Tangled Web of Transactions Utilized to Fund Bankrupt Italian Hospital
NEWS ANALYSIS: The Register has reviewed documents that indicate Vatican officials employed covert and deceptive methods to divert 50 million euros needed at a children’s hospital to the troubled institution.
VATICAN CITY — Using costly methods that appear deceptive, Vatican officials diverted 50 million euros belonging to the Bambino Gesù children’s hospital in Rome to guarantee a loan for the same amount to a bankrupt Italian dermatology hospital in 2014, despite warnings from the cardinal appointed to oversee financial transparency not to go ahead with the transaction.
According to documents seen by the Register, the officials, including two lay consultants who received six-figure commissions on top of their other salaries for their efforts, worked with two Curial cardinals to arrange for the Bambino Gesù hospital, which is under Vatican authority, to guarantee the loan to the Istituto Dermopatico dell’Immacolata (IDI).
The IDI, then owned by the Congregation of the Sons of the Immaculate Conception (CFIC), was at the time on the brink of closure, with debts in excess of 600 million euro. A further body, a foundation called the Fondazione Luigi Maria Monti, was set up in 2015 to help save IDI and keep it within the field of Catholic health care.
As reported by CNA in November, the loan was firmly opposed at the time by Cardinal George Pell, then the prefect of the Vatican Secretariat for the Economy, but Pope Francis overrode his opposition and agreed to let the Administration of the Patrimony of the Apostolic See (APSA) go ahead with the transaction. The Holy Father later canceled the hospital’s guarantee of the loan when he realized the error, but the 50 million euro has yet to be returned by APSA to the children’s hospital.
Documents show that Vatican officials concealed the origins of the loan by forcing the Bambino Gesù to deposit the funds with APSA, the Vatican department also responsible for real estate management, in the form of a “certificate of deposit” (CD) issued by APSA itself. This usually takes the form of a no-risk loan to be repaid within a fixed time. APSA then used the CD as collateral to guarantee the loan to the IDI, which went to the congregation.
The plan made it look as if APSA, rather than the Bambino Gesù hospital, which is a well-respected children’s hospital in Italy mostly funded by the Italian state, was providing the financing to the CFIC, IDI’s owners — something unlikely to have been allowed in view of the children’s hospital being mostly state-funded.
‘Smoke and Mirrors’
“The overall loan and guarantee transaction was executed covertly by APSA, shielded from the eyes of the public,” an informed source told the Register. “APSA didn’t lend the money to the Luigi Monti Foundation or to IDI. Formally, it was lent to the congregation (CFIC), who in turn instructed APSA to pay it out of their account to the foundation — it was all smoke and mirrors.”
A March 2015 confirmation slip, seen by the Register, documents the funds’ transfer from the congregation to the foundation.
According to other documents seen by the Register, in 2016, the Bambino Gesù’s current president, Mariella Enoc, asked Cardinal Domenico Calcagno, the president of APSA, to liquidate the CD and return the 50 million euro to the children’s hospital.
To this day, however, the Register understands that the funds have not been returned, although Antonio Leozappa, the president of the Luigi Monti Foundation, has suggested loans to the IDI could be returned “in 2022 in case of a return to profitability.”
The Register on Dec. 5 directly emailed Cardinal Calcagno’s successor, Archbishop Nunzio Galantino, about whether he could confirm the 50 million euro would be returned to the Bambino Gesù hospital, but he has not responded.
Although committed to prevent the IDI from collapse with consequent job losses, Cardinal Pell advised the Pope and Cardinal Pietro Parolin, the Vatican secretary of state, in 2014 not to go ahead with the loan.
“He considered it immoral to condemn the children’s hospital to losing money that it needed to treat needy children,” the Vatican source said.
The source added that Cardinal Pell also believed it was “extremely dangerous to comingle the children’s hospital’s patrimony, which, for the most part, was made up of Italian government public funds, with IDI’s growing deficits and debt.”
Vatican Bank Refusal
A key reason why Vatican officials believed they had no option but to take this route was because the Institute for Works of Religion (IOR), better known as the Vatican Bank, had already refused to issue the loan on the grounds it was too risky and would be in breach of its new practices.
Cardinal Pell concluded this was why Cardinal Calcagno, Cardinal Giuseppe Versaldi, then-president of CFIC, and Giuseppe Profiti, then-president of the Bambino Gesù, insisted on obtaining the loan guarantee from the children’s hospital, along with the fact that they knew that the children’s hospital had extensive funds to draw upon. All three underwrote the loan guarantee from the Bambino Gesù, according to documents examined by the Register.
But before doing so, they tried to win over Cardinal Pell and the Pope by hiring the accountancy giant KPMG to conduct a feasibility study to show how the loan could and would be repaid. But when Cardinal Pell’s office asked that KPMG sign their study, the firm refused to do so. The Register has asked KPMG’s Italian branch, which conducted the study, why the accountant group was unwilling to endorse it, but so far has received no response.
On the strength of the study, Pope Francis and Cardinal Parolin went ahead with the 50 million-euro loan despite opposition from Cardinal Pell and others — something the Vatican source said became a pattern.
“The Pope again chose to override his own regulatory authorities and side instead with the ‘old guard’ leaders whom he had failed to replace,” the source said.
In Nov. 28 comments to veteran Vatican reporter Sandro Magister, Leozappa said the Luigi Monti Foundation had not received financing from APSA or from the Bambino Gesù. But this was never in question, as documents show the loan had been given to the congregation rather than to the foundation, although it was the final beneficiary of the loan along with IDI itself.
Laymen Received Commissions
And although Cardinal Parolin told Catholic News Agency he was responsible for “operations involving IDI,” two laymen played significant roles as consultants to APSA regarding the Bambino Gesù loan: professor Franco Dalla Sega of the Catholic University of the Sacred Heart in Milan, and Carmine Stingone, a Rome-based attorney, both of whom received six-figure commissions for their work in securing the loan.
In a July 2016 letter to both Dalla Sega and Stingone, Msgr. Mauro Rivella, secretary to APSA, thanked them for their professional services and detailed how they would receive “.25% on the total value of the operation of €50 million,” amounting to 125,000 euro plus expenses. A January 2017 payment confirmation from APSA shows Dalla Sega received a gross total of almost 175,000 euro, on top of his salary as a consultant for APSA, a position he still holds. Stingone has since ceased employment with the dicastery.
Dalla Sega was also a member of the Fondazione Luigi Monti board of directors while he worked to secure the loan for CFIC, a clear conflict of interest that would later catch the attention of Cardinal Pell and Libero Milone, the Vatican’s former auditor general.
The Register asked Dalla Sega Dec. 5 why he negotiated the loan despite the opposition of Cardinal Pell and others, how he justified such a large commission in addition to his salary, and whether APSA would be returning the loan to the Bambino Gesù, but he has also not responded.
Edward Pentin is the Register’s Rome correspondent.