Vatican Lawsuit Liability Could Reach $1 Billion in US
By Lawrence Morahan
CNSNews.com Senior Staff Writer
May 22, 2002

(CNSNews.com) - Lawsuits filed in the United States targeting the Catholic Church for alleged money laundering, theft of property in Yugoslavia during World War II, and sexual abuse by American priests, call for the Vatican to pay total damages that could reach $1 billion, lawyers said.

"They all have the same defendant, which is the Vatican, and the legal issue is the same: whether you can sue the Vatican in a U.S. court," said attorney Jonathan Levy, who is suing the Vatican Bank in a class action lawsuit seeking reparations on behalf of World War II Holocaust victims.

Insurance commissioners from Mississippi, Missouri, Tennessee, Oklahoma and Arkansas are also seeking to recover over $200 million in a federal Racketeer Influenced and Corrupt Organizations (RICO) Act lawsuit against the Vatican.

The lawsuit stems from an alleged scam headed by financier Martin Frankel, who is accused of using the Catholic Church as a front to buy insurance companies and then siphon the insurers' cash reserves to buy houses and cars.

The insurance commissioners of the five states are already seeking more than $600 million in damages from Frankel in a lawsuit filed in 2000.

The latest lawsuit, targeting the Vatican, was filed under federal racketeering statutes, which allow for actual damages to be tripled so that a final judgment in restitution and penalties could exceed $600 million in that case as well.

According to the suit, the scam allegedly involved Frankel donating $55 million to the Vatican for a charitable foundation, the Vatican keeping $5 million and allowing Frankel to retain control over the remaining $50 million.

The suit further claims that Monsignor Emilio Colagiovanni, a senior member of the Vatican at the time, helped propose the insurance fraud scheme to senior Vatican officials.

Frankel was arrested in Germany in 1999 and is in pre-trial confinement awaiting trial in U.S. District Court in Connecticut on charges of racketeering, fraud and conspiracy.

Colagiovanni has been under house arrest in Ohio since his arrest in August 2001 on charges of wire fraud and conspiracy to launder money in connection with the insurance scam.

Michael Hurley, a spokesman for the U.S. Conference of Bishops in Washington, said the suit against the Vatican "has no merit in terms of relationship to the church, as I understand it.

"There may be some legal merit to whatever Monsignor Colagiovanni is being accused of and whatever his relationship with Frankel was, but there's no merit to bringing the Church into it," Hurley said.

A Vatican spokesman told wire services that at the time of the alleged scheme, Colagiovanni was a retired priest no longer holding any Vatican office and was acting as a private citizen.

But Levy said because Colagiovanni "used his position in the Vatican to further Frankel's scheme, the Vatican is held responsible."

"I think the way for this to end is if the Vatican is held to the same standards as everyone else," he said.

In terms of other landmark legal settlements, such as tobacco and asbestos, $1 billion is not a lot of money, Levy said.

With five states' insurance departments filing suit under an anti-racketeering act, it's getting harder for the Vatican to claim sovereignty, Levy added.

"Insurance commissioners are generally pretty conservative fellows and they're spending the states' money to hire outside counsel, so I would expect they have a fairly strong case in their estimation," he said.

Levy is suing the Vatican Bank on behalf of Serb and Jewish survivors of atrocities committed by the Ustashe, the wartime fascist organization that ruled Yugoslavia.

The suit alleges that gold and other assets valued by Levy "at several hundreds of millions" of dollars were looted by the Ustashe and laundered by the Vatican after World War II.

Michael Schwartz, vice president of government relations with Concerned Women for America, who has written extensively on the alleged Vatican-Ustashe connection, dismissed the notion of Vatican involvement.

Based on his studies of the history of the region, Schwartz said it was probable that priests or bishops in the area had acquired property from the wartime government that supported the Nazis.

"But the idea that there was some kind of conspiracy to steal the money of the Jews is just outlandish," he said.

Earlier this year, the victims of sexual abuse by priests in the United States sued the Vatican under the RICO Act. In an ever-expanding round of lawsuits, Jeffrey Anderson, a prominent sex abuse attorney has included the Vatican as a defendant in a racketeer lawsuit against four American dioceses and former Florida Bishop Anthony O'Connell. All the lawsuits are pending.