Merchants in the Temple (3 page)

C-l-a-r-i-t-y. That's what's done in the most humble companies and we have to do it, too. The protocol for starting a project is the payment protocol. Before any purchase or construction job we have to request at least three different estimates to decide which one is more convenient. Let me give you an example, the library. The estimate said 100 and then 200 was paid. What happened? A little more? Alright, but was it budgeted or not? [Some say] we have to pay for it. No we don't! Let them pay … We don't pay! This is important for me. Discipline, please!

Francis goes on to describe the utter superficiality of Vatican bookkeeping. He's angry. Seven times he repeats, “We don't pay.” For too long, in an incredibly facile and superficial manner, millions have been disbursed to pay for unbudgeted jobs that were executed without the required oversight and with ridiculously padded invoices. Many have taken advantage, pocketing even the donations of the faithful, the offerings that were supposed to go to the needy. The Pope then addresses the cardinals who lead dicasteries that over the years have mismanaged Church money, the department heads who haven't exercised the necessary oversight. His criticism of them is overt: harsh, direct, scathing, even humiliating. He emphasizes issues that any manager working in even the smallest business should know and understand.

Francis stares Secretary of State Tarciso Bertone in the face. Those who are sitting near the Pope see no signs of the friendship and indulgence that Ratzinger felt for the Italian cardinal that led him to elevate Bertone to the pinnacle of power at the Vatican. No, Francis's gaze conveys the icy admonishment of the Jesuit who came to Rome from the “ends of the Earth.” These accusations are an indirect rebuke of Bertone.
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At the Vatican, in fact, resource management and governance are the responsibility of the Secretariat of State, which had accumulated unprecedented power under Bertone. In the unreal silence that dominates the room, the Pope delivers the final blow by raising the most embarrassing issue:

It is no exaggeration to say that most of our costs are out of control. This is a fact. We always have to check the legality and clarity of contracts with the utmost attention. Contracts can be very tricky, right? The contract might be clear but in the footnotes you find the fine print—that's what it's called, right?—which is tricky. Examine it carefully! Our suppliers should always be businesses that guarantee honesty and propose a fair market price for both products and services. And not all of them can guarantee that.

The Pope's Accusation: “Our costs are spiraling out of control”

The financial situation inherited from Ratzinger and Bertone—as described by the auditors and seconded by Francis—was a dead-end, prebankruptcy scenario. On the one hand there was total chaos in the management of resources and spending, which was spiraling out of control, with inflated costs, deceptive contracts, and dishonest suppliers dumping obsolete and overpriced products on the Vatican. On the other, cronyism and shady financial dealings prevented change and undermined the policies already adopted by Benedict. This might have been the unspoken reason for Ratzinger's decision to step down. By giving the helm of Peter's Bark to someone else, he hoped to break their grip on power and prevent a storm that might ultimately compromise the financial and the evangelical future of the Church. Francis delivered his indictment in the same room used in the dramatic days leading up to the Conclave, when there had been talk about irregularities and concerns at the meetings on the eve of the voting for the new pope—concerns that may have led Bergoglio to choose the name of Francis, the first pope in history to do so—after the saint who dedicated his life to poverty.

The Pope was not done. While condemning the items that fell under “expenses,” the Holy Father reserved his greatest wrath for the handling of revenue—the donations and inheritances left by the faithful. There was a complete lack of “oversight of investments.” As we shall see in the next chapter, the question is very simple: does the money left by the faithful end up in good works or is it swallowed up by the black holes in the Holy See's wasteful administration? This question demands an investigation.

So concerned was Francis that he pressed on with another disturbing example. The situation illustrated by the auditors reminded him of Argentina in the dark days of the military junta, of the
desaparecidos
, when he discovered that the Church in Buenos Aires had made some truly unholy investments:

When I was a provincial prelate, the general accountant told me about the attitude we should take toward investments.
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And he told us the story of how the Jesuit province of the country has a good many seminaries and made investments into a serious, honest bank. Then, when they changed accountants, the new man went to the bank to check up on things. He asked how the investments were doing: he came to find out that more than 60 percent had gone to weapons manufacturing!

Oversight of investments, ethics, and even risks, because sometimes [you are tempted by interesting proposals and people say]: since this yields high interests, then … Don't be so trusting, we need to have technical assessors for this. Clear guidelines are needed on how and into what investments should be made, and they must always be made with scrupulous care and the utmost attention to risks. One of you reminded me of a problem that led to our losing more than ten million with Switzerland, through a bad investment, and the money was gone. There is also a rumor that there are satellite administrations [whose investments are not reported in their financial statements]. Some dicasteries have their own money and they administer it privately.

Our books are not in order, we have to clean them up.

I don't want to add more examples that will make us even more concerned, but we are here to solve everything, my brothers, for the good of the Church. I am reminded of an elderly parish priest in Buenos Aires, a wise man who was very careful with money. He said, “If we don't know how to look after money, which you can see, how can we look after the souls of the faithful, which you can't see?”

A Scathing Critique

The Pope delivers a scathing critique of how the Church finances are managed. He does not cite anyone by first and last name but he clearly shares the international auditors' concerns. He has also been informed of the disastrous results of the investments that had been entrusted to UBS, BlackRock, and Goldman Sachs: an initial investment of 95 million euros lost half its value under their watch.

The levels of alarm rise even higher when the Pontiff—the monarch and thus the supreme religious and civic authority of the Vatican State—says that he wants to get to the bottom of the situation, going through each and every office, donation, and expense. For this purpose he will soon create a new commission to comb through the books in search of “wounds,” and reorganize the Vatican State.
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I'm sure that we all want to move forward together to continue the work you have been doing for so long. To help you, I have decided to set up a special commission to build on the work you have done and to find solutions to the problems. This commission will have the same profile as the one established for the IOR … One of you will be the coordinator or general secretary or chairman of this commission to help in a process that I am happy to see moving forward. But we must make an effort to bring it to a conclusion and say so clearly.

We are all good people, but even the Lord demands from us a management for the good of the Church and of our apostolic work … I suggest that at least once during these meetings [of the cardinals], to invite the auditors board, for maybe half a day, to have an exchange of information, concerns, and work … If you have any suggestions, I am ready to hear them. This much I can offer you, and I thank you most warmly. Are there any questions, comments?

After the Pope's words, the silence is broken, once again, by Cardinal Vallini, who is still trying to alleviate the tension. To disassociate himself from any responsibility, he makes a point of stating that he himself holds no financial posts. His outlook is optimistic: “We're moving toward reforms that were already planned,” he begins, “the administrative chiefs are working hard to adapt their departments to a proper management of assets.” Vallini tried to downplay the assertions in the auditors' documents and promulgated by the Pope. So who is right? Vallini continues:

The international auditors, to my way of thinking, have the right perspective for their part but only in terms of finances. They are providing suggestions and provocations that are useful, important, and we are grateful. But it is also true that the question or the dysfunctions stem from one fact—and I don't think, well at times someone might be acting in bad faith, but not ordinarily—from our lack of administrative culture … Then, it's true, there are parallel administrations and they have to be fought, too. Where we need to dedicate our efforts is into instilling a new management culture. But I have to say that the work being done these days, and over the past few years, is moving in this direction, and I hope that we can continue to provide even more relief to the Pope.

In other words, Cardinal Vallini believes that the prelates are suffering merely from a lack of management culture. This is the source of their mistakes and of the financial losses. And yes, there is a chance that some people might take advantage.

The Pope is quick to reply. “What Vallini says is true, the culture … We improvise. It's the same in Argentina, we make it up as we go, without that culture of clarity, of protocols, of method…”

For the moment he avoids entering into the individual problem areas. Francis doesn't want to alarm the cardinals too much. It will be up to the new commission to venture into the bottomless pit of the budgets and balance sheets, knowing that the auditors' warnings are just the tip of the iceberg.

The Auditors' Report

The board of auditors has always had the delicate task of inspecting the books and balance sheets of all the dicasteries that manage the Vatican finances. It consists of five laypeople from different European countries.
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It meets once every six months at the Vatican together with eight members of the Prefecture, representing the full hierarchy of the dicastery: from the President, Cardinal Giuseppe Versaldi, to the Secretary, Monsignor Lucio Ángel Vallejo Balda, to the Office Manager, Monsignor Alfredo Abbondi.

The meetings are confidential. In addition to the members, two interpreters and a stenographer attend to translate and transcribe the proceedings. Their minutes from 2010 to today read like a constant denunciation by the auditors of the waste, mismanagement, irregularities, and inefficiency that plague the Vatican, with many specific suggestions to improve the situation. For years their warnings had been ignored, and no tangible changes had been made, to the growing discomfort and frustration of the professionals who saw their every constructive criticism ignored.

On December 22, 2010, no longer knowing how to get anyone to heed their warnings, the board of auditors had sent a detailed letter to Benedict XVI, highlighting the most critical areas where action was needed—to no avail, like all the earlier proposals that had never made it past the drawing board. The significance of the fact that the auditors had now resorted once again to writing to the Pope should not be underestimated. The accounting experts felt that the new Pope could move with greater decision and speed.

Francis had not requested the damning document. It was the auditors themselves, only a few weeks earlier, who had realized that they could no longer hesitate and that they had to give the Pope a detailed account of the financial situation. And this report would differ sharply from the optimistic, sanitized, and simplistic indications that Francis had received from the managers who had operated under Ratzinger, some of whom had every interest in painting a rosy picture, in an apparent effort to minimize their own responsibility.

On June 18, fifteen days before the secret meeting, the auditors who work with the Prefecture—laypeople motivated by a deep and sincere love of the Church, as they wrote in their private letter to the Pontiff—attended the early morning mass with the Holy Father at Casa Santa Marta. At nine o'clock that day they all met for one of the two annual meetings dedicated to examining the books of the Holy See and the Governorate.

The meeting was coordinated, as always, by Cardinal Versaldi. According to the minutes—which I was able to consult—the group had an animated discussion. The prevailing tones were pessimistic. While the auditors had expressed their concerns on previous occasions in the past, this time the broadsides were relentless, and they were all from the laypeople on the board (ten of the thirteen members), a squad of solid pragmatic professionals who had reached the conclusion that their every effort to improve things over the years had been ignored. In particular, from the documentation in my possession, the most outspoken members were Joseph Zahra from Malta, an economist; Jochen Messemer from Germany, formerly of the consulting group McKinsey & Company; Josep M. Cullell from Barcelona; Maurizio Prato from Italy, an accountant; and John F. Kyle from Canada.

The most concise, bitter assessment was from Kyle. “The efforts that have been made over the past twenty-five years have come to practically nothing.” He thought it would be “advisable to have a group close to the Pope that can act more decisively and firmly and take measures against those who fail to follow instructions.” In his sermon that morning Francis had reminded them—men of numbers but also of faith—that, “To be believable the Church has to be poor,” and that “the Prefecture—as the supervisory body—has to address the budgetary problems more courageously.” It was an explicit exhortation to act—to come out of the dark.