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Vatican bank starts legal case in Malta over US$20m lost investment

[VATICAN CITY] The Vatican bank has started legal proceedings in Malta against those it holds responsible for the loss of millions of euros in investment funds based on the Mediterranean island, the Vatican said on Tuesday.

A statement said the action was taken "against various third parties deemed liable of having caused significant damages to (the bank) in connection with certain investment transactions in which it participated".

The statement gave no names or details. But the Vatican spokesman said the money lost in this specific case amounted to US$20 million.

Pope Francis, who has said he wants the Roman Catholic Church to be a model of austerity and honesty, has made financial reform a central plank of his papacy.

According to a source close to the matter, the Vatican bank, officially known as the Institute for Works of Religion (IOR), invested tens of millions of euros in funds in Malta and other countries in 2012 and 2013 when the bank was without a president.

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In May, 2012, the board of the bank ousted Italian Ettore Gotti Tedeschi by a no confidence vote. The bank was without a head until February of the next year, when German Ernst von Freyberg was appointed.

As part of his clean up operation, the new president stopped participation in various funds, which the source said Freyberg considered "dodgy" and with unsafe underlying assets.

Some of the money was recovered, but much was lost and the bank took write-downs on the bad investments to get them off the books, the source said.

The Vatican statement said the bank took the action against the persons in Malta to show its commitment to "any appropriate action to protect its financial and reputational interests".

Since the 2013 election of Pope Francis, the IOR has closed thousands of accounts as part of a major clean-up of the bank, which had been embroiled in many Italian financial and international scandals in previous decades.

Magistrates in both the Vatican and Italy found that the bank, which is supposed to serve Vatican employees, Church officials and religious orders of priests and nuns, had been used by outsiders to either launder money or evade taxes.

The IOR is currently headed by Frenchman Jean-Baptiste Douville de Franssu, who succeeded Freyberg in 2014 and has been continuing the reforms.


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