The Pope’s Corruption Problems
The reform-minded Francis hopes the upcoming trial of one of his top Cardinals will show he’s serious about cleaning up the Vatican’s finances. New information indicates that the troubles may boomerang back onto the pontiff himself.
The biggest financial criminal trial in the history of the Catholic Church, scheduled to restart October 5 in a makeshift courtroom in the Vatican Museums, has been carefully positioned as a critical moment for reform-minded Pope Francis. It’s a chance for him to signal that no one is above the law, and he has a two-year investigation, a 487-page indictment and charges against a once-untouchable cardinal to back it up. So far, so good, at least in terms of a branding exercise, as the world’s biggest media outlets breathlessly declare it a “landmark fraud and corruption trial” and the Vatican’s “trial of the century.”
Behind the scenes, though, this case—a soap opera in clerical robes, complete with allegations of fraud, scandal and nepotism—has a real chance to boomerang back on Francis. Forbes has spoken with dozens of Vatican sources over the past few weeks, and what emerges is a striking counter-narrative—a continuation of the self-dealing, favoritism and lack of due process that leads all the way up to the Vatican’s absolute monarch, the pope himself.
Among the new revelations:
The pope received a damning briefing about the cardinal now on trial years before he was indicted, yet let him remain in his position.
Francis approved the raid that suddenly pitted the Vatican’s prosecutors against its financial watchdog.
An outside director says a meeting with Francis to warn him about the approaching legal catastrophe was blocked by the pope’s personal secretary.
Insiders use the term “Friends of Francis” to explain why some Vatican officials are being prosecuted and others aren’t.
The Pope's Dossier Problem
The trial narrative starts in a former Harrods showroom in London’s affluent Chelsea neighborhood. The church hoped to convert it into 49 luxury apartments—but the murky €350 million investment turned into a €100 million loss for the Vatican, much of it donations from the faithful set aside for the pope to distribute to charity. Connected fixers and middlemen, some of who are defendants in the current trail, collected tens of millions.
The chief defendant, 73-year-old Cardinal Angelo Becciu, had until 2019 been one of the city-state’s most powerful clerics. As sostituto (substitute), Becciu directed the Vatican’s day-to-day management—and he was the only official who did not require an appointment to meet with the pope.
Things changed after the pope’s blessing to raid his auditors. Well-intentioned or not, this move dealt a major blow to the Vatican’s financial reforms.
The indictment places the major responsibility on him for the London fiasco and also accuses him of nepotism by funneling €825,000 to his brother’s Sardinian charity and €575,000 to a businesswoman (who was also indicted) and her Slovenia-based company that was hired as a “security consultant”; prosecutors contend that about half that money was spent on luxury designer goods and lavish vacations. In theory, the indictments of a once-trusted close ally offered the possibility of historic Vatican accountability. (Becciu and the businesswoman adamantly deny all allegations.)
But the Vatican is a sovereign state, and the pope is a non-hereditary monarch with absolute power. Francis retains unrestricted authority to intervene in criminal and civil investigations or trials, change or waive existing rules or procedures, even block senior clerics from testifying. While this trial marks the first time in Vatican history that a cardinal will be tried by lay judges and prosecutors, that judge and those prosecutors work for the Vatican and the pope.
And it’s not so simple for Pope Francis to distance himself from Cardinal Becciu despite having removed him from his post and stripped him of his rights as a cardinal a year ago. According to a former Vatican official in a position to know what transpired, Pope Francis directly received a secret dossier some five years ago that supposedly set out “incontrovertible” proof about Cardinal Becciu diverting more than $2 million in church funds. “His Holiness closed the file; that was the end of it,” the ex-official told Forbes. The information, that source says, was never passed to the Vatican’s version of a public prosecutor, the Promoter of Justice. And Becciu then continued overseeing the day-to-day operations of the Vatican.
Francis strongly intervened in the case through the investigation that produced the current indictment. In one instance, he gave an extraordinary carte blanche to the prosecutor, Gian Piero Milano. It allowed Milano, a former ecclesiastical law professor, to unilaterally order any searches and seizures without “regard to the rules in force.” It also freed the prosecutors from routine oversight. That left the defense without any recourse for contesting the evidence accumulated during the investigation, a right they would have had in Italy and most of Europe.
The result, emboldened by the pope, was a series of unprecedented raids in late 2019 on the secretary of state’s offices and the Supervisory and Financial Intelligence Authority, the Vatican’s financial watchdog, better known by its Italian acronym, AIF. The latter move was particularly startling. Francis’ traditionalist predecessor, Pope Benedict XVI, under intense pressure from European financial regulators, created the AIF and issued the Vatican’s first law against money laundering in 2010. Francis, who ascended to the papacy with a reformer’s agenda, quickly found himself in the middle of unraveling that progress.
The Pope's "James Bond" Problem
For most of the past decade, the key person in the Vatican’s attempt to clean up its own act has been René Brülhart, a Swiss lawyer and anti–money laundering expert appointed by Benedict. Brülhart had already taken on one “mission impossible,” overseeing Liechtenstein’s Financial Intelligence Unit. Colleagues at the Egmont Group, a worldwide umbrella organization that seeks to root out corruption, hailed Brülhart’s reforms, as he removed the notorious tax haven from global financial blacklists. (He later joined the group as vice chair.)
The Vatican, similarly, was a small principality in which entrenched power often worked to undermine reforms. Over seven years, Brülhart established the AIF as a vital internal watchdog that earned praise from European peers. The business press dubbed him “the James Bond of the financial world.” And as the London property deal went south, the AIF began conducting a multi-jurisdictional investigation trying to follow the money.
Things changed after the pope’s blessing to raid his auditors. Well-intentioned or not, this move dealt a major blow to the Vatican’s financial reforms. The global consortium of national auditors suspended the Vatican’s AIF over concerns the raid had compromised confidential information about ongoing criminal investigations.
Seven weeks later, Brülhart surprised everyone by resigning. Two members of his independent board followed. Forbes has learned that one of them, Marc Odendall, a retired Swiss and German investment banker turned philanthropist, quit only after a meeting with the pope was quashed. Concerned that the AIF had been transformed into an “empty shell,” Odendall reached out to Cardinal Pietro Parolin, the Vatican’s secretary of state, whom Odendall says arranged the meeting. But the pope’s gatekeeper, Archbishop Georg Gänswein, blocked it. “I wanted to give [the pope] a direct fraternal and professional warning of the consequences of his action,” Odendall tells Forbes.
The case against Brülhart smacks of personal payback—and that’s a problem for Pope Francis. Multiple sources say that Brülhart made powerful enemies with his by-the-books Swiss approach.
The stakes rose this summer when those indicted by the prosecutors included Brülhart himself. It was a shocking move, considering that Brülhart had been considered the Vatican’s biggest financial-reform asset. The thrust of the charge against him is that he violated “basic rules governing supervision” by allowing the London investments to proceed. Yet Brülhart’s intelligence unit had oversight only of the Vatican Bank, not the secretary of state’s office from which the entire deal was hatched, executed and supervised. And while Brülhart could lead the overall planning and goals for the financial intelligence unit, he had no executive power and could not approve any Vatican transaction or money transfer.
The case against Brülhart smacks of personal payback—and that’s a problem for Pope Francis. Multiple sources, all of whom requested anonymity for fear of drawing the enmity of church leadership, say Brülhart made powerful enemies among the 825 citizens in the insular city-state with his by-the-books Swiss
approach. Clerics in a 2,000-year-old institution were instinctively resistant to regulations created by financial bureaucrats in Brussels. In a place where many believed that rules could be bent and favors traded as a matter of right, Brülhart was judged to be inflexible.
His James Bond image, burnished by his matinee-idol looks, impeccable slim-cut suits and mysterious, press-shy air, also did him no favors in the Vatican. He was a minor celebrity in a place where only the pope is supposed to be a star. According to insiders, Vatican traditionalists regarded Brülhart as a newcomer who was too full of himself. They also noted that European regulators had repeatedly lavished praise on his efforts at reforming the Vatican Bank, while simultaneously criticizing Vatican prosecutors—the same ones who have now charged him—for failing to take sufficient action on the suspicious activity that his AIF forwarded to them.
An Italian attorney who worked with one of the prosecutors before he joined the Vatican tells Forbes that in his conversations with his former colleague, “they thought the Brussels regulators were the types who got along with Brülhart—they were cut from the same cloth.” One prosecutor derisively referred to Brülhart as “the golden boy.” Evidently, in the months preceding the indictments, on at least one occasion there was a heated argument inside the Office of the Promoter of Justice over whether to indict Brülhart. Multiple sources say that a report from the European consortium this past June—which lauded the Vatican’s progress in transparency but criticized its prosecutors as “insufficiently resourced” and the London deal as a “red flag”—sparked fury in the prosecutor’s office. A month later, Brülhart was indicted.
Brülhart would not comment about the case against him, but his lawyer has told the press that he intends to fight the charges. Meanwhile, the Vatican press office ignored numerous questions and requests for interviews from Forbes for this article. But Odendall, the AIF director who resigned after being rebuffed from meeting with the pope, dismisses the indictment as “probably personal revenge” from the lead prosecutor, Gian Piero Milano, with whom Brülhart had “a difficult and strained relationship.” As Odendall sees it, even if Brülhart beats the charges, the prosecutor “will have successfully banned and tarnished the reputation of an adversary. No downside.
“The person responsible for this is the pope,” Odendall adds. “He has made the wrong decisions and appointed the wrong people, all the while pretending he is fighting against bad people.”
The Pope's "Friends of Francis" Problem
The pope’s association with the case also arises in connection with Gianluigi Torzi, one of the Italian businessmen who brokered the London property deal. The prosecutor charges that Torzi managed to insert a last-minute contract provision that gave him control of the London property and he used that to extort €15 million, which he denies. And while the prosecutor says the pontiff didn’t personally authorize any payments, Francis has attended at least two meetings in which Torzi claims he discussed the final terms of the investment deal.
Cardinal Parolin, whom Francis appointed secretary of state in 2013, has overseen the London investments since the beginning. He approved the Torzi contract in which the trick clause was allegedly added. He was also involved in efforts to repay the loans and may have approved one transaction that Vatican prosecutors say was “fraudulent” and which he personally considered “opaque.” Archbishop Edgar Peña Parra, the cleric who replaced Cardinal Becciu in 2018, also oversaw the London investment and arranged Torzi’s meeting with the pontiff. Monsignor Alberto Perlasca, the chief of the administrative office for the secretary of state, was also amid the flurry of contracts, principals and the ever-changing list of affiliated offshore companies connected to the London deal.
“The person responsible for this is the pope,” Marc Odendall says. “He has made the wrong decisions and appointed the wrong people, all the while pretending he is fighting against bad people.”
None of those Ps—not Parolin, not Peña Parra, not Perlasca—was indicted. In a related case in the United Kingdom, the Vatican prosecutor contended that those three clerics were merely gullible dupes who were ultimately deceived by Becciu and others.
But this is where the pope’s ultimate authority creates a haze that might threaten his reputation. Vatican insiders often look at decisions in this area through what they call a “Friends of Francis” lens. Was Becciu the sole bad operator at the top? Or is it just a coincidence that Becciu had already lost favor with the pope by the time the prosecutor’s investigation got underway, while those excused for gullibility happen to be the ones still in Francis’ good favor? “For many observers, it’s tempting to reach that conclusion,” says John Allen Jr., a journalist who covers the Vatican. Allen says the fact that Parolin and Peña Parra were so close to the pope would have made them “politically untouchable,” whereas Becciu, who had fallen out with the pontiff, would be considered “expendable.”
This past March, a judge in a U.K. case that involved a Vatican petition to freeze Torzi’s substantial bank accounts noted that when the Vatican prosecutor started his arguments, he identified Perlasca as one of three key people in an “ongoing, orchestrated conspiracy.” Five months later, the same prosecutor contended that Perlasca had been “kept in the dark about the way in which the transaction was to be structured.” Wrote the judge: “I find that suggestion . . . difficult to accept.” As for Peña Parra, the judge observed, “I find it difficult to accept any suggestion that Archbishop Peña Parra would have signed such a document without familiarizing himself with the documents . . . given the apparent significance of the transaction and the substantial sums of money involved.” And regarding Parolin, the jurist was incredulous that he “must have had the wool pulled completely over his eyes.”
The judge concluded that the Vatican’s arguments were “unsupported by credible evidence” and involved egregious and appalling “material nondisclosures and misrepresentations.”
It would be logical to assume that this could all be cleared up at the Vatican trial. Don’t hold your breath. The Vatican does not give defendants the automatic right to call witnesses. The magistrates overseeing the trial will decide who can testify, with an eye, insiders acknowledge, on what the pope might think—and whether they are Friends of Francis.