Important case in the US against the Vatican dismissed

Today, the United States District Court for the Southern District of Mississippi dismissed with prejudice the lawsuit filed in 2002 by the insurance commissioners of five states – Mississippi, Tennessee, Missouri, Oklahoma and Arkansas – against the Holy See.

The plaintiffs in the case withdrew their claims definitively due to an absence of evidence supporting the accusations.

Below we publish the Statement of Lawyer Jeffery S. Lena, Counsel for the Holy See regarding this Dismissal.


Statement of Jeffrey S. Lena Regarding Dismissal of Dale v. Colagiovanni

I. Introduction

Today, the United States District Court for the Southern District of Mississippi
dismissed with prejudice the lawsuit filed in 2002 by the insurance commissioners of
five states – Mississippi, Tennessee, Missouri, Oklahoma and Arkansas – against the
Holy See. The dismissal “with prejudice” means that the U.S. District Court
terminated the Dale v. Colagiovanni case with a definitive judgment that bars the
insurance commissioners from ever reviving their claims.

The dismissal was not the result of any settlement agreement. The request for
dismissal was filed by the insurance commissioners of their own accord without any
form of payment or other consideration being made to the commissioners by the Holy
See or any other entity or individual.

The insurance commissioners’ original lawsuit, filed in 2001, was based upon
the criminal activity of Martin Frankel and his co-conspirators from 1991 to 1999.
Frankel, operating under the pseudonym “David Rosse,” acquired and looted several
insurance companies in the above-mentioned states. The insurance commissioners
added the Holy See as a defendant to the lawsuit – which alleged violations of the
federal criminal fraud statutes and the Racketeer Influenced and Corrupt
Organizations Act (“RICO”) – on May 9, 2002.

As shown by the pertinent facts and the insurance commissioners’ decision to
dismiss their own case with prejudice, the Holy See had nothing to do with Frankel’s
scheme to acquire and loot insurance companies. The commissioners’ decision to
pursue fraud, conspiracy, and racketeering claims against the Holy See was wrong.

II. Important Facts

The Holy See was first approached by Frankel’s associates in 1998 under the
false pretense that “Rosse,” purportedly a wealthy financier from the United States,
wished to donate millions of dollars to the Catholic Church to help the poor. Through
his associates, “Rosse” proposed helping the poor by creating and funding a
charitable foundation in the Vatican. Unbeknownst to the Holy See, Frankel’s secret
intention was to use the foundation in his ongoing scheme to buy and loot insurance
companies.

The Holy See categorically rejected the notion that “Rosse” could ever create
a Vatican foundation. In particular, on September 7, 1998, Holy See Secretary of
State Angelo Cardinal Sodano, writing in his own hand, rejected outright the idea of
a donation by “Rosse” and instructed that no such foundation could ever be created
in the Vatican.

Faced with the Holy See’s unambiguous rejection, Frankel pursued a new
scheme. He created a fake foundation in the British Virgin Islands that he
denominated the “St. Francis of Assisi Foundation to Serve and Help the Poor and
Alleviate Suffering” (“SFAF”). Posing as the Vatican’s “financial advisor,” Frankel
falsely claimed that SFAF was affiliated with the Holy See and that Pope John Paul
II had personally authorized the funding of the foundation. Through these
machinations, the Holy See became the unwitting victim of Frankel’s fraud, which
sought to trade on the Holy See’s name and reputation to continue to purchase and
loot insurance companies.

The Holy See consistently repudiated any notion that it was connected to SFAF.
When an insurance company targeted by Frankel inquired in January 1999
whether SFAF was affiliated with the Vatican, the Holy See responded in writing that
“no such Foundation has the approval of the Holy See or exists in the Vatican.” See
Attachment A. When the Mississippi Insurance Department asked the Apostolic
Nunciature to the United States in April 1999 whether the Vatican had provided $1.9
billion to SFAF – a patently absurd figure amounting to more than eight times the
Holy See’s annual budget – Nunciature officials explicitly told the regulators that the
Holy See had not provided any funds. The Nunciature provided further information
to the Mississippi Insurance Department in June 1999, when it again confirmed
through the General Counsel of the United States Conference of Catholic Bishops
that the Holy See had no affiliation with SFAF and had never provided any funding
to the foundation. See Attachment B. And when the United States District Court for
the District of Connecticut transmitted a formal letter rogatory to the Vatican City
State Tribunal in 2001, Holy See officials, in the spirit of international comity and
cooperation, provided sworn testimony explaining that the Holy See had rejected
Frankel’s attempt to create a Vatican foundation and had repeatedly made clear that
the Vatican had nothing to do with h SFAF.1

Despite the Holy See’s ready cooperation with official inquiries, state insurance
regulators sued the Holy See for $600 million in 2002 – even though the Holy See
had never received any money from Frankel. As noted above, the lawsuit charged
that the Holy See had engaged in criminal fraud and racketeering in violation of the
federal RICO statute.

1 Attached is the sworn testimony of Giovanni Battista Cardinal Re before a
civil tribunal of the Vatican City State pursuant to the letter rogatory request of the
United States District Court for the District of Connecticut. See Attachment C.
Cardinal Re affirmed that the creation of a foundation in the Vatican “was
unthinkable and impossible.” Id. Cardinal Re also testified that, in response to
requests for information related to SFAF, “the Secretariat of State made clear, with
certainty, that such a foundation was not a Vatican foundation and never had anything
to do with the Holy See.” Id.

As today’s dismissal with prejudice shows, the state insurance regulators’
decision to sue the Holy See for Frankel’s crimes was unsupported by the evidence.
It was also incongruous, since two government investigations had already concluded
– long before the Holy See was ever sued – that it was state insurance regulators who
allowed Frankel’s nine-year scheme to persist unabated. Indeed, according to reports
by the United States General Accounting Office and the Tennessee Comptroller of
the Treasury, the failures of state regulators included the followin2 g:

• Failure to act on “red flags” relating to the highly unusual ownership
structure of Frankel’s insurance companies.
(GAO Report at 16, 17, 47; Comptroller Report at 17, 18, 19).
• Inadequate due diligence at the insurance company acquisition stage.
(GAO Report at 16, 17, 47; Comptroller Report at 18).
• Inadequate assessment of highly unusual and improbable investment
activities.
(GAO Report at 16, 22-23, 31, 47; Comptroller Report at 7, 27, 29, 35,
38, 52).
• Inadequate efforts to independently validate the identity and
appropriateness of the insurance companies’ asset custodian.

2 See United States General Accounting Office, Insurance Regulation: Scandal
Highlights Need for Strengthened Regulatory Oversight (Sept. 2000) (“GAO
Report”), available at http://www.gao.gov/new.items/gg00198.pdf (Attachment D);
Tennessee Comptroller of the Treasury, Review of Inaction on the Part of Insurance
Division Employees Involved in the Regulation of Franklin American Life Insurance
Company (July 2000) (“Comptroller Report”), available at http://www.comptroller1.
state.tn.us/repository/SA/in003501.pdf (Attachment E).
(GAO Report at 16, 22, 26, 29, 31, 47; Comptroller Report at 23, 25, 26).
• Inadequate examinations of the Frankel insurance companies.
(GAO Report at 16, 29, 30; Comptroller Report at 31, 34, 35, 37).
• Failure to obtain necessary securities-related expertise from state
securities regulators or contracted assistance.
(GAO Report, at 16, 28; Comptroller Report at 29, 30, 54).
• Failure to communicate with other relevant state agencies.
(GAO Report at 16, 17, 21, 27, 28, 35, 36; Comptroller Report at 26).
• Failure to communicate properly within the insurance division.
(Comptroller Report at 13, 16, 41, 42).
• Failure to communicate with out-of-state insurance regulators examining
the Frankel insurance companies.
(GAO Report at 16, 17, 21, 29, 32, 33, 34, 48).
The reports concluded that if state insurance regulators had not been asleep at the
wheel, Frankel’s scheme either would have never gotten off the ground in 1991 or
would have been halted long before 1999. See GAO Report at 15, 17, 18, 19, 25, 27,
28, 29, 31, 32, 36, 46, 47; Comptroller Report at 13, 14, 18, 23, 25, 28, 31, 35, 42,
50-51, 52, 54.

In short, according to the findings of the Government Accounting Office and
the Tennessee Comptroller, state insurance regulators bore much of the blame for
allowing Frankel’s long-running scheme to continue unchecked. And yet state
regulators turned around and sued the Holy See – a foreign sovereign that had
cooperated with official investigations and that was in no way responsible for
Frankel’s crimes.

III. Conclusion
The insurance commissioners’ lawsuit against the Holy See, which alleged a
wide-ranging Vatican conspiracy and cast aspersions upon numerous respected Holy
See officials, perhaps effectively shifted the spotlight from the regulators’ own
conduct. But, in the end, the lawsuit resulted in the imposition of major unnecessary
litigation costs upon the Holy See, which was thereby further victimized by Frankel’s
fraud. And the case only served to aggravate any prior errors by state regulators,
since a significant amount of public money was wasted pursuing an ill-conceived
lawsuit.

It is worth noting that Dale v. Colagiovanni was one of three cases filed in the
United States during the 1999-2002 period that alleged misconduct by the Institute
for Religious Works (“IOR”). Like the other two cases – Alperin v. Vatican Bank and
Zivkovich v. Vatican Bank – Dale has now resulted in complete dismissal of all
claims. Once again, sensational allegations of IOR misconduct have crumbled under
their own weight.

That inflammatory allegations against the Holy See and the IOR are easily
disseminated and make good fodder for conspiracy theorists cannot be doubted. But
it would inure to the public’s benefit if those same journalists who enthusiastically
disseminated such allegations when the cases were filed would pick up their pens to
write with equal vigor upon the cases’ demise. To do so would responsibly reflect
the public record that each of the cases died the undignified death it deserved.

Jeffery S. Lena, Counsel for the Holy See

E-mail: [e-mail]


IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
MIKE CHANEY, Commissioner of Insurance for the
State of Mississippi, in his official capacity as Receiver
of FRANKLIN PROTECTIVE LIFE INSURANCE
COMPANY, et al.,
Plaintiffs,
v.
EMILIO COLAGIOVANNI; et al.,
Defendants.
)))))))))))
No. 3:01-cv-00663-WHB-LRA
ORDER
This cause comes to be heard upon Plaintiffs’ Motion for Voluntary Dismissal of Claims
Against Defendant Holy See a/k/a Vatican City State (“Holy See”), the Court being informed that
the Holy See has no objection to the Motion or to the form of this Order, and the Court having
concluded the Motion is well taken, IT IS HEREBY ORDERED that the motion is GRANTED,
and Plaintiffs’ claims against the Holy See are hereby dismissed with prejudice.
SO ORDERED.
Date: 02/1/2012 s/William H. Barbour, Jr.
Honorable William H. Barbour
United States District Judge