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Vatican Bank Faces Controversy Over New President

Alex Constantine - February 20, 2013

Also see: "Knight of Malta CEO of Firm that Built Planes for Hitler to Run Vatican Bank"

By Nicole Winfield

The Associated Press, February 16, 2013

The Vatican was drawn into a new controversy Friday after acknowledging that  its bank's new president is also chairman of a shipbuilder making warships - a  significant conflict for an institution that has long shunned ties to military  manufacturing.

The Vatican announced to great fanfare that Pope Benedict XVI had signed off  on one of the last major appointments of his papacy, approving Ernst von  Freyberg as president of the Vatican's bank, officially known as the Institute  for Religious Works.

The Vatican spokesman was caught off-guard, though, when a journalist noted  that the German shipbuilder von Freyberg chairs, Blohm + Voss, is known for its  military ship construction.

The Rev. Federico Lombardi demurred and defended the selection. He later  issued a statement saying von Freyberg chairs a civilian branch of Blohm + Voss,  which repairs and transforms cruise ships and builds yachts - but that the  company is currently part of a consortium that is building four frigates for the  German navy.

The Vatican and its bank have deep-rooted traditions of steering clear of  investments in companies that manufacture weapons or contraceptives, in line  with Catholic Church teaching.

Michael Brasse, spokesman for Blohm + Voss in Hamburg, said that von Freyberg  is chairman of the executive board of Blohm + Voss Shipyards, a unit that  concentrates on building civilian ships.

But before Blohm + Voss Shipyards and other non-military units of Blohm +  Voss were sold in 2011 to Star Capital Partners, its military shipbuilding unit,  Blohm + Voss Naval, had contracted with the German Defence Ministry for four new  frigates. Blohm + Voss Naval subcontracted the actual construction of those  vessels to Blohm + Voss Shipyards.

Though Blohm + Voss Naval is now known as ThyssenKrupp Marine Systems GmbH,  and is entirely separate from the other Blohm + Voss units, the Shipyards unit  is still constructing the frigates under the legacy contract. After they are built, however, the company plans to concentrate entirely on  non-military ships. Von Freyberg will remain its chairman while working for the  Vatican.

"The focus of the business is for yachts, and on the repair side for cruise  ships or the offshore oil and gas industry," Brasse said.

Lombardi pointed out that Blo-hm + Voss is not engineering or designing  military equipment, just involved in steel welding and docking. Germany's navy  has contributed frigates and other ships to the EU's anti-piracy patrols off the  Horn of Africa.

The revelation dominated what was supposed to have been the Vatican's  triumphant appointment of a new president for the bank after its last president,  Italian banker Et-tore Gotti Tedeschi, was fired nine months ago for  incompetence. Gotti Tedeschi's stunning ouster came just as the Vatican was submitting its  finances to a review by the Council of Europe's Moneyval committee in a bid to  join the list of financially transparent countries.

The Vatican last summer passed the test of the Moneyval committee, which  seeks to prevent money laundering and terrorist financing. But the IOR and the  Vatican's financial watchdog agency received failing grades. The new president will be tasked with bringing the IOR into compliance by  Moneyval's next review.

The Vatican stressed von Freyberg's Catholic credentials, noting that he was  a member of the Sovereign Military Order of Malta, an ancient chivalrous  military order drawn from European nobility. He himself is a member of one of  Germany's aristocratic families. The Vatican said he had been appointed by the bank's commission of cardinals  and that the pope had "expressed his full consent."

The appointment may well be one of the last major decisions of Benedict's  papacy given his planned retirement Feb. 28. On Friday, he held one of his last  audiences, meeting with Romania's president.

While the appointment was seemingly curiously timed, Lombardi went to great  lengths to stress that the selection process took its own path.

Lombardi said von Freyberg was selected after a "meticulous and articulate"  seven-month search process from an initial list of about 40 candidates put  forward by an international executive headhunting firm. He had the full support  of the bank's lay board, the five members of its cardinal's commission, and  finally the pope, Lombardi said.

But he was completely thrown by the suggestion that the bank's new president  may have links to Germany's military.

"I would say that if he is a competent person who works in the field of  shipbuilding, this is not a reason not to take him," Lombardi said. "As we know,  he also organizes pilgrimages to Lourdes, he is a member of the Order of Malta,  he takes care of the sick, so certainly he is a person with a notable human and  Christian sensibility."

It appeared that the IOR's board simply didn't know about the old frigate  contract and that von Freyberg didn't think to mention it, given that the  company's primary work is in civilian shipbuilding.

The Vatican bank's finances have long been shrouded in secrecy and scandal.  Most famously, the bank was implicated in a scandal over the collapse of the  Banco Ambrosiano in the 1980s in one of Italy's largest fraud cases. Roberto  Calvi, the head of Banco Ambro-siano, was found hanging from Blackfriars Bridge  in London in 1982 in circumstances that remain mysterious.

Banco Ambrosiano collapsed following the disappearance of $1.3 billion in  loans the bank had made to several dummy companies in Latin America. The Vatican  had provided letters of credit for the loans. While denying any wrongdoing, the Vatican bank agreed to pay $250 million to  Ambrosiano's creditors.

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