The case of Gianluigi Torzi is likely to shed a light on one of the Catholic church's most controversial financial deals in decades
As the rest of Italy relaxed on December 26 2018, Gianluigi Torzi put on a dark suit and tie for an important meeting. The client the Italian businessman was visiting later that day answered to no one less than God himself.
At 12pm Pope Francis stepped out on to his balcony in the Apostolic Palace, to deliver a sermon on St Stephen, the first Christian martyr. Francis instructed the crowd of thousands gathered below "to learn from him how to forgive. It is not easy to do, as we all know."
Later that afternoon the Argentine pontiff, who has refocused the Catholic Church on the poor and rooting out corruption since his election in 2013, granted a private audience in his ascetic Santa Marta residence to Torzi and his family, an honour normally reserved for only the most senior foreign dignitaries and Cardinals.
The man Francis met that day had been a suspect in multiple criminal investigations, was flagged on a global anti-money laundering watchlist, and would come to earn millions of euros in payment from the Vatican for just five months of work.
Last Friday evening Torzi was arrested and charged by the Vatican authorities for what they described as "extortion, embezzlement, aggravated fraud and self laundering" for his role in a controversial purchase of a luxury building in Chelsea, one of the wealthiest neighbourhoods in London, on behalf of the Vatican in 2018.
The Italian broker is accused by Vatican prosecutors of having demanded payment for his role in helping the Church acquire the building, and having threatened to keep the property for himself — a charge Torzi, through his lawyers, has denied.
Before Torzi's arrest, Pope Francis called the Vatican investments that are being probed "a scandal". "There is corruption, we can see it," he said late last year.
Yet the Vatican has so far failed to explain how weeks before his audience with the Pope, Torzi, a little-known businessman based in London, managed to gain access to some of the highest-ranking officials in the Holy See who decided to hand him control of hundreds of millions of euros worth of Church assets.
Contracts, banking records and financial documents seen by the Financial Times, as well as accounts from people with direct knowledge of the Vatican's financial affairs, show the deal with Torzi was signed off by some of the most senior officials in the Catholic Church.
These documents cast doubt on the Vatican's official narrative that the controversy surrounding its purchase of 60 Sloane Avenue, a large building in Chelsea, was the work of Torzi and a handful of junior administrators who have been suspended during the investigation.
Torzi now awaits the prosecutor's next steps in what has become the most high-profile Vatican financial scandal in decades.
A solution for the Holy See
Sat in his offices in a mews building off Berkeley Square, one of London's most prestigious areas, Torzi described himself as a simple man. "I am a trader, I love to trade. I love the screens," he told the FT earlier this year, pointing to the computer terminal on his desk.
Born in the southern Italian region of Molise, the 41-year-old Torzi, a large man with a frequently startled expression, gained no higher education and began working in various small businesses in his twenties. His biography, which he gave to the FT, says that he started out as an independent currency trader before working in various Italian family offices. He later moved to London, and now runs a small financial brokerage there.
Yet there are a number of incidents that Torzi left off his CV. One of the companies he established in Italy was later investigated on suspicion of false invoicing by Italian prosecutors, and he was named as a suspect in multiple other criminal investigations but never prosecuted. Several other of his companies have filed for bankruptcy in Italy.
These legal investigations into Torzi resulted in him being flagged on the WorldCheck database used by banks to screen for money-laundering risks. He says all the criminal cases against him have been archived, and the WorldCheck entry is a mistake.
Torzi also offers a straightforward explanation about how in a matter of weeks in late 2018 he managed to convince Vatican officials to hand him hundreds of millions of euros worth of Church property. He was introduced, he says, by a lawyer he knew at Ernst & Young in Rome, who had become aware that a group of priests had a tricky financial issue that needed to be resolved.
"I was introduced by a guy I knew at EY. The Holy See had a problem, and we offered them a solution," he said.
The problem Torzi refers to was how, several years before they met Torzi, officials at the Vatican's Secretariat of State, the Holy See's powerful central administration office, had made a minority investment in a building in London, which was worth approximately £200m ($390m), that they had since come to regret.
Rather than sell, and realise a loss, the Vatican officials had decided the Church would buy the building outright in the hope of protecting the value of their investment.
In November 2018, a meeting was set up in the offices of the secretariat inside the Vatican where Torzi met Alberto Perlasca, a 59-year-old Italian priest and senior official inside the secretariat handling its investments.
Torzi says he proposed that Perlasca sign over the building to a Luxembourg shell company called Gutt SA owned by the Italian businessman. A contract seen by the FT shows that on November 22 Perlasca signed an agreement with Torzi on behalf of the Vatican that would come to give Torzi complete control of the building.
"I cannot think of any possible legitimate economic rationale for this deal," says Matthew O'Brien, a US-based Catholic financier who has campaigned for financial reform in the Church. "You don't just sign over hundreds of millions of charitable funds into an offshore company to a man you apparently just met, with no way of getting it back."
To seal the deal, Perlasca then went to his bosses at the Secretariat of State to get them to authorise the deal.
Documents seen by the FT show that three weeks before Torzi's company took control of the building, Cardinal Pietro Parolin, head of the Secretariat of State and the second most powerful man in the Vatican after Pope Francis, authorised his deputy, the Venezuelan archbishop Edgar Peña Parra, to take control of the Secretariat's bank accounts.
Then on November 28 Peña Parra sent a request to Credit Suisse in Lugano asking for payment to be made that resulted in the building being transferred to Torzi's Luxembourg shell company. Through the Vatican's press office Cardinal Parolin and Archbishop Peña Parra declined to comment.
The Milan lawyer
Also present in the meetings between Torzi and the Vatican priests were two Italian lawyers. One of these was Manuele Intendente, the lawyer from EY in Rome who Torzi says simply introduced him to the Vatican. The other was Nicola Squillace, a lawyer based in Milan, who Torzi says was there to help him structure the transaction for the Holy See.
To others in the meeting the lawyers might have appeared as mere functionaries, there to deal with documents and ensure things went smoothly. In fact both men had stronger connections to Torzi than may have first appeared.
Before moving to London Torzi had worked for several years in companies that were controlled by Squillace's family trust.
Squillace has faced his own legal difficulties. In February last year, three months after being invited into the heart of the Catholic Church, Squillace was sentenced to six and a half years in prison by a Milan court for his role in the bankruptcy of a company called Novaceta. He will appeal the conviction, which was made in a lower court, and would only go to jail if the decision is upheld in a higher court.
Because of the Vatican officials' decision to appoint Torzi's company to handle its purchase of the London building, Squillace was in effect representing the interests of both the Vatican and Torzi at the same time as he was facing criminal charges.
When contacted by the FT, Squillace said he could not comment on his role because of client confidentiality. He declined to answer questions about his conviction in Italy.
The second lawyer in the meeting was Intendente from EY in Rome, who Torzi said had provided him with the introduction to the Vatican. Notes of the meetings show that Intendente was identified as an EY employee, and he signed documents for the deal using EY's corporate address in Rome.
However, the FT has learnt that EY never authorised Intendente to work on a multimillion-euro deal with the Holy See. In December last year, Intendente's contract was terminated by EY in Italy when it discovered that he had been moonlighting on the transaction with Torzi.
Several months after the Vatican deal was struck and while still working for EY, Intendente acquired shares in the financial brokerage in London in which Torzi was chairman and a shareholder.
Intendente told the FT that he was not paid for his work on the property deal and was working in an independent capacity. He did not comment on why or how he had acquired the shares in Torzi's London brokerage.
In response to questions from the FT about Intendente's role in the Vatican transaction, EY said: "EY has a global code of conduct with which all EY people must comply and we do not hesitate to take disciplinary actions against anyone we determine to have violated our policies."
Vatican investigation
This February, five months after the first junior Vatican employees were suspended, Holy See investigators raided the personal residence of Perlasca to seize documents and computers in what a short press release called an "investigation into financial and real estate investments by the Secretariat of State".
This made the Italian priest the highest ranking Vatican official yet to be drawn into the probe.
Perlasca told the FT that he had only ever met Torzi once inside the Vatican, on the advice of more junior officials who already knew Torzi.
He said that he signed the contracts with Torzi as a proxy for more senior officials in the Vatican. "I would like to emphasise that the operation had been regularly approved by Superiors, including the Holy Father. I therefore did NOT act personally: the operation had been evaluated by the Superiors, who approved it," he said in an email on Tuesday evening.
What remains unclear is how Torzi won his private audience with Pope Francis a month after the deal was struck. Some Vatican insiders doubt the pontiff, who abhors money matters, would have known all of the details of Torzi's role in the transaction.
"Large amounts of Vatican money are rarely moved around without the Pope's knowledge," one Vatican insider says. "That does not mean that the people around Francis, who he trusts, are telling him the whole story." The Vatican declined to comment on any contact between Pope Francis and Torzi.
Several months after Torzi's audience with the Pope, something caused the priests to suddenly change their mind about the wisdom of their arrangement with the Italian businessman. Vatican prosecutors allege that Torzi began to demand money for managing the property, and threatened to not return the building unless he was paid, according to the Vatican news service. According to a draft contract proposed to the Vatican and seen by the FT, Torzi asked to be paid £2.75m ($5.36m) a year in fees, and a cut of profits from any sale.
People with knowledge of the situation said that in early 2019 a suspicious activity report was lodged with the Financial Information Authority (AIF), the Papal State's financial crime monitoring unit. The AIF then began investigating the transaction, making information requests to overseas enforcement agencies, and the Vatican set about getting the property back from Torzi.
However, because of the contracts signed by Perlasca, the Vatican had no means of forcing Torzi to relinquish control of the building. By May 2019 the two sides agreed that Torzi would receive a compensation payment.
There are conflicting accounts of how much Torzi was paid. Vatican prosecutors, according to the official Vatican news publication, suggest this was €15m ($26m), while other sources say the payment was around €5m ($8.7m).
In comments made before his arrest last week, Torzi told the FT he was paid this money fairly by the Vatican for the work he did related to the London property.
After the arrest last Friday, Torzi's lawyers said: "We believe that this measure is the result of a major misunderstanding caused by allegations that may have misinterpreted a correct interpretation of the case by the investigators . . . Mr Torzi never intended to act against the interests of the Holy See."
Watchdog raid
During 2019 the Vatican's financial crime unit continued to probe the suspicious property transaction involving Torzi. Then, in October of that year, Vatican police suddenly decided to raid the offices of the AIF and seized documents, some relating to the London building investigation.
The Vatican's raid on its own financial regulator stunned its officials, several of whom had been drafted in from outside Italy by Pope Francis to give the unit much-needed international credibility. Two of its four board members and its president, the Swiss-born lawyer René Brülhart, resigned. Pope Francis later said the AIF was raided because it had failed to "exercise control over the crimes of others".
Juan Zarate, a former deputy national security adviser to George W Bush who quit the board of the AIF after the raids, said the watchdog's integrity had been "undermined and compromised". "You would never see this in a properly functioning banking or financial centre," he told AP at the time.
One former AIF official says the unit had raised multiple financial crime cases with the Vatican's prosecutors over several years, but these were never taken further. "All the right steps were being taken but what wasn't happening were prosecutions. There were numerous occasions where we were raising concerns. Perhaps there were some people who didn't want prosecutions to happen".
The case of Torzi will intensify the scrutiny. "They need to explain what has happened here, or the international image of the Vatican . . . will only get worse," says the financier O'Brien.
Speaking to the Italian media this week, Cardinal Giovanni Angelo Becciu, former deputy head of the secretariat, put the blame on Torzi. He "will have to answer for a specific crime for which he alone is responsible", the cardinal said. "And the Vatican will continue as before."
Written by: Miles Johnson
© Financial Times
