Cardinal Parolin says he arranged controversial hospital loan, Papal Foundation grant

By Ed Condon, JD Flynn

Vatican City, Nov 20, 2019 / 10:26 am

The Vatican Secretary of State told CNA this week that he is responsible for arranging a controversial loan for the purchase of a bankrupt Italian hospital, and that he arranged with Cardinal Donald Wuerl a grant from the U.S.-based Papal Foundation to cover the loan when it could not be repaid.

Cardinal Pietro Parolin told CNA he felt "compelled" to address the matter "in order to put an end to a controversy that takes away time and resources from our service to the Lord, to the Church and to the Pope, and disturbs the conscience of many Catholics."

"The operations involving IDI...are ascribable to myself," Parolin told CNA Nov. 19, while insisting that his actions regarding the IDI were both legal and transparent.

CNA asked Parolin to confirm that he personally had arranged a 2014 loan of 50 million euros from APSA, the Vatican's central bank, to partially fund the purchase of the bankrupt IDI hospital. The cardinal confirmed that he had.

The IDI was purchased in 2015 by a for-profit partnership of the Vatican's Secretariat of State and the religious order that had owned and managed the hospital while it went bankrupt, incurred 800 million euros of debt, and saw some of its former administrators prosecuted and jailed for systematic fraud and embezzlement.

Though Parolin said the arrangement was "carried out with fair intentions and honest means," the APSA loan is likely to draw scrutiny from European banking regulators, as the loan seems to violate 2012 regulatory agreements prohibiting the bank from making commercial loans.

Those agreements were the result of an on-site inspection by Moneyval, the Council of Europe's Committee for combating money laundering and terrorist financing, and legally prohibit APSA from providing services to individuals or taking part in commercial transactions.

CNA also asked Parolin to confirm that he had personally devised a plan with Wuerl to request Papal Foundation funds to cover APSA's bad loan. The cardinal confirmed that he had.

The $25 million grant request was widely understood to be an effort to remove the bad debt from APSA's ledger before it drew attention, after it became obvious that the debt-ridden and insolvent hospital could not repay its loan to the Vatican central bank.

Wuerl, however, told the Papal Foundation board that the funds were intended to save the IDI from closure by covering short term operating deficits. But lay board members raised questions about whether the cash was really intended to meet an operating shortfall at the hospital, or to cover the bad debt at APSA.

Papal Foundation trustees and donors expressed also skepticism about the amount requested, which was far larger than its normal disbursements, which ordinarily are grants of a few hundred thousand dollars to charities around the world, selected by the Holy See.

After one board member objected to the loan by letter, former cardinal Theodore McCarrick, who was then a member of the board, wrote that raising concerns was "irresponsible, and seriously harmful to The Papal Foundation." McCarrick was under investigation for sexually abusing minors at the time he intervened in the matter.

Despite objections, the grant was ultimately approved by the Papal Foundation board in a secret ballot - sources inside the foundation told CNA that board members believe all but one of the bishop members voted for it, while all but one of the lay members voted against approving the grant.

Dispersal of the money stalled after the board continued to ask questions about the final destination of the funds.

Two initial installments were sent to Rome in late 2017 and early 2018, totaling $13 million. After internal disagreements about the grant went public, Cardinal Wuerl said he would ask the Vatican to cancel the request and return the funds. In early 2019 Parolin wrote to the board saying the $13 million would be reclassified as a loan, rather than a grant, and would be repaid as credits against future grant requests.

When the grant money stalled, APSA was forced to write off 30 million of the 50 million euro loan, wiping out APSA's profits for the 2018 financial year.

Bishop Nunzio Galantino, head of APSA, acknowledged the loan and its write-off in September, even though APSA is legally prohibited from making loans that finance commercial transactions, due to its 2012 moneyval agreement.

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After the Oct. 21 publication of a book that alleged the Vatican was nearly insolvent, Galatino blamed the loan for APSA's failure to register a profit for the first time in its history.

Parolin answered CNA's questions this week after Cardinal Angelo Becciu, who has widely been reported to have been the driving force behind both arranging the loan and pushing for the Papal Foundation grant, contacted CNA to deny his involvement in those matters. He told CNA that both matters were the "competence" of the Secretary of State, Parolin.

Becciu told CNA by text message earlier this month that he had not known about the APSA loan until after it was arranged, and that he had no part in requesting a grant from the Papal Foundation.

The 2014 APSA loan was arranged over the strong objections of Cardinal George Pell, then serving as the Prefect of the Secretariat for the Economy and charged by Pope Francis with enforcing financial accountability on the Roman Curia. CNA has also reported a loan request for the same purpose had been vetoed by the IOR, the Vatican's deposit bank, after its president, Jean-Baptiste Douville de Franssu, and Pell agreed that the IDI was unviable and the money would never be repaid.

While Parolin took responsibility for the IDI arrangements, Vatican officials across several dicasteries have told CNA Becciu was involved in organizing both the loan and coordinating the lobbying effort for the Papal Foundation grant. That effort included a visit to McCarrick by the secretary of APSA, Fr. Mauro Rivella, in Washington, DC, shortly after the grant request was made. The visit took place before McCarrick pushed board members to approve the grant, and after an investigation into McCarrick's sexual misconduct had begun.

Still, Parolin insisted that "as far as I know, Cardinal Becciu had no role whatsoever in" those matters.

Nevertheless, Becciu's personal connections to the IDI hospital go back at least as far as his appointment to the position of sostituto in 2011.

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Shortly after Becciu began working as the second-ranking official in the Secretariat of State, Fr. Franco Decaminada, the IDI's president - subsequently arrested, prosecuted, imprisoned, and laicised for theft and fraud - approached him for support on a proposal that the Secretariat of State supply the IDI with 200 million euros, ostensibly to fund a take over of another hospital by the IDI, which was already teetering on insolvency.

In October, Becciu told CNA he did not recall any such proposal, though it had been reported previously in Italian media. Shortly after that proposal was made, Decaminada hired Becciu's niece Maria Piera Becciu, as his personal secretary.

In October, CNA asked Becciu if he or his position at the Secretariat of State had played any role in the hiring of his niece at the IDI. He told CNA that "she applied for the position and was hired."

Last month, Becciu told CNA that his interest and involvement with the IDI ceased when Cardinal Parolin was appointed Secretary of State.

"Cardinal Parolin assumed the office of Secretary of State [in 2013] and I no longer concerned myself with IDI," he said.

While taking responsibility for the APSA loan and the Papal Foundation request, Parolin told CNA that the interpretation of those events "by certain media is a different matter, presenting these operations as non-transparent, irregular or even illegal: this, as far as I am concerned, is not the truth."

But beyond the APSA loan and Papal Foundation grant, other aspects of the IDI purchase have raised serious questions.

In addition to the APSA loan, the Vatican also used 30 million euros diverted from the Bambino Gesu, another hospital under its oversight, to purchase the bankrupt IDI. That money was taken from an 80 million euro grant the Italian government had given the Bambino Gesu.

Cardinal Guisseppe Versaldi, arranged that diversion. At the time, Versaldi led the partnership to buy the IDI, oversaw the Prefecture for the Economic Affairs of the Holy See and was the Vatican's delegate to oversee the Italian province of the Sons of the Immaculate Conception, the religious congregation that had owned the hospital, had a partnership with the Vatican to buy it again, and had also been dragged into insolvency.

Wiretaps recorded Versaldi discussing the plan with Giuseppe Profiti, the president of Bambino Gesu, with the two agreeing to conceal the misdirection of the funds from Pope Francis. 

Versaldi and Profiti later denied any wrongdoing, and the cardinal claimed he only wanted to spare the pope the technical details of the efforts to save the IDI. 

In his comments to CNA Parolin also addressed a lament from Becciu, who told CNA this month that while he is uncertain which Vatican officials have suggested he is connected to the IDI affair, he believes he could be the victim of a misinformation campaign, designed to sully his reputation by linking him to the affair.

Parolin does not think that to be the case.

"I believe there is no curial plot. In any case, I am completely extraneous to any operation of the kind: if there were such an operation I would condemn it in the strongest possible terms," Parolin told CNA.

A spokesman for Wuerl told CNA that the cardinal "has no comment beyond reiterating those facts already on the public record regarding the Papal Foundation application process."  

Ed Condon is a canon lawyer and worked as Catholic News Agency's Washington DC editor until December 2020.

J.D.Flynn served as Catholic News Agency's editor-in-chief from August 2017 to December 2020.