Inside the Financial Times Quasi-Scandal Over the Vatican's London Property Investment

The Vatican financial quasi-scandal is back—well, sort of. The sequel to the original still maintains the basic theme, but the cast has changed, making it more like a spin-off. The original quasi-scandal centered on a high-end property deal in London’s Sloane Square, normally the sort of property one would want to own. The villain was played by a financier named Raffaele Mincione.

In an October 13, 2019, article the Financial Times claimed that Mincione had extracted money unfairly from the property deal and alluded to the fact that there may have been some corruption involved. Many Catholic outlets then picked this story up and, albeit without solid additional evidence, painted a nefarious plot of corrupt cardinals and their henchmen siphoning money from the Church. It is Rome, after all, and in the topsy-turvy world of 2020, attacks on the Holy See now come frequently from Catholics.

I. Perpetrator or Victim?

Six months ago in the essay, “London Real Estate and a Cardinal: How a Dull Deal Became a Conspiracy Theory”, we pointed out that this “plot” was pure speculation. Given the facts as they were then reported, there was no evidence of a plot of any kind; we suggested that those with additional evidence send a tip to the Financial Times or inform Vatican investigative authorities. To us, it looked—and looks all the more so today—like the Vatican had gotten involved in a bad property deal that had gone sour. Vatican officials had bought a possibly overpriced share in a London property and, as they grew distrustful of their partners in the arrangement, they bought out the remaining share—again, at a possibly elevated price. A bad deal, to be sure, but not a scandal.

We were clear when we wrote the original article that we were not ruling out the possibility of foul play. If new facts came to light that showed illegal activity or actual corruption, we would be the first to accept this and let those involved receive the media criticism that they deserved. But till such facts were established, we argued that the press—and most especially the Catholic press—had no right to throw around innuendo and potentially false testimony. Critical exposés of the Vatican’s finances, no matter how tenuous the arguments, weaken the lay faithful’s willingness to support the Holy See and thus injure the Church’s operations around the world.

Now the Financial Times published another article on the quasi-scandal (9 June 2020). The Sloane Square property is still at the center, but the supporting cast has changed completely. Raffaele Mincione, for example, is nowhere to be seen. Instead we have a new villain named Gianluigi Torzi, an Italian businessman. Mincione has made only a brief reappearance to distance himself from Torzi—a perfectly plausible denial since Mincione handed over the property the moment Torzi took over.

Immediately, the new narrative appears odd. When the Financial Times reported on Mincione’s alleged shenanigans last October, they were conceivably breaking a scandal. They were telling us something that the authorities were not. But Torzi was arrested by the Vatican gendarmerie on the first Friday of June 2020. Arresting the mastermind is not usually the optimal way of engaging in a cover-up. Accordingly, the scandalmongers have turned toward speculating on where the investigation will go from here.

The Financial Times tells us that Torzi has a dubious background. Most of this is hearsay. He worked in places that were investigated in the past for fraud. Apparently Torzi is flagged in anti–money laundering screens, but that is hardly surprising if he has been questioned in fraud investigations in the past. Being screened is not evidence of a crime—as anyone who has been pulled aside in airport security can tell you. Torzi also apparently had a private audience with the pope, a fact sure to entertain conspiracy theorists for months to come.

When the Vatican bought the remaining stake of the Sloane Square property, they were approached by Torzi who offered to take over ownership of the property. The Financial Times does not know why this occurred and instead quotes an American financial reform advocate to the effect that there is “no possible economic rationale” for this.

Is there really no possible rationale? The Vatican got involved in the Sloane Square deal without intending to own and manage the property themselves. Maybe Torzi offered to take over ownership to manage it for them more easily. This rationale may be a bad one, but it is at least a possible rationale, and there are likely many other possible rationales.

The Financial Times then goes on to say that they have interviewed Torzi and seen some documents; they do not confirm whether Torzi showed them the documents himself, however—perhaps to create a dust cloud around his arrest. What do the documents say? Not much, beyond the fact that the deal may have been signed off on at a high level within the Vatican. The documents show money being transferred by Archbishop Edgar Peña Parra, Substitute of the Secretariat of State under Cardinal Pietro Parolin, the Vatican Secretary of State. But a money transfer is not the same as assent to a deal. And even if there was a high-level sign-off on the deal, the fact does not matter in itself unless the deal were fraudulent or otherwise illegal.

Finally, the Financial Times report highlights two lawyers who appear to have done the paperwork on the deal. One worked for Ernst & Young till he was fired for moonlighting on the deal; another has a past criminal record. So, one was exposed to his boss for doing work on the side by press reporting; the other has done bad things in the past. Nothing to see there.

What did Torzi do? The Vatican accuses him of trying to extort money. They say that he used his position as owner of the property to extort money from the Vatican and threatened that if they did not give it to him, he would not relinquish control over the property. Now, it is obvious that the Vatican should not have given control of the property to Torzi, because this gave him the leverage he needed to potentially engage in extortion. But doing something imprudent is not equivalent to doing something illegal.

By arresting Torzi, the Vatican has shown its willingness to clean up its shop even if it risks bad press. Indeed, such an approach is exactly what we called for in our December essay. The Vatican City State is a sovereign entity with functioning investigative and judicial systems. In this instance, it has shown itself capable of looking into suspicious financial activity. The arrest of an Italian citizen is certainly a way to show the Vatican’s sovereignty over its internal processes without the assistance of the press, who had not focused on Torzi prior to his arrest.

All in all, the Vatican once again looks like the victim, not the perpetrator. We remain more baffled than ever as to why the Vatican falling victim to bad investment and bad managers somehow triggers certain Catholics into attacking the Vatican. What is more, the Vatican seems to be doing its best to remedy the problem—even though they are being attacked for doing so by the American Catholic press.

II. The Problem of Perception

Throughout the nineteenth century and well into the twentieth, American anti-Catholic propagandists drew a picture of a Vatican characterized by greed, nepotism, and corruption. Bring too many Catholics into the country, they suggested, and the new Catholic immigrants would become agents of the pope’s global ambitions—agents of the “papal octopus.” In response, American Catholics rushed to show themselves worthy adherents of the American cause, at home in America but proud of their Church and its Roman foundations.

One hundred years ago, English-speaking Catholics were closely attuned to the question of papal sovereignty over the Papal States, and the need to resolve the Roman Question in the pope’s favor. More common today, sadly, is a lack of knowledge about that pivotal portion of Catholic history, when a nascent Italian nationalism led to the occupation of the pope’s territory in the central portion of the Italian peninsula. The anti-Catholic side in the United States regularly drew attention to this peculiar feature of the Church. Books such as Gilbert O. Nations’s 1917 Papal Sovereignty: The Government within Our Government were a dime a dozen. On the Roman side in the United States, Msgr. Joseph Schroeder (then of the Catholic University of America) published American Catholics and the Roman Question in 1892; across the pond, one finds titles like that of Kenelm Digby Best, CO, who published The Victories of Rome and the Temporal Power in 1893, to say nothing of Cardinal Manning’s many works.

Fast forward one hundred years, and an alarming number of American Catholics have taken up a position of distance and hostility toward Rome—and particularly the corruption that supposedly stalks the Roman Curia at every turn. In recent years, the Catholic media space has become populated with otherwise proud Catholics who hold the Apostolic See at a remove. For better or worse, the generosity of American Catholics makes a difference in the life of the Church, and when donations from the United States are impacted, the Church’s operating finances suffer, along with its ability to fulfill the mission entrusted to it.

While the Financial Times has provided the most informed reporting on the London investment, American Catholic media have sadly picked up the baton of insinuating the existence of a deep scandal. EWTN's Catholic News Agency has consistently framed the story as one of “the serpentine turns of the ongoing Vatican financial scandals,” describing “a raft of financial scandals at the Vatican Secretariat of State.” Unfortunately, in most cases these analyses boil down to rank speculation of those looking in from the outside, as the titles often suggest. One article, under the speculative title “Analysis: Could Curial Politics Stop a Vatican Finance Trial?,” strings together anonymous accusations by supposed clerical officials and concludes by observing that the perception of the faithful will take a hit due to lack of transparency.

Ironically, it was less than a month after the author’s speculation that “there may be no trials at the end of the Vatican’s investigation,” that in fact the Vatican made an arrest. Writers elsewhere have sarcastically called the Vatican “the financial equivalent of the Keystone Kops”—slanders not yet borne out by the facts. Such articles slowly wear away at readers who are informed that the Vatican’s prestige has taken a hit.

Motivations aside, the consequences of such insinuations are real. In January of this year, a law firm in Dallas launched a class action suit against the U.S. Conference of Catholic Bishops. The complaint alleges that the annual Peter’s Pence collection is a “bait and switch” designed to raise funds for the pope on the false expectation that donations will be spent on charitable activity. A slick website collects recent reports—again, ironically from Catholic news sources—of supposed financial mismanagement by the Holy See, and calls for injured parties to contact the firm and join the suit.

The suit faces a number of legal challenges: the class of injured parties will have to be certified, which will require a separate motion and court approval. Nor is Peter’s Pence simply a donation to a charitable organization. As its name implies, it consists of small donations from Catholics around the world for the support of the Holy Father, including but not limited to his charitable activities.

As the pope said in an interview last November, “In good administration it is normal for a sum to come from the Peter’s Pence, and what do I do? Put in a drawer? No, this is bad administration. I look to make an investment, and when there is the need, to give.” Even if ordinary Catholics do not join the lawsuit, hearing of it may still cause them to question whether giving money to Peter’s Pence is something they wish to do. Nonstop reporting on ecclesiastical scandals real and imagined has left many churchgoers disgruntled and not inclined to charity.

The larger question raised by the quasi-scandals concerns the operational independence of the Church in an increasingly strained and difficult financial environment—an environment, it should be noted, that is driven by COVID-induced economic strain and not connected to Vatican financial management. As John Allen of Crux has reported,

According to an internal Vatican analysis recently presented to Pope Francis for a meeting with his department heads, declines in revenue due to the coronavirus pandemic will cause the Vatican’s annual deficit to balloon somewhere between 30 and 175 percent, depending on which of three scenarios, ranging from best to worst case, is realized (emphasis added).

Also this spring, the pope announced a series of reforms geared toward the consolidation of Vatican holdings as well as oversight.

The Vatican is now faced with a situation that, more than ever in modern times, highlights the importance of the Church’s sovereignty over its internal affairs. As a sovereign financial entity (albeit tied to the Euro), the Holy See can invest its funds according to normal financial rules and prosecute violations of those rules in the same way that other states can. Faced with a budget shortfall, however, the Vatican will have to begin to think creatively about how to maintain its funds—a topic to which we will return in the near future.

As anglophone Catholics of the early twentieth century knew, the independence and security of the Holy See is not of merely archaic interest. The activities of the successor of St. Peter rely on that independence throughout the world. Now is the time for Catholics to be thinking creatively about how to bolster the Church’s operations.

“You have that instinct which knows intuitively that, ‘True love does not eliminate legitimate differences, but harmonizes them in a superior unity,’” Pope Francis said last year, quoting Pope Benedict XVI. Going forward, Catholics of every variety should band together to find ways to support the Church’s finances during what will be a trying financial situation for the Church and for the world.

Featured Image: Canaletto, The City of London Seen Through and Arch of Westminster Bridge, 1747; Source: Wikimedia Commons, PD-Old-100.


Gladden Pappin & Edoardo Bueri

Gladden Pappin is an assistant professor of politics at the University of Dallas. Edoardo Bueri is the pseudonym of a real estate investor with knowledge of the British property market.

Read more by Gladden Pappin & Edoardo Bueri