200 dioceses (196 actually) with a total of 17,700 parishes. Interestingly, almost 20% of these parishes are open and functioning, but without a permanent pastor.

Finally, there is the Pope’s ‘Defense Department’ establishment, including priests (diocesan and religious), permanent deacons, women religious and lay religious, which amounts to more than 1.2 million men and women, about four-fifths the size of the U.S. armed forces on active duty.

And his ‘State Department’ which consists of about 170 bilateral and multilateral diplomatic missions around the world, second only to the size of the U.S. diplomatic machine with about 200 missions.

End Comment

It is worth keeping in mind that Papa Francesco is one of the oldest men elected pope in the past few centuries, 77 years old at the time of his accession to the Throne of San Pietro on March 13, 2013. So he may have a keen sense of how fleeting time can be. His intense activity, criticized by some as hyper-activity, ins a sharp contract with his predecessor’s disengaged approach. Tempus fugit (the fugit is Latin, not English).

Over the past two centuries, the only cardinal older than Jorge Mario Bergoglio coming out of the conclave as pope was Joseph Ratzinger, elevated at age 78.

It is said that young cardinals elect old popes, in the expectation of short and serene tenures. But this does not always turn out to be the case

Cardinal Gioacchino Pecci was elected in 1878 at age 68, and reigned for almost 25 years as Leo XIII;
Cardinal Giovanni Roncalli was clearly a transitional choice in 1958, elected at age 76, he ruled for less than five years as John XXIII, but fifty years after his death he is still very consequential.

Who knows what is ahead. But the stasis of the Benedict years is over. To paraphrase Bette Davis in All About Eve, Fasten your cinctures, it’s going to be a bumpy ride.