Vatican funds rescue of Rome hospital linked to financial scandal

The Vatican has reached a financial agreement to save a Catholic hospital in Rome from closing. The Fatebenefratelli hospital, on an island in the middle of the Tiber, had to close due to mounting debts, linked in part to the financial scandal and the ongoing lawsuit.

The Fatebenefratelli Hospital, formerly managed by the San Giovanni di Dio religious community, is now owned by a special company and will be managed in partnership with the Gamelli Hospital Foundation, famous for having treated several popes. According to Italian mediathe bailout, which sees the Vatican partnering with a private company, is said to be worth a total of 100 million euros, and was personally organized and approved by Pope Francis.

Fatebenefratelli Hospital in Rome. Credit: Dguendel/wikimedia CC BY SA 3.0

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The deal was reportedly funded by investments from Luxottica, an Italian eyewear company, and APSA, the Vatican’s central bank, sovereign wealth manager and payroll administrator. APSA and Luxottica jointly financed the project through the creation of a company called Società Isola Tiberina.

APSA previously funded the rescue of another Catholic hospital in Rome, through the Vatican Secretariat of State, which raised questions about the bank’s adherence to Vatican and European financial regulations.

In 2015, the Vatican’s financial watchdog, ASIF, concluded that APSA was no longer an “entity that engages in financial activities in a professional capacity”, and explained that “APSA ceased to be part of AIF’s jurisdiction at the end of 2015” – meaning APSA was exempted from future inspections by ASIF and Moneyval, the Council of Europe anti-money laundering watchdog.

Despite this decision, in 2019 the head of APSA, Bishop Nunzio Gallatino acknowledged that the APSA had granted a commercial loan of 50 million euros in 2014, in violation of the commitments to ASIF and Moneyval that led to the 2015 exemption. The loan went to a foundation jointly owned by the Secretariat of State and was used to finance the purchase of the hospital Rome’s IDI, which had collapsed under 800 million euros in debt linked to charges of money laundering, embezzlement and fraud.

Cardinal Parolin later acknowledged that he acted to guarantee the APSA loandespite a ban on such loans in 2012. Parolin also claimed to be responsible for a US-based Papal Foundation grant application for $25 million which was intended to help cover the loan to APSA. When the grant stagnated and the loan was not repaid, APSA had to write off 30 million euros in bad debt, wiping out its profits for 2018.

This week’s announcement of Fatebenefratelli’s recusal agreement comes after the Vatican confirmed in October last year that it was helping draw up a ‘recovery plan’ to resolve the ‘economic and management crisis’ of long time in hospital, caused by crippling levels of debt.

Among these debts, Italian authorities have been investigating for several years whether businessman Gianluigi Torzi, who is also on trial in the Vatican for extortion, committed multi-million euro fraud against the hospital.

The authorities are investigate whether the companies owned by Torzi defrauded the Fatebenefratelli when they helped convert debts owed to the hospital into securities that could be sold at a reduced value to raise funds for hospital operations.

There are conflicting reports in Italian media on exactly how Torzi’s companies allegedly defrauded the hospital, but they are generally depicted as having made large commissions and exorbitant service fees for their work, while allegedly withholding some funds owed to the hospital.

Torzi maintained his innocence.

Torzi was also embroiled in a similar scandal involving securitized debt, along with his longtime associate Giacomo Cappizzi.

Capizzi was the administrator of the Sierra One Bond, a financial product worth 100 million euros, made up of receivables owed to Italian hospitals and related suppliers, which was packaged and sold by Torzi’s company, Sunset Enterprise ltd.

The Sierra One bond included debt issued by facilities management company Esperia SpA, which was ordered into compulsory liquidation for alleged links to a Camorra mafia family in July 2018.

The pillar previously reported that Raffaele Mincione, the businessman who for years managed hundreds of millions of euros in Vatican funds for the Secretariat of State, and who sold the London building at 60 Sloane to the Vatican Ave., had business dealings with Torzi, who was engaged by the Secretariat of State to negotiate his separation from Mincione and finalize the purchase of the London building.

Company records reviewed by The pillar show that, on December 31, 2018, a month after the sale of the building was finalized, a fund through which Mincione invested the Vatican assets under his leadership held 3.9 million euros of investment in Sierra One SPV SrL, a special purpose financial entity composed of receivables due from Italian hospitals and related suppliers.

Mincione and Torzi were among 10 people charged in the Vatican’s ongoing financial crimes trial, which began last July, following a two-year investigation into the financial transactions of the Secretary of State.

Torzi is accused of extorting 15 million euros from the Secretariat of State in exchange for control of the London building after ownership of the building was transferred when purchased from his Luxembourg holding company, Gutt SA .

Mincione is also on the trail in Vatican City, facing related charges of abuse of power, fraud, embezzlement and money laundering.

Mincione and Torzi maintain their innocence, the trial is ongoing.

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