The Bishop of Bling…taken to the woodshed

The Bishop of Bling:
Monsignor Franz-Peter Tebartz-van Elst
Ordinary of the Diocese of Limburg, Germany

[October 23, 2013]

Summary: Breaking News

As reported today in the Italian daily, il Fatto, Pope Francis has decided that Monsignor Franz Peter Tebartz-van Elst, bishop of Limburg, Germany, but currently in Rome to explain the out-of-control spending in his diocese on a restoration project…

“[translated from the Italian] will not return to the diocese until light is cast upon the renovation expenses of the episcopal see…”

An Apostolic Administrator has been appointed on an interim basis to run the diocese.

According to a Vatican statement,

“[translated from the Italian] there has been created a situation in which the bishop for the present may not exercise his episcopal ministry.”

This is significant, and goes far beyond the alleged spending habits of one among several thousand Catholic bishops and eparchs around the globe:

It signals the seriousness of Pope Francis’ campaign against displays of luxury and profligate spending by high-ranking clergy;
It comes with lightning speed after a private audience between the pope and the bishop two days ago, where the bishop was given an opportunity to explain himself;
It is a swift reaction to lame news management efforts by the bishop yesterday, with a posting on his diocesan website to the effect that the papal meeting had been ‘very encouraging’;
It goes against the ingrained view within the Curia Romana that when it comes to cardinals and bishops, scandal must be avoided at all costs;
It hauls on the carpet one of Pope Benedict’s favorites, a protege he elevated to the rank of bishop at the youthful age of 47 (making Tebartz-van Elst at the time the youngest bishop in Germany);
There is nothing doctrinal about this episode, ‘it’s just business’ as Tessio said in The Godfather.

Overview

German and Italian media, and to a lesser extent some outlets in the U.S., have been reporting the widening controversy about the spending habits of Monsignor Franz-Peter Tebartz-van Elst, ordinary of the Diocese of Limburg in Germany, within the Ecclesiastical Province of the Archdiocese of Cologne. [I will avoid a facile riff about the pungent smell of local Limburger cheese.]
The issue is whether Catholic bishops and Eastern rite eparchs take seriously the pope’s admonitions about living large…
There is also the complicating factor that Tebart-van Elst was hand-picked by Pope Benedict and elevated in 2007 as the then-youngest bishop in Germany, clearly destined for higher duties, and a prelate in the mold of Pope Benedict.

The Facts of the Case, below, are drawn from the excellent reporting of two full-time Vaticanisti: Robert Mickens of The Tablet and Andrea Tornielli of La Stampa.

The End Comment is my responsibility.

Facts of the Case

 Spending

The renovation of a cluster of diocesan buildings close to the Cathedral, including the bishop’s residence, began some years ago with a budgeted cost of about €5 million (almost $7 million), and has soared to a current estimate of €31 million ($43 million); a six-fold increase.

As frequently happens, a particular item has become the ‘gotcha’ symbol for a complicated tangle of technical details:

€15,000 ($21,000) for His Excellency’s bathtub

Comment: Remember the $600 ashtray in a USAF stealth airplane? Turns out that the plane was pretty damn good, btw…

Separately, His Excellency got into a dispute with a wide-circulation German weekly, Der Spiegel, over his trip to India a few years ago to a poverty conference, and the cost of his air fare.

 Commentators

This episode has drawn comments from some leading personalities in Germany and in the Vatican:

Chancellor Angela Merkel, daughter of a Lutheran minister;
Archbishop Gerhard Müller, prefect of the Congregation for the Doctrine of the Faith, a German national;
Archbishop Robert Zollisch, head of the German conference of bishops; and
Cardinal Reinhard Marx, Cardinal-archbishop of Munich and Freising, and a member of Pope Francis Group of Eight cardinal-consultors; a German national.

It lines up 3:1 against the Bishop of Bling.

Chancellor Merkel has described the Limburg situation as a ‘scandal’.
This is remarkably direct for someone whose defining trait is prudence.
But before anyone howls about ‘separation of church and state’ it should be kept in mind that the German government provides a handsome subsidy to the Catholic Church in Germany (and to other recognized religious denominations):

German taxpayers may direct to their designated religion the “Kirchensteuer,” about 8-9% of their tax bill.

So government officials have a stake in how money is spent by subsidized religious denominations. Pity that dozens of American attorneys general and district attorneys could not get it through their heads that the religious exemption from property taxes is in fact a taxpayers’ subsidy, something that any Ec-101 student could explain.

We are also four years away from the date of Martin Luther’s 95 theses, posted almost half a millennium ago in 1517; an anniversary that will have a lot of resonance in Germany.

Archbishop Gerhard Müller rose to the defense of Bishop Tebartz-van Elst last month, and described the media campaign against the bishop as

“a building of lies…the bishop stays…”

Interesting resonance here…when Pope Benedict was urged to remove his #2, Cardinal Tarcisio Bertone he reportedly answered,

“Der Mann bleibt” [the guy stays].

Further back in time, when the Boston clergy sex abuse scandal broke in January of 2002, several American cardinals were summoned to Rome in March, including Boston’s Cardinal Bernard Law. With a pack of eager media types waiting to hear the results of their meeting with Pope John Paul II, Cardinal Law skipped the presser, and the lead spokesman for the Church, then-prefect of the Congregation for the Clergy, Cardinal Dario Castrillon Hoyos, told the assembled scrum:

“Concerning the problem of sexual abuse and pedophilia…It’s already an X-ray of the problem that so many of the questions [are] in English”

This was his adorably oblique was of suggesting that pedophilia is most prevalent among Anglophones.

On the other hand, Archbishop Robert Zollitsch and Cardinal Reinhard Marx had some rational things to say about the Limburg situation:

Archbishop Zollitsch said, “we have an enormous credibility problem”;
Cardinal Marx described what was happening in Limburg as “disturbing.”

End Comment

The German episcopal conference has launched a commission to study the matter which is technically quite complex. So it is still possible that the bishop of Limburg will be exonerated. But two circumstances suggest otherwise:

a) The exiling of the bishop from his own see.
Interesting canonical question, usually, when an Apostolic Administrator is appointed (Boston, December, 2002 through July, 2003), this is because of a sede vacante (vacant seat); but in Limburg there is a sede plena sed absente (full but vacant see). But how can a single sede accommodate two prelates?

b) As noted above, three very senior stake-holders in Germany have weighed into the fray.

And there is quite a back-story here.

Pope Benedict’s selection of Tebart-van Elst in 2007 for the Limburg see was remarkable, and not just for the bishop’s age at the time (all of 47).
Monsignor Joseph Ratzinger himself was named bishop of Munich and Freising in 1977 at the age of 49, still slightly older than Tebart-van Elst at the equivalent times.
Previously, Monsignor Ratzinger had taught at Regensburg University; almost ditto for Monsignor Tebart-van Elst who had taught at Münster University.

Furthermore, the Limburg see is within the Ecclesiastical Province of Cologne, and this would make the Limburg ordinary a contender for one of the most prestigious big-city sees in Germany, the Archdiocese of Cologne.

It is too soon to draw any firm conclusions, but in the event that the Bishop of Bling’s temporary exile becomes permanent, this suggests an interesting avenue of recourse for beleaguered Catholics whose churches are being sold off while the local hierarchy lives large. Follow the advice that Pope Francis gave in Rio, and

‘make a mess in your dioceses’

Financial Report of Vatican Bank The Good, the Bad and the Ugly (apologies to Sergio Leone) [October 5, 2013]

Financial Report of Vatican Bank
The Good, the Bad and the Ugly
(apologies to Sergio Leone)
[October 5, 2013]

Overview
“A certain wisdom is needed here; with a little ingenuity anyone can calculate the number”
(Revelations, Chapter 13 Verse 18)

The 2012 Annual Report of the Vatican Bank, the Istituto per le Opere di Religione (IOR), was released on October 1 last. It covers financial activity for calendar 2012; the currency of account is the euro; and the results have been audited by the Swiss affiliate of the accounting firm KPMG, and certified as compliant with International Financial Reporting Standards.
In all of its glory, the report runs to 100 pages, available at http://www.ior.va.

These results can be categorized as:

The Good:
Net Profit of €86.6 million (about $117 million); this is a four-fold increase from profits realized in 2011.

The Bad:
Net Trading income (profit) of €51.1 million (about $69 million); this is a radical swing from the previous year’s Net Trading loss of €38 million, and shows that the entire Net Profit of the bank of €86.6 million is exposed to its trading desk, which between 2011 and 2012 swung from negative to positive by €89 million.
Remember the TARP bank bailouts of a few years ago? There is no equivalent bailout mechanism in the Vatican.

The Ugly:
Reuters reports that the IOR “is likely to close all accounts held by foreign embassies [accredited to the Holy See], following concerns about large cash deposits and withdrawals by the [diplomatic] missions of Iran, Iraq and Indonesia [which is the most populous Muslim country in the world].”

The sections that follow discuss:

 Trading activity;
 Operating Expenses;
 Dividend remitted to the share-holder (the Holy See); and
 IOR Governance.

Trading Activity

As mentioned, the most note-worthy development is that between 2011 to 2012, the IOR’s net trading position swung by €89 million ($120 million) from negative to positive, i.e. from a €38 million loss to a €51.1 million profit.
This swing exceeded the IOR’s overall profit of €86 million posted in 2012, and it exposes the bank’s profit, dividend and clients to market volatility on the downside.
About 70% of the IOR’s assets are in euros, meaning exposure to the stresses of the foreign exchange markets when the bonds of individual countries in the 17-member euro zone come under speculative attack.
On January 1, 2014, the euro zone expands to 18 members, with the scheduled entry of Latvia.
And one-third of the IOR’s assets consist of the obligations of Italy and Spain, where the local economies remain mired in crisis.
Collectively, this means that several factors beyond the IOR’s control could affect its trading margins, for the worse.

Operating Expenses

The IOR’s expenses grew by almost 15% between 2011 and 2012, to a total of €23 million. It is likely that this expense category will grow considerably in the future for several reasons:

 The sudden resignations in June, 2013, of the bank’s general director and the deputy general director; as IOR employees of a few decades, their so-called spese di buonuscita (exit payments) are likely to be considerable;

 Between 2011 and 2012 the IOR switched its audit firms, going from Deloitte & Touche’s Italian affiliate in 2011 to KPMG’s Swiss affiliate in 2012; it is probable that the elaborate presentation of results for 2012 and the continuing in-depth review of the IOR accounts (approximately 25,000), will require more accounting and auditing effort in the future;

 A risk and compliance manager was hired in July, 2013; over time this function will probably grow considerably.

Dividend to the Holy See

From the report:

“The IOR posted earnings of EUR 86.6 million, which allowed us to contribute EUR 54.7 million [almost $74 million] towards the budget of the Holy See, while transferring EUR 31.9 million to our general operating risk reserves.”

This level of dividend payout to the Holy See as sole shareholder is consistent with previous guesses in the media, to the effect that the Holy See and its curia have grown very dependent on the IOR for an annual dividend of about €50 million ($67.5 million) as the mainstay for the Vatican’s operating budget.

It also suggests that notwithstanding some recommendations that the IOR should be disbanded and its banking functions turned over to arms-length financial institutions, the Holy See may be ‘hooked’ on its IOR’s dividend. And it raises the question of what happens to the dividend in bad years, something the IOR has experienced in the past.

Governance of the IOR

The governance of the IOR is currently under review by a papal commission appointed last spring. In its current structure the IOR’s governance is as intricate as the Russian matryoshka dolls, each nesting or nested within another; but not as transparent. What’s worse, each level of governance has been the subject of sharply negative media interest in the recent months.

Within the bank there is a directorate, consisting of the General Director and the Deputy General Director.
In June, both incumbents resigned suddenly, after many years of service, shortly after the arrest of a high-level Vatican finance official.

Above the directorate there is a bank president and a board.
The incumbent was appointed during Pope Benedict’s lame-duck period, i.e. the two-and-a-half weeks between the pope’s earth-shaking announcement of his intent to resign (February 11), and the effective date of his resignation (February 28).

Above the board there is a Cardinals Commission.
Its president, Cardinal Tarcisio Bertone, was reconfirmed to his five-year term during Pope Benedict’s 17-day lame-duck period. Curious timing.
President John Adams was criticized for his “midnight judges” appointed before turning over the reins to Thomas Jefferson in 1801. “Midnight bankers” at the Vatican in the 21st century?

And finally there is the position of ‘Prelate for the IOR’, essentially the pope’s eyes and ears focused on the bank.
This position had been vacant for about two years, when – last June – Pope Francis appointed a monsignore with very limited financial expertise. A few weeks after the appointment, one of the most prominent Vatican-watchers in the media published a ‘scandalous’ account concerning the monsignore, with detailed allegations going back more than a decade ago.

End Comment

The IOR has been an alcatraz (oops, I meant ‘albatross’; Boston joke, sorry) around the neck of several popes.

Pope Francis has made a heroic effort to strip away from the center of the Church the trappings of pomp and the over-the-top displays of luxury, at a time when economic hardship in Italy is deepening; according to official statistics:

40% unemployment today among the young (ages 18 through 29);
9% net loss in GDP (!) over the past 11 years.

And there are troubling warning signs ahead for the IOR:

 The significant turnover at the top levels of its management;
 The fierce infighting that has hit the highest levels of IOR governance, and may erupt again;
 The imprisonment of the senior Vatican financial official last June;
 The deeply entrenched interest groups who have benefitted immensely from their ability to launder funds through the bank;
 The recent allegations of IOR transfer services to the diplomatic mission of a government guilty of state-sponsored terrorism over several decades.

Which brings an observer full-circle back to the root question, why an IOR?
Is it worth it to a global Church with a vocation to spiritual leadership?

“Behold, I set before you this day a blessing and a curse”
(Deuteronomy Chapter 11 Verse 26)