Bloomberg News

Vatican Bank Managers Resign Amid Broadening Financial Scandal

July 02, 2013

IOR Head Ernst von Freyberg

Italian prosecutors in 2010. Pope Benedict XVI appointed Ernst von Freyberg, a German lawyer and financial adviser, to head the IOR in February as one of his last acts before retiring. Photographer: Alessia Pierdomenico/Bloomberg

The director and deputy director of the Vatican bank resigned yesterday as a series of investigations lead to a renewal of the Church’s financial structures.

Paolo Cipriani and his deputy Massimo Tulli stepped down “in the best interest of the institute and the Holy See,” the Vatican said in a statement late yesterday. Ernst von Freyberg, the bank’s president appointed last February, will take over as interim director general and a new position of chief risk officer will be created. “It is clear today that we need new leadership to increase the pace of this transformation process,” von Freyberg said in the statement.

The resignations come three days after senior Vatican cleric Monsignor Nunzio Scarano was arrested by Italian authorities along with an Italian secret service agent and a financial broker as part of a corruption investigation. The three are accused of plotting to bring 20 million euros ($26 million) into Italy from Switzerland in a private jet, according Rome prosecutor Nello Rossi. Scarano has denied the accusations.

The Vatican bank, known as the Institute for the Works of Religion, or IOR, is increasingly in the spotlight of investigations as Pope Francis works to bring it in line with international standards. Last week, the pope named a commission to oversee the operations of the Vatican bank after Moneyval, the Council of Europe’s monitoring body for money laundering and terrorism financing, called for independent supervision of the bank.

Decades of Scandals

The Vatican is trying to overcome three decades of scandals ranging from the Banco Ambrosiano failure in the 1980s to the freezing of 23 million euros by Italian prosecutors in 2010. Cipriani and the IOR’s former head, Ettore Gotti Tedeschi, were placed under investigation as part of the 2010 probe for allegedly omitting data in wire transfers from an Italian account.

The IOR oversees about 7.1 billion euros in assets, mostly in bonds and cash. In an interview last month von Freyberg said he was committed to making the bank more transparent. A German lawyer and founder of a financial advisory firm, von Freyberg replaced Ettore Gotti Tedeschi, who was ousted from the IOR last year for “failing to carry out various duties of primary importance,” according to a May 2012 statement.

The Vatican said yesterday its oversight council will soon appoint new directors. Rolando Marranci was named acting deputy director and Antonio Montaresi the new acting chief risk officer. Von Freyberg also asked senior advisers from Promontory Europe, which were hired in May to strengthen the Institute’s anti-money laundering program, to support the management.

To contact the reporter on this story: Alessandra Migliaccio in Rome at amigliaccio@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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