July 15th's New York Post breaks with A Deal with the Devil, detailing Camden Bishop Joseph Galante's working relationship with Italian con artist and playboy Raffaello Follieri, jailed two weeks ago on federal fraud and money-laundering charges (PDF) in a complicated scheme to use investor money to buy up Catholic churches at below market value then "flip them" for profit.The Bishop sold Follieri his $400,000 beach house in January 2007 (it was back on sale recently) even as news of the scheme was unraveling and even as the Bishop was working on the plan to close and sell off half of the churches in his diocese.
A Business Model Built on Bilking the Church
Follieri arrived in New York in 2003 and presented himself as a brash, young well-connected real estate developer. What he quickly developed was a reputation for high living. As the National Catholic Reporter wrote in 2006:
The business opportunity exploited by the Follieri Group is evident: A cash-hungry, land-rich institution (the American church) experiencing a demographic shift among its clientele (parishioners abandoning the inner city) and huge and ongoing liabilities (more than $1 billion has already been paid victims of clergy sex abuse) needs to divest itself of long-held but increasingly unproductive holdings (inner-city parishes and other excess real estate holdings). It's a big business.The NCR profile showed that Follieri Group lavished a lot of time and money on the 2006 meeting of the U.S. Conference of Catholic Bishops, providing a "hospitality suite" for the bishops and lobbying them on real estate sales. At the meeting the bishops changed the rules on Vatican oversight on large sales of church property. A important player in the Conference was its former spokesperson, Bishop Joseph Galante.
Follieri spent the next few years using exaggerated ties to the Vatican to build a real estate scam that used money from Californian billionaire Ron Burkle (friend of Bill Clinton and assorted nineteen year old NYU students) to buy up church property below market value, then flip them for profit. They figured that the crushing debts following the sexual abuse scandal would have created a country full of desperate bishops (Trenton politicians squashed independent prosecutorial investigations into the sex abuse scandal in New Jersey so we'll never learn the details that have become public in places like Boston). Most diocese turned away the Follieri Group; few churches were sold and none seem to have been resold for profit. Most of the Burkle money went to feed Follieri's jet-setting penthouse lifestyle complete with Hollywood pretty girl Anne Hathaway.
But it was not to last. Investor Ron Burkle had wised up according to FBI records he flew a representative to New York in January 2007 to examine Follieri's "engineering reports." The Italian was out of the office and claimed to have the only copies with him. When pressed, Follieri warned Birkle's man that he "should see what happened to the last guy that crossed Follieri." Around February 13 Birkle directly confronted Follieri's $20,000 expense of a private jet between Los Angeles and Las Vegas and turned off the money.
Buying a "Unique Relationship with the Catholic Church"
Follieri went looking for a new business model. From the FBI indictment:
By or about early 2007, Follieri took additional steps to look for new investors. Among other things, Follieri directed the production of a pitch book based on the false representations that Follieri had connections witht he Vatican and the ability to obtain church properties cheaply. The pitch book for Follieri Media, which Follieri had distributed to several potential investors, state, among other things, that Follieri Media had a "unique relationship with the Catholic Church."Starting February 28, 2007 Follieri began liquidating Birkle money he had stashed in Monaco, "transferring hundreds of thousands of dollars from two other accounts at a private bank in Monaco to a bank account in New York, New York, for the Follieri Group." (FBI).
His new plan to build a "unique relationship with the Catholic Church" proceeded remarkably quickly. Within three weeks of the money transfer he was named a "special consultant" to the New York-based Pontifical Mission Society, headed by Monsignor John E Kozar, a priest appointed in 2001 by the U.S. Conference of Catholic Bishops. Eight days later, on Wednesday March 28, Kozar and Follieri announce a joint financial venture, an affinity credit card with proceeds earmarked for charity.
The next day Follieri settled on the $400,000 sale of a nondescript condo in a South Jersey beach town that had been sitting idle on the market for over six months. It was a far cry from Follieri's usual San Tropez/New York Penthouse and an unusual choice for an international playboy. The seller had recently launched phase two of a plan that would eventually call for the sale of over sixty church properties to real estate developers. Bishop Joseph Galante had bought the house a decade earlier for $114,000, a remarkably healthy annual return of 32%. Two nearby properties that Zillow.com identifies as "Comparable Homes" have since sold for $165,000 and $208,900.
Our Usher in the Vatican
Galante says the suggestion to first use then-26 year old Raffaello Follieri came from a 2004 phone call from a high Vatican office but now can't seem to remember just who it was who called. The FBI says Follieri's only real Vatican connection was a low level employee. Italian papers name him as Tonino Mainiero, an "usher" or "lay clerk" at what the Post identifies as a "small church within the Vatitcan." Follieri had hired the nephew of a powerful Vatican figure for his vice president but there is no indication that he had any special connection to his uncle or involvement with the Follieri Group and he seemed to have been used mostly to get a well-known Vatican name on the letterhead.
Previous negotiations between Follieri and the Diocese to buy property in Atlantic City had fallen through, but sometime around the sale of the condo, Bishop Galante loaned Follieri a priest. Diocesan spokesperson Andrew Walton has admitted the diocese was aware that Atlantic City Monsignor William Hodge spent a considerable amount of time traveling to investor meetings with Follieri, but that press reports about him being directly employed by Follieri are not true. If Walton's denial is to be believed, then the only salary Hodge received during his time working for Follieri was coming from diocesan offices in Camden.
The FBI reports that Galante's loaner priest was actively involved in the scam. They have sworn testimony that Follieri kept clerical robes of "a more senior clergyman" in his New York office and that Hodge and Monsignor John E. Kozar used them to impersonate Vatican officials to would-be investors. New reports are implying that Kozar's charity began laundering Follieri money around this time and that $6 million is still missing in a mysterious shadow company. Hodge left the country "on vacation" the same week Follieri was arrested by federal authorities in New York and has phoned in a denial that he dressed in bishop's clothes.
"Nobody Was Aware"
Bishop Galante says he didn't know Follieri was a con artist when he sold him the beach house at such a good profit. His spokesman Andrew Walton claims that "nobody was aware of problems with Mr. Follieri or his company at that time". Yet in 2005 a potential investor in a Follieri scheme to siphon charity money for an Ecuadoran orphanage asked around and was advised to "stay away, that's not good. I don't think it's a real foundation." A year later the National Catholic Reporter article came out and quoted a financial officer of a religious order as saying "this thing smells in my opinion. I wouldn't get close to these people." In 2006, the Pittsburgh Post-Gazette opined that Follieri "has had an easier time maneuvering around Manhattan society than in acquiring and developing Catholic church property" and outlined his shady billionaire backers, expensive life style and glitzy Hollywood girlfriend. It gets better: a Follieri Group vice president, listed prominently on their website, was Vincent Ponte, son of convicted waste-management mobster Angelo Ponte. Vincent's own resume included a 1997 bribery conviction, easily discovered via Google. A full two years before Galante accepted Follieri's $400,000 check, even a blogger could connect enough dots to warn the Boston diocese to keep the Follieri Group "at arm's length."
Even if there had been no signs of a brewing scandal it was a clear conflict of interest for Galante to sell personal property to this group at the same time he was organizing a mass sell-off of churches.
We're not the first to recognize that many of the churches slated for closure are both financially solvent and sitting on prime real estate. Spokesperson Andrew Walton disingenuously claims that "parishes own their own properties and any sale would benefit them, not the diocese" without explaining that when a parish is closed its trustee body ceases to exist: proceeds of the sale go to the newly created mega-parish entity, three of whose five trustees will have been recently hand-picked by the bishop.
What this means to the movement?
Vati-Con, or The Great Church Sell Off, has been occurring in diocese after diocese all across the country and the script is remarkably consistent. Bishop comes in, makes showy listening tour, commissions committee to make future plan, then calls in the TV stations to express shock and dismay at the depth of the proposed cuts before throwing his hands up and bowing to the process, as if this is all another victory for democracy.
The consistency of the process (and the invariable ending) is a clear clue that this The Sell Off is being coordinated at a higher level. Raffaello Follieri almost certainly acted as public relations consultant to the bishops, and other networks formal and informal are probably at work. It is commendable that U.S. bishops are working together to address national issues facing the Catholic Church, and it would be fine to hire an outside real estate developer for consultation. But it becomes conspiracy when the network and the motives and money are hidden behind church walls and tax records.
It is conspiracy when Camden and dozens of other Dioceses produce showy process for a known end: closure and sell-off of churches. It is conspiracy when employees of the Diocese of Camden dress up as high church officials and jet around the world with a real estate developer on diocesan time. It is conspiracy when the bishop quietly sells his personal beach condo to a known con artist who will be a likely bidder on the sixty-some properties about to go up for sale.
Those behind the Sell Offs have relied on the lack of coordination of local efforts to save the churches. Google around and you'll see that every diocese hit by this has spawned blogs and websites determined to save the churches. We've been divided by lack of communication but also by the loyalty and trust that church-goers properly extend to their pastors and bishops, a trust which has been used to deflect tough questions and honest answers.
We've now found that at least one U.S. bishop is in bed with Raffaello Follieri and has profited from at least one six-figure personal business transaction. Where else will this money trail lead?
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