Cardinal Parolin Letter Not a ‘Smoking Gun’ Regarding Failed Vatican Property Deal

Sources tell the Register that the March 2019 letter the Vatican secretary of state sent to the president of the Vatican Bank appears to be a justifiable action intended to stem further losses on the property transaction.

A 2019 letter has surfaced from Cardinal Pietro Parolin, secretary of state for the Holy See,  shown at the ordination of 29 Opus Dei priests at the Basilica of Sant'Eugenio in Rome, Sept. 5, 2020, regarding Vatican finances.
A 2019 letter has surfaced from Cardinal Pietro Parolin, secretary of state for the Holy See, shown at the ordination of 29 Opus Dei priests at the Basilica of Sant'Eugenio in Rome, Sept. 5, 2020, regarding Vatican finances. (photo: Daniel Ibanez / CNA)

VATICAN CITY — A letter from Vatican Secretary of State Cardinal Pietro Parolin has come to light, showing how he sought to stem the losses from a controversial Vatican property deal that had gone bad by requesting a 150-million euro loan from the Vatican Bank — which it subsequently refused.

But while the letter appears to confirm that by early 2019 Cardinal Parolin was engaged in damage control, in terms of trying to stem further Vatican losses from the transaction, knowledgeable sources told the Register that his intervention did not appear to be improper.

On March 4, 2019, Cardinal Parolin wrote to Jean-Baptiste de Franssu, president of the Vatican Bank, formally known as the Institute for Works of Religion (IOR), saying the loan was needed to refinance “some valid investments.”

In the letter, leaked to Italian journalist Emiliano Fittipaldi of Editoriale Domani, the cardinal explained that the investments were “not easy to liquidate with profit in the medium term,” and so a refinancing was necessary. He argued that “market trends suggest” the need for more “liquidity” and that this additional liquidity would “protect the assets” as well as respect “the nature of confidentiality.” 

The cardinal, then a member of the IOR’s supervisory board, was applying pressure on the bank after an initial request for the loan had been made by his sostituto, or deputy, Archbishop Edgar Peña Parra. 

The loan concerned a 2014 Vatican investment, part of an apartment complex in London’s prestigious Sloane Avenue, that had been making losses. 

At the time of its initial purchase, the investment cost the Vatican a total of 200-250 million euros funded by off-balance sheet funds taken from Swiss bank accounts under the control of the Secretariat of State. Drawing on loans and investment funds, the Vatican then bought the property outright in November 2018, most probably to avert greater losses.

By the time of Cardinal Parolin’s letter, the Vatican therefore technically owned the entire building, with a very large mortgage attached to it. But the property, made up of office spaces, was not generating any cashflow and needed refinancing, or it would inflict even greater losses on the Vatican. 

In his Jan. 10 article, Fittipaldi alleges that the IOR, working with the Vatican’s financial watchdog, the Financial Information Authority (FIA), spent many months assessing whether the loan should be granted. 

After coming very close to agreeing to the loan, the director general of the IOR, Gianfranco Mammi, suddenly changed his mind at the end of June 2019 and refused to allow it on the grounds of “opacity” and that the “beneficiary of the sums is not specified.” The whole affair was then reported to Vatican prosecutors, leading to raids on the Secretariat of State in Oct.1, 2019, the dismissal of six officials and the resignation last year of Cardinal Angelo Becciu, Archbishop Peña Parra’s predecessor as sostituto

Until now, it has not been known how much Cardinal Parolin knew of the London investment. When reporters asked him about it at the end of October 2019, the secretary of state described it as “rather opaque” but also that the Vatican was “working to clear up everything.”

In his Jan. 10 article in Editoriale Domani, Fittipaldi therefore calls Cardinal Parolin’s letter to de Franssu “sensational,” as it shows the secretary of state not only knew the details of the investment, but that the cardinal also described it in his letter as “valid” and “protected” and said that the loan was needed in order to retain “confidentiality.”  

Cardinal Parolin has yet to reply to a request for comment, but sources with detailed knowledge of the matter have told the Register that it is not accurate to say the cardinal was responsible for initiating the investment and that it made “perfect sense” for him to ask for a loan in order try to salvage the value of the investment. 

Also, although Cardinal Parolin saw the investment as “valid,” it was Cardinal Becciu as the then-sostituto who was the first to sign off on funding and investment in the building. The original loans for the transaction were also made possible because the Secretariat of State had arranged them with the bank Credit Suisse around 2012, when Cardinal Tarcisio Bertone was secretary of state.

Still, many problematic decisions over the London property were taken under Cardinal Parolin’s watch that also led to massive losses for the Vatican. These include the main cause of those losses: purchasing the London property as offices at a higher price that reflected planning permission that was in place to turn it into more expensive residential flats and then inexplicably letting the planning permission lapse in 2018. This meant that although the Vatican purchased the property for an eventual cost of 300 million euro, it had allowed its value decrease to half that amount, which it then tried to recover.   

A second mystery revolves around the hiring in 2018 of a broker, Italian financier Gianluigi Torzi, to make good on the losses. Reportedly at the time of his hiring, Torzi was on the blacklist of European banks. The financier, who ended up being paid 15 million euros for his services, allegedly tried to extort the Vatican for millions of euros and was arrested by the Vatican last year before being released on bail. Torzi was hired by Msgr. Alberto Perlasca, then-head of the administrative office of the general affairs department of the Secretariat of State, but Msgr. Perlasca maintains he was acting on the orders of Archbishop Peña Parra. 

Cardinal Parolin also knew about the hiring, and Pope Francis met Torzi on at least one occasion. Last year, it was claimed the Pope “certainly” knew about Torzi’s fee and “authorized everything,” although the Vatican disputes this.    

Now, given what some argue is a lack of checks and balances and separation of powers in the Vatican, questions are emerging over the Vatican’s own investigations into such investments as well as its ability to bring guilty parties to justice and protect the rights of the accused. 

But Opus Dei Father Robert Gahl, vice chairman of the Program of Church Management at the Opus Dei Pontifical University of the Holy Cross in Rome, supports the Pope’s most recent decree on Vatican finances, promulgated on Dec. 26. It transfers all of the Secretariat of State’s investments and real estate interests to APSA, a dicastery primarily responsible for managing the Roman Curia’s real estate and investments, as a clear step forward and a part of a variety of reforms that could “increase trust in Vatican finances.”

Referring to words from the Pope in his recent decree of the need to “ensure transparent and efficient management and a clear separation of competences and functions” as a “fundamental point in the reform of the Curia,” Father Gahl said “the entire Church urgently needs to see such successful reform.”

Ivan Aivazovsky, “Walking on Water,” ca. 1890

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