VATICAN CITY — The Vatican is seeking to turn the tables on its former auditor general and his deputy after they sued the Vatican for $10 million for unlawful dismissal, and threatened to reveal extensive financial misconduct they discovered during their curtailed five-year tenure.

Libero Milone, a top-flight auditor whom the Vatican hired in 2015 as its first auditor general, and his former deputy, Ferruccio Panicco, are suing the Holy See  for “breach of contract, damage to reputation and moral damage to us and our families.” 

They accuse senior Vatican officials, especially the former No. 2 official at the Secretariat of State, Cardinal Angelo Becciu, of working with the Vatican police to force their removal in 2017 by framing them on false accusations of spying and embezzlement after their auditing began uncovering evidence of corruption at the highest levels of the Roman Curia.

But after submitting their claim on Nov. 4, the Vatican responded by rejecting Milone’s choice of defense lawyer. In a Nov. 16 letter, the Vatican said it would not authorize Romano Vaccarella, one of Italy’s most distinguished jurists and a former judge on the country’s Constitution Court, to bring the former auditor’s lawsuit against the Vatican. It gave no reason for their decision.

It is standard practice for Italian lawyers to request the Vatican’s permission to offer their services in the Vatican Tribunal. Vaccarella, 79, whose previous clients have included Italy’s former Prime Minister Silvio Berlusconi, had been working on the auditors’ case for two years and helped draw up their claim. 

“Refusing to authorize Vaccarella is a rudimentary violation of due process and shows how desperate they are,” a source close to Milone told the Register, pointing out that the constitutional lawyer “is the best that’s going and would have been formidable.” Milone said he was “flabbergasted” by the Vatican’s decision, which they are appealing. 

Earlier this year, Milone and Panicco successfully lobbied the Vatican to lift the pontifical secret on their forced resignations so that their case could be properly heard, but the Vatican used the lifting of the restriction to reopen its accusations against them of spying and embezzlement, despite having withdrawn the charges in 2018. By pursuing the charges again, the auditors’ civil claim could be delayed indefinitely. 

The auditors have always strenuously denied the Vatican’s accusations, insisting they were simply carrying out their auditing duties — and that, on the contrary, it was Cardinal Becciu and other Vatican officials who were spying on them. 

Milone has also stressed that the Vatican has never provided any evidence to back up its accusations, and that a report the Vatican wrote allegedly substantiating the accusations of spying and embezzlement has never been revealed.

Still, the Vatican is pressing ahead with its charges, which Milone said he expects will end up in the Vatican Tribunal. The Vatican’s chief prosecutor, Promoter of Justice Alessandro Diddi, interrogated Milone and Panicco separately on the evening of Nov. 14 for a total of six hours until 1am. Panicco suffers from Stage 4 cancer (part of Panicco’s claim is that his cancer considerably worsened after Vatican police seized important medical papers on his condition in a raid on their offices in 2017 and never returned them). 

One question frequently raised by those following this case is how much Pope Francis knew about the ousting of Milone and Panicco, and whether he could step in to resolve the case. 

Although the Pope pays fairly close attention to internal curial matters, one view circulating in the Vatican is that he may have been fed false information by Cardinal Becciu and others and is now embarrassed by what has happened. Milone has already written to the Pope seven times but so far has received no reply.

Some sources close to the Vatican believe that if Francis were to meet with the former auditors, it may offer him a face-saving way to acknowledge that a mistake had been made, reverse the Vatican’s action and come to an amicable out-of-court settlement. 

Should that not happen, and Milone and Panicco continue to believe justice has not been served, they are likely to go public with the financial misconduct they say they uncovered through their auditing work.  

Milone has already given reporters basic facts about some of these discoveries but says there are plenty more. These allegations include the disappearance of 2.5 million euros ostensibly donated to construct a new pavilion for the Vatican-run Bambino Gesù pediatric hospital, and the illicit use of 170,000 euros from Vatican police funds to cover the costs of renovating the Vatican apartment belonging to its then-commander, Domenico Giani — the same commander who led the raid on the auditors’ offices that led to their forced dismissal. 

Another instance of alleged malfeasance involves the questionable granting of $50 million of Vatican funds to a medical entity that was already hundreds of millions of dollars in debt.

Whether or not an out-of-court settlement is reached, most or all of the alleged financial misappropriation and poor stewardship in the Roman Curia — which one well-informed source estimates has cost the Vatican $500 million since the 1980s — may need to be made public if reforms in this area are ever to be made truly effective.