Vatican woes its own fault, says Maltese company in multi-million euro lawsuit

Earlier this year, the Vatican Bank filed a multi-million euro case for damages, claiming a committee it set up was misled by directors of Malta-based Futura Funds

Futura Funds director Alberto Matta
Futura Funds director Alberto Matta

Far from being caught up in a “menacing web of intrigue and suspicious transactions,” the Vatican Bank had found itself in a hole that it had dug itself, Malta-based Futura Funds SICAV has claimed.

Earlier this year, the Istituto per le Opere di Religion (IOR), otherwise known as the Vatican Bank, filed a multi-million euro case for damages, claiming that a committee it set up to invest €30 million of its cash was misled by the directors of Futura Investment Management – Alberto Matta and Girolamo Stabile – and their affiliated company in Luxembourg, Optimum Management. 

In 2013, the IOR had set up the ‘Ad Maiora’ committee to consult on how to invest €30 million through the offices of Optimum Management. Central to the issue is an alleged ruse, utilizing the Vatican’s money to buy a company that owns the Exchange Palace in Budapest, by taking over a non-performing loan it had been issued by a Hungarian bank.

It had also set up a sub fund called ‘Ad Maiora’ and had been encouraged to invest in Futura’s Kappa Fund Budapest project. This was advertised as needing a €41 million capital commitment by Ad Maiora.

While the IOR believed its money was going to be used to take over the loan directly, it found out that Futura Investment Management made an undeclared profit of €11.6 million, ostensibly after misleading the Vatican as to the price of the Hungarian deal.

IOR then filed a claim for €17 million euros in damages against Futura.

On Thursday, lawyers acting on behalf of Futura Funds SICAV p.l.c. filed a counter-claim for €24 million it was owed under a separate agreement. It asked the court to declare IOR as its debtor in the amount of €24 million, representing the Vatican Bank’s residual capital obligations to the Kappa Fund, and to order the repayment of the debt. It also asked the court to liquidate damages caused by “IOR’s failure to honour its capital obligations” which had resulted in “significant damages” to Futura.

Futura Funds was a collective investment scheme, holding a number of sub funds, which includes the Kappa fund, argued its lawyers. Kappa’s aim is “to invest in the real estate markets and to actively manage its assets in order to seek to realise long term compounded returns in excess of those available through conventional investments in public markets by making investments based on the principle of risk spreading by an appropriate level of risk and asset diversification over time.”

Presently the only assets belonging to Kappa are historical buildings in Budapest that are held by a Hungarian SPV, that were intended to be redeveloped into a “mixed-use project that was going to deliver considerable profits,” it claimed.

But Futura Funds is arguing that there was no juridical relationship at the time that the transactions in questions took place. The Vatican Bank’s role had been to provide for the custody and the administration of property transferred or entrusted to the Institute and intended for religious works or charity.”

The redemption of the Ad Maiora fund was only requested at a later stage, to allow it to invest it all in Kappa Fund, claims the Malta-based investment vehicle. It insisted that no damages had been suffered, arguing that in any case these would have been set off against the amounts owed to Futura.

Effectively any decision by the Investment Committee was exclusively taken by the IOR. Futura had no hand in the setup or decision making process of Ad Maiora, protested Futura.

The Investment Committee had no relationship with the defendant, but had been chosen by the IOR which had then suggested investing in Kappa.

“Not only was IOR not caught in a clandestine web of intrigue and shady transactions” but it had made a solid, profitable investment - had it not failed to abide by its obligations,” argued Futura in court documents filed on Thursday. The defendants had “involuntarily ended up suffering because they had been caught between two factions in the IOR and between management regimes at the IOR,” they said.

Futura Funds said it was “caught by complete surprise” by the filing of court proceedings. “In fact, up till a few weeks before the filing of this case, discussions between the parties had been at an advanced stage and a draft compromise agreement had already been circulated.”

“All of a sudden, the applicants chose to pull out of the discussion and announced at a formal press conference at the Vatican, that it was going to begin court proceedings. This without even sending a simple official notice as per ethical and legal practises. In the light of this irregular attitude, the defendant humbly requests that irrespective of the outcome of these proceedings, the applicants be made to cover the costs of the case.”