03Oct Fortune Magazine and Pope Francis: Fr. Seán McDonagh, SSC

Those who buy Fortune do so to read the latest about finance and how companies are performing. The September issue of the magazine follows this pattern with articles on Mexico opening up its oil business, the goings-on at Google and the 100 fastest growing companies. But on the cover of September 2014’s Fortune is a smiling picture of Pope Francis. The blurb tells up that he plans to restructure the Vatican’s scandal-plagued finance and generate money for the Church.

The author of the article Shawn Tully recounts that a mere five months after his election as Pope he invited seven prominent financiers to a meeting at the Vatican. These included George Yeo, former foreign minister of Singapore, Jean-Baptiste de Fransuu, ex-chief of asset-management at Invesco in Europe, Jochen Messemer, a top executive at ERGO, and a large German insurer. The location of the meeting set the tone for Pope Francis’s leadership style. It did not take place at the ornate Apostolic Palace were for centuries Popes met various dignitaries. The group were ushered into a meeting room in Casa Santa Marta where Francis has chosen to live.

In clear, but simple terms, Pope Francis told the group that “for his spiritual message to be credible, the Vatican’s finance must be credible as well.” This was a very ambitious target, because for decades the Vatican bank has been riddled with scandal. A typical scandal was the collapse of the Banco Ambrosiano in 1983. The Vatican Bank was Banco Ambrosiano’s main shareholder. At the centre of the bank’s failure was its chairman, Roberto Calvi. He was a member of the illegal Masonic Lodge Propaganda Due and was murdered in June 1982 in London.

Many believed that the Bank was also involved in serious money laundering. In 2009, the European Union put pressure on the Vatican bank to draw up rules and protocols for combating money laundering. But the management of the Vatican bank was unwilling to identify those who were using the bank to send money. Their typical response was that “our laws don’t require us to tell you.” The Bank of Italy began putting pressure on commercial banks such as J.P. Morgan Chase to stop doing business with the Vatican bank.

Francis made it clear at the meeting that “sound financial management was a pillar of his greatest mission: aiding the poor and underprivileged.” Tully was impressed with Francis’s elite managerial skill. He sets out his vision and then chooses the right people to implement it. Tully claims that “his rapid overhaul of the Vatican’s finances is both one of the most unusual case studies in the annals of business and one of the more instructive.”

Shortly after becoming Pope he recruited some of the world’s top finance companies to clean up the mess that was the Vatican Bank. He brought KPMG in to implement uniform, internationally accepted accounting standards to replace the ad-hoc book-keeping which had prevailed in the past. Ernest &Young were tasked with scrutinizing the management of the Vatican’s stores, utilities and other services. Deloitte &Touche now audits the Vatican’s accounts.

The cleric Francis chose to oversea the financial clean up is Cardinal George Pell formerly Archbishop of Melbourne and Sydney. He has been appointed to the newly created Secretariat for the Economy. He is responsible for setting and enforcing all budgets and managing all the Vatican’s investments. The Cardinal is keen to increase the Vatican’s revenue for its museum. Personally, I have found Cardinal Pell’s climate skeptic stance quite upsetting and annoying given the destruction and pain which climate change has already caused to poor people around the world. Maybe in his new role, Cardinal Pell will have a Pauline conversion and follow the lead of the Rockefellers in divesting from fossil fuel companies!

When Pope Francis was elected the Vatican bank was close to collapsing because other banks were no longer doing business with it. The pope chose a Swiss lawyer, Rene Bruelhart who had previously helped clean up money-laundering in Liechtenstein, to undertake a similar task at the Vatican bank. He was appointed head of the Financial Information Authority (FIA) which was established by Pope Benedict in 2010 to monitor the monetary and commercial activities of Vatican agencies, including the Vatican bank. When Bruelhart ran into difficulties with the board of the FIA, Pope Francis fired and replaced the entire board. Pope Francis also hired Ernest von Freyberg to review every one of the Vatican Bank’s 19,000 accounts. 755 accounts were closed. Within two years huge, positive changes have taken place at the Vatican Bank. Hopefully, the scandal-ridden days are over.


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