A federal court in Mississippi Feb. 2 dismissed a 10-year-old lawsuit accusing the Vatican of complicity in a scheme to bilk more than $200 million from insurance companies.
The state insurance commissioners of Mississippi, Tennessee, Missouri, Oklahoma and Arkansas had filed the lawsuit in 2002 charging the Vatican and Msgr. Emilio Colagiovanni with racketeering and fraud.
Jeffrey S. Lena, an attorney for the Holy See, noted in a statement that the dismissal "was not the result of any settlement agreement," and that the insurance commissioners had requested the court's action "of their own accord."
The end of the lawsuit demonstrates that "all too frequently there's an inappropriate jump, based on an incomplete record, made between what people thought happened and what happened," Lena told Catholic News Service.
The commissioners claimed that Msgr. Colagiovanni and the Holy See had aided financier Martin Frankel in purchasing small, ailing insurance companies, whose assets he then siphoned off, leaving them unable to pay claims.
"The plaintiffs knew that the Holy See never received any money" from Frankel's scheme, but chose to sue anyway, Lena said.
Lena noted that a federal court in Connecticut, using the appropriate procedures of international law in 2001, sought and obtained the Vatican's cooperation with an investigation of Frankel's scheme. The Vatican provided that court with relevant sworn testimony by Cardinal Giovanni Battista Re, then-prefect of the Vatican's Congregation for Bishops. But the plaintiffs in the Mississippi case never made any such attempt, Lena said.
The case itself followed a pattern of negligence by the insurance regulators, "who allowed Frankel's nine-year scheme to persist unabated" despite "highly unusual and improbable investment activities" and other "red flags" raised by the Frankel and his associates, Lena said in his statement.
Msgr. Colagiovanni, a retired judge of a Vatican court, was arrested during a visit to Cleveland in 2001 on charges of wire fraud and conspiracy to launder money.
In 2002, he pleaded guilty to federal counts of conspiracy to commit wire fraud and money laundering. The same year he pleaded guilty in state court in Mississippi to one count of conspiracy to decide state insurance regulators. In 2004, he was fined $15,000 by a federal judge and placed on five years' probation.
According to the commissioners' lawsuit, Msgr. Colagiovanni and the Vatican helped Frankel purchase companies, through charitable foundations and with a letter claiming the Vatican had given funding to Frankel's St. Francis of Assisi Foundation.
Msgr. Colagiovanni admitted in 1999 that he had signed the letter even though he knew the claim was false, because Frankel had told him he wanted to donate millions of dollars to Catholic charities anonymously through the foundation.
Lena noted that Frankel set up the foundation in the British Virgin Islands only after the Vatican's then-Secretary of State Cardinal Angelo Sodano rejected in writing a proposal by Frankel's associates to establish it in the Vatican.
Frankel, who is now in prison in the United States, also allegedly tried to use the Vatican bank account of the Monitor Ecclesiasticus Foundation, a foundation which Msgr. Colagiovanni headed as president. The Naples-based foundation published a canon law journal but was not an agency of the Vatican, Lena said.
"That Colagiovanni was ever in any way a representative of the Holy See is the fantasy that animated the plaintiffs' 10-year case," Lena said.
The 92-year old priest, who now lives in a nursing home in Italy, was already suffering from the early stages of Alzheimer's during his dealings with Frankel, said Lena, who concluded that "in the end, this was an elder abuse case."
As Lena told CNS, the commissioners had requested the court's action, and in a statement to CNS in Washington, the commissioners said that filing the motion for dismissal "was not filed due to any perceived defect or deficiency in the receivers' evidence or in their legal theories of liability against the Holy See."
Their evidence, it said, included "the federal fraud conviction of Monsignor Emilio Colagiovanni for his role in assisting in Martin Frankel's conspiracy to loot these seven insurance companies."
The decision to dismiss their claims "was an economic one," according to the statement.
"Given the passage of time and the lack of progress in the case, combined with significant recoveries obtained by the receivers from other parties as well as successful asset recovery efforts," it said, "the receivers determined that it was not in the financial interest of their estates, or to the claimants of their estates, to pursue the case against the Holy See further."