Vatican In Chaos After Butler Arrested For Leaks

by THE ASSOCIATED PRESS

VATICAN CITY May 27, 2012, 01:06 pm ET

VATICAN CITY (AP) — The Vatican's investigation into the source of leaked documents has yielded its first target with the arrest of the pope's butler, but the investigation is continuing into a scandal that has embarrassed the Holy See by revealing evidence of internal power struggles, intrigue and corruption in the highest levels of the Catholic Church governance.

The detention of butler Paolo Gabriele, one of the few members of the papal household, capped one of the most convulsive weeks in recent Vatican history and threw the Holy See into chaos as it enters a critical phase in its efforts to show the world it's serious about complying with international norms on financial transparency.

The tumult began with the publication last weekend of a book of leaked Vatican documents including correspondence, notes and memos to the pope and his private secretary. It peaked with the inglorious ouster on Thursday of the president of the Vatican bank. And it concluded with confirmation Saturday that Pope Benedict XVI's own butler was the alleged mole feeding documents to Italian journalists in an apparent bid to discredit the pontiff's No. 2.

"If you wrote this in fiction you wouldn't believe it," said Carl Anderson, a member of the board of the Vatican bank which contributed to the whirlwind with its no-confidence vote in its president, Ettore Gotti Tedeschi. "No editor would let you put it in a novel."

The bank, known as the Institute for Religious Works, issued a scathing denunciation of Gotti Tedeschi in a memorandum obtained Saturday by The Associated Press. In it the bank, or IOR by its Italian initials, explained its reasons for ousting Gotti Tedeschi: he routinely missed board meetings, failed to do his job, failed to defend the bank, polarized its personnel and displayed "progressively erratic personal behavior."

Gotti Tedeschi was also accused by the board of leaking documents himself: The IOR memorandum said he "failed to provide any formal explanation for the dissemination of documents last known" to be in his possession.

In an interview with the AP, Anderson said the latter accusation was independent of the broader "Vatileaks" scandal that has rocked the Vatican for months. But he stressed: "It is not an insignificant issue."

Gotti Tedeschi hasn't commented publicly about his ouster or the reasons behind it, saying he has too much admiration for the pope to do so. He also hasn't been arrested, avoiding the fate that befell Gabriele.

The 46-year-old father of three has been in Vatican detention since Wednesday after Vatican investigators discovered Holy See documents in his apartment. The Vatican spokesman, the Rev. Federico Lombardi, said Gabriele had met with his lawyers and that the investigation was taking its course through the Vatican's judicial system.

Gabriele, the pope's personal butler since 2006, has often been seen by Benedict's side in public, riding in the front seat of the pope's open-air jeep during Wednesday general audiences or shielding the pontiff from the rain. In private, he is a member of the small papal household that also includes the pontiff's private secretaries and four consecrated women who care for the papal apartment.

Lombardi said Gabriele's detention marked a sad development for all Vatican staff. "Everyone knows him in the Vatican, and there's certainly surprise and pain, and great affection for his beloved family," the spokesman said.

The "Vatileaks" scandal has seriously embarrassed the Vatican at a time when it is trying to show the world financial community that it has turned a page and shed its reputation as a scandal plagued tax haven.

Vatican documents leaked to the media in recent months have undermined that effort, alleging corruption in Vatican finance as well as internal bickering over the Holy See's efforts to comply with international norms to fight money laundering and terror financing.

The Vatican in July will learn if it has complied with the financial transparency criteria of a Council of Europe committee, Moneyval — a key step in its efforts to get on the so-called "white list" of countries that share financial information to fight tax evasion.

Anderson acknowleged that the events of the last week certainly haven't cast the Holy See in the best light. And he said the bank's board appreciated that the ouster of its president just weeks before the expected Moneyval decision could give the committee pause.

"The board considered that concern and decided that all things considered it was best to take the action at this time," Anderson said. "These steps were taken to increase the IOR's position vis-a-vis Moneyval."

The Vatileaks scandal began in January when Italian journalist Gianluigi Nuzzi broadcast letters from the former No. 2 Vatican administrator to the pope in which he begged not to be transferred for having exposed alleged corruption that cost the Holy See millions of euros in higher contract prices. The prelate, Monsignor Carlo Maria Vigano, is now the Vatican's U.S. ambassador.

Nuzzi, author of "Vatican SpA," a 2009 volume laying out shady dealings of the Vatican bank based on leaked documents, last weekend published "His Holiness," which presented a trove of other documents including personal correspondence to the pope and his secretary — many of them painting Benedict’s No. 2, Cardinal Tarcisio Bertone, in a negative light.

Nuzzi has said he was offered the documents by multiple Vatican sources and insisted he didn't pay a cent € to any of them.

Gabriele was in Vatican custody and unavailable for comment. No known motive has come to light as to why Gabriele, if he is found to be the key mole, might have passed on the documents. Nuzzi declined to comment Saturday on whether Gabriele was among his sources.

Bertone, 77, has been blamed for a series of gaffes and management problems that have plagued Benedict's papacy and, according to the leaked documents, generated a not inconsiderable amount of ill will directed at him from other Vatican officials.

"For some time and in various parts of the church, criticism even by the faithful has been growing about the lack of coordination and confusion that reign at its center," Cardinal Paolo Sardi, the former No. 2 official in the Vatican secretariat of state, wrote to the pope in 2009, according to the letter cited in "His Holiness."

Anderson, who heads the Knights of Columbus, a major U.S. lay Catholic organization, said he was certain the Holy See would weather the storm and that the Vatican bank, at least, could move forward under a new leader with solid banking credentials as well as a desire to show off the bank's transparency.

"I hope this will be the beginning of a new chapter for the IOR and part of that chapter will be restoring the public image of the IOR," he told AP. "I think we have a good story to tell."

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Vatican bank chief ousted with no-confidence vote, failed to do job Vatican says

Andrew Medichini/Associated Press - ** FILE ** In this Dec. 21, 2011, file photo, Ettore Gotti Tedeschi, head of the Vatican bank I.O.R., leaves after greeting Pope Benedict XVI at the end of a weekly general audience at the Vatican. Gotti Tedeschi was ousted after a no-confidence vote of the Vatican bank I.O.R. governing body on Thursday, May 24, 2012.

By Associated Press, Published: May 24

VATICAN CITY — The president of the Vatican bank has effectively been ousted after receiving a unanimous vote of no-confidence from bank overseers for having leaked documents and failed to do his job at a critical time in the Holy See’s efforts to show financial transparency, the Vatican and officials said.

Ettore Gotti Tedeschi has been a polarizing figure ever since he was named president of the bank, known as the Institute for Religious Works, or IOR, in 2009. He is under investigation for alleged money laundering by Italian magistrates, but the investigation isn’t believed to have factored into the decision since the Vatican considers the probe to be motivated by outside political interests.

The Vatican said in a statement Thursday that the vote was taken because of Gotti Tedeschi’s failure to fulfill the “primary functions of his office.” He himself has told prosecutors that he barely paid attention to the bank’s works, showing up only two days a week while tending to his primary position as head of Spain’s Banco Santander’s Italian unit in Milan.

In addition, Gotti Tedeschi was found to have leaked confidential documents to serve his personal and political interests, according to a person familiar with the Vatican’s investigation. The person requested anonymity because he was not authorized to speak about the matter.

The Vatican is in the midst of a scandal over leaked documents and has begun a criminal investigation into the source of the leaks, as well as appointed a commission of cardinals to get to the bottom of it.

In the statement, the Vatican said the board had grown increasingly concerned about the governance of the bank and that the situation had deteriorated recently.

During a regularly scheduled board meeting Thursday, the five superintendents, who include the former No. 2 at Deutsche Bank, Ronaldo Hermann Schmitz, and Carl Anderson, head of the Knights of Columbus, a major U.S. Catholic fundraising organization, unanimously adopted a no-confidence motion and recommended that Gotti Tedeschi’s mandate be terminated.

His fate isn’t final. On Friday the cardinals who sit on the IOR’s governing council are to meet to consider the board’s decision. While it wasn’t clear if they could ignore the no-confidence vote, the Vatican made clear the search was already on for a replacement.

“The council is now looking forward to search for a new and excellent president who will help the institute rebuild relationships between the institute and the financial community based on mutual respect based on internationally accepted banking standards,” the IOR said.

The no-confidence vote comes at a critical time for the Holy See in its efforts to shed the IOR’s image as a secretive tax haven battered by years of scandal.

The Holy See is heading into a July meeting of Moneyval, a Council of Europe committee that will determine whether it has complied with international norms to fight money laundering and terror financing. Transparency of the IOR’s finances has been one of several criteria that the Moneyval evaluators have investigated.

It wasn’t clear if the timing of Gotti Tedeschi’s ouster was aimed at sending a message to the Moneyval investigators, but just last week the Holy See met with them to discuss the preliminary findings of their report.

Gotti Tedeschi has long painted himself as the symbol of Vatican financial transparency, but the vote Thursday indicated that his primary collaborators on the board had found him to be anything but. He was faulted for not keeping the board of superintendents apprised of the work of the bank, among other failings.

Recently, he raised eyebrows when he made a joke about Hitler, war and economics.

Gotti Tedeschi was a frequent contributor to the Vatican newspaper and went on a very public speaking tour extolling the benefits of a morality-based financial system and citing frequently from the pope’s encyclical on the subject, “Charity in Truth.”

Italian authorities placed Gotti Tedeschi and the IOR’s top manager under investigation in September 2010 and seized €23 ($30 million) from a Vatican bank account at the Rome branch of Credito Artigiano Spa, after the bank informed the Bank of Italy about possible violations of anti-money laundering norms.

Gotti Tedeschi and the Vatican have denied any wrongdoing, calling the investigation a misunderstanding. No charges have been filed, and the money was subsequently released after the Vatican passed a series of measures to combat money laundering and create a financial watchdog authority — key requirements for the Moneyval process.

The Vatican bank was founded in 1942 by Pope Pius XII to manage assets destined for religious or charitable works. Located in a tower just inside the gates of Vatican City, it also manages the pension system for the Vatican’s thousands of employees.

The bank is not open to the public. Depositors are usually limited to Vatican employees, religious orders and people who transfer money for the pope’s charities.

The Vatican bank’s finances have long been shrouded in secrecy. Most famously, it was implicated in a scandal over the collapse of the Banco Ambrosiano in the 1980s in one of Italy’s largest fraud cases. Roberto Calvi, the head of Banco Ambrosiano, was found hanging from Blackfriars Bridge in London in 1982 in circumstances that remain mysterious.

Banco Ambrosiano collapsed following the disappearance of $1.3 billion in loans the bank had made to several dummy companies in Latin America. The Vatican had provided letters of credit for the loans.

While denying any wrongdoing, the Vatican bank agreed to pay $250 million to Ambrosiano’s creditors.

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‘Ratings agencies must be aware of actions’

Photo (Courtesy) http://blog.panorama.it/italia/2010/11/02/ettore-gotti-tedeschi-vi-racconto-lo-ior-senza-segreti/

VATICAN CITY: The head of the Vatican’s bank Ettore Gotti Tedeschi has slammed Standard and Poor’s’ downgrade of nine Eurozone nations, saying ratings agencies be aware of the consequences of their actions.

The head of the Institute for Religious Works, the formal name of the bank, also urged Europe and the United States to jointly work “towards kick starting the economy to regain competitiveness.”

He told Vatican Radio in an interview that ratings agencies “must be more conscious of the consequences” of their evaluation of countries and that they should “explain their actions much better.”

“We have cut the world in two,” Gotti Tedeschi said. “We have created a world of consumers in the West and producers in the East who are not yet consumers.”

S&P, one of the top three global ratings agencies, on Friday cut its long-term ratings on Cyprus, Italy, Portugal and Spain by two notches while Austria, France, Malta, Slovakia and Slovenia were cut one notch

Seven other Eurozone countries had their ratings confirmed. S&P said its actions reflected its view that “the policy initiatives taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the Eurozone.”

On Saturday, the Vatican newspaper l’Osservatore Romano said the decision came at a “time when the markets were showing the faintest signs of improvement ... on public debt,” and branded the “attack” as “suspect” and one with “perfect timing.”

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Vatican Bank mired in laundering scandal

By NICOLE WINFIELD and VICTOR L. SIMPSON - Dec 11, 2010 6:16 AM ET

By The Associated Press

VATICAN CITY (AP) — This is no ordinary bank: The ATMs are in Latin. Priests use a private entrance. A life-size portrait of Pope Benedict XVI hangs on the wall.

Nevertheless, the Institute for Religious Works is a bank, and it's under harsh new scrutiny in a case involving money-laundering allegations that led police to seize euro23 million ($30 million) in Vatican assets in September. Critics say the case shows that the "Vatican Bank" has never shed its penchant for secrecy and scandal.

The Vatican calls the seizure of assets a "misunderstanding" and expresses optimism it will be quickly cleared up. But court documents show that prosecutors say the Vatican Bank deliberately flouted anti-laundering laws "with the aim of hiding the ownership, destination and origin of the capital." The documents also reveal investigators' suspicions that clergy may have acted as fronts for corrupt businessmen and Mafia.

The documents pinpoint two transactions that have not been reported: one in 2009 involving the use of a false name, and another in 2010 in which the Vatican Bank withdrew euro650,000 ($860 million) from an Italian bank account but ignored bank requests to disclose where the money was headed.

The new allegations of financial impropriety could not come at a worse time for the Vatican, already hit by revelations that it sheltered pedophile priests. The corruption probe has given new hope to Holocaust survivors who tried unsuccessfully to sue in the United States, alleging that Nazi loot was stored in the Vatican Bank.

Yet the scandal is hardly the first for the centuries-old bank. In 1986, a Vatican financial adviser died after drinking cyanide-laced coffee in prison. Another was found dangling from a rope under London's Blackfriars Bridge in 1982, his pockets stuffed with money and stones. The incidents blackened the bank's reputation, raised suspicions of ties with the Mafia, and cost the Vatican hundreds of millions of dollars in legal clashes with Italian authorities.

On Sept. 21, financial police seized assets from a Vatican Bank account at the Rome branch of Credito Artigiano SpA. Investigators said the Vatican had failed to furnish information on the origin or destination of the funds as required by Italian law.

The bulk of the money, euro20 million ($26 million), was destined for JP Morgan in Frankfurt, with the remainder going to Banca del Fucino.

Prosecutors alleged the Vatican ignored regulations that foreign banks must communicate to Italian financial authorities where their money has come from. All banks have declined to comment.

In another case, financial police in Sicily said in late October that they uncovered money laundering involving the use of a Vatican Bank account by a priest in Rome whose uncle was convicted of Mafia association.

Authorities say some euro250,000 euros, illegally obtained from the regional government of Sicily for a fish breeding company, was sent to the priest by his father as a "charitable donation," then sent back to Sicily from a Vatican Bank account using a series of home banking operations to make it difficult to trace.

The prosecutors' office stated in court papers last month that while the bank has expressed a "generic and stated will" to conform to international standards, "there is no sign that the institutions of the Catholic church are moving in that direction." It said its investigation had found "exactly the opposite."

Legal waters are murky because of the Vatican's special status as an independent state within Italy. This time, Italian investigators were able to move against the Vatican Bank because the Bank of Italy classifies it as a foreign financial institution operating in Italy. However, in one of the 1980s scandals, prosecutors could not arrest then-bank head Paul Marcinkus, an American archbishop, because Italy's highest court ruled he had immunity.

Marcinkus, who died in 2006 and always proclaimed his innocence, was the inspiration for Francis Ford Coppola's character Archbishop Gilday in "Godfather III."

The Vatican has pledged to comply with EU financial standards and create a watchdog authority. Gianluigi Nuzzi, author of "Vatican SpA," a 2009 book outlining the bank's shady dealings, said it's possible the Vatican is serious about coming clean, but he isn't optimistic.

"I don't trust them," he said. "After the previous big scandals, they said 'we'll change' and they didn't. It's happened too many times."

He said the structure and culture of the institution is such that powerful account-holders can exert pressure on management, and some managers are simply resistant to change.

The list of account-holders is secret, though bank officials say there are some 40,000-45,000 among religious congregations, clergy, Vatican officials and lay people with Vatican connections.

The bank chairman is Ettore Gotti Tedeschi, also chairman of Banco Santander's Italian operations, who was brought in last year to bring the Vatican Bank in line with Italian and international regulations. Gotti Tedeschi has been on a very public speaking tour extolling the benefits of a morality-based financial system.

"He went to sell the new image ... not knowing that inside, the same things were still happening," Nuzzi said. "They continued to do these transfers without the names, not necessarily in bad faith, but out of habit."

It doesn't help that Gotti Tedeschi himself and the bank's No. 2 official, Paolo Cipriani, are under investigation for alleged violations of money-laundering laws. They were both questioned by Rome prosecutors on Sept. 30, although no charges have been filed.

In his testimony, Gotti Tedeschi said he knew next to nothing about the bank's day-to-day operations, noting that he had been on the job less than a year and only works at the bank two full days a week.

According to the prosecutors' interrogation transcripts obtained by AP, Gotti Tedeschi deflected most questions about the suspect transactions to Cipriani. Cipriani in turn said that when the Holy See transferred money without identifying the sender, it was the Vatican's own money, not a client's.

Gotti Tedeschi declined a request for an interview but said by e-mail that he questioned the motivations of prosecutors. In a speech in October, he described a wider plot against the church, decrying "personal attacks on the pope, the facts linked to pedophilia (that) still continue now with the issues that have seen myself involved."

As the Vatican proclaims its innocence, the courts are holding firm. An Italian court has rejected a Vatican appeal to lift the order to seize assets.

The Vatican Bank was founded in 1942 by Pope Pius XII to manage assets destined for religious or charitable works. The bank, located in the tower of Niccolo V, is not open to the public, but people who use it described the layout to the AP.


Top prelates have a special entrance manned by security guards. There are about 100 staffers, 10 bank windows, a basement vault for safe deposit boxes, and ATMs that open in Latin but can be accessed in modern languages. In another concession to modern times, the bank recently began issuing credit cards.

In the scandals two decades ago, Sicilian financier Michele Sindona was appointed by the pope to manage the Vatican's foreign investments. He also brought in Roberto Calvi, a Catholic banker in northern Italy.

Sindona's banking empire collapsed in the mid-1970s and his links to the mob were exposed, sending him to prison and his eventual death from poisoned coffee. Calvi then inherited his role.

Calvi headed the Banco Ambrosiano, which collapsed in 1982 after the disappearance of $1.3 billion in loans made to dummy companies in Latin America. The Vatican had provided letters of credit for the loans.

Calvi was found a short time later hanging from scaffolding on Blackfriars Bridge, his pockets loaded with 11 pounds of bricks and $11,700 in various currencies. After an initial ruling of suicide, murder charges were filed against five people, including a major Mafia figure, but all were acquitted after trial.

While denying wrongdoing, the Vatican Bank paid $250 million to Ambrosiano's creditors.

Both the Calvi and Sindona cases remain unsolved.

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AP reporter Martino Villosio contributed from Rome.
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Vatican Bank Probe Threatens New Scandal for Beleaguered Pope

David Gibson
Religion Reporter

VATICAN CITY -- The head of the Vatican bank is being investigated on suspicion of money laundering, Italian law enforcement officials said on Tuesday, a bad omen for the Catholic Church as it struggles to overcome the scandal of clergy sexual abuse.

Italian authorities said that besides bank chairman Ettore Gotti Tedeschi, chief executive Paolo Cipriani was also a target of the probe. And Italian prosecutors said they have seized $30 million in Vatican assets held in another Italian bank, Credito Artigiano.

Reports in the Italian press said that investigators suspect influential people who reside here in Italy are using the Vatican bank -- which is housed in a huge stone tower behind the Vatican walls -- as a "screen" to hide fraudulent dealings or evade taxes.



The Vatican responded in a strongly worded statement saying it was "perplexed and astonished" at the investigation and was expressing "the maximum confidence in the president and in the chief executive of the IOR" -- the acronym for the bank's formal Italian name, Instituto per le Opere Religiose, or the Institute for Religious Works.

The IOR, which was created during World War II, manages bank accounts for religious orders and Catholic associations and benefits from Vatican offshore status.

But the Vatican bank is perhaps best known for its role in a sinister scandal in the early 1980s while it was under the direction of the late American archbishop, Paul Marcinkus. (The events inspired a plotline in the "Godfather III" movie.)

The IOR eventually paid out more than $240 million to creditors in connection with its role in the fraudulent bankruptcy of Banco Ambrosiano, then Italy's largest private bank.

News of the investigation is certainly unwelcome press for Pope Benedict XVI, who just returned Sunday night from a four-day visit to Britain during which he met with sexual abuse victims and issued his most forthright apologies yet on the abuse crisis, winning him better-than-expected reviews for what was a challenging trip to the largely secular island nation.

Moreover, bank chairman Gotti Tedeschi, a conservative Italian economist with a sterling reputation, was appointed just a year ago to move the IOR "towards greater transparency and better business practices," as Vatican-watcher John Allen put it.

Both executives are accused of violating legislation passed in 2007 that requires banks to disclose information on financial operations.

The revelations also put the spotlight on Gotti Tedeschi, who was an unusually high-profile appointment for a post where discretion and a low profile had been valued, especially in recent years.

For example, in a speech last September just before his appointment as head of the IOR, Gotti Tedeschi, a daily communicant at Mass, argued that beyond the United States' "debt addiction," a main reason for the financial crisis was that people did not follow the Catholic Church's ban on birth control, which in turn led to "the rejection of life and the suppression of childbirth."

Gotti Tedeschi, 65, likes to say that he has five children, "all from the same mother." As a profile last year by Vatican expert Sandro Magister noted, he worked for years in Milan, Italy's financial capital. "He gets up very early in the morning, like a monk," driving his BMW to work, reading the newspapers in his office, then heading to Mass, "every morning, without fail."

He taught financial ethics at the Milan's Sacred Heart University, and his economic thought seems an unusual mixture of conservative and liberal tendencies.

Gotti Tedeschi cites free-market Catholic champions like Americans Michael Novak and Father Robert Sirico as influences, and he likes the work of Friedrich Hayek, Glenn Beck's favorite economist, as well as the "clash of civilizations" thesis of Samuel Huntington.

In 2007 he signed a 13-point manifesto spearheaded by the former leader of Italy's Radical Party which proposed a 20 percent "flat tax," tax credits for health care and education and tax exemption for overtime work, among other things.

Yet he also helped Pope Benedict on his social justice encyclical, "Caritas in Veritate" (Charity in Truth), which has been blasted by conservatives in America for its critiques of capitalism and the financial system. And he believes in "the superiority of a capitalism inspired by Christian morality," and specifically a Catholic morality.

In fact, in his 2004 book, "Money and Paradise: The Global Economy and the Catholic World," Gotti Tedeschi argued that capitalism was born in Italy -- "the home of Catholicism" -- in the 13th century as a result of the writings of Franciscan theologians, and at a time "when Protestantism, to which Max Weber's famous thesis attributes the birth of the 'spirit of capitalism,' was yet to arrive."

Protestantism, he said, was arguably responsible for "defects" in capitalism, such as profiteering and a laissez-faire dedication to "the law of the strongest."

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P.S.
1. Highlights added for emphasis.
2. Signore Ettore Gotti Tedeschi bears a striking resemblance to another financial wizard - Bernie-to Madoff-i.
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