The position of the lawyers of Futura and Optimum was detailed in a reply the sent to the Times of Malta on December 14, 2019, following an article about the case.
The lawyers say, “Despite IOR’s allegations about a lack of transparency, the details of the transaction were indicated by our clients to IOR before the execution of the investment.”
Futura claims that the IOR and its investment committee had been offered the opportunity to invest €20.4 million directly in a non-performing loan or to wait for the sell out of the building to run its course to recover the full amount of the loan eventually.
“This was a risky and reputationally problematic instrument,” the IOR, the lawyers continued, so they decided not to invest in the non-performing loan. “since it deemed that
Instead, the IOR preferred to acquire the asset once it was cleared of risk, that is, when bankruptcy had been deactivated, and then to invest in a cleaned-up asset.
This choice, the lawyers argue, required third parties, and, naturally, the price of the asset without debt is much higher than the non-performing loan.
According to the Maltese lawyers, “[T]he truth is that IOR defaulted on its undisputable contractual obligations and has been trying in every possible way to find legal ground in order to avoid the inevitable and severe consequences of this.”
The lawyers also pointed the finger at the new IOR’s management. They underscored that, after the unexpected renunciation of Benedict XVI, the Institute had experienced a series of changes, with the change of two presidents of the Board of Superintendence from 2013 to today, two general directors and most senior officials, as well as many members of the Cardinals' commission.
“New management launched a scathing critique of the previous management of the Institute and, particularly, the former DG Paolo Cipriani and his deputy Massimo Tulli, against whom the IOR has brought legal proceedings before the Vatican Tribunal and in Italy,” the Futura and Optimum lawyers wrote.
It is worth mentioning that a Vatican court has sentenced Cipriani and Tulli for mismanagement, and the appeal process is ongoing.
The first instance sentence is, however, food for thought. The financial operations of the Institute of Religious Works had also been praised in the first report of MONEYVAL, released in 2012. The same report said that the review of customers had already been started.
Cipriani and Tulli resigned in July 2013, to allow the Institute to better defend itself in a process involving an APSA Vatican official. After their resignation, the IOR hired the Promontory Financial Group’s highly expensive external consultants, who completed a review already underway and well advanced.
There is more.
The last balance sheet signed by the old IOR management, referring to 2012, bore assets of 86.6 million euros, a figure that has not been reached anymore.
Many investments have been abandoned. Still, the IOR’s investment procedures required each transaction to be examined by the Investment Committee, where the chairman of the Board of Superintendence sometimes sat.
So if the operations were all in surplus, how can the two IOR executives be accused of bad management? And if the higher authorities scrutinized every activity, how could responsibility for any mismanagement fall solely on the two former executives?
The statements of Futura’s lawyers thus risk shedding light on the fact that the IOR was unable to maintain the investments of the previous management and that divesting them caused significant damage to several different interests, including the IOR’s own.
Everything will have to be demonstrated with the process, but this is indeed the impression one gets from it.
Futura’s lawyers went even heavier. “The Institute’s real goal,” they wrote, “is not to protect its investment. On the contrary, our client contends that, through its actions, not least its refusal to honour a €24 million residual capital commitment pivotal in the development of this major real estate project, IOR is consciously putting the Hungarian investment at risk, to strengthen its allegations of mismanagement against Cipriani and Tulli.”
They concluded: “It is, to say the least, unfortunate, that our clients have ended up in the crossfire between various factions within IOR, with the Institute blithely unconcerned about the reputation of our clients, the success of its investment and the rights of other third-party investors in the same project, which have nothing to do with the ongoing dispute! [sic]”
These disputes play into and out of two other cases, which we will also scrutinize in this series of three pieces on Vatican finances.
One of the other cases is the purchase by the Vatican Secretariat of State of a prestigious property on Sloane Avenue in London. This purchase is at the center of a dispute that led to the suspension of five Vatican officials: four of them formerly in Secretariat of State, and one of them at the Financial Intelligence Authority. All of them were removed from their positions without any formal charges ever being brought against any of them, and indeed before the investigations were even finished.
This is a dispute that goes beyond the Institute for Works of Religion and is not only a financial scandal but also an institutional problem.
The third case is the discussions around the Vatican investments, which are closely connected with the Malta and Sloane Avenue issues.
The Malta, Sloane Avenue, and general administrative matters all point to a single, central issue, which has become even more pressing today in times of economic crisis due to the coronavirus: how does the Vatican support itself?
1 – continue
(first of a series of 3 pieces on the Vatican financial situation)