ROME – A Vatican court on Thursday sentenced a former senior Vatican bank official and his lawyer for embezzlement and money laundering, sending a strong signal that the church was determined to put its financial house in order.
The defendants – Angelo Caloia, president of the Vatican bank for two decades, and his former lawyer Gabriele Liuzzo – were accused of embezzling millions of euros in obscure real estate deals between 2002 and 2007.
Sentenced to eight years and 11 months in prison each, the defendants were ordered to pay the Vatican bank an indemnity of more than € 20 million, or $ 24 million.
The court also ordered “the confiscation of amounts totaling approximately 38 million euros” from the defendants, the Vatican said in a statement accompanying the sentence, which the Holy See’s press office released shortly after the court’s decision. The two were also fined € 12,500 each.
Caloia, who served as bank president between 1989 and 2009, is the highest-ranking Vatican official to be convicted of a financial crime.
The Vatican said the convictions were the product of legislation enacted in 2018 to bring them “to international standards to combat money laundering, corruption and other serious crimes”.
The Vatican bank, whose official name is Institute for the Works of Religion, wanted to send a message “that certain practices are no longer tolerated, are not acceptable and there is zero tolerance,” said Alessandro Benedetti, one of his lawyers.
“For the Vatican bank, the important thing was to have justice” and “to bring out the truth,” he added.
The defendants’ lawyers said they appealed the decision, noting that the harsh sentences were handed down at a time when the Vatican plans to send a public message.
The verdict was given “in a climate not particularly favorable for those who have to defend themselves,” Caloia’s lawyer, Domenico Pulitanò, said in a statement.
“I’m surprised,” said Fabrizio Lemme, who defended Liuzzo, on the verdict. He said it is unlikely that Caloia, 81, or Liuzzo, 97, would see the inside of a prison cell due to age.
The lack of oversight has allowed corruption to remain unchecked for decades at the Vatican bank, which has gained notoriety as a money laundering center.
Aware that the Vatican’s moral authority and financial stability were at risk, as well as its unrestricted access to the global financial system, Pope Benedict undertook reforms that accelerated under Pope Francis.
The Vatican’s effort to improve accountability has included the creation of new supervisory structures, a reorganization of financial departments and the closing, in recent years, of hundreds of suspicious accounts at the Vatican bank to comply with anti-money laundering laws and international standards.
But efforts have not been perfect and Francis has reversed some decisions, leading to confusion, critics say.
Vatican prosecutors are investigating other questionable real estate deals at the Secretariat of State, the Holy See’s diplomatic and administrative arm, which have already led to the resignation of a prominent cardinal.
As part of his financial sector reform, Francis in 2014 reconfigured the Vatican bank’s board of directors, hiring a fund manager, Jean-Baptiste de Franssu, to be its new president.
In December of that year, after an audit by external financial advisers, the bank signaled a series of suspicious real estate transactions to Vatican prosecutors, leading to the case that culminated on Thursday. A third person, a senior manager at the Vatican bank, was also put under investigation, but died in 2015.
In 2018, the bank claimed to have lost more than 50 million euros as a result of the “disposal of a considerable part of the Institute’s real estate assets”.
Thursday’s case involved the sale of 29 buildings, most in Milan and Rome. Prosecutors said the defendants sold the buildings at a price well below market value, receiving the cash difference, which the prosecutors estimated at € 59 million, and the appraisers later estimated at € 34 million.
Prosecutors argued that part of the money was recycled in Switzerland with the help of Liuzzo’s son Lamberto, who was sentenced on Thursday to five years and two months in prison and fined € 8,000 for money laundering.
In its decision on Thursday, the court acquitted the defendants of the charges involving the sale of some buildings. The test, which began in May 2018, was briefly suspended last year because of restrictions on the coronavirus.
In 2014, Reuters reported that Vatican prosecutors froze € 16 million in accounts owned by defendants at the Vatican bank. Other funds were later frozen in Liuzzo’s bank accounts in Switzerland. The court on Thursday ordered the Vatican bank’s funds to be seized.
This was not the first trial involving former Vatican bank employees.
The bank had previously lobbied two other former managers, who were held responsible for maladministration in 2018. A Vatican civil court ordered them to indemnify the bank for damages.