Posted on 04/12/2019 1:59:10 PM PDT by ebb tide
In 2017, Cardinal Donald Wuerl provided false and misleading information to the board of the Papal Foundation to secure a $25 million grant for the Istituto Dermopatico dell’Immacolata (IDI), a scandal-plagued hospital in Rome.
Vatican Secretary of State Cardinal Pietro Parolin requested this grant from the Papal Foundation in June 2017, on behalf of Pope Francis. When the Papal Foundation board met in December 2017 to discuss the grant, Wuerl made two false assertions which were recorded in the meeting minutes. First, he claimed that the Italian religious congregation that oversaw the IDI’s descent into insolvency through fraud and embezzlement (the Congregation of the Sons of the Immaculate Conception) was no longer involved with the IDI. Second, he understated the amount of debt encumbering the IDI and its affiliates since the hospital group emerged from state-administered insolvency proceedings in April 2015. He painted a picture of a hospital that was experiencing momentary cash-flow problems, but was otherwise sound.
But the Congregation of the Sons of the Immaculate Conception was not separated from the IDI. It retains indirect ownership today, in partnership with the Vatican’s Secretariat of State, through the non-profit Fondazione Luigi Maria Monti and a limited liability subsidiary, Luigi Maria Monti, S.r.l. Together they own and operate the IDI and its affiliates. Moreover, IDI’s debt was far greater than Wuerl suggested: Though Wuerl mentioned that the IDI group owed $26 million in payables, he did not mention that it also owed $60 million in mortgage debt. Because Wuerl resisted lay board members’ requests to obtain financial statements from the IDI hospital, the Papal Foundation board had to rely upon Wuerl’s remarks about its ownership and financial situation when evaluating the $25 million grant request.
Wuerl’s actions are especially questionable in light of what he knew at the time about then-Cardinal Theodore McCarrick’s interest in securing the grant. The Holy See, Wuerl, and McCarrick—an ex-officio member of the Papal Foundation board—knew that McCarrick was at the time under investigation in New York for sexually abusing a minor, according to two sources with personal knowledge of the situation. Wuerl was aware that McCarrick stood to win leniency in his sex abuse case if the Papal Foundation secured $25 million for the Vatican’s Secretary of State.
Wuerl’s actions roiled the Papal Foundation’s donors and lay board members. Several people involved with the Foundation spoke on background for this article and shared copies of Foundation meeting minutes and legal reviews. Shortly before Wuerl resigned from the chairmanship of the Foundation’s board at the end of 2018, he orchestrated a change in its bylaws that decreased the already limited influence of lay board members by shortening their terms of service.
Today Wuerl remains a member of the Papal Foundation’s governing board of cardinals. As one of just two American members of the Congregation for Bishops at the Vatican, Wuerl oversaw the recent appointment of his successor to the Archdiocese of Washington, D.C., Archbishop Wilton Gregory. Gregory too serves alongside Wuerl on the Papal Foundation board.
The sex abuse scandal rocking the Catholic Church is not just about sex. Nor is it just about clericalism. It’s also about money. The controversy over the Papal Foundation’s $25 million grant reveals how sexual abuse, its cover-up, and money are intertwined.
The Italian province of the Congregation of the Sons of the Immaculate Conception, referred to by its Italian acronym “PICFIC,” previously owned the IDI healthcare group outright. From 2007 to 2012, PICFIC oversaw the “despoiling” of the IDI and its affiliates, according to Italian prosecutors, who in 2013 charged PICFIC priest Father Franco Decaminada and his collaborators with stealing tens of millions of euros through fraud and embezzlement. PICFIC managed to keep the IDI group afloat for years, in spite of growing losses, by relying upon successive fraudulent bank loans as well as allegedly inflated reimbursements from the regional Italian government of Lazio. In total the IDI group accumulated between €400-800 million in debt, according to various estimates, before it went bankrupt.
Decaminada and his collaborators were ultimately convicted and sentenced to prison. On March 29, 2013, PICFIC was admitted to state-administered insolvency proceedings, which froze its debts and facilitated an emergency loan from the Italian state. Two years later, after two failed public auctions for the IDI and its affiliates where no bids were received from private healthcare investors and its operations racked up further debts, the Sons of the Immaculate Conception and the Vatican created the non-profit Fondazione Luigi Maria Monti as a vehicle to purchase the IDI healthcare assets from PICFIC (which today is still under state administration).
In spite of the nominal change in ownership, some leadership remains in place from the period of embezzlement and is active in the administration of the Fondazione Luigi Maria Monti. The provincial superior of PICFIC throughout the 2000s was a priest named Father Giuseppe Pusceddu. Pusceddu has been regularly re-elected as superior by the Italian province and today serves on the five-member board of directors of the Fondazione Luigi Maria Monti.
Pusceddu’s name appeared in IDI documents that came to light during the 2013 criminal investigation. Although prosecutors traced the commencement of the fraud and embezzlement schemes at the IDI to 2005, financial troubles at the hospital group appear to have begun years earlier. According to the Italian newspaper La Repubblica, during the criminal investigations a letter was found in a safe in PICFIC’s Rome office dated December 18, 2003, and written by then-administrative director of the IDI Piero Nicolai. Addressed to Pusceddu and another hospital director, the letter stated, “By the months of March and April, without any chance of giving guarantees to the banks, we will be in an unsustainable situation with no way out, apart from a miracle. I therefore ask you to study the situation together with extreme urgency to find a way out.”
A portion of the outstanding debt from the insolvency period was assumed by the Fondazione Luigi Maria Monti as part of the purchase of the IDI and its affiliates, contrary to Wuerl’s claims at the Papal Foundation board meeting. According to the Roman mortgage registry, the Fondazione took over debts of €25,944,443.56 (about $30 million) as partial consideration for the assets of the IDI group. Furthermore, the government registry shows that the Fondazione assumed an additional €27,138,875 in debt from another mortgage that it took out against the IDI group’s real estate, the proceeds of which helped to fund the 2015 acquisition.
At the December 2017 meeting, Wuerl stated that “the debt at IDI is roughly $26.0m in payables….” Accounts payable are short-term debts owed to suppliers or other vendors arising from a business’s ordinary operations, and they are contrasted in an accounting ledger with long-term debts such as mortgages. Wuerl did not mention the further $60 million in debt backed by the IDI group’s real estate in addition to the $26 million in payables, which he implied was the only debt outstanding.
The additional $60 million in mortgage debt is significant, because along with the operating deficit that Wuerl did mention, it implies that the IDI hospital group may still effectively be insolvent, in spite of having been bought out of state administration. The Italian procedure of “extraordinary administration” for insolvent companies is not handled by a politically-independent court, as bankruptcies in common law jurisdictions like the United States are, in spite of Wuerl’s reference to “the bankruptcy court.” Rather, in Italy “extraordinary administration” is a political process overseen by appointees from the ministry for economic development, and in recent years some Italians have criticized the process as unduly subject to influence peddling by well-connected companies, to the detriment of tax-payers.
After PICFIC entered extraordinary administration and while it still owned the IDI group outright, it received a bail-out in the form of a €30 million loan guarantee by the Italian state in August 2014. The terms of the bail-out are listed in a December 2014 letter from the market competitiveness regulators at the European Commission and posted publicly on its website. The European Commission’s letter states that PICFIC’s financial statements reported its healthcare operations generated a loss of €38 million in 2013, before interest payments and taxes. Italy and the European Commission approved the bail-out on a “one time, last time” principle, with the understanding that the IDI group was ineligible to return for additional state aid, and would be liquidated if it could not be turned around without another bail-out.
In order to receive the €30 million loan guarantee in 2014, Italy and the European Commission required that PICFIC provide them with its financial statements, which it apparently did. In 2017 the Vatican neglected to provide, and Wuerl refused to request, any financial statements to the Papal Foundation on behalf of the Fondazione Luigi Maria Monti, despite lay members of the Papal Foundation’s board of trustees’ insistence for some sort of financial due diligence.
Wuerl not only presented false information to the Papal Foundation regarding IDI’s ownership and debt, but he also failed to disclose to the Foundation board that a Vatican dicastery which he helps to oversee as a board member, the Administration of the Patrimony of the Apostolic See (APSA), was apparently a creditor of the IDI while he lobbied for bailing it out with the Papal Foundation grant. According to articles in Corriere della Sera and La Stampa’s Vatican Insider, and confirmed to me by a source in Rome who is familiar with the matter, APSA lent €50 million to the IDI as part of its reorganization in 2015. Wuerl’s simultaneous roles—chairman of the Papal Foundation and a board member of a creditor of a Papal Foundation grant recipient—likely amounted to a conflict of interest that, under Pennsylvania law, he should have disclosed to the board.
He also cultivated confusion among board members about who precisely the beneficiary of the $25 million grant was supposed to be. The minutes from the meeting show that the board believed they were being asked to give money to a charitable hospital on the recommendation of the Holy See, with the Holy See also serving as the intermediary which would deliver the funds.
This belief was reinforced by the Foundation’s outside attorney, whom Wuerl arranged to speak at the meeting about the board’s fiduciary responsibilities. According to the meeting minutes, Wayne Murdy, a lay member of the board who is the retired chairman and CEO of Newmont Mining,
commented that the requests [for grants] come from the Holy See and the Foundation responds to the requests by sending the funding to the Holy See, not the individual grant recipients or for that matter the hospital … and he asked the question whether this provides a safe harbor? Should this be considered by the Board when making the decision on the ultimate usage of the grant?
In other words, Murdy asked legal counsel whether the board would discharge its fiduciary duty of care under the law by relying upon the expert advice of the Holy See in recommending the grant to the IDI hospital.
The Foundation’s outside attorney “responded by stating that the [Papal Foundation’s] statute provides that members of the Board are permitted to rely on experts. In dealing with grants in other parts of the world in which the Board does not have direct knowledge, Board members may rely on the Holy See and the Secretary of State….” Thus the attorney’s response implied that the Vatican was standing in the position of an expert adviser on the appropriateness of the $25 million grant.
A few weeks after the December meeting, however, Wuerl and the executive committee of the board stated that the Holy See wasn’t advising on the grant after all, but was receiving the grant. A letter to Papal Foundation donors dated January 19, 2018, and signed by Wuerl, Cardinal Timothy Dolan, Bishop Michael Bransfield, and the other members of the executive committee, stated that in approving the grant “we did not send money to a hospital. We sent money to the Holy See. Legally, our grantee is the Holy See….” In the December meeting, however, Wuerl made no attempt to correct the understanding created by the attorney’s suggestion that the hospital was the grantee on the expert advice of the Holy See.
Wuerl’s presentation to the Papal Foundation board also failed to mention the involvement of a for-profit private healthcare company in the Fondazione Luigi Maria Monti’s acquisition of the IDI group and its ongoing operations today, the Gruppo Villa Maria, S.p.A. (GVM). GVM is controlled by an Italian healthcare magnate named Ettore Sansavini and operates healthcare centers throughout Italy and in several European countries. GVM reportedly owns a stake in the limited liability company, Luigi Maria Monti, S.r.l., alongside the Holy See and the Sons of the Immaculate Conception.
For-profit and non-profit partnerships are common in Italian healthcare, as in the United States. However, a controversial related-party transaction between the Fondazione and its for-profit partner provoked criticism in the Italian press and a lawsuit from hospital employees, which raises concerns about the independence of the IDI healthcare group’s management. Just a month after the Fondazione bought the IDI group from state administrators in 2015, the Fondazione sold one of the IDI group hospitals, the San Carlo di Nancy Hospital near the Vatican in Rome, to Sansavini’s GVM for €241,140, according to the bill of sale reported by il Fatto Quotidiano.
In addition to acquiring the hospital, the Fondazione’s for-profit business partner also avoided taking over burdensome employment obligations to the San Carlo Hospital’s legacy staff. In September 2018 Claire Giangravè reported in Crux that leading up to the 2015 sale of the hospital, its staff was reorganized and superfluous employees were transferred to new positions at the IDI itself, while the San Carlo was streamlined: “… many of the additional staff stood out for filing complaints or having had disciplinary measures taken against them. The idea was that IDI would assume San Carlo’s dead weight, allowing San Carlo to regroup.” This transfer of employment obligations may itself have been worth many millions of euros to GVM, because in Italy generous labor entitlements often make it impossible to terminate employees.
It is not clear why it was in the Fondazione’s interest to sell the San Carlo hospital or to take on over one hundred of its excess employees, although the benefit to GVM seems manifest: With the San Carlo folded into its network, GVM acquired its first foothold in the Italian capital, and did so without debilitating employment costs. If the for-profit GVM had bid to purchase the San Carlo hospital directly from the state administrators, before the Fondazione’s acquisition of the IDI group, public disclosures would have been required and the state administrators would have been tasked to ensure that the sale price of the San Carlo for €241,140 was fair. By waiting one month to acquire the San Carlo hospital from the Fondazione instead of the state administrators, however, GVM avoided such scrutiny.
The Holy See is a sovereign entity under international law and it exercises a public monopoly over the subsidiary organizations that operate in the Vatican City State. The goods and services that would be provided by private, for-profit companies in a conventional market economy are at the Vatican provided by city-state enterprises. This means that many Vatican entities are not even remotely analogous to tax-exempt charitable organizations in the United States, in spite of the larger charitable mission of the Church.
Thus the Vatican City State’s Governorate, which is overseen by the secretary of state, owns and operates several gas stations, a pharmacy, a perfume shop, clothing and electronics stores, a supermarket, and even a tobacco shop. In 2012 the Vatican’s tobacco shop did $3.5 million in revenue—which comes to an impressive $4,375 in tobacco purchases per inhabitant of the tiny city-state—and until several years ago had an exclusive supplier agreement with Philip Morris, according to an audit from Ernst & Young published in Merchants in the Temple (2015), an investigative book by Italian journalist Gianluigi Nuzzi.
When someone makes a charitable donation to “the Vatican,” therefore, where does the donation actually go? The question is a delicate one, and the Papal Foundation’s articles of incorporation and bylaws were clearly written with this question—and IRS regulations for 501(c)3 charities—in mind:
Where any contributions, gifts, grants, or other charitable transfers are made to foreign organizations, however, the foreign organization must be organized and operated in a manner analogous to United States tax-exempt organizations. Contributions, gifts, grants, or other charitable transfers to such foreign organizations shall be made only for purposes which the Corporation [i.e., the Papal Foundation] has reviewed and approved and over which it maintains control and responsibility.
The Papal Foundation’s approval of the $25 million grant appears to have flouted each one of these requirements. Under Wuerl’s chairmanship, the board failed to determine whether the ultimate beneficiary of the grant is organized and operated in a manner analogous to a United States tax-exempt organization, approved the grant without ever specifying any concrete purpose for which it would be used, and ceded control and responsibility over the funds to the Vatican’s Secretariat of State.
To this day it is unknown whether the first two installments of the grant worth $13 million, which Wuerl had wired to the Vatican, were ever delivered to the Fondazione Luigi Maria Monti or where the money is now. The Papal Foundation has not stated publicly whether it has sent the final installment of the grant.
Cardinal Wuerl was asked to comment on the accuracy of his December 2017 presentation to the Papal Foundation board and whether he stands by it today. Mark Corallo, an outside spokesman for the Papal Foundation, responded on Wuerl’s behalf:
As The Papal Foundation Board responded to the grant request, a variety of interpretations of the true financial condition of the IDI and its sponsoring entities were presented.
Among the elements of the discussion was the still unclear relationship of the religious congregation that originally sponsored IDI, the recently formed Fondazione Luigi Maria Monti, that was now considered responsible for what have been the properties of the religious congregation, and the IDI itself. Sorting out who was responsible for what part if any of the bankruptcy assessment was also a part of the Papal Foundation’s discussion. All of this discussion was made more difficult by conflicting interpretations.
At the December 2017 Board meeting, Cardinal Wuerl presented the information made available to the public and that provided by the Holy See. Other interpretations were also offered. The Board voted to make the requested grant.
Clearly there were different readings of available information, but it is not correct to characterize the presentation of Cardinal Wuerl or other participants at the Board meeting as false or misleading.
Contrary to Corallo’s statement, however, information about the Fondazione’s $60 million in debt was publicly available in the online Roman mortgage registry at the time of the December 2017 board meeting, as it is today. Furthermore, the involvement of the Sons of the Immaculate Conception in the Fondazione is a matter of public record, stated in a press release from the Italian Ministry of Economic Development on April 14, 2015, and archived on its website: the government agency characterized the Fondazione Luigi Maria Monti as “established by the ecclesiastical Congregation of the Sons of the Immaculate Conception….”
Given his personal role in governing APSA, Wuerl’s professedly limited knowledge about the Fondazione Luigi Maria Monti is remarkable. By statute the cardinals on APSA’s board are required to receive copies of the dicastery’s annual budget and minutes from its regular meetings, even if they don’t attend them personally. Yet Wuerl (who speaks fluent Italian, lived for years in Rome, holds several important curial positions at the Vatican, and has a reputation as a meticulous administrator) does not appear to have taken any steps to clarify the crucial information about the supposed beneficiary of the $25 million grant.
Wuerl’s control over the Papal Foundation’s grant-making gave him outsize influence in the cash-strapped Vatican, just as it had for Theodore McCarrick before him. “The Papal Foundation was a huge point of leverage for [McCarrick] in terms of going to Rome,” according to Steve Schneck, a longtime McCarrick collaborator from Catholic University of America. The Papal Foundation apparently gave Wuerl leverage as well.
Ping
Bust 'em. I want all these characters in the stripey black-and-whites.
Build the scaffold....3 ropes, or four. Make it 5.
i.e. no oversight.
My guess (and this is only a guess) is that if the institution is physically outside of the State of Vatican City --- that is, operating in Italy --- Italy law apparently has some kind of jurisdiction.
If foreign currencies are involved, I believe international regulators can intervene as well.
I imagine that international financial transactions can spark very complicated jurisdictional disputes.
But what do I know. Any smart FReepers here who know more, who can comment?
I know the Lateran Treaty of 1929 governs relations between the governments of Italy and the Vatican State, and that Italy has certain rights - but I do not know the details.
Perhaps, but it occurs to me that Italian “oversight” never seemed to slow down the Mafia.
On the other hand, --- this is from the Wikipedia article on the IDI, the Demopathic hospital referenced in the posted article, Wikitranslated from Italian:
"2012 episodes of mismanagement led to the opening of judicial investigations for alleged wrongdoing with the referral of some secular and religious representatives of the Congregation. The Institute swated [?] in a managerial crisis that forced the summits to request a preventive agreement At the Court of Rome. On 29 March 2013, by decree of MISE, the institute entered into an extraordinary administration regime which ended on 14 April 2015 with the acquisition of the Institute By The Luigi Maria Monti Foundation.
Recent years On April 14, 2015, the Luigi Maria Monti Foundation, a non-profit moral entity, became the owner of IDI. The first president was Cardinal Giuseppe Versaldi, prefect Of the Congregation for Catholic Education at the Holy See. On October 1, 2016 was Mariapia Garavaglia to take over the presidency. On June 13, 2017, Antonio Maria Leozappa was called by Vatican Secretary of State Cardinal Pietro Parolin to Chair the foundation's board of directors and LEAD THE IDI .
So it's separately incorporated as a secular "foundation" (though no less than the Vatican Secretary of State is the head of its Board of Directors.) .
I don't hav time to look up the rest of it, but the words "embezzlement," "money laundering," and "illegal transactions with foreign currency" would be excellent keywords.
Cardinal Pell had called in PricewaterhouseCoopers to sort through the whole Vatican financial scene, and within months Pell was gone (no diplomatic immunity for him!), the PwC investigation was terminated before they even filed their first preliminary report, and Parolin was on top.
Hmmm...
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