The Secrets of the Peter’s Pence
The Perks of Being a Cardinal
There is a black hole in the heart of the Church that took great efforts for Francis to uncover: a black hole created by mismanagement of the Vatican’s finances and compounded by swindling and accounting fraud. Through the Commission that he established in an unprecedented blitz, the pope was able to ascertain that the expenses of the Curia were paid for by money that was supposed to go to the poor. Offerings for charity that Catholics from throughout the world sent to the Vatican were being used to plug up deficits created by a handful of Church officials who maneuvered the bureaucratic levers of the Holy See.
Jorge Mario Bergoglio had chosen the name Francis because his mission for the Church was to help the poor, in service of the teachings of St. Francis of Assisi. From the moment he stepped out on the balcony overlooking St. Peter’s Square in March 2013 to salute the crowd, he rejected all frills. He often wore simple, shabby tunics. He invited the homeless to the Sistine Chapel and asked the heads of the Church’s religious orders and administrative bodies to shelter the needy in their unused buildings, in the halls, hostels, and dormitories of the great seminaries that had been deserted because of the crisis in vocations.
In addition to rigor and transparency, poverty and charity were the key words of his pastoral language and pontificate. He tried to foster this sense among nuns and priests in particular, starting with the smallest, simplest things, such as the use of motor vehicles. He discussed this at length during an audience with seminarians and novices on July 6, 2013:
“I tell you, it truly grieves me to see a priest or a sister with the latest model of a car,” he declared, “but this can’t be! It can’t be … cars are necessary because there is so much work to be done, and also in order to get about … but choose a more humble car! And if you like the beautiful one, only think of all the children who are dying of hunger … You are all disgusted when you find among us priests who are not authentic, or sisters who are not authentic!”
He was the first to set the example. When he went to the Italian island of Lampedusa to embrace the refugees arriving from Africa, he used a Fiat jeep provided by a parishioner who lived on the island. On a visit to Assisi, the land of St. Francis, he used a small car, a Fiat Panda. “When a priest from Verona gave him a Renault 4, the Pope accepted it but transferred it to the graveyard of papal vehicles.”1
Confronted by these words and deeds, unusual for a pope, there were many cardinals in the Curia who, after their initial surprise, tried to manifest their allegiance to the new era, but only in words and smiles. Their real attitude is better expressed by a joke that was making the rounds among their drivers: “They have left their limousines and sedans in the garage, and now they’re driving around in economy cars, a Fiat 500 or Panda, but they’re still living in the same luxury apartments.”
The truth behind these words is apparent in the living quarters of the cardinals who occupy the highest positions in the Church hierarchy. Many live in luxurious homes in the heart of Rome—unimaginable realities for most.
The story of Cardinal Tarcisio Bertone’s home made headlines. By combining two apartments, he created an immense residence for himself on the top floor of the Palazzo San Carlo at the Vatican. This is not the exception, but the rule. The cardinals of the Curia reside in princely dwellings of 400, 500, even 600 square meters.* They live alone or with a missionary nun—usually from a developing country—as their assistant, cleaning lady, or housekeeper. The apartments have rooms for every whim and fancy: waiting rooms, television rooms, bathrooms, reception rooms, tea rooms, libraries, rooms for the personal assistant, the secretary, the files, and rooms for praying. And these dwellings are often in stunning buildings, like the splendid Palace of the Holy Office, immediately behind the colonnade of St. Peter’s Square: it dates back to the sixteenth century and had once been the headquarters of the tribunal of the Inquisition.
The largest apartment in the Palace of the Holy Office—a full 445 square meters—was given to Cardinal Velasio de Paolis, born in 1935, a hard-core ally of Ratzinger and President Emeritus of the Prefecture for Economic Affairs of the Holy See. Slightly smaller is the 409-square-meter apartment of the eighty-one-year-old Slovenian cardinal, Frank Rodé. The former archbishop of Lubljana, he had been a personal friend of Marcial Maciel, the disgraced founder of the Legionnaires of Christ, who had been suspended from the ministry for pedophilia.2 Rodé is also a member of the Pontifical Council on Culture. Cardinal Kurt Koch, President of the Pontifical Council for the Promotion of Christian Unity, had to settle for a house of 356 square meters.3
Another group of cardinals lives not far away, on the opposite side of St. Peter’s Square, in a beautiful building, in the heart of the Eternal City. This is the residence of the Canadian Marc Ouellet, born in 1944, Prefect of the Congregation for Bishops and President of the Pontifical Commission for Latin America. His apartment is almost 500 square meters. Cardinal Sergio Sebastiani, eighty-four, also a member of the Congregation for Bishops and of the Congregation for the Causes of Saints, lives in a 424-square-meter apartment. (Let us not forget that all cardinals older than eighty have a role that is primarily symbolic, and do not have the right to vote in the Conclave.)
Raymond Burke, an American cardinal born in 1948 and a patron of the Sovereign Military Order of Malta, is quite comfortable in his 417 square meters, as is the Polish cardinal, Zenon Grocholewski, born in 1939, who had been the Prefect Emeritus of the Congregation for Catholic Education until March 2015. His residence is 405 square meters. A stone’s throw away, in the Borgo Pio neighborhood, is the 524-square-meter princely residence of the American Cardinal William Joseph Levada, born in Long Beach, California, in 1939, a loyalist of Ratzinger, who appointed him as his successor at the Congregation for the Doctrine of the Faith. In 2006, Levada was summoned to testify, in San Francisco, about the sexual abuse of minors by priests in the archdiocese of Portland, Oregon, where he had been Archbishop from 1986 to 1995. The priests were later found guilty of abuse. By comparison to these sumptuous quarters, Room 201 of the Casa Santa Marta, the home of the Pope, was almost a closet, barely 50 square meters.
The cardinals’ privileges do not end there. The cardinals did not have to pay any rent, only the utilities, for as long as they hold an official post in the Curia, after which they are charged a monthly rental fee of 7–10 euros per square meter. In reality, however, even after the mandatory retirement age of eighty, some cardinals hold onto a dicastery assignment that allows them to continue to benefit from the no-rent policy. The typical response to criticisms of the sizes of these apartments is that various rooms are needed to accommodate the two, three, and even four nuns who live with the cardinal to administer to his domestic needs.
The cardinals of the Curia administer the most important departments of the Holy See, however: they control the heart of the universal Church. And it was from here that Francis felt that the evangelical and charitable work of the Church should begin and emanate throughout the world. But I have to use the conditional “should,” because the reality is a different matter completely.
Where Does the Money for the Poor End Up?
According to the Vatican website, the Peter’s Pence is
the financial support offered by the faithful to the Holy Father as a sign of their sharing in the concern of the Successor of Peter for the many different needs of the Universal Church and for the relief of those most in need … The faithful’s offerings to the Holy Father are destined for Church needs, to humanitarian initiatives and social promotion projects, as well as for the support of the Holy See. The Pope, being Pastor of the whole Church, is attentive to the material needs of poor dioceses, religious institutes and of faithful in grave difficulties (the poor, children, the elderly, those marginalized and the victims of war or natural disasters; concrete aid to Bishops or dioceses in need, Catholic education, assistance to refugees and immigrants, etc.).
The pontiffs have always valued the charitable aims of the Peter’s Pence, and have urged the faithful to give generously. “‘Peter’s Pence’ is the most characteristic expression”—Benedict XVI emphasized—“of the participation of all the faithful in the Bishop of Rome’s charitable initiatives.”4 He describes the central importance of charity in his encyclical Deus caritas est (2006), noting that, “The Church can never be exempted from practicing charity as an organized activity of believers, and on the other hand, there will never be a situation where the charity of each individual Christian is unnecessary, because in addition to justice man needs, and will always need, love.”5
Yet according to the financial statements and balance sheets—which I was able to consult directly—the management of the Peter’s Pence is an enigma cloaked in the most impenetrable secrecy. Every year the amount of the collection is publicized but there is no explanation of how it is administered. In other words, we know how much money has been collected from the faithful but not how it is spent. Absolute secrecy is maintained around this detail.
This paucity of information raised the suspicions of the COSEA members, who wanted a clearer picture of the situation. They had also sensed that their success depended on getting the Peter’s Pence managers to comply with the audit. It was clear that something was amiss when the charity did not reply to Versaldi’s July 2013 request for financial reports, data, and documents. They did not reply, not by the deadline indicated by the Cardinal, nor by the end of autumn. They did give a few informal, evasive answers, but nothing written. Not a single clear, formal, and thorough document emerged from these queries.
Was this just the classic example of buying time until attention shifted away from the problem? If so, rather than respond negatively, evaders usually prefer to send partial signals, involve other persons, and pretend they don’t understand the request, maybe by claiming that the documents have gone missing. This seemingly casual strategy ended up raising the suspicions of the COSEA members and of the financial consultants of McKinsey, KPMG, and Promontory Financial Group who had been hired by the papal Commission. The issue almost provoked a diplomatic incident in the Curia. The story helps to illustrate the hostile climate in which Francis has to operate. Through the documents that have come into my possession, I am able to reconstruct every step of the conflict.
The problems started in December 2013 when the Secretariat of State and APSA proved to be less than forthcoming in their answers to the Commission’s requests for documentation. On December 2, in a letter to Reverend Alfred Xuereb, Francis’s personal secretary, the Commission requested the Pontiff’s direct intervention:
Most Reverend Monsignor,
Among the tasks awaiting us in the short term there is also an inspection of the activity and the role that the Secretariat of State plays at the economic and administrative level. This was already mentioned to the Secretary of State at a recent meeting. [The former Secretary of State, Tarcisio Bertone, had retired after reaching the age limit. In his place Francis had appointed Cardinal Pietro Parolin, who took office on October 15, 2013.] Based on what came out at the meeting, we believe that an ad hoc action—formal, explicit and unequivocal—could help confirm the desires of the superior Authority.
The Commission feared that its investigation would continue to be paralyzed by inertia and resistance. Indeed, the letter did not produce the desired effect: the stalemate continued. On December 18, Filippo Sciorilli Borelli of McKinsey of Zurich, one of the Commission’s outside consultants, made another attempt to gain clarity. He managed to schedule an appointment for the next day with Monsignor Alberto Perlasca, the man inside the Secretariat of State in charge of the Peter’s Pence. To prevent yet another postponement, Borelli sent an advance email detailing point-by-point the information and documents he would be requesting on the bank accounts and the expense items for the fund. The email was sent from his computer at 2:09 P.M. on December 18. At 2:16 P.M. the prelate’s response arrived in his inbox. It ran to a total of seventeen words:
Very good. Better at 9:30. With regard to your questions, we’ll see if and how to respond. Regards.
The next day, December 19, the team of consultants—Ulrich Schlickewei of McKinsey, Claudia Ciocca of KPMG, and Carlo Comporti of Promontory—met with Monsignor Perlasca at the Vatican. They were expecting answers—finally—about where the offerings of the faithful had ended up. The meeting was cordial, and the three laypersons asked numerous questions, but the answers they received were unsatisfactory. When they left the room, the three of them looked at one another, shocked and aggrieved. They perceived a seemingly impenetrable brick wall. When they got back to the office, they decided to notify chairman Zahra.
Today we had a meeting with Monsignor Perlasca to obtain a better understanding of the use of the St. Peter’s Pence. The meeting was cordial but we did not learn anything new. We were told that part of the money is used to pay the deficit of the Curia, while the other part is for the commitments of the Holy Father, but not for the setting up of reserves. When we requested more details, they refused to reveal anything more.
What was the reason behind all the mystery? Without the requested information the investigation into the Vatican finances was at risk of running aground—an investigation that had started at the express request of the Holy Father. The concerns mounted. Other complaints were made to chairman Zahra, always by the consultants:
One of the biggest gaps is the Peter’s Pence, where they did not give us access to a complete vision of the collection and management of the funds (we’re talking about at least 30–40 million euros, which is the net of the total revenue minus the financing of the Secretariat of State and APSA). A second gap is, to put it bluntly, “what they are not telling us.” We don’t know whether other funds or assets, in addition to the Peter’s Pence, are being kept off the books of the Secretariat of State.
What They Don’t Want to Say
Five months had already gone by since its first letter to the Vatican’s administrative bodies and the Commission was still at the starting point. There was still no way of knowing whether there were off-the-books funds that were not included in the consolidated financial reports. So the members decided to go straight to the top. On January 3, 2014, Monsignor Vallejo Balda, the coordinator of the Commission and the liaison with the Curia, wrote a firm letter to the new Secretary of State, Monsignor Pietro Parolin, with a request for clarification. In the letter he refers explicitly to the Pope’s wishes twice in six lines:
Most Reverend Excellency,
For some time now, in fulfillment of the tasks assigned by the Holy Father to this Pontifical Commission, a large-scale audit in loco has been under way at the main Entities of the Holy See that conduct activities that are significant at the economic and administrative level. We were pleased to find, almost everywhere, a cordial reception and concrete collaboration, a sign of the profound awareness of and loyal adherence to the desiderata of His Holiness. This activity also involves necessarily the Entity that you direct. Pursuant to the dictates of the Pontifical Chirograph by which this Commission was established, I would therefore like to cordially request that you provide instructions for our operators to be provided with all the documentation, on paper and in digital format, pertaining to the attached list. As you well know, we are working on a very tight schedule; we therefore request that this documentation be made available by January 10. While remaining available for any needs you may have, and thanking you already for the cordial collaboration that we know will be forthcoming, I avail myself of these circumstances to confirm my utmost devotion to your most reverend Excellency.
Monsignor Vallejo Balda
Attached to the letter Parolin found a long list of twenty-five entities on which documentation was requested.6 The Pope’s task force was particularly interested in the last two points:
We have not yet received: the list of bank accounts, stocks and the like, held or managed by the Secretariat of State (or any other activity) and a full vision of the management of funds collected (expenditures, investments, etc.) of the Peter’s Pence and other sources of revenue.
The Chairman of the Commission, Zahra, was well aware that the information provided was still insufficient. He waited impatiently for a reply from the Secretariat of State. Without that information it would be impossible to have a clear picture of the situation and propose a credible reform. After waiting in vain yet one more time, on January 16 he drafted an alarming letter to Francis:
Your Holiness,
I regret to inform you that your Commission is unable to complete the consolidated financial position of the Holy See due to the lack of fundamental information. We have requested from Monsignor Parolin a list of bank accounts held by the Secretariat of State, and of the investments made into bonds, funds and stock, as well as information on other accounts such as the Peter’s Pence, but they never arrived. We realize that the Secretariat might wish to maintain confidentiality on some of these accounts, but it is not willing to make available financial information about any of them.
Without a complete picture of the financial situation of the Holy See, your Commission will not be able to evaluate the various risks present in the economic administration of the Vatican. This is a vital part of the work of the Commission and the members cannot complete their assignments if the evaluation of the risks for the Vatican is not taken into consideration. We would be most grateful if you could instruct us on this matter, since we do not wish to disappoint Your Holiness by not providing [analyses] of this important sector of our mission. We ask for your blessing.
On January 30, an answer finally arrived, either thanks to the direct intercession of Francis or the pressures of Xuereb on Parolin. The Secretariat of State delivered a twenty-nine page dossier bearing the grandiloquent title: “The Venerated Financial Report.” In the first confidential document that I was able to read, it emphasized that
the Peter’s Pence consists of the traditional gathering of offerings collected on the feast day of Saints Peter and Paul at all the dioceses of the world and of all the offerings delivered during the celebrations to the direct collaborators of the Holy Father or his envoys. It is entrusted to a special office of the general affairs division of the Secretariat of State that is in charge of managing the collection of offerings for the charitable works of the Holy Father and for the Holy See.
The Secretariat of State then went on to specify that this information was protected by the utmost secrecy:
While on the one hand an analytical report on the revenue relative to the Peter’s Pence is published annually, on the other absolute confidentiality has been maintained to date, in compliance with Superior instructions, on how the report is used, since it is excluded from the consolidated financial report of the Holy See.
In practice, to date, the offerings for the poor are still a black hole: absolute secrecy on how the money is spent and only an “itemizing” of how much is taken in, thereby sidestepping the requirement of accounting in the official financial reports. A decision dictated by “superior instructions,” in other words, by the Secretary of State or the previous Pope. Why all the secrecy? What was done with the money? Here is the response, vague but illuminating:
The collection is used for charitable initiatives and/or specific projects indicated by the Holy Father (14.1 million), for the transmission of offerings with specific targets (6.9 million) and for the maintenance of the Roman Curia (28.9 million). Plus the setting aside of 6.3 million from the Peter’s Pence fund.7
This means that more than half of the offerings that arrive from the faithful throughout the world and that should go to the needy ends up instead in the coffers of the Curia: to be exact, 58 percent, not counting the sum that was set aside. If we do an item-by-item check of the “donations of the Holy Father,” what clearly emerges from the Secretariat’s unpublished document, is that the Curia largely used that 14.1 million to balance the shaky finances of the Holy See rather than for charitable works: 5.5 million euros went to the printers, 1 million to the library, and 309,000 euros to the foundations. In other words, of the 53.2 million taken in through the Peter’s Pence (2012)—to which we should add the three million in interest payments—a good 35.7 million (67 percent) was spent on the Curia and another 6.3 million (12.4 percent) was not used, set aside as reserves of the Peter’s Pence fund.
In the Red
For every euro that finds its way to the Holy Father, barely 20 cents end up in actual projects to help the poor. This situation is enabled by a lack of financial oversight in the Apostolic Palaces. Almost every department in which former Secretary of State Bertone convinced Benedict XVI to appoint his Italian loyalists is showing a deficit or other problems, as the confidential file shows:
From the summary outlines of the financial situation, it appears that 2012 ended with a financial deficit of 28.9 million euros, based on the difference between the 92.8 million in revenue and 121.7 in expenditures. The expenditures consist of the 66 million deficit of APSA [real estate management], the 25 million deficit of Vatican Radio, 25.4 million for the operation of the pontifical nunciatures and 5.3 million for the operation and direct expenses of the Secretariat of State. Given the above-mentioned revenue, the Secretariat of State recalculates in advance the deficit of APSA and, in a broader sense, of the Roman Curia, which is unable to achieve the desired balanced budget through its own resources.
Therefore, every year the Secretariat of State is forced to come up with huge sums of money that it withdraws directly from the offerings of the faithful to the Holy Father.
The Secretariat of State is thus forced every year to dip into the resources of the Peter’s Pence, removing a sizeable amount for the maintenance of the Roman Curia, especially to cover the costs of personnel employed there, which is the largest single budget item … Over the years the Secretariat of State has de facto and by necessity taken on the role of a financing agency through the “improper” use of the Pence, collecting other resources through the pontifical nunciatures that are the liaison between the Holy See and the bishops’ conferences and dioceses of the world.
This was the worst possible news for a Pope who had humbly chosen the name of the saint of the poor.
If these sums of money were not being spent, then why weren’t they invested in order to make them more profitable? I was able to ascertain that the 377.9 million total of the Peter’s Pence reserves is divided up into bank accounts in twelve different banks: the largest sums are deposited in the IOR (89.5 million) and Fineco of Unicredit (78.5 million). Fifty-eight million euros are sitting in the vaults of the Merrill Lynch commercial bank. At Credit Suisse 46.5 million is held. Between 2011 and 2012, all this money has guaranteed truly modest interests: only 2,979,015 euros, not even one percent, a ridiculously low rate. Why? And above all, why are the set-aside euros not used?
Thirteen Unanswered Questions
Francis’s men were left speechless by the financial report. By carefully examining the information they had received, the financial consultants working for the Commission found numerous irregularities, rather obvious mistakes, and various discrepancies. After reviewing it for a few days, in the late afternoon of February 10, 2014, Filippo Sciorilli Borrelli of McKinsey decided to make his move. He sent Zahra thirteen questions about the finances of the Secretariat of State. Precise questions regarding deposits, expenses, and the actual management of the Pence. The first question concerned the interest rates, which were too low. How was this possible? His findings left no uncertainties:
In the document it is stated that the average annual interest rate recognized by the IOR for the Peter’s Pence Fund [generated] three million euros in 2012. In 2012 89.5 million euros were deposited at the IOR. Does this mean that the interest rate was three percent? Is this statement true or false?
If true—and there was no reason to doubt that it was—then it is not clear, “what to make of the interests on the other known deposits (for example, the 58 million at Merrill Lynch). If the above statement is false, then how do you explain that the overall interest rate is barely one percent of the total funds invested (in 2012, three million in interest on a base of 377.9 million euros)?”
Sciorelli Borelli wanted to know why the annual deposit made by the Holy Father to the Osservatore Romano (5.3 million in 2011, and 5.6 in 2012) does “not appear under the item ‘to cover the deficit,’ although it falls under the deficits of the Curia?” And, “To what does the item Peter’s Pence c/allocations of 7.3 million in 2012 and 2.1 in 2011 correspond?” Finally, when you look at the actual deposits in the various banks of the 371.6 million indicated as the Peter’s Pence reserve fund (2011), only 353.4 is accounted for, “a discrepancy of 18.2 million euros. How do you explain this negative difference?”8
The answers were not forthcoming. The thirteen questions never became official. They never even left “Area 10,” which holds the most important secrets of the Commission’s work. So COSEA had to make do with partial and often misleading reports. It’s difficult to say the exact reason why. Some in the Apostolic Palaces believe that both in the leadership of the Commission and within the Secretariat of State, the usual practice was to nip in the bud any question whose results might be unpredictable.
The same dilemma had beset Ettore Gotti Tedeschi, the former President of IOR, when he wanted to avail himself of the top consultants on the issue of money laundering, originating from the Banca d’Italia, to get the Vatican on the “white list” of the countries in compliance with the rules of financial propriety. On this project, Benedict XVI was subject to the influence of Bertone’s men, who discredited Gotti Tedeschi and altered his proposals claiming that he would expose the Vatican to dangerous interference by the central bank of a foreign state. Tradition dictates that in the Curia the influence, weight, and power of a layperson is always inferior to that of a cleric, regardless of whether he is a cardinal or a simple priest, and regardless of whether he knows how to manage bookkeeping and financial reports or is completely inadequate to the task.
The Secret Bank Accounts of the Pope
The financial situation of the Secretariat of State was a web of confusion and major losses. The tangle of accounts opened at different banks was evidence enough. Fifteen years after the fact, four accounts for the 2000 Jubilee were still open. Of these, two were at APSA, where the Secretariat of State manages eight accounts altogether. One of them is listed as “Vatican Radio, Slovak newsroom,” with an ending balance of $134,000.
Does the Pontiff have his own bank account? Decades have gone by without ever finding the truth. Various improbable theories have circulated, followed by halfhearted denials or even more imaginative reconstructions. It was not until the confidential papers photocopied by Paolo Gabriele, the butler of Benedict XVI, and published in my book His Holiness, that it emerged that Ratzinger, on October 10, 2007, had ordered the opening of account number 39887 at the IOR to receive from a company fifty percent of his royalties from more than 130 publications.9 Large sums of money poured in the account, like the 2.4 million euros deposited in March 2010 by the Joseph Ratzinger Benedict XVI Fund.
From the unpublished documents sent in early 2014 by the Secretariat of State for the bookkeeping audits, a truth emerged that no one had ever been able to verify. Each pope has his own personal bank account. In many cases, it has remained open for years after his death. The most mysterious accounts are in fact held by deceased pontiffs, with currency converted into euros, of course. In particular, the account of Pope John Paul I (Albino Luciani), who died in 1978, is still open. The account number is 26400-018, and it is held by “His Holiness John Paul I.” It has a balance of 110,864 euros. Who manages it?
Thirty-seven years after his death, there are still two accounts in the name of Pope Luciani’s predecessor, Paul VI (Giovanni Battista Montini), who was recently beatified. From the documents that we were able to read, there is one account, number 26400-042, titled “Personal Account of Paul VI,” with a balance of 125,310 euros, and another account, 26400-035, with a balance of 298,151 dollars. Evidently, Montini preferred to diversify his accounts into different currencies, to avoid the need for damage control in the event of devaluations or financial crises.
There is still no answer today to the delicate questions raised by the existence of these and many other similar bank accounts. If they are really held by deceased persons, the accounts should be closed. Yet they remain open, and in some cases quite a few years have gone by. How is this possible? Is someone moving money through them? An heir, perhaps? If so, what right did he or she have to keep an account at the IOR, where laypeople are not allowed to bank. These are all questions that for unclear reasons would not be conveyed to Monsignor Peter Wells, the Assessor for General Affairs of the Secretariat of State, or even to his superior, Monsignor Angelo Becciu, Substitute for General Affairs of the Secretariat of State, the last bastion of the old guard.