Dispute over Papal Foundation’s $25 million grant approval continues

Vatican City, Apr 16, 2019 / 16:36 pm

Scrutiny continues for the U.S.-based Papal Foundation, amid questions of whether some of its grant activity was motivated by a desire to secure leniency for disgraced former cardinal Theodore McCarrick.

The ongoing controversy surrounds the foundation's decision to make an unprecedented grant to a leading Italian hospital whose former leadership had faced accusations of massive embezzlement and financial misconduct.

Cardinal Donald Wuerl, the outgoing Archbishop of Washington, made "false and misleading" statements about the grantee to the foundation board, said Matthew B. O'Brien, a Philadelphia-based writer, in an April 12 essay for First Things. O'Brien cited several people involved with the Papal Foundation who spoke on background and provided copies of foundation meeting minutes and legal reviews.

"He painted a picture of a hospital that was experiencing momentary cash-flow problems, but was otherwise sound," O'Brien charged. "Wuerl's actions are especially questionable in light of what he knew at the time about then-Cardinal Theodore McCarrick's interest in securing the grant."

"Wuerl was aware that McCarrick stood to win leniency in his sex abuse case if the Papal Foundation secured $25 million for the Vatican's Secretary of State," said O'Brien.

Mark Corallo, a spokesman for the Papal Foundation, challenged this interpretation. His statement, quoted in O'Brien's essay, said there were "a variety of interpretations" of the financial condition of the grantee and its sponsoring entities.

"Clearly there were different readings of available information, but it is not correct to characterize the presentation of Cardinal Wuerl or other participants at the Board meeting as false or misleading," Corallo said.

Since 1990, the foundation has given over $100 million to support projects and proposals recommended by the Holy See. American cardinals are ex officio leaders of the foundation, though it has a significant number of lay board members. Grants are made for needs that are particularly significant to the pope, and often go to institutions and organizations in developing nations. The grants typically do not exceed $200,000 each.

The foundation's approval of a $25 million grant to a financially and legally troubled Italian hospital became a major controversy among board members who argued the grant was approved without due diligence. This controversy drew media coverage in early 2018.

After the June 2018 exposure of sex abuse allegations against then-Cardinal Theodore McCarrick, a past Washington archbishop, further questions were raised about the possibility of further corruption, the use of funds for undue influence, and Cardinal Donald Wuerl's knowledge of McCarrick's abuse.

In December 2017, the foundation approved a $25 million grant to the Rome hospital Istituto Dermopatico dell'Immacolata (IDI). According to O'Brien, this approval came in response to a request from Vatican Secretary of State Cardinal Pietro Parolin, made on behalf of Pope Francis.

The hospital, which had been under the direct ownership of the Congregation of the Sons of the Immaculate Conception, remains one of the leading dermatological hospitals in Italy.

In 2013, Italian authorities arrested a priest who was its chief executive through 2011 and two others for allegations dating back as far as 2005. They were convicted on charges relating to the embezzlement of 6 million euros in public money from the hospital and diversion of another 82 million euros. The hospital allegedly evaded taxes on 450 million euros. Its debt of over 800 million euros led to bankruptcy.

Financial reorganization led to the purchase of the hospital and its affiliates through a partnership between the Congregation of the Sons of the Immaculate Conception and the Vatican Secretariat of State. This partnership owns and operates the IDI hospital and its affiliates through the non-profit Fondazione Luigi Maria Monti and a limited liability subsidiary, Luigi Maria Monti, S.r.l.

At the Papal Foundation's December 2017 meeting that approved the grant, O'Brien charged, Wuerl made two false statements recorded in the meeting minutes: he wrongly claimed that the religious congregation involved in the hospital during the time of fraud, embezzlement and insolvency was no longer involved; and he understated the debt of the hospital and its affiliates after April 2015 insolvency proceedings.

Corallo, a Papal Foundation spokesman, said there were "a variety of interpretations" of the financial condition of the IDI and its sponsoring entities. The relationship of the religious congregation and the IDI was "still unclear," he said, and all discussion was made difficult by "conflicting interpretations." Wuerl's December 2017 presentation used both publicly available information and information "provided by the Holy See."

"Other interpretations were also offered," said Corallo.

O'Brien countered that much information, including the $60 million debt and the continued involvement of the Sons of the Immaculate Conception, were available publicly. He argued that Wuerl "does not appear to have taken any steps to clarify the crucial information about the supposed beneficiary of the $25 million grant."

Wuerl told the board that the IDI group owed $26 million in payables but did not mention a $60 million mortgage debt, O'Brien said. He added that Wuerl resisted lay board members' requests for financial statements from the hospital.

McCarrick, Wuerl's predecessor as Archbishop of Washington, at the time was an ex officio member of the foundation board.

O'Brien said Wuerl knew that McCarrick could win leniency in the Vatican's treatment of his sex abuse case if he were able to secure the grant for the hospital, at the request of the Vatican Secretary of State.

Wuerl also failed to disclose that a Vatican dicastery for which he is a board member, the Administration of the Patrimony of the Holy See (APSA), is apparently a creditor of the troubled IDI, O'Brien said. The APSA lent 50 million euros to the IDI as part of its reorganization.

O'Brien said it is still unknown whether the first part of the grant, worth $13 million, was delivered to the Fondazione Luigi Maria Monti. According to O'Brien, the Papal Foundation has not said whether it has sent the final part of the grant.

Cardinal Wuerl in a Jan. 19, 2018 letter asked the Holy See to decline about half the grant. In February 2018, a Papal Foundation spokesman told the National Catholic Register it is not the foundation's practice to comment on individual grant requests.

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The Papal Foundation was launched in 1988 by Cardinal John Krol of Philadelphia, Cardinal John O'Connor of New York and then-Archbishop of Newark Theodore McCarrick. McCarrick would go on to become a cardinal and Archbishop of Washington and also president of the foundation.

The revelations that McCarrick had sexually abused minors and seminarians would lead to his resignation from the College of Cardinals and removal from the clerical state. The revelations would lead to many questions about his influence as a global diplomat and fundraiser and whether his abuse was known and covered up by prominent churchmen.

In a September 28, 2018 essay at First Things, O'Brien had criticized McCarrick's "manifest and gross conflict of interest" because he stood to benefit personally if, by securing the grant, "he could win leniency in how [the Vatican] handled his sex abuse case." O'Brien argued that under Pennsylvania law which governs the Papal Foundation, directors of non-profits are obliged to disclose material conflicts of interest to the organization's directors and officers, and recuse themselves from relevant board decisions.

O'Brien said foundation board members had told him that foundation grants had been audited in 2015 or 2016, finding a lack of records for many grants and other records indicating poor oversight on the part of the grant recipients or middlemen, who were sometimes papal nuncios.

A spokesman for the papal foundation, cited in O'Brien's September 2018 essay, said it is making "every effort" to ensure grants are acknowledged and reported. He said the foundation is audited annually and it has been confirmed that the foundation's procedures and operations are consistent with its bylaws and mission. At the same time, O'Brien cited a December 2017 letter from the foundation's attorneys noting an apparent failure to confirm that grant recipients operated in a way analogous to U.S. charities and an apparent failure to obtain meaningful audits or accountings of how the grants were spent.

In March 2018 the foundation said its executive committee and board made an inadequate effort to address and correct what it said was "anonymous, inaccurate and misleading information related to the grant request" as well as "unsubstantiated claims that called into question the integrity of the request by the Holy See and of members of the board."

The foundation said it would review its mission, its grant-making approach and its relationship with the Holy See. This review comes after its "intensive, six-month review and approval of a special request by the Vatican for assistance with a three-year financial reform plan" for the IDI hospital.

In October 2018, Cardinal Sean O'Malley of Boston was elected chairman of the Papal Foundation's board of trustees. O'Malley had been a member of the board for 12 years previously. He succeeded Cardinal Wuerl, who had been chairman for eight years.

"The Papal Foundation remains committed to assisting our Holy Father in meeting needs that face the Church," the Papal Foundation told CNA April 16, in a statement sent by its vice president for advancement James Coffey.

"To do this, we look to the future with an expanded Board of Trustees that will give an opportunity for greater collaboration for the laity and the clergy to work together for the benefit of the Church and many who face great needs."