Of course the people who can answer that question won’t. However, in their suit against the Holy See five US state insurance commissioners have given us an extraordinary glimpse through a peephole of how the Vatican operates. If you’re like me, it will literally take your breath away that two lawyers, three priests, two monsignors, one bishop, one archbishop and four cardinals – in fact every single Vatican employee or person with close ties to the Vatican – were willing to launder a convicted swindler’s money without hesitation or moral quandery thereby giving the impression that this was just business as usual.
Before reading directly from the actual case as presented in court, some background is needed to understand the transactions.
Insurance is regulated by the states. Insurance companies are required by statute to keep reserves for the purpose of paying anticipated claims. These reserves are in assets that are cash or can easily be converted to cash. Martin Frankel’s scheme was to purchase small life insurance companies which mostly sold funeral policies to the poor and siphon off the reserves into his own bank account. The annual reports continued to show adequate, but falsified, quantities of reserves. He chose small companies in small states where he thought the number of insurance department employees too few to verify his information. Purchasers of insurance companies are required to complete forms attesting to the backgrounds of the principals and their financial strength. Since Frankel had been barred by the Securities and Exchange Commission from dealing in securities due to prior illegal operations, Frankel needed a “front” to purchase the companies. From 1990 until 1998, he was able to get by with a bogus business name and using the names of others as corporate officers, but when he wanted to purchase companies with larger reserves, he needed to show greater financial backing. He chose the Catholic Church as his front. Through a phony charitable foundation guaranteed to hold an account at the Vatican Bank, Frankel moved on to larger deals. Eventually, the Mississippi insurance commissioner, George Dale, caught on to his scheme. Frankel was caught after fleeing to Germany in 1999, was prosecuted and sent to prison. The insurance commissioners of four other states in addition to Mississippi – Missouri, Oklahoma, Tennessee and Arkansas – brought suit against the Vatican as conspiring with, and aiding and abetting Frankel. The money Frankel had looted from the companies domiciled in their states amounted to $200,000. The commissioners brought suit under the Racketeer Influenced and Corrupt Organizations (RICO) Act which trebled the damages to $600,000.
The names in the “Factual Allegations” should be self-explanatory except for Collins and Corbally who were associates of Frankel. Colagiovanni and MEF were explained in the lawsuit as follows:
“Monsignor Colagiovanni was a judge emeritus of the Tribunale della Rota Romana (the “Rota“), one of the Vatican‘s three appellate courts, and a professor in the Studio Rotale, a graduate program connected to the Rota. He was a consultant to two of the Vatican‘s Congregations: the Congregation for Divine Worship and Sacrament, and the Congregation for the Clergy. At all relevant times, Colagiovanni was a senior member of the “Curia,” the Vatican‘s government, and was an agent of the Vatican, exercising both actual and apparent authority on behalf of his principal, the Vatican. Colagiovanni‘s status as a member of the Curia was integral to the workings of Frankel‘s scheme.”“MEF is an autonomous pious foundation originally established in the Archdiocese of Naples, Italy. It was at all relevant times headquartered in and operated from the Vatican. An “autonomous pious foundation ” is an ecclesiastical entity, formed under the internal laws of the Roman Catholic Church known as “Canon Law.” MEF publishes a journal, Monitor Ecclesiasticus, which reports the decisions of the Vatican‘s three tribunals and publishes articles relating to those decisions. The journal is distributed in nearly every country of the world, including the United States. In addition to publishing
Here are direct quotes from the complaint filed in Fifth District Court, No. 3:01 CV 663BN, in 2002. I have made one change for editorial clarity. Sometimes the commissioners referred to Frankel by his alias “Rosse”. The lawsuit, however, states that the persons involved knew Frankel’s true identity and – whether the name was Frankel, Rosse or Kadiddlehopper – these Catholics knew they were laundering money and that money is laundered for illegal/immoral purposes.
“In late July 1998, Frankel decided that the Roman Catholic Church would make an even better “front” than Collins for his purchase of United States insurance companies….Corbally introduced Frankel to Thomas A. Bolan (“Bolan“), a well-connected New York lawyer with ties to the Roman Catholic Church. Corbally told Bolan he knew a man who made millions a day through trading who wanted to help the poor and thought he should do it through the Roman Catholic Church.
Bolan contacted Father Peter Jacobs (“Jacobs“), a Roman Catholic priest with ties to the Vatican. Jacobs is officially incardinated in the Archdiocese of Washington, D.C., but lives in Rome.
Jacobs in turn contacted Defendant Colagiovanni. In the early part of August 1998, Jacobs and Colagiovanni flew to the United States at Frankel‘s expense and met with Bolan and Frankel at Frankel‘s home in Greenwich, Connecticut.
Frankel told Bolan, Jacobs and Colagiovanni he planned to set up a charitable foundation. This foundation would be formed in the Vatican, under Vatican law. Frankel proposed to secretly control the foundation through the ability to elect a majority of its Board of Trustees. Frankel offered to transfer $55 million to this Vatican foundation. The Vatican would be permitted to keep $5 million to do with as it saw fit, in exchange for which Frankel would be allowed to secretly retain control over the remaining $50 million, ostensibly to use for insurance company acquisitions. While at Frankel‘s home in Greenwich, Bolan, Jacobs and Colagiovanni discussed how the $5 million that was to be donated for charitable purposes might be spent.
For Frankel‘s plan to work, the $50 million had to appear to be Vatican money, being used to pursue a Vatican-related initiative. As Frankel explained in a letter addressed to Bolan: “Our agreement will include the Vatican‘s promise that the Vatican will aid me in my effort to acquire insurance companies by allowing Father Jacobs or another Vatican official to certify to the authorities, if necessary, that the source of funds for the Foundation is the Vatican.” In fact, Frankel repeatedly stressed that his name should not be disclosed in any documents, and that no outsider should know he was the true source of the funds used in the deal.
Bolan then traveled to the Vatican and, with Colagiovanni, proposed the plan to Bishop Francesco Salerno (“Salerno“) in a meeting at the Vatican. At that time Salerno was the Secretary of the Prefecture for the Economic Affairs of the Holy See, the Vatican‘s “finance department.” Salerno was also on the board of MEF. The parties discussed the proposal, informing Salerno specifically that Frankel would be the source of the funds, and would retain control of the $50 million, even after it was “donated” to the Vatican foundation.
On August 18, 1998, Salerno approved the plan, saying it was “a good idea,” and instructed Bolan to prepare by-laws for the foundation. Bolan did so, and Jacobs provided them to Salerno. The proposed by-laws allowed Frankel to appoint two of the proposed foundation‘s three trustees, and the Vatican to appoint the other. Salerno inquired of John Cardinal O’Connor, then the Archbishop of New York, as to who the Vatican appointee should be.
Thereafter, Jacobs received a telephone call from Salerno saying that the Vatican‘s Secretary of State had expressed misgivings about the plan. After consultation with Frankel, Bolan was again dispatched to the Vatican, where he and Jacobs met with Monsignor Gianfranco Piovano and Father Brian Farrell. Both were employees of the Vatican‘s Secretariat of State and met with Bolan and Jacobs in the Vatican building which houses the Secretariat. Piovano informed Bolan that Frankel could not control a Vatican foundation, and that the Vatican “did not want the perception that it was running insurance companies.” Piovano stated that some other way would have to be found to make the donation.
Frankel accepted Piovano‘s suggestion that they “find some other way” by devising an alternative plan to accomplish the original goal of the scheme. Under the new plan, Frankel would form St. Francis of Assisi Foundation to Serve and Help the Poor and Alleviate Suffering (“St. Francis“). The new foundation would be created outside of the Vatican to alleviate the Vatican‘s concern about appearing to be involved in insurance company operations. A Vatican related charity would be the settlor of the new foundation. The Vatican-related charity would be able to state that it was funded by the Vatican, so that St. Francis could claim that its funding originated from Vatican sources. In actuality, however, St. Francis would be funded entirely from looted funds held in Frankel‘s Swiss bank account.
Colagiovanni then agreed to allow MEF, the Vatican-related organization of which he was President, to be held out as the “settlor” of St. Francis. Colagiovanni spoke to Piovano and Salerno about MEF playing the role of the Vatican entity in Frankel‘s plan. After speaking with them, Colagiovanni faxed a letter to Bolan, on Rota letterhead, informing him that MEF “had been authorized” to receive the $55 million; that is, MEF would first receive and transfer the sum of $50 million to Frankel‘s foundation, which would remain under Frankel‘s control. MEF would then receive an additional $5 million from Frankel, to keep and use without restriction. Colagiovanni also confirmed to Bolan and Jacobs at a later meeting in Italy that the plan had been authorized.
MEF was used to create the impression that the funding for Frankel‘s foundation, St. Francis, had come from the Vatican or Vatican-related sources. However, neither the Vatican nor MEF would provide any of their own funds to St. Francis. Instead, Colagiovanni was told that Frankel would deposit funds in an MEF account, which would in turn be transferred to an account in St. Francis‘ name. Colagiovanni, acting as an agent for the Vatican, knew of and approved this plan. Bolan memorialized this plan in a writing which Colagiovanni signed.
Other Vatican personnel also knew of this plan. Upon information and belief, Colagiovanni consulted with sostituto Giovanni Battista Cardinal Re, head of the First Section of the Vatican Secretariat of State, before he agreed to assist Frankel in implementing the plan. Cardinal Re, as sostituto, was the third highest-ranking Vatican official at the time.
Jacobs discussed Frankel‘s plan with his friend, Pio Cardinal Laghi, who was the head of the Congregation for Catholic Education in the Vatican, and who had previously served as the Vatican‘s Nuncio (Ambassador) to the United States. While Frankel was trying to gain approval for his plan, Laghi intervened at the Vatican on his behalf. Laghi also received $100,000 from Frankel in August 1998 as a donation to a hospital. When Laghi sent a thank-you letter to Frankel for the donation, it was returned to him by Jacobs, who told Laghi not to thank Frankel personally for the payment. Laghi then sent a new thank-you letter, which thanked only Frankel‘s foundation for the funds.
Another Vatican official who knew of the plan was Father Giovanni D‘Ercole, who is now one of the Capi Ufficio in the First Section of the Vatican‘s Secretariat of State. Frankel had considered using D‘Ercole‘s religious order, the Sons of Divine Providence, also known as “Don Orione” after its founder, as the vehicle through which to channel funds to St. Francis. D‘Ercole visited with Frankel at his home in Connecticut, and a charity operated by the Sons of Divine Providence received donations from Frankel.
Archbishop Alberto Tricarico (“Tricarico“) also knew about the plan. Tricarico was the Nunzio Apostolico a disposizione in the Second Section of the Vatican‘s Secretariat of State, where his responsibilities included overseeing the Holy See‘s relations with the countries formerly comprising the Soviet Union. Tricarico knew that Frankel was the “donor” of St. Francis. Tricarico considered traveling to Connecticut to meet Frankel in person. He also, through Jacobs, sought to obtain money from Frankel for Catholic charities in Kazakhstan. Jacobs traveled to Almaty in Kazakhstan at Tricarico‘s request to visit some of the charities. Jacobs‘ airplane ticket was charged to an American Express card controlled by Frankel and paid with looted funds.
Frankel was also interested in securing the involvement of the Istituto per le Opere diReligione (“IOR“), popularly known as the “Vatican Bank.” As a Vatican entity, the IOR is beyond the reach of any regulatory scrutiny other than the Vatican‘s own supervision. Although Colagiovanni informed Frankel that, as a non-Catholic, he could not open his own account at the IOR, Colagiovanni assured Frankel that any fund or donation given to MEF would fall under the protection of the “very strict confidentiality and secrecy” laws that apply to any entity linked to the IOR.
The IOR was involved in a number of ways with Frankel‘s scheme. MEF has an account at the IOR, and Colagiovanni and, apparently Jacobs, were both authorized users of that account. Frankel wired money to MEF‘s account at the IOR, as described below. Jacobs also had his own account at the IOR to which Frankel wired money.
In addition, as part of the scheme, Frankel had Colagiovanni obtain a letter from the IOR, indicating that MEF was an organization in good standing with the IOR. Before the IOR would issue the letter, Colagiovanni was required to, and did, provide the IOR with information about Frankel and the plan. Colagiovanni and Frankel provided the IOR with the private telephone number of Frankel‘s Swiss banker, Jean-Marie Wery (“Wery“), a Managing Director of Banque SCS Alliance. The IOR contacted Wery to confirm that Frankel had the wealth necessary to make the proposed donation.
After the IOR checked Frankel‘s bank reference, Salerno prepared a letter confirming MEF‘s “uninterrupted relation” with IOR, which was signed by the IOR‘s director, Dr. Lelio Scaletti, and by another IOR official, Dr. Anthony Chiminello. This letter was used to bolster MEF‘s and St. Francis‘ credibility with insurance regulators and others. For example, when lawyers and officials connected with one of the United States insurance companies Frankel targeted questioned the Vatican‘s connection to St. Francis, the IOR letter was presented as proof of the association.
Frankel then directed that the proposed purchase of CLICO [Colorado Life Insurance Company] move forward, with MEF allegedly providing funding through St. Francis, the new purchaser.
Colagiovanni was directly involved in assisting Frankel in his efforts to acquire insurance companies. Colagiovanni made a number of significant representations in the United States about the Vatican‘s relationship with St. Francis. He used his position as a member of the Curia to convince state government officials and insurance companies in the United States that St. Francis was connected with the Vatican through MEF, and that St. Francis was a Vatican-funded initiative.
On November 24, 1998, St. Francis filed a Form A application with the Colorado Department of Insurance (the “Colorado Department“) for the purchase of CLICO. The Form A application included false representations stating, among other things, that St. Francis was the source of funds for the CLICO acquisition and that St. Francis had received its money from MEF. The Form A application also intentionally concealed Frankel‘s involvement in and control of St. Francis, and falsely represented that Jacobs controlled St. Francis as its sole Trustee, when Frankel had complete control of St. Francis.
At the time of the filing of the Form A application, Colagiovanni, as an agent of the Vatican, knew, or was subjectively aware of a strong possibility of illegal conduct and purposefully contrived to avoid learning, that statements in the Form A application about control of St. Francis and its source of funding were false.
On November 24, 1998, Colagiovanni signed an unsworn “affidavit” in which he stated: “The funds that the MEF has contributed to St. Francis for the purchase of the common stock of CLICO Acquisition Corporation have come from funds of the Holy See that are dedicated to use for investment for charitable purposes.” The “affidavit” was signed “Emilio Colagiovanni, President MEF.” This “affidavit” was distributed to several insurance companies which Frankel was seeking to acquire. Colagiovanni has admitted this affidavit was false.
On December 4, 1998, in response to the Form A application, the Colorado Department sent Jacobs twenty-three detailed questions about St. Francis and its source of funding. As a result of this further inquiry by the Colorado Department, by mid-December, Frankel and his associates withdrew the St. Francis Form A application and abandoned the proposed CLICO acquisition.
In December 1998, not long after St. Francis had submitted the Form A relating to CLICO, St. Francis signed a Letter of Intent to purchase Western United Life Assurance Company (“Western United“) of Spokane, Washington. In the course of negotiating the deal, representatives of St. Francis told Western United employees that Frankel, who was still posing as “Rosse,” did bond trading for the Vatican, that the source of funds for the Western United deal was the Vatican, that the purpose of the Vatican‘s proposed investment was to grow Vatican assets, and that the Pope himself had authorized funds to go to MEF from a general fund, which were then contributed to St. Francis. These statements were false.
Vatican leadership was informed on several occasions that persons acting on behalf of St. Francis and MEF were representing that St. Francis was connected with the Vatican, and making misrepresentations about St. Francis‘ funding and control. In January 1999, C. Paul Sandifur (“Sandifur“), the President of Western United‘s parent company, sent a letter to Vatican Secretary of State Angelo Cardinal Sodano asking for a confirmation of statements about St. Francis‘ and MEF‘s relationship to the Vatican. In particular, Sandifur asked Cardinal Sodano (a) whether St. Francis was an agent of the Holy See, (b) whether MEF was a Vatican foundation, (c) whether MEF was the settlor of St. Francis, and (d) whether the Holy See had given $190 million to MEF and St. Francis, as had been represented.Re sent a reply on behalf of the Vatican, but stated only that, with respect to St. Francis, “no such foundation has the approval of the Holy See or exists in the Vatican.” Re did not deny that the Vatican had donated $190 million to MEF, that MEF had donated $190 million to St. Francis, or that MEF was a Vatican foundation. Re‘s careful, cryptic and incomplete response to Sandifur‘s letter in February 1999 was in sharp contrast to the Vatican‘s response to similar questions posed by the international press in June 1999, after Frankel‘s scheme was exposed to the world. It also differed from the more informative, but still incomplete, letter Re wrote to Cardinal O‘Connor of New York, dated the same day as his response to Sandifur. Despite being informed through the Western United letter that statements were being made in the United States to insurance companies that the Vatican knew were false, neither Re nor any other Vatican official took steps to correct or stop the misrepresentations made by Colagiovanni, Frankel and others concerning St. Francis‘ control and funding. In fact, by giving an incomplete response to Sandifur‘s inquiries, Re created the impression that the statements he failed to address were true. Colagiovanni explained the letter by stating that, according to Vatican policy, failure to address certain facts in such a response indicates those facts are true.
On February 16, 1999, after Western United had received the letter from Re, and to mitigate the ambiguous nature of Re‘s letter, representatives of St. Francis faxed to Western United a written statement signed by Colagiovanni in which he represented that MEF had contributed $1billion to St. Francis with funds that came from various “Roman Catholic tribunals and Roman Catholic charitable and cultural institutions.” This statement was later submitted to insurance regulators in an attempt to substantiate the Vatican‘s alleged funding of MEF and St. Francis. Colagiovanni knew that the representations made in the statement were false when he made them….
To further demonstrate St. Francis‘ and MEF‘s ties to the Vatican, Frankel and Colagiovanni arranged for two Western United executives, Sandifur and William Snider (“Snider“), Chief Financial Officer of Western United, to travel to the Vatican and meet with Vatican officials to clarify whether representations made about the Vatican‘s involvement with St. Francis and MEF were true. Snider and Sandifur were accompanied by Father Eugene Tracy (“Tracy“), a former insurance executive now serving as a Roman Catholic priest in Spokane. Frankel had thus far failed to make the $5 million “donation” he had promised to MEF. Apparently in the hope of encouraging Frankel to make the payment, Colagiovanni agreed to host the executives.
Sandifur, Snider and Tracy met with Colagiovanni in the Cancelleria, the building which houses the Rota. This building, although located in a section of Rome which is not contiguous to the main area of Vatican City, is considered the Vatican‘s sovereign territory. Swiss Guards, the personal guards of the Pope, were stationed outside.
While in an office in the Cancelleria, Colagiovanni told the Western United executives and Tracy that the funds MEF provided to St. Francis originated from friends of the foundation and that some of the money was actually secret Vatican funds. Sandifur, Snider and Tracy then met with an Italian bishop believed to be Salerno, who by that time had become the Secretary of the Supremo Tribunale della Segnatura Apostolica, another of the Vatican‘s courts with offices in the Cancelleria. The bishop posed for a picture with them.
The Western United visitors were given a tour of the Vatican by Colagiovanni, including several areas not usually accessible to tourists. The Western United executives reasonably concluded from their visit that MEF and St. Francis were known in the Vatican, that Colagiovanni was who he claimed to be, and that MEF and St. Francis were recipients of Vatican money.
The Western United visitors also met with Alan Kershaw, an American lawyer who argues cases before the Vatican‘s tribunals and who represents the Vatican‘s own interests from time to time. Kershaw, apparently at Colagiovanni‘s request, assured the Western United visitors that a group of “northern Italian laypeople” who wanted to obtain the tax benefits available by a donation to the Vatican had secretly donated large sums of money to MEF. Like Colagiovanni, Kershaw also indicated that MEF had received funds from the Vatican. To further assure the Western United visitors about the proposed deal, Kershaw told them that the Vatican exercised supervisory power over St. Francis and that St. Francis‘ funds and money management would go through the IOR.
Meanwhile, Frankel, Bolan and Colagiovanni had been upset with Re‘s letter sent to Sandifur, because it did not, in their view, affirmatively support the representations being made about MEF and St. Francis. To ensure that this would not happen again, Colagiovanni arranged for Bolan to meet with Vatican officials in March 1999 to discuss how the Vatican should answer future inquiries related to St. Francis‘ acquisition of United States insurance companies. Colagiovanni originally arranged for Bolan to meet with Re, but Bolan and Colagiovanni in fact met with Agostino Cardinal Cacciavillan (“Cacciavillan“), the president of the Administration of the Property of the Holy See. At this time, Cacciavillan was the government official in charge of the Vatican‘s investments, although he had recently left his post as the Vatican‘s Nuncio (Ambassador) to the United States.
Sandifur‘s letter and Re‘s response were specifically discussed at this meeting. Cacciavillan was informed that a private individual, and not MEF or the Vatican, was the source of St. Francis‘ funds, and he knew that MEF would be used as a vehicle through which this private individual would make “donations” to St. Francis. Despite this knowledge, Cacciavillan did not tell Bolan or Colagiovanni to stop claiming that the funds originated with MEF or the Vatican. Cacciavillan directed only that St. Francis not be held out as a Vatican foundation, and did not express any concern about any other aspects of the described relationship between St. Francis and MEF or between MEF and the Vatican.
Instead, Cacciavillan, Colagiovanni and Bolan agreed that if the Vatican received any future inquiries related to St. Francis‘ purchase of United States insurance companies, the inquiries would be routed to Colagiovanni or someone else who understood the MEF/St. Francis plan, who could then respond….
[In addition to the $100,000 which Pio Cardinal Laghi received] Colagiovanni, and, indirectly, the Vatican, received benefits from Colagiovanni‘s role in Frankel‘s scheme.
From August 1998 to May 1999, Frankel made periodic financial contributions to Colagiovanni, Jacobs and MEF, and to accounts designated by them. The following represent some, but not all, of the wire transfers:
On December 11, 1998, Frankel wired $10,000 from his Swiss account to Jacobs’ account at Chase Manhattan Bank in New York for further credit to MEF‘s account at the IOR.
On February 24, 1999, Frankel caused $10,000 to be wired from the account of “Rosse” at Chase Manhattan Bank in New York to MEF‘s account at the IOR.
On April 20, 1999, Frankel wired $40,000 to Jacobs‘ account at the IOR for the benefit of “Rosse/St. Francis.“
On April 22, 1999, Frankel wired $30,000 to Jacobs‘ account at Chase Manhattan Bank in New York. Jacobs wrote a check to Colagiovanni for $20,000 which Colagiovanni then deposited at the IOR….
Thomas A. Bolan received three payments totalling $175,156.89
Don Orione Fathers received two payments of $49,105.35
Father Peter Jacobs received sixteen payments totalling $245,421.09….
[In March 1999, the Mississippi insurance department began investigating Frankel and called a hearing in April.] On April 27, 1999, Colagiovanni traveled from Rome to Mississippi at Frankel‘s expense. Frankel, Colagiovanni and others associated with St. Francis visited the Bishop of Jackson‘s official residence on April 27, 1999, in hopes of convincing the bishop to attend the hearing at the Mississippi Department. He declined to do so….
By mid-May 1999, Frankel‘s financial fraud had been uncovered by state insurance regulators and federal and state law enforcement officials and was made public. On June 30, 1999, the Vatican, through its Press Office Director, for the first time contended publicly that the Vatican had no legal or financial connection to MEF or St. Francis:
“I wish to make it clear that the Monitor Ecclesiasticus and St. Francis of Assisi Foundations do not have Vatican juridical character and are not inscribed in the registers of Vatican juridical personalities. I wish to add that the Holy See does not have any relationship with Father Peter Jacobs and has neither furnished nor
received funds from either the Monitor Ecclesiasticus Foundation or the St. Francis of Assisi Foundation. Contrary to what has been affirmed, the St. Francis of Assisi Foundation does not have an account in the Institute for Works of Religion (IOR) and indeed is not recognized by this Institute. Msgr. Emilio Colagiovanni is president of the Monitor Ecclesiasticus Foundation, established by the archdiocese of Naples in 1967. This foundation has always acted totally outside of any Vatican context, and does not have any relationship with it whatsoever.”….
[The section “CLAIMS AGAINST COLAGIOVANNI, MEF AND THE VATICAN Violations of 18 U.S.C. ‘ 1962(c) All Plaintiffs v. Colagiovanni, MEF and the Vatican“, notes:]
The Vatican was associated with the enterprises through the actions of its agent Colagiovanni. At all times relevant to this Complaint, Colagiovanni acted as the agent of the Vatican. Through its agent Colagiovanni and other agents, the Vatican knew that funds represented as being held by St. Francis and contributed to St. Francis by MEF, were not held by St. Francis and had not been contributed to MEF. It knew, through its agent Colagiovanni, that funds allegedly contributed to MEF by the Vatican or Vatican-related entities for further contribution to St. Francis had not been contributed. It knew, through Colagiovanni, that Frankel was to be the source of any funds allegedly contributed to either foundation. It knew, through Colagiovanni, that Frankel controlled St. Francis, even though Jacobs, Bolan and Collins were listed as members of the Board of Trustees. Colagiovanni‘s position within the Vatican was an essential element of the scheme because it gave a patina of legitimacy to St. Francis, and Colagiovanni used his position in furtherance of the scheme. High-ranking officials at the Vatican authorized or ratified the plan whereby MEF would be used as a conduit for the flow of Frankel=s money to St. Francis to purchase U.S. insurance companies, while St. Francis claimed a “Vatican tie.“
Colagiovanni had actual authority to act as the Vatican‘s agent in connection with Frankel‘s scheme by virtue of his position as a member of the Curia, as a prelate auditor emeritus, and as a consultant to two Vatican Congregations. Further, high-ranking officials with the power to bind the Vatican in financial matters were aware of, did not object to, and explicitly or tacitly approved Frankel‘s plan and Colagiovanni‘s and MEF‘s role in the plan in advance of its implementation, including that part of the plan that would require representations to be made that Frankel‘s foundation had Vatican connections. Colagiovanni consulted with high-ranking Vatican officials about the plan, and obtained their approval. Because of the involvement of these highranking officials, Colagiovanni had the Vatican‘s actual authority to assist Frankel in his scheme, and Colagiovanni‘s representations about the Vatican connection and funding were made within the scope of that authority. As Colagiovanni‘s principal, the Vatican is responsible Colagiovanni‘s acts committed within the scope of his agency.
In addition, Colagiovanni had apparent authority to bind the Vatican by virtue of his positions within the Vatican. He had access to private areas of the Vatican and brought insurance company executives there to convince them of the Vatican‘s involvement in the MEF/St. Francis plan. He used Vatican faxes, letterhead and telephone lines, including the letterhead of the Rota and the fax cover sheet of “Vatican City,” to participate in the plan. He was able to secure for lay people
audiences with Vatican officials, in their offices on Vatican sovereign territory, and was able to have members of the Curia pose for pictures with visiting insurance company executives. While in Mississippi, Colagiovanni wore clerical clothing and a purported Papal ring, and expressly held himself out to Mississippi regulators as an emissary of the Vatican.
The Vatican manifested this authority to third parties by allowing Colagiovanni to use the Vatican‘s office buildings to meet with third parties, by participating in these meetings, by allowing Colagiovanni to use its fax and telephone lines to contact third persons, and by allowing Colagiovanni to use its letterhead to communicate with third persons. The Vatican also manifested its approval of Colagiovanni‘s and MEF‘s role in the scheme by its silence when questioned about them, which connoted approval under the circumstances.
Colagiovanni‘s actions were also ratified by the Vatican. High-ranking Vatican officials – including Re and Cacciavillan – knew of, and failed to repudiate, certain of Colagiovanni‘s misrepresentations, when presented with the opportunity to do so. This refusal to repudiate or comment was in complete contrast to the Vatican‘s efforts to distance itself from Colagiovanni, MEF and St. Francis in June 1999, after the Frankel scandal drew the attention of the international media. Both Re and Cacciavillan, among others, had the clear chance to end Colagiovanni‘s participation in the scheme and to prevent further misrepresentations about the claimed Vatican link. Neither took the steps to do so.
When presented with Sandifur‘s pointed inquiries about MEF‘s and St. Francis‘ funding clearly premised on misrepresentations, Re did not deny that the Vatican had given $190 million to MEF for St. Francis, a fact which Re knew was false, nor did he act to correct or even address several of the other issues presented in the Sandifur letter. His silence gave the impression that St. Francis‘ misrepresentations about its funding were correct and enabled the scheme to continue.
When Cacciavillan was presented with evidence of Colagiovanni‘s involvement in Frankel‘s plan, including the claims that the Vatican had given $190 million to MEF, instead of repudiating the claims to the target of the misrepresentations and directing Colagiovanni to cease making such claims as an agent of the Vatican, Cacciavillan agreed to forward to Colagiovanni or someone else more familiar with the scheme any future inquiries about MEF, St. Francis or about the Vatican‘s connection to either, thereby enabling the plan to continue.
At all times relevant to this complaint, the activities of the Vatican and its agents were wholly commercial and secular. Its actions were not uniquely sovereign in nature, nor were they of a religious character. Its actions and motivations, and those of its agents, were of the same type as any private commercial entity interested in investing in U.S. insurance companies for profit.
In 1998 and 1999, Colagiovanni, MEF and the Vatican knowingly conducted, participated in, controlled, manipulated, or directed the enterprises‘ affairs through a pattern of racketeering activity consisting of violations of the federal mail and wire fraud statutes, in violation of 18 U.S.C. ‘ 1962(c).
Specifically, Colagiovanni, MEF and the Vatican implemented Frankel‘s scheme to defraud by assisting Frankel in the establishment of St. Francis for the purpose of acquiring insurance companies while concealing the true source of St. Francis‘ funding, and concealing Frankel‘s control of and involvement in St. Francis, and by causing false statements to be made to insurance regulators and others to conceal St. Francis‘ true source of funding and Frankel‘s control and involvement in the proposed acquisition of those insurance companies, and to conceal and maintain Frankel‘s control of the Insurance Companies and their assets…..”
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