In addition to the agricultural company at Via Laurentina 1351, there was also a warehouse registered to Edil Ars. S.r.l., a company that specialized in the restoration of historic buildings and—by a strange coincidence highlighted on the homepage of its website—“a subcontractor of works at the State of the Vatican City for the Administration of the Patrimony of the Apostolic See and for the Governorate.”

  “We had a storage facility there, nothing more. Our headquarters is located elsewhere, on Via di Porta Cavalleggeri 53,” is what I was told on the telephone. The company pays an annual rent of 30,000 euros for a huge commercial space. Today Edil Ars. no longer exists, and has been incorporated by another company, Ap Costruzioni Generali, which does the same kind of work, with the same people and from the same location, on Via di Porta Cavalleggeri, a few hundred meters from St. Peter’s Square.

  Edil Ars. was the same company that had infuriated the former President of APSA, according to a letter that Cardinal Nicora had written to Cardinal Bertone in 2008. The company was considered too “unreliable”:

  On April 17, 2002, Monsignor Carlo Liberati, a representative of the ordinary section of APSA, drew up a leasing contract with the Edil Ars. company of Signor Angelo Proietti, granting free of charge occupancy of the barns, warehouses and a house and the use of water from the pre-existing artesian well. In reality, Edil Ars. went well beyond the allowances of the lease in its occupancy, modifying de facto the purposes of the locations and making increasingly difficult the collaboration with the pontifical villas [which were managing the asset at the time] … Considering the deterioration of the locations as the result of the storage of enormous quantities of materials, including the presence of polluting substances, and of various pieces of construction equipment, on December 22, 2006, APSA formally cancelled the leasing contract with Edil Ars., since the counterpart had proven to be unreliable.

  Edil Ars did, however, enjoy the full confidence of Marco Milanese, who had been on the staff of former Italian Finance Minister Giulio Tremonti. Edil Ars presented a 400,000 euro project to restructure a house Milanese owned on Via di Campo Marzio, inhabited by Tremonti. Edil Ars had also been awarded contracts between 2002 and 2006 from the publicly traded company Sogei. These stories made headlines in the Italian newspapers in 2011, with pictures showing the dome of St. Peter’s in the background.

  The Vatican Colonies in Europe

  Another aspect of the Vatican’s real estate patrimony are the “colonies,” prudent real estate investments abroad into marquee buildings in various parts of Europe—downtown Paris, London townhouses on the Thames, dreamy apartments in Lausanne and other parts of Switzerland. The market value of these properties amounts to approximately 591 million euros.

  This information is in the public domain today thanks to an investigative report by Emiliano Fittipaldi for the weekly magazine l’Espresso. Now the public knows all about the Sopridex holding company—valued at 46.8 million euros—which manages some of the most prestigious buildings in the center of Paris.9 “The staff includes a manager, three employees, cleaning personnel”—according to the article—“and 16 concierges.” The Promontory analysts documented the income of the staff and the members of the board: 56,000 euros is paid to the chairman of the board, and 6,825 to the three board members, one of whom is Paolo Mennini. The director of Sopridex, Baudouin de Romblay, received a gross salary of 12,956 euros per month, also for his thirteenth-month bonus. Fittipaldi combed through the wages of the sixteen concierges who work at the various properties: their salaries range from 7,000 to 29,000 euros. The 38,563 euros paid to their replacements during vacation was also verified and entered into the books. Seventy-five percent of the expenses for concierge services were billed to the tenants, while the remainder was covered by Sopridex.

  In the French capital the Vatican owns “500 properties grouped into various buildings,” with a market value quite different from what appears in the financial statements. The confidential documents report that the income amounts to ten times more than what is declared, 469 million. The reason for this discrepancy is quite simple. The more the value of the property is understated, the lower the property tax owed to countries where there are real estate taxes.

  The Swiss properties were administered by another holding company, Profima SA, founded in Lausanne in 1926, which in the past had been used as Pope Pius XI’s strong box for part of the so-called “damages” the Vatican had received from Italy after the signing of the Lateran Pacts.

  Profima SA belongs to a financial archipelago consisting of nine other companies. These include Rieu Soleil and Diversa SA, which handle “savings management”—according to the analysts’ report—“holding securities, including stocks, in Roche.”10 Four other holding companies have almost exactly the same name, except for the last letter (S.I. Florimont B., S.I. Florimont C, S.I. Florimont E, S.I. Florimont F) and they are in good company with the other three “Siamese twins” (S.I. Sur Collanges A, S.I. Sur Collanges B, S.I. Sur Collanges C). A total of ten companies in Switzerland—a sophisticated network that controls a patrimony worth billions—report to the Vatican. “The ten companies”—according to the analysts—“were established to manage one property each, between Geneva and Lausanne.” Altogether they own assets indicated in their financial statement at 18 million, but their actual value is quite different: 49 million.11

  In London, the properties are managed by British Grolux Investments Ltd., founded in 1933, which administers homes and luxury stores, with a market value of 73 million euros but entered into the books at 38.8 million.12 British Grolux also manages various properties located outside of the city. Altogether, according to the Promontory analysts, the real estate holdings of APSA—in Italy, Switzerland, France, and Great Britain—are worth a total of 2,000,709,000 euros. But the financial statements report a far lower amount: only 389.6 million euros. This discrepancy represents the deep contradiction within the Vatican today. On the one hand there is a sophisticated archipelago of holding companies led by managers in double-breasted suits who control immense wealth; on the other, a Pope who demands that the Vatican clean up its act and who is fighting for a poor church, following the dictates of the Gospel.

  7

  Holes in the Pension Fund

  A Deficit of Half a Billion Euros

  The Afterlife, for believers in the Christian faith, is a place of peace and liberation from the body and from sin. But the attachment of Catholics to worldly evils, to be condemned, seems to be very durable, at least according to the charts of mortality rates in the Curia. Catholics, especially those who reside in Rome, in the Vatican, and in the rich West, live longer, even five to ten years more than the average.

  If earthly life is lengthened, we should all be happy, but that is not necessarily the case. Rather than give joy, this statistic is a source of concern at the Holy See. This might sound absurd, but there are reasons for it. The longer a person lives, the longer they receive retirement pay, adding to a deficit that has been growing year after year without anyone paying adequate attention. But if this fact were made public, it could increase tensions among the employees within the Vatican walls. Can you imagine the demonstrations and picketing that would take place in the Vatican City?

  The alarm was raised by the head of the Prefecture, Giuseppe Versaldi, who, with regard to the financial situation and expenditures—especially the management of social security funds—had even feared for the survival of the small state’s administrative bodies and, consequently, of the Vatican itself.

  When a lay manager sounds the alarm on a troubling financial situation—in this case, the pension fund—few people take notice and even fewer pay any attention at all. There are two reasons for this: the ecclesiastical nomenclature of which Francis is so critical has very little sense of responsibility, and the long togas tend to minimize everything laypeople say, no matter how well supported it is by data and careful audits. “The Church does not consist of numbers but of souls”: this is the generic response of the cardinals when a lay official allows himself to make a criticism.

  This is what happened in 2012, when the cracks in the pension system started to appear. On June 12, the consultant to the Prefecture, Jochen Messemer, spoke at the meeting of the international auditors. Many of his colleagues were literally astounded by the gravity of the situation that he described and the harshness of his words. His statement centered on the uncertain future of the pensions for the current 1,139 retirees and the 4,699 employees of the small state, when they themselves would retire, slowly but surely.1 “The bankruptcy of the diocese of Berlin,” Messemer thundered, “was caused by the inability to understand what was really going on, to grasp the risk that was being run.2 To underestimate the pension potential could lead to a disaster of this kind.”3

  His alarm sparked no reaction. Six months later, on December 19, once again before his colleagues on the board of auditors, Messemer tried to be more explicit and incisive, as the minutes of the meeting make clear:

  Mr. Messemer wishes to address the problems of the pension fund. Consideration should be given to three main liabilities that have accrued:

  1. For employees who have already retired (current average value of pension contributions): 266 million euros;

  2. For active employees (current average value of pending contributions—presently active): 782 million euros;

  3. For employees who will be employed in the future (current average value of pending contributions—active in the future): 395 million euros.

  This adds up to a total of an approximately 1.47 billion euro liability on the pension fund. The current endowment is the equivalent 369 million euros and, by comparison to the total liability of about 1 billion, can only guarantee 26 percent coverage. The value is too low by comparison to other pension funds. Even the poorest dioceses try to assure 60–70 percent coverage.4

  Messemer then raised the question that was fundamental to sketching out a credible operating plan for the future: since retirement pay lasts for the duration of a person’s life, how could anyone project the average number of years that a pension will be paid to employees who go into retirement? The only data available, to which he was referring, came from the mortality chart:

  As for the mortality chart, when was it last updated? According to some statistics, Catholics tend to live longer. This statistic, if true, could represent a serious problem since, by living 5–10 years longer, the whole chart would become unreliable because, with the accrual of liability, the deposits made until that moment would not be sufficient to cover them … There has never been any discussion of investment policies for this fund. In economic terms a pension fund cannot disregard the behavior of the market. We have to effect stress tests, and insert clauses on what to do in cases of loss.

  These are technical but necessary aspects. When you manage a fund of this type you need a good dose of responsibility. The employees work for 40 years on 80 percent of their wages (excluding the 20 percent withheld for the pension fund). There’s nothing worse than saying that the fund is not solvent … We cannot err on the side of superficiality. The basic framework of the pension fund is outdated. We need to establish a working group to address these issues confidentially.

  Apart from the collective dismay, his criticism would never go beyond the perimeter of the room in the Prefecture where the experts were assembled. The summary of that meeting, nine pages written by the trusted note taker Paola Monaco, was too disruptive to be addressed, so the document remained in the ironclad safes of the Prefecture. It was only six days away from Christmas: the last Christmas for Ratzinger as Pontiff and for Bertone as Secretary of State.

  With the election of Bergoglio to the papacy in March 2013, the wall of silence started to crumble. Messemer’s appeal was welcomed in May by the cardinals chosen by Francis to help the Pontiff in his leadership of the universal Church.5 So the minutes made it out of the locked box and ended up discreetly in the black leather [carpette] of the senior prelates who had the full trust of the Pontiff. From the Secretariat of State, Cardinal Wells proposed that Messemer become a member of the COSEA Commission because of his expertise in the field of social security.

  In August 2013 the troubled issue of the pension fund was taken up as one of the official subjects of inquiry of COSEA. This was all done with the utmost secrecy, to avoid disturbing the peaceful sleep of the precious hardworking community that every day labors away at the Vatican and knows nothing of the pension system, which is so severe that it could compromise the future of many employees.

  In the end, Messemer’s proposal that a task force be formed did not fall on deaf ears, and action to that effect was quickly taken. The mission was assigned to a giant in the field of management consultancy: Oliver Wyman, a multinational company headquartered in New York with offices in more than fifty countries. Wyman was delegated to conduct an actuarial study to estimate the financial health of the pension fund and assess whether the paychecks withholdings were sufficient to guarantee a safe future for everyone. COSEA also asked Wyman to “develop a proposal to cover the deficit,” as the internal documents indicate, and to restore the health of the fund, assuring a serene old age to all the Vatican employees, from the cardinals to the Swiss guards.

  Here, too—as was often the case on the various critical fronts opened by the teams deployed by Francis—well-informed cardinals, bishops, and monsignors were divided into two factions. The optimists, loyal to continuity with the past, proposed the sale of some real estate to balance the budget. And they spread the word that the actual deficit amounted to “only” 40 million euros. This is the number that had been circulating ever since the last audit of the pension fund, in 2011, by a Roman expert, who estimated the deficit at precisely this amount. For them there was no reason to panic, and the situation was under control.

  The realists, instead, described the actual situation. They were the loyalists of Francis, including the Spanish Cardinal Santos Abril y Castelló and the Frenchman Jean-Louis Tauran. They knew that the size of the deficit was much greater than the unofficial figures being circulated, and that all the data showed the Vatican social security system on the edge of collapse. The picture they painted was hardly reassuring. The cardinals closest to the Pope proposed another set of urgent and, above all, serious inspections. They were all rightly convinced, as the other financial questions had made crystal clear, that viable countermeasures could only be identified and enacted through solid data.

  Francis’s collaborators were shrewd enough not to contradict the optimistic reports circulating within the Vatican walls, which downplayed the size of the deficit, saying it only amounted to a few tens of millions. Their strategy was aimed at reassuring the people and preventing the spread of panic or alarm. On the issue of pensions, a very delicate hand was being played: it was essential that the pensions be safeguarded to prevent unpredictable reactions by the employees of the Holy See, which might spark a domino effect with repercussions in the media, and provoke a chain reaction of rampant destabilizing events such as strikes and protests.

  In late September Wyman’s team was able to offer a preliminary assessment on the basis of data collected from various Vatican dicasteries. A top-secret document was drafted and sent in a sealed envelope on October 11 to Zahra, the Chair of the COSEA Commission, and to Messemer, who had been assigned to follow this specific project. The next day was a relatively peaceful Sunday. The COSEA commissioners met early in the morning for the third time. After a quick coffee and welcoming remarks, Messemer and Zahra did not conceal their desire to share all the information they had received. Wyman’s report gave a sharp photograph of the situation that shocked the experts assembled at Casa Santa Marta. Their profound distress emerges clearly in a few lines of the meeting summary:

  The consultancy company that was hired, Oliver Wyman, presented already on October 11 a preliminary report on the data it had acquired on about forty Vatican offices. Now it will focus primarily on the pension fund, which at first glance shows a heavy exposure to risk that is extremely troubling.

  In fact, the first indications report a deficit that was far greater than what had been imagined in the spring, comparing the available data with the reports prepared in past years. The unofficial figure that had been rumored in the corridors of the holy palaces shot up to incredible levels: the deficit had increased to half a billion. But even this projection would prove to be too optimistic.

  “The Vatican Risks Extinction” According to the Head of the Prefecture, Cardinal Versaldi

  Francis’s goal was to return the Holy See to the dictates of the Gospel in every sector, from finance to management and administration. Health insurance and pensions also had to be rethought, according to these criteria. The reform of the pension system should thus not be studied in isolation but rather in connection to a new model relationship between the worker and the Holy See. The functions and role of the Labor Office had to be reviewed, correcting and rationalizing three key points: human resources, pensions, and health insurance. This is made clear in a COSEA memorandum of late October 2013, which proposes the creation of a new strategic office to manage everything having to do with workers. The document appears to be the draft of a speech written in the first person and bearing the signature of the Pope.