Merchants in the Temple (30 page)

Authors: Gianluigi Nuzzi

BOOK: Merchants in the Temple

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âThe McKinsey consultant's questions also touched on other issues, such as expenses for the papal nunciatures: “Does the 5.5 million in special expenses also include the cost of purchasing the buildings of the nunciatures (for example, of the Russian Nunciature)? All the buildings of the nunciatures are held by APSA at the cost of one euro. How does this work from an accounting perspective if consideration is given to the amounts the Secretariat spends to purchase real estate? Was this another donation to the benefit of APSA? What happens when the property is sold, who gets the profits? Why do the names of the accounts for the âPeter's Pence Fund' vary according to the institution that holds them (for example, in 2012 a 20-million-euro account is referred to as âPeter's Pence'; a 264-million account is called âSecretariat of State'; a 95-million euro account is given yet another name)?”

4. Handcuffs in the Vatican

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âAccording to a memo of October 23, 2013, from department head Paolo Mennini to Cardinal Calcagno, the road to APSA's becoming a central bank began in 1940 when: “In a letter of June 10, the then delegate of the âspecial section,' Bernardino Nogara, requestedâthrough the papal nunzio to Washington, Monsignor Cicognaniâand obtainedâthanks to the authorization of the Ministry of the Treasury of the United Statesâpermission to open a custodial account for the gold reserves of the special section that had previously been deposited in London. The processing of the gold transactions was handled by a commercial bank, JPMorgan of New York. On February 15, 1954, the Federal Reserve Bank denied APSA's request to open an account in US dollars, since Fed policies only allowed that facility for central banks. In letters of March 2, 1976, and March 8, 1976, the Federal Reserve Bank, following express approval by President Volcker and the Board of Governors of the Federal Reserve System, allowed APSA to open an account in US dollars with âfull account facilities,' including the possibility of investments and custody of stocks. Attached to the letters were the terms of treatment and operability reserved exclusively for Central Banks.” With regard to the International Regulations Bank, “APSA sold the physical gold at the bank, while keeping its deposit active, and currently maintains a bank account in US dollars.” Relations with the Bank of England go back to October 2, 1989, when APSA, “wrote to the Bank of England requesting the possibility of opening a gold custodial account as generally accorded to all central banks, indicating as a reference the relationship it already enjoyed with the Federal Reserve Bank of New York, the International Relations Bank in Basel, and the World Bank in Washington. The reply of the Bank of England, dated November 2, 1989, granted APSA the right to open a gold custodial account and a bank account in sterling pounds, attaching the relative terms and conditions. Recently the bank has sent us the updated conditions that regulate access of central banks to inspection of their physical deposit of the gold bars that they own, reiterating its recognition of this Department's status as a central bank.”

5. The Sins and Vices of the Curia

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âThe document goes on to say: “EY recommends the following actions to improve oversight and reduce the operative and/or economic risks of the commercial activities:

â¢ With regard to buyer's cards: review the policy and the requirements for issuing the cards; verify the status of the temporary cards; regulate the limits on use.

â¢ With regard to the sub-contracted operators/contracts: agreement for a temporary extension until a new partnership strategy and reliable procurement process have been defined. The commercial activities should address their attention to revenue and the generation of profit for basic supplies [in other words, without going overboard]. For this purpose, specific actions have been inserted for each activity:

â¢ Supermarket: limit customer targets and reduce the assortment of products; also, assess an alternate path for the supermarket.

â¢ Fuel: limit target customers; also, assess the number and position of sales points and consider the partnership with a third party.

â¢ Pharmacy: limit customer targets and reduce the assortment of products.

â¢ Clothing and Electronics: limit customer target and assortment of products; in the long term, the activity can be suspended.

â¢ Tobacco: limit customer target, raise prices (bring Vatican prices to the level of Italian prices); in the long term the activity can be suspended.

â¢ Fragrance Shop: raise prices (bring Vatican prices to the level of Italian prices), limit customer target and establish maximum amounts card-holders can buy; in the long term, the activity can be suspended.”

6. The Immense Real Estate Holdings of the Vatican

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âThe letter that Monsignor ViganÃ² wrote to Pope Benedict XVI, defending his actions and criticizing Secretary of State Bertone, is an eloquent document of the dramatic period I am describing: “
Most Holy Father
, I find myself constrained to make recourse to Your Holiness because of an incomprehensible and serious situation affecting the governance of the Governorate and me personallyÂ â¦ My transfer from the Governorate in this moment would cause deep dismay and discouragement among those who believed that it was possible to clean up the many situations of corruption and abuse of power that have long been rooted in the management of various departmentsÂ â¦ I place in the hands of Your Holiness this letter, which I addressed to His Eminence the Cardinal Secretary of State, so that you may dispose of it in accordance with your august will, having as my only desire the good of the Holy Church of Christ. With sincere sentiments of profound veneration, the most devoted son of Your Holiness.” A few days later, ViganÃ² would deliver to Pope Benedict XVI in person a confidential note describing his actions. Here is an excerpt from that note: “When I accepted the assignment at the Governorate on July 16, 2009, I was well aware of the risks I would encounter, but I never thought I would find myself facing such a disastrous situation. I mentioned this on several occasions to the Cardinal Secretary of State, pointing out that I would not be able to manage through my own forces alone: I needed his constant support. The financial situation of the Governorate, already gravely debilitated by the international crisis, had suffered losses of more than 50â60 percent, also because of the incompetence of the persons who administered it. To remedy the situation, the Cardinal President has assigned the management of two State funds to a Finance and Management Committee, consisting of some major bankers, who ended up acting more for their own interests than for ours. For example, in December 2009, in a single operation they made us lose two and a half million dollars. I reported this to the Secretary of State and to the Prefecture of Economic Affairs, which considered the very existence of this committee to be illegal anyway. Through my constant participation in the meetings, I tried to contain the action of these bankers, with whom I often had to disagree necessarily. More about the conduct of this committee can be related to you by Mr. Gotti Tedeschi, who was a member until his appointment to the IOR, and he is well aware of how much I tried to keep its conduct under control.”

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âThe document forwarded by Cardinal Calcagno highlights the gradual decline in APSA's power: “Consequently attention should be drawn to the gradual erosion and dilution of the institutional role of APSA, from which many duties have been removed, but even more, which has had (and will continue to have) cognizance of various realities gradually emerging in the Holy See that rob APSA of its administrative duties (art. 172 of
Pastor Bonus
). All of this has inevitably diminished the power of the Dicastery in those areas that could be granted to it as financial âpiazzas' and, above all, it has opened up areas of administrative management that received practically a waiver from any form of oversight and that at times were the source of occasions of âhindrance' with investments also outside of the IOR.”

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