The Institute for the Works of Religion, commonly known as the Vatican bank. / Andrea Gagliarducci/CNA.

Vatican City, Jan 21, 2022 / 10:30 am (CNA).

A Vatican appeal court this week fully confirmed an earlier ruling that two former senior managers at the Institute of Works of Religion (IOR) were liable for mismanagement.

The appeal court ordered Paolo Cipriani and Massimo Tulli to compensate the IOR with 40.5 million euros (around $46 million) plus court costs.

Cipriani and Tulli had served until 2013 respectively as the director and deputy director of the IOR, which is often called the “Vatican bank,” though it does not operate as a bank. The IOR derives its acronym from its Italian name, Istituto per le Opere di Religione.

This week’s ruling upheld the judgment of the Vatican Court of First Instance in 2018, while reducing the amount of compensation from 47 million euros (approximately $53 million).

Cipriani and Tulli still have a further right of appeal at the Vatican and may then challenge the verdict in the international courts.

The pair were found to have violated statutory obligations, autonomously deciding on investments that would have caused financial damage to the IOR.

An IOR press release issued on Jan. 21 said that the two men were ordered to pay compensation amounting to “35,740,587 euros by way of emerging damage, as well as 4,799,445 euros by way of loss of profit (therefore for a total of 40,540,032 euros, plus monetary devaluation and legal interest).”

It went on: “The court charged the appellants with court costs, including those relating to the first instance.”

The IOR added that “the judgment concerns Mr. Paolo Cipriani and Mr. Massimo Tulli mala gestio [mismanagement] arranged with some investments of the Istituto per le Opere di Religione between 2010 and 2013, and which proved to be immediately harmful as problematic and, in several cases, also illegitimate and subject to criminal proceedings.”

The court ruling is based on the losses that would have been caused to the IOR by two consultancy contracts and the opening of the Ad Maiora fund. This fund was used for a real estate operation — the acquisition of the former Budapest stock exchange building — made with a Maltese company, also now the subject of a complaint by the IOR.

The IOR accuses its Maltese counterpart of having sold higher than the market price, favoring other intermediaries. The Maltese side accuses the IOR of not having kept the agreed commitments, as well as having always rejected the purchase offers that would have settled the debt. There is even an insinuation that the IOR is putting the investment at risk to strengthen allegations against past management.

The same real estate investment is considered by the ruling to be a violation by managers, given that there was a moratorium on real estate investments from 2003.

But as evidenced by some subsequent decisions and acquisitions, the moratorium would no longer be in force. In December 2012, the IOR’s board of superintendence decided to launch a new class of investments of a more speculative nature, effectively circumventing the moratorium.

It should be noted that both the moratorium and regulation of the IOR were missing from the appeal documentation. Their inclusion would have allowed a better understanding of responsibilities. The same Vatican court of appeal judges consider that there is no “dual system” of decisions at the IOR because everything passes through the board of superintendence.

When the defense argued that none of the investment decisions could have been taken without the approval of the board of superintendence, the prosecution replied that the board meetings were “rarefied, unlike what is practiced in similar institutions,” the ruling said. But the verdict admitted that the board members may have studied the papers before the meetings.

Cipriani and Tulli resigned in July 2013. They left the IOR in a healthy situation, but profits dramatically dropped after their exit.

In 2014, the IOR filed a civil suit against the old management, complaining that the investments made by the administration had not managed the IOR’s assets well. In 2018, Cipriani and Tulli were found liable for mismanagement.

The Vatican appeal court’s verdict defends the work of the IOR but leaves some questions open. Some could already be answered by the results of the lawsuit filed by the IOR in Malta.