On July 28, 2018 the Vatican announced that Pope Francis had accepted Archbishop Theodore McCarrick’s resignation from the College of Cardinals.
Along with the disgrace which attended that announcement, one of its immediate effects was the severing of McCarrick’s nearly thirty-year relationship with the Papal Foundation, a charitable organization he helped to found, which is based in suburban Philadelphia and has an endowment of $200 million.
It comes now to the attention of interested parties that, as an ex officio member of the Board of Cardinals which controls the Foundation, McCarrick advocated and voted four times to approve an extraordinary, expedited grant of $25 million to the Vatican, in order to help it bail out a scandal-plagued dermatology hospital that it controls, the Istituto Dermopatico dell’Immacolata (IDI) in Rome.
McCarrick voted first in Executive Session in June 2017, then at the Foundation’s Annual Meeting in December 2017, again in January 2018, and finally in April 2018.
During at least the latter three votes, McCarrick may have known that he was under a Vatican-authorized investigation, carried out by the Archdiocese of New York, for sexually molesting a boy.
But, McCarrick likely would have known by October 2017 at the latest that he was under investigation.
Here’s the problem and its impact not only upon McCarrick himself, but upon the Papal Foundation and the $ 25 million grant to the Vatican.
Because the recipient of the grant was the Vatican, the very entity that would determine McCarrick’s fate as a result of the investigation it authorized into his conduct, McCarrick appears to have had a manifest and gross conflict of interest in considering whether the grant request was in the best interest of the Papal Foundation.
On its very face, a case could be made that McCarrick stood to benefit personally by helping to secure $25 million for the Vatican, and thus influence how it handled the accusations against him.
Now, under Pennsylvania law, the Directors of Non-profits such as the Papal Foundation are under an obligation to disclose material conflicts of interest to their organization’s Directors and Officers, and to recuse themselves from board decisions in which their conflict of interest is implicated.
But, according to those present at the Board Meetings in 2017 and 2018, McCarrick failed to make any disclosures to the Papal Foundation’s Board or to recuse himself from Board decisions.
If, as it increasingly seems to be likely, that McCarrick knew that he was under investigation during any of the four Board votes in which he participated, then under settled principles of corporate law, he appears to have committed a fraud upon the board of the Papal Foundation.
According to Robert T. Miller, a Professor of corporate law at the University of Iowa, “The legal effect of McCarrick’s apparent fraud upon the Board is to taint the vote of every board member participating in the decision.” This may render the grant voidable and returnable to the Foundation at the instigation of the Attorney General of Pennsylvania or any of the clerical or lay members of the Foundation’s Boards.
In June 2017 Cardinal Donald Wuerl received the grant request for $25 million from the Holy See’s Secretary of State, Cardinal Pietro Parolin, at the behest of Pope Francis.
Cardinal Wuerl pushed hard to meet it immediately.
According to the draft of Board Minutes, he said the grant was an emergency measure on which the hospital’s survival depended and moved formally to take it up later in June, outside of the Foundation’s normal grant cycle. Moreover, the Cardinal convened an Executive Session of the Cardinals’ Board—including McCarrick, who also lobbied for making the grant—and called for a summary vote to approve the grant.
Meanwhile, in May 2017, just weeks before Cardinal Wuerl received the grant request from Vatican Secretary of State Parolin, McCarrick’s alleged victim had contacted the Archdiocese of New York’s Independent Reconciliation and Compensation Program with the charges against him. Before the Archdiocese of New York could investigate the charges, it had to receive authorization from the Holy See, for as a Cardinal McCarrick lay under the canonical jurisdiction of the Holy See alone.
In August of 2017, the Papal Foundation sent $8 million to the Vatican Secretariat of State.
It was only after $8 million had been sent to the Secretariat of State that the Foundation’s entire tiered Board—Cardinals, Bishops, and laymen—was presented with the extraordinary request, and they were asked to approve the full $25 million (including the already-sent $8 million installment) at the Foundation’s annual meeting in Washington on December 12, 2017.
After some tense discussion, and a presentation by Foundation attorneys about the Board’s fiduciary duties, Cardinal Wuerl made the extraordinary decision to hold the vote by secret ballot.
Fifteen Cardinals and Bishops and 9 laymen comprise the Papal Foundation’s full Board of Directors. According to a Board member present at the December 12th meeting, the result of the secret ballot was 15 votes in favor, 8 against, and 1 abstention. Only 1 of the remaining 8 laymen, who chose to cast a vote, voted in favor of the grant.
Secret ballots are virtually unheard of in corporate board meetings. The members of corporate Boards are meant to speak freely in order to persuade each other how to vote in the best interests of their corporation; the idea of a secret ballot, which is used in political elections where people fear retribution for their vote is incongruous with the very idea of a deliberative fiduciary Board.
A second installment of $5 million was sent to the Secretariat of State in January of 2018, again over strenuous objections from a number of lay donors to the Foundation who were involved.
To help quell the lay dissent on the Papal Foundation board, Sr. Carol Keehan, DC, the head of the Catholic Health Association, was dispatched by Wuerl to Rome to visit the IDI and report back. Keehan returned with an assortment of documents from the hospital in a binder.
Still missing, however, were any financial statements or balance sheet from the hospital, or any professional due diligence addressing its recent history of fraud or the sudden resignation, after just eight months on the job, of the CEO who had recently been appointed to clean up the hospital’s administration.
The Cardinals and Bishops on the Foundation Board nevertheless voted to send the $5 million.
The controversy over the $25 million made its way into the press in February 2018.
Those reports prompted Cardinal Wuerl to ask the Vatican to halt the grant, and to announce that the remaining $12 million due in the final installment would be canceled.
Yet the Cardinal reversed course again during the Papal Foundation’s annual visit to Rome in April 2018, announcing to a shocked gathering of lay donors at dinner in the Vatican that the Board had decided to proceed after all with completing the full $25 million grant to the Secretariat of State to meet the financial emergency of the Istituto Dermopatico dell’Immacolata.
Yet, more than a year since the first $8 million installment was sent, it has been reported that the Papal Foundation’s emergency grant sits today in a Vatican bank account, undisbursed.
No prelate has been more consistently and intimately involved in the Papal Foundation than McCarrick, who helped to found the non-profit in 1988 alongside the late Cardinal Krol of Philadelphia and Cardinal O’Connor of New York.
The current chairman of the controlling Board of Cardinals is Cardinal Wuerl, McCarrick’s successor as Archbishop of Washington.
Before he was elevated to the Cardinalate and moved to Rome, then-Bishop Kevin Farrell, McCarrick’s protégé and former housemate in Washington, was a member of the Papal Foundation’s Board of Trustees.
The current President of the Board of Trustees is another McCarrick protégé, Bishop Michael Bransfield, himself accused of sexual abuse and forced to resign from the Diocese of Wheeling-Charleston on September 13 of this year.
But there is more.
The first Executive Director of the Papal Foundation, who served from 1988 until 2001, was a priest named Monsignor Thomas Benestad. Benestad, who retired early from his home Diocese of Allentown and now lives in Boca Raton, Florida.
He is accused in the Pennsylvania Grant Jury Report of sexually abusing a boy over a period of years in the early 1980s, beginning when he was nine years old.
The Diocese of Allentown forwarded Benestad’s case to the Vatican which restored his priestly faculties in 2014. However, the Diocese of Palm Beach where he now lives has still apparently refused to authorize him to celebrate the sacraments there.
Lay members of the Papal Foundation are now calling for a serious investigation of this spidery web of influence and possible corruption.
Such an investigation would not face canonical impediments or infringe upon the proper authority of Bishops since the Papal Foundation is not an ecclesiastical entity, but an ordinary 501(c)(3) religious non-profit.
No permission from Rome is necessary.
The Foundation’s Board could commission an investigation with a simple vote. If the Foundation does not authorize its own independent investigation, it may nonetheless find itself facing one from State or Federal authorities.
Pope Francis challenged journalists to look into the accusations made against the Church and himself.
The information being reported to the public is not what the Pope may have anticipated and may provide law enforcement the impetus it has thus far lacked to begin holding Church officials legally accountable for their actions and omissions.
Tough times lie ahead for so many who once enjoyed the dignity of the Offices they themselves appear to have besmirched.
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