VATICAN CITY -- Pope Francis gave clear indications to get out of a disastrous London real estate deal by saying the Vatican must "start over and lose as little money as possible," an exit strategy that eventually involved paying off a broker 15 million euros, the Holy See's No. 3 official told a court Thursday.
Archbishop Edgar Pena Parra, the "substitute" in the secretariat of state, was the highest-ranking witness to be questioned by defense attorneys for 10 people on trial for alleged financial crimes involving the London property and related dealings. His testimony was eagerly sought by the defense, given that he oversaw the final phase of the London deal in 2018-2019 as well as the negotiations with the broker, Gianluigi Torzi.
Prosecutors have accused Torzi of extorting the Holy See for the 15 million euros in exchange for ownership of the building, charges he denies. The nine other defendants have similarly denied wrongdoing.
The crux of the London case rests on the passage of ownership of the London property to Torzi's Gutt SA fund at the end of 2018 after the Vatican decided to prematurely exit another fund that had invested in it.
Pena Parra accused Torzi of deceiving the Vatican but he also identified his onetime deputy, Archbishop Alberto Perlasca, of having entered into the deal with Torzi without any approval or authority to sign contracts.
By the time Pena Parra first learned of the deal Nov. 22, 2018, Perlasca had already signed the contracts giving Torzi effective control of the property in the form of the 1,000 voting shares in Gutt, while the Vatican held 30,000 non-voting shares. The lawyer Perlasca engaged assured the Vatican the deal was in its interests, but the lawyer turned out to have ties to Torzi, Pena Parra said.
At a Dec. 22, 2018 meeting with the pope and two people external to the Vatican who had looked at the contracts, Pena Parra realized the Vatican had been duped and had acquired "empty boxes."
Francis, he said, gave clear, general instructions how he wanted the disaster resolved: "Start over and lose as little money as possible," Pena Parra quoted Francis as saying. "I realized that it was all a deception."
Over the ensuing six months, Pena Parra and a team negotiated an exit strategy with Torzi after ruling out "riskier" legal action against him. After initially hoping to pay a maximum of 3 million euros, the Vatican received a proposal from Torzi's lawyers for 25 million euros, reduced to 15 million, Pena Parra told the court.
"For me it was profoundly painful that we had to pay 15 million euros for this, but it was the only possibility," he said. "We were forced into it. Torzi had all the power and we couldn't do anything about it."
"It really was a Via Crucis," he said, referring to Christ's final moments before his crucifixion.
Perlasca was initially a prime suspect in the investigation, but flipped in August 2020, started cooperating with prosecutors and became their star witness. He was never charged and is considered an injured party in the case.
The investigation was triggered after Pena Parra sought a 150 million euro loan from the Vatican bank to extinguish the mortgage on the property, considering the 1 million euro monthly mortgage payment too onerous. Initially the bank, known as IOR, agreed but by July 2019 refused and reported the whole deal as suspicious to Vatican prosecutors.
Pena Parra was still bitter with the bank Thursday, claiming the Holy See lost some six months in needless mortgage payments, since he quickly secured the loan from another Vatican office after the IOR delivered its negative verdict.