Vatican’s €17 million injunction on Malta property fund reversed

The Vatican bank IOR has had a request for a prohibitory injunction against a property finance fund turned down by the Maltese courts.

In a continuation of a legal dispute over a €17 million claim for damages, the Maltese courts rejected a warrant of prohibitory injunction which the Istituto per le Opere di Religione filed against a subsidiary of the Futura Funds SICAV, a Maltese umbrella fund.

The IOR had declared in court it had been caught up in a “menacing web of intrigue and suspicious transactions”, in a ruse by Futura’s Italian financiers that hived off millions into a property company owned by offshore firms in Dubai and Panama.

The Vatican’s cash was invested by Futura’s subsidiary, the Kappa Fund, in a Luxembourg property company, Cougar Real Estate, in 2013, for the purpose of acquiring the historic Budapest stock exchange, the Exchange Palace.

The IOR has accused Futura of having used the Vatican’s money to buy the company that owned the Exchange Palace but making an undeclared profit of €11.6 million in the process, by duping the Vatican on the price of the Hungarian deal.

“Futura strongly denies all wrongdoing, claiming that the investment was precisely performed in the very terms, which had been openly discussed with, and fully approved by, IOR’s own external advisors and top managers of the time,” the company said in a statement to MaltaToday on the court decision.

Futura’s spokesperson said it was the IOR which, following a change in management upon the election of Pope Francis, that reneged on a €24 million capital commitment with Futura for a real estate project.

The IOR’s recent request for injunction was to prevent Cougar Real Estate, the 90% owner of the Exchange Palace, from transferring the property. But the Maltese courts said the IOR failed to prove the elements required for injunction.

Futura’s general counsel Andrea Suriano insists the Kappa Fund’s investment in the Exchange Palace was legitimate. The Vatican claims the investment fund made a huge profit by performing a different kind of transaction

Futura’s spokesperson said that even disgraced Cardinal George Pell – imprisoned for over a year as a registered sex offender – wrote in his ‘Prison Journal’ that in 2017 the Vatican authorities had negotiated a settlement on the Futura dispute, but that its final approval was blocked by the Vatican authorities.

“What is is quite difficult to understand is why IOR keeps undertaking unscrupulous and abusive legal strategies in order to sink this important project and create great damage to the Kappa Fund, of which it is one of the investors,” Futura’s counsel Andrea Suriano said.

“Futura has reasons to believe that this information is hidden to the most at the IOR and in the Vatican, among a fierce clash of factions that followed the resignation of Pope Benedict.”

Suriano insists the Kappa Fund’s investment in the Exchange Palace was legitimate and would have brought in a significant €30 million return for all investors, the IOR included “had it not been irresponsibly disrupted by the Vatican Bank to self-inflict a damage as evidence against former top managers – a trial for them of crucial political importance – as it is finally emerging very clearly.”

Other cases were filed and may still be ongoing in the Budapest and Luxembourg courts, apart from those in Malta.

Vatican accusations

The IOR claims it handed over millions to Futura to manage and invest. A joint committee decided it would invest €30 million, part of which to buy out a non-performing loan issued to the owner of the Exchange Palace.

The loan would then be converted into an 84% share of the Hungarian company that owns the Exchange Palace.

To do this, IOR pooled in €21 million of its cash in ‘class B’ shares in Futura’s Kappa fund, together with other investors to raise the cash to buy the loan.

The IOR however claims Futura used a Luxembourg firm, Cougar Real Estate, to first buy 90% of the Hungarian company that owns the Exchange Palace. Cougar then spent €20.4 million to acquire the bank loan; while the Kappa fund investors’ cash was used to buy Cougar’s shares for €32 million. That resulted in an instant €11.6 million that went to Cougar’s owners – an offshore Dubai company called Holdabco, and minority shareholder, a Panamanian firm called Alpininvestissements.

The IOR insists it was misled, because its cash has to be used buy Kappa shares and then invested directly in the Budapest development.

Instead, it claims the realised profit took IOR’s cash away from it and into the hands of Cougar’s owners.“It is clear that the IOR has been abusively caught up in a menacing web of intrigue and suspicious transactions,” the IOR’s lawyers in Malta complained.

Futura Funds’ former director Alberto Matta was also a director of Cougar Real Estate, and was accused by IOR of having inflated the price for the Hungarian loan. Matta is no longer a director of the SICAV.