“Vatileaks 2”: corruption, cronyism, and mismanagement

Two new books make the case for Pope Francis' financial reforms.

Austen Ivereigh | Nov 19 2015 | comment

Two books published recently that draw on leaked documents to expose financial wrongdoing and mismanagement in the Vatican will allow people better to understand the reasons why the cardinals wanted Pope Francis elected — and why he has prioritized the financial reform of the Curia.

But most of what they record was already well known — even if the documents provide vivid extra detail. Nor do they record much actual corruption, exposing, rather financial and accounting practices that fall well below standards of transparency and accountability that should be expected in a European state. The AP headline is accurate: these are instances of mismanagement rather than criminality.

The focus of both Gianluigi Nuzzi’s Merchants in the Temple and Emiliano Fittipaldi’s Avarice highlight failures and malpractices that were all too obvious at the time of Pope Francis’s election: spiraling costs, nepotistic employment practices, and abuses of the Vatican’s fiscal and tax sovereignty.

“There is a complete absence of transparency in the book-keeping both of the Holy See and the Governorate,” five international auditors wrote to Pope Francis in June 2013, according to Nuzzi’s book. “Costs are out of control. This applies in particular to personnel costs, but it also extends elsewhere.”

The auditors had raised similar complaints in previous years but had been ignored. Alarmed, Pope Francis created a powerful body of outside experts a month later, which was tasked with presenting an accurate profile of the Vatican’s finances, and to put a stop to spiraling costs and cronyism.

This is history

The Pope’s task force, the Pontifical Commission for Reference on the Organization of the Economic-Administrative Structure of the Holy See, or COSEA, was chaired by Joseph Zahra, a Maltese banker, and coordinated by a Spanish monsignor, Lucio Vallejo Balda.

What COSEA found and recommended triggered Pope Francis’s decision to create in February 2014 a powerful new finance ministry, the Secretariat for the Economy, under the leadership of Cardinal George Pell, answerable directly to the Pope and to a policy-setting oversight board, the Council for the Economy.

That’s why, beyond the publisher’s blurb, this is mostly a book of historical interest: it shows what led to the reform now in place.

Nuzzi’s book — the more detailed of the two — essentially draws on documents gathered by COSEA at the end of 2013 and the start of 2014. Its coordinator, Mgr Vallejo Balda, was arrested by Vatican police on Monday, accused of the crime of leaking documents, and remains in custody.

If Vallejo Balda turns out to be guilty, Nuzzi suggests what may have been his motive. “The people who made this material available to me did so because they are pained by … the huge gap between what Francis has promised and what is being done to hinder his reforms and undermine his credibility”.

Crusading journalism?

Nuzzi himself tries to justify the book by saying he aims to “flush out and denounce the opponents of Francis” in the Curia and “to lend transparency to an authority that has long been obfuscated by narrow, often illegal, interests at odds with Gospel principles”.

But on Monday, when he announced the arrests of Mgr Vallejo Balda and Francesca Chaoqui, Father Lombardi scotched that idea. “One must absolutely avoid the mistake of thinking that this is a way to help the mission of the Pope,” he said.

The stories are mainly of mismanagement, cronyism and a culture of entitlement, rather than actual corruption or malfeasance. Yet the way Nuzzi presents the information suggests the second rather than the first.

The Vatican’s spokesman, Father Federico Lombardi, said yesterday that a more objective, serious investigation would better distinguish between the majority of Vatican financial dealings that are above board and those areas “to correct, ambiguities to be clarified (and) real improprieties or illegalities to be eliminated.”

As for the authors’ claims to be helping to root out those practices, the Pope “doesn’t need the books of Nuzzi or Fittipaldi” to tell him where problems exist in the Vatican, Fr Lombardi said, adding that most of the information in the books was already known publicly, although usually with less detail, and was information the Pope himself had asked for.

Father Lombardi told reporters that while the books did not cause rejoicing in the Vatican, the pope is “serene, he’s a person who knows what he needs to do, who knows there are difficulties in life — it’s not like someone has to explain that to him.”

Why COSEA was created

The drama in the Nuzzi book comes from COSEA at the end of 2013 trying to get an accurate picture of Vatican finances by demanding to see records of assets and balance sheets, and yet finding themselves stonewalled. COSEA’s experience led Pope Francis to take the dramatic step of creating, in February 2014, the powerful new Secretariat of the Economy headed by Cardinal George Pell (See CV Comment here).

Pope Francis inherited a grim situation. “On the one hand there was total chaos in the management of resources and spending, which was spiraling out of control, with inflated costs, deceptive contracts, and dishonest suppliers dumping obsolete and overpriced products on the Vatican. On the other, cronyism and shady financial dealings prevented change and undermined the policies already adopted by (Pope) Benedict.”

At a meeting with the cardinals overseeing the Vatican’s finances in June 2013, Pope Francis gave them a copy of the auditors’ letter outlining the need for change, and gave a 16-minute speech which was recorded by one of those present and later given to Nuzzi.

“Our books are not in order, we have to clean them up,” said Francis, who goes on to criticize the lack of transparency in book-keeping, cronyism in employment practices leading to spiralling costs, the lack of oversight of investments, the absence of proper tendering for work, and the way millions were wasted.

On 18 July 2013 Francis announced the creation of COSEA, which set up operations the Casa Santa Marta, and sought over the next few months to get to grips with the problems.

What COSEA found

Although most departments responded to COSEA’s calls for full disclosure of wages, financial statements and so on, it also encountered refusals to cooperate from the Congregation for the Causes of Saints, which claimed not to have documents showing how much the 450 postulators — the officials who prepare and make the case for sainthood — charged for their services. The average cost of a canonization, says Nuzzi, is 500,000 euros, to cover costs of the many experts and lawyers who are needed in the process.

In response, the Pope ordered more than 400 accounts in the IOR (the Vatican’s bank) linked to the postulators to be frozen, and an investigation was launched into the accounting practices that lasted, says Nuzzi, many months. But he does not record what changes were made as a result of the investigation. Nor does he claim that there was corruption, although he alleges that the 20 per cent of every canonization cost after expenses was not going, as it should, to a fund to assist poor dioceses.

Peter’s Pence

Another chapter in the Nuzzi is dedicated to Peter’s Pence, the annual collection made around the world to assist the work of the Pope and the Curia. Nuzzi claims that “the Pope was able to ascertain that the expenses of the Curia were paid for by money that was supposed to go to the poor”. But this assumes that Peter’s Pence is intended solely for papal charities, which it has never exclusively been.

In a statement yesterday Father Lombardi said: “The pope’s works of charity for the poor certainly are an essential aim (of the collection), but it obviously is not the intention of the faithful (who donate) to rule out the pope evaluating for himself the needs and the ways of responding to them in the light of his service for the good of the universal church.”

Peter’s Pence has always been used to in the past, as now, to cover the Vatican’s annual deficits. In 2013, Nuzzi says, 67 per cent of the fund was spent on the Curia. “For every euro that finds its way to the Holy Father, barely 20 cents end up in actual projects to help the poor”, he says.

This was precisely why Pope Francis created the Secretariat for the Economy — to ensure that the Vatican cut its costs and lived within its means, so that the poor would benefit. In December 2013, COSEA refused to sign off on the Vatican departments’ budgets, which would require approval by the Secretariat for the Economy.

Cardinal Pell in July 2014 announced a “new economic framework” implementing new accounting procedures, as well as cost-cutting measures, and said he hoped to eliminate the deficit within a few years.

Tax-free cigars

Another issue, dealt with in detail in Fittipaldi’s Avarice, is the way the Vatican’s tax-free shops and services (a petrol station, supermarket, and tobacco shop) generate tens of millions of euros in income for the Vatican City government, or Governorate, by selling tax-exempted products at low prices. Even though, in theory, these are for the sole use of Vatican residents and employees, the numbers show that many are being bought by non-residents and sold on the open market.

Although, as John Allen says, “little of this will come as news for old Rome hands”, Nuzzi makes a good case for the need of reform in this area. He produces evidence of a cigarette supplier to Vatican listing its sales targets with bonuses, plus payments to introduce particular brands (as the conclave was getting under way in March 2013, the Governorate was agreeing to promote and merchandise Philip Morris cigarettes for a fee of 12,000 euros). He noted that this was now being looked at, “but today, almost three years since beginning of Francis’s pontificate, his reform of the Governorate has still not taken effect”.

Property and pensions

Another area for scrutiny by COSEA was the Vatican’s real-estate holdings. Nuzzi’s documents show that rental properties were being massively under-valued, with peppercorn rents because residents have been able to cut deals.

Many of the beneficiaries of these deals are senior Vatican officials, including curial cardinals who enjoy elegant and spacious properties in the heart of Rome. Again, this will not come as news — although it certainly raises the issue of how Vatican officials are living out their commitment to evangelical simplicity. And there is certainly plenty of evidence that mismanagement of buildings produces what Nuzzi calls “waste, nepotism, and outright scandals”.

Nuzzi also hones in on the black hole in the Vatican’s pension fund — an issue facing most European states — but does not mention that this, too, is being dealt with by Pell’s Secretariat.

The case for reform

Ultimately, today’s books show little more than why the cardinals, in electing Francis, wanted him to get to grips with the Vatican’s dysfunctions. It illuminates the challenges he faced, and continues to face, in modernizing an apparatus that is long accustomed to jealously guarding its privileges and autonomies.

Nuzzi’s book in particular portrays an old guard fighting back hard against Francis’s reformers — a battle that still goes on, although there is little doubt about the direction of travel. The Vatican is slowly being brought up to international standards of accountancy and management. Malpractices and dysfunctions are being rooted out.

Nuzzi’s book makes a powerful case for reform — but it’s the case which Pope Francis himself made back in 2013, and which is leading to current changes.

Austen Ivereigh is coordinator and co-founder of Catholic Voices in the UK. This article first appeared on its website.

- See more at: http://www.mercatornet.com/articles/view/vatileaks-2-corruption-cronyism-and-mismanagement/17208#sthash.Cv4cM2eE.dpuf

There’s nothing like a Vatican scandal to spice up an editor’s front page, even if the scandal is not new, and even if it is not quite as shocking as headlines suggest. That seems to be the case with the latest “Vatileaks” affair centering on two books published in Italy a couple of weeks ago and based on leaked documents about mismanagement of the Holy See’s finances.

As you see, we did not rush into the kerfuffle created by Gianluigi Nuzzi’s Merchants in the Temple and Emiliano Fittipaldi’s Avarice, the most sensational part of which was the arrest of a priest who had a role in a task force reviewing the Vatican’s finances. There was no need, as the suggested reforms had already been set in motion by the Pope at the beginning of last year.

The books are, as Austen Ivereigh points out, mainly of historical interest, giving supposedly juicy details of what was going amiss rather than how things are done now. For those who care about the Catholic Church and want to understand what Pope Francis wants to reform, Austen’s article probably tells you as much as you want to know.