ROME – In February 2013, in his last official act as pope, Pope emeritus Benedict XVI appointed a commissioner for a small, seemingly insignificant hospital in Rome, the Immaculate Dermatological Institute (IDI).

Two years later, that same hospital was at the center of a tug-of-war between Australian Cardinal George Pell and the Vatican’s Secretary of State. Today, IDI is deepening the rift that threatens to tear apart the Church in the U.S., and to poison its relationship with Rome.

To understand what makes this hospital such a lightning rod, one needs to look at the path that led what was once a symbol of excellence in Catholic healthcare to the brink of ruin and almost $1 billion in debt.

In just three years, IDI has received three major infusions of cash from the Vatican and the Italian government, amounting to well over $70 million, and each time opinions were split between those who wished to save the institution and those ready to pull the plug.

What was once a Roman story drew global attention when the U.S.-based Papal Foundation, charged with financing the pope’s charitable initiatives, was asked by Pope Francis to help IDI with a $25 million payment. The request divided the foundation, with mostly clerics on one side supporting the pope and mostly lay people on the other skeptical of an institute many see as a poor investment at best, corrupt at worst.

While $13 million of that payment has already been sent to IDI, the remaining $12 million, approved in April 2018, remains for the time being in the foundation’s own account, inside sources told Crux.

Meanwhile, outside changes may decide the future of the hospital. In a couple of months, a bankruptcy case under the extraordinary administration that took over the institute will be placed before an Italian court, which could result in a complete overhaul of the hospital and its management.

Francis’s nomination of Italian Cardinal Nunzio Galantino as head of the Administration of the Patrimony of the Apostolic See (APSA), the office that handles the Vatican’s investment portfolio and its real estate holdings, might also affect IDI’s future. Galantino is seen as a reformer but also a Francis loyalist, so it’s hard to know which way his sympathies on IDI may lean.

Oceans away in Australia, Pell is fighting off criminal charges for historic sexual offenses. If the cardinal is not convicted, it raises the question of whether he would return to his role as Prefect for the Secretariat for the Economy and pick up where he left off – including what had been his behind-the-scenes opposition to Vatican involvement with IDI.

A stellar clerical cast has been involved in IDI at one point or another, from U.S. Cardinal Donald Wuerl to the notorious ex-Cardinal Theodore McCarrick, from Italian Secretary of State Cardinal Pietro Parolin to wealthy American benefactors. The small Roman hospital has, for years, represented a cluster of questions and thorns for the global Church.

A Less than Immaculate Institution

In the late 1800s, a small group of friars belonging to the Congregation of the Sons of the Immaculate Conception, founded by Blessed Father Luigi Maria Monti, settled in the northern part of Rome and began to cure ringworm.

At the beginning of the 20th century, Father Antonio Lodovico succeeded in creating a balm that cured the disease, which was widely spread in the peripheries of Italy largely inhabited by farmers. This was the first of many technological advancements that through the years set the Congregation’s hospital apart from the competition.

The history of the Vatican’s involvement begins in 1925, when the Holy See sponsored the expansion of the health care project. IDI’s deep ties to the Vatican went on to become an issue hanging around every debate on the hospital, both within and without Vatican walls.

During the Second World War the institute protected 52 Jews persecuted by Italy’s fascist government and its Nazi allies. From the ’50s onward, the hospital grew in fame and size. By the 1980s, there was no doubt that IDI was the reference point for skin care on the Italian peninsula.

In the beginning the friars were the heads of every department but, over time, they were replaced by highly qualified lay personnel. This was possible, health care veterans say, because IDI could offer some of the highest salaries in the business.

The hospital offered a walk-in service that offered treatment with no appointment and, as its fame grew throughout Europe, between 300 and 600 people would purchase a ticket every day.

“The daily income was guaranteed and monstrous,” a former employee who asked to remain anonymous told Crux.

Since the congregation that owned the hospital was a non-profit entity, all the money coming in had to be spent, hence employees took home massive checks and IDI was able to purchase the best and latest machinery.

The hospital was strongly unionized, to the extent that at the height of its power, mayoral candidates would visit for their campaigns. IDI began to expand, creating auxiliary clinics around Rome and increasing the number of departments.

The 2008 global financial crisis hit IDI hard, and the hospital eventually declared bankruptcy. But what really crippled the institute, sources say, came from within. Several sources close to IDI told Crux that starting in 2011, Father Franco Decaminada, the congregation’s representative at IDI, began to bring in “strange characters.”

“They looked out of place,” one IDI insider told Crux. The men had bodyguards and spoke with a heavy Neapolitan accent the source said, and rumors abounded that shoe boxes full of cash were being secreted out of the hospital.

Subsequent reporting by Italian journalists, especially the Italian public television service RAI and the news magazine L’Espresso, led to the discovery that money was being funneled out of the hospital to tax havens around the world and even to fund oil extraction projects in Africa.

Basic hospital necessities, such as syringes and medicines, were purchased at a staggering surcharge. Eventually the hospital was declassified by the Italian state as not eligible for state support destined for healthcare facilities.

At the same time, observers say, the hospital had become through the years a hub for clerical nepotism, and many employees could be found to share surnames with high-ranking prelates.

“Step by step, it drove the hospital into debt,” the source said.

Around the same time, stipends began coming late until eventually they trickled down to nothing. The staff continued to work but poor morale spread through the hospital. One cardinal told Crux that he went to IDI to treat a skin cancer in 2014, and his driver was told the staff hadn’t been paid in six months. When the cardinal asked his doctor if that was true, the response was, “No, we haven’t been paid in eight months.”

A 2012 financial inquiry found that IDI was indebted for more than $800 million and owed millions to the state in unpaid taxes. Charges were filed against DeCaminada and 40 others for money laundering and fraudulent bankruptcy. The hospital was collapsing onto itself.

Around that time, thousands of IDI employees went to St. Peter’s square for the Angelus to ask the pope to intervene and save the hospital. But a Deus ex Machina approach, be it by the Vatican or Italian authorities, was not enough to turn the situation around.

On February 18, 2013, Benedict XVI appointed Italian Cardinal Giuseppe Versaldi – at the time President of the Prefecture for the Economic Affairs of the Holy See, a former papal commission for the Legion of Christ and today the Prefect of the Vatican’s Congregation for Catholic Education – to take over as a commissioner for IDI.

Pell, IDI and APSA

Versaldi rolled up his sleeves to save the institute, and recommended that a $50 million loan be made by the Vatican’s “Institute for Religious Works” (IOR, the so-called “Vatican bank”) to IDI. The deal was signed under the auspices of the Italian government and allowed for an arrangement with the creditors of the institute.

When the time rolled around to make the payment in 2015, Pell and the president of IOR, French financier Jean Baptiste de Franssu, objected to the expense, questioning its justification just as the so-called Vatican bank was emerging from its own history of financial crisis and scandal.

The amount, de Franssu wrote in a letter to Versaldi, “would not be spent according to the prudence of a good head of family.” Ironically, de Franssu’s language would echo that of Papal Foundation members who objected to the request for $25 million for IDI in 2017.

The risk for the hospital without that money was massive.

“Losing support for 1,500 families, would be a social disaster,” explained a former IDI employee, and it would also have created a serious clash in Italian/Vatican relations.

The Italian cardinal found an alternative in APSA, an entity not under Pell’s control, which could give out the $50 million loan and the friars could have paid it back in the following years. Two steps were missing: The first was finding a guarantor for the loan, and the second was to separate the hospital’s administration from the friars.

The guarantor was found in the Vatican-owned Pediatric Hospital Bambino Gesù, at the time headed by Italian layman Giuseppe Profiti, who was later found guilty of abuse of power by a Vatican tribunal in October 2017.

The top-class children’s hospital had managed to put aside over $500 million at the time and received nearly $30 million a year by the Italian state for treating children from all of Italy. Local reports found that Bambin Gesù did not spend a large part of those $30 million, which instead were put aside until the idea arose of using it to pay off IDI’s debt.

Many were not pleased that Italian taxpayers’ money was being spent to save a hospital that had collapsed due to negligence and fraudulent administration. But Italian authorities forgave the incident and not much was said after. IDI had its money.

The second question of the friars required some reshuffling. The Luigi Maria Monti for-profit Foundation, which is nothing other than the friars under a different name, took over IDI on April 14, 2015. Versaldi became its first president, succeeding in ensuring the hospital’s name and short-term survival in just over two years.

APSA’s intervention – and Italian public money – saved over 1,000 jobs and avoided a diplomatic incident, but IDI’s troubles were far from over. Many wondered why the Vatican was so committed to the survival of an Italian hospital on Italian soil, and questioned its ties with the “chameleon congregation.”

The Incestuous Relationship of Catholic Hospitals in Rome

There are a number of Catholic healthcare facilities in the Eternal City and a quick glance at their Boards of Directors reveal the deep ties interlocking the various institutions. It comes as no surprise that when IDI was sinking, other hospitals “were used as puppets,” as one source put it.

The Bambino Gesù definitely suffered the lion’s share of consequences from the IDI fiasco, with new President Mariella Enoc asking for reparations. The Gemelli hospital in Rome was also brought in, though not with quite so catastrophic results, to help IDI, and currently shares staff and resources with the institute.

The winner in the deal was surely the San Carlo di Nancy general hospital next door to the Vatican, which, in 2015, brokered an agreement that dealt yet another blow to IDI.

In July 2015, the San Carlo was also reeling due to financial woes. A choice was made to basically let IDI take the hit instead of San Carlo, with over 100 employees being moved from the latter to the former. A former IDI employee told Crux that many of the additional staff stood out for filing complaints or having had disciplinary measures taken against them. The idea was that IDI would assume San Carlo’s dead weight, allowing San Carlo to regroup.

To close the deal, the head of human resources at IDI, Sergio Felice, became the Chief Medical Officer of the now-improved San Carlo. The hospital was then bought out by the private Italian healthcare magnate Ettore Sansavini.

IDI, led by former Italian health minister Mariapia Garavaglia starting in October 2016, was left burdened with a surplus of 100 unionized workers that it could not afford and that heavily weighed on its balance sheet.

The Americans

The consensus among the lawyers, economist, accountants and prelates whom Crux reached out to is that regardless of the money thrown at IDI, the hospital is likely to remain a financial hole, with one observer referring to the millions thrown into the institute so far as “petty cash” compared to the massive debts it has accumulated.

Private investors are skeptical of the Vatican’s involvement in the operation and appear to have lost interest in making an offer. (One veteran Italian financial professional told Crux that he has clients who might be interested in purchasing IDI, hoping to recapture its former glory, but not as long as the Vatican has its fingers in the pie.) The Italian government has delegated the issue to an upcoming trial, hoping that a sentence will decide the future of the troublesome institute.

Left with no alternatives, Pope Francis asked Wuerl to help him find a way to once again fend off the “social catastrophe” of an IDI collapse. The American cardinal forwarded the request to the Papal Foundation, a group of wealthy U.S. benefactors who gave their first grant for charitable initiatives under St. Pope John Paul II in 1990.

Among those pushing for a $25 million grant to be sent to IDI, sources within the foundation said, was also McCarrick, now at the center of a sexual abuse scandal hitting the Church’s hierarchy, and who participated in some sessions of the Papal Foundation until June 2017.

But lay foundation members were not so eager to spend that money, especially since IDI did not release any financial statement or strategy. Speaking to the Wall Street Journal, the former chairman of the foundation’s audit committee, businessman James Longon, called the grant an “irresponsible and immoral stewardship of funds.”

Though ostensibly a dispute about the proper use of funds, the fight over IDI inside the Papal Foundation is also seen by many observers as a proxy battle for the larger war over Francis and his leadership of the Church. Many of the clergy supporting the hospital are also major Francis loyalists, while several of those most skeptical have their doubts about the pope on other grounds as well.

Normally the foundation offers grants for the poor in amounts that rarely exceed $300,000, and its members found themselves at odds with the Vatican’s leadership, to the extent that an audience with the pope last April had to be canceled.

Eventually the lay members capitulated to the request. In July 2017, the first $5 million was approved, followed in January by another $8 million. While these first two payments have already been sent to IDI, the remaining $12 million is still in the foundation’s account, sources within the foundation told Crux.

How those U.S. funds were used by IDI, and the reasons behind the delay of the final payment, remain shrouded in mystery.

Looming Questions

Starting on June 13, 2017, Italian layman Antonio Maria Leozappa was nominated by Vatican Secretary of State Pietro Parolin to head the foundation running IDI.

“Until this administration, I saw a lot of immobility,” said a source within the hospital. “The latest administration shows signs of wanting to bring the organization back on track.”

Leozappa has attempted to make some improvements within IDI, and even offered to cut his salary to pay for a grant for distinguished staff. But not everyone is optimistic.

“Giving money to IDI means that between now and the near future, they will not exist anymore,” a former employee told Crux. “It’s a lost investment.”

The source expressed doubt about the new leadership at the Dermatological Institute, many of whom lack a degree or professional experience in the healthcare sector.

He also marveled at the continued involvement of the friars and the Vatican within the hospital, adding that the only hope would be a private investor – but predicts any such investor would be thrown off by the current situation.

“As long as the Vatican is involved, and the same governance remains, the hospital has no future,” the source said.