MIAMI (FL)
International Consortium of Investigative Journalists (ICIJ) [Washington DC]
October 5, 2021
By Spencer Woodman
Leaked files reveal nearly $300 million stashed overseas for the Legion of Christ in wake of Vatican investigation. Millions were invested with a corporate landlord that evicted struggling U.S. tenants during pandemic.
[PHOTO ABOVE: Marcial Maciel embraced by Pope John Paul II in a 1991 ceremony marking the 50th anniversary of the Legion of Christ order. Image: Photo by Maria Dipaola/MCT/Tribune News Service via Getty Images]
Key Findings
- Leaked records reveal a set of secret New Zealand trusts holding nearly $300 million in assets devoted to the Legion of Christ, Roman Catholic order caught in an international pedophilia scandal.
- As the secret trusts’ investments expanded, victims of sexual abuse by Legion priests were seeking financial compensation from the order through lawsuits and through a commission overseen by the Vatican.
- In response to questions about whether the Legion disclosed the trusts to the Vatican, the order told ICIJ that “religious institutes do not have an obligation to send detailed information to the Vatican regarding their internal financial decisions.”
- The trusts used a shell company to invest heavily in U.S. rental properties, including in apartment complexes where tenants were evicted during the coronavirus eviction moratorium.
In January, Carlos Lomena, a truck driver in suburban Miami who lost his job during the coronavirus pandemic, begged a judge to stop his landlord from evicting him.
The 37-year-old Lomena hoped to get a fair shake in court. He’d emigrated from Venezuela after high school with a sense that the U.S. had a more just legal system.
In a letter to the Florida judge, he pointed to a recent extension of the nationwide moratorium on evictions during the coronavirus outbreak and asked for more time to pay his overdue rent.
“I do not have a place to go,” Lomena wrote, “nor the money to move into a new apartment.”
His landlord — a holding company formed by real estate firms in Miami and Iowa — wasn’t moved by his pleas; it had investors to satisfy. The company pressed the court to evict him and, in early February, the judge ruled that Lomena hadn’t filed the right form to prevent his eviction. Within days, during the height of the pandemic, the Broward County Sheriff’s Office posted a large notice in bold red letters on his door ordering Lomena to vacate his home within 24 hours or be arrested for trespassing.
Lomena isn’t alone.
Tenants across the country have faced aggressive tactics — including evictions during the pandemic — from a growing number of massive corporate landlords that draw on pools of money from wealthy investors around the world.
A trove of leaked documents reviewed by the International Consortium of Investigative Journalists and 150 media partners provide an unprecedented view of global financial maneuvers that turn rent payments into big profits that are often hidden in accounts owned by shell companies controlled by anonymous investors.
The investors revealed in the leaked documents include offshore trusts holding hundreds of millions of dollars for the Legion of Christ, a wealthy Roman Catholic order disgraced by an international pedophilia scandal.
The confidential records show that the trusts became a secret partner in the ownership structure of Lomena’s apartment complex, working with the landlord to invest $2 million in the complex in 2015. The trusts invested millions more in other modest residential buildings in Florida, Texas, Iowa, Indiana and Illinois.
Soon after the Vatican announced in 2010 that it would seize the operations of the troubled order and launch a new investigation, high-profile Legion of Christ operatives began quietly setting up one of a trio of New Zealand trusts designed to hold money for the Legion, according to leaked records.
Two of these trusts, formed shortly after, secretly moved millions of dollars around the world. This included more than $14 million funneled into investments in apartment complexes that Pensam Capital, the firm that owned Lomena’s building, was acquiring across the United States. In comments to ICIJ, Pensam said it has not received information indicating it has received investments from the Legion.
These two trusts would come to hold nearly $300 million in assets devoted to the Legion of Christ, according to leaked records, at a time when victims of sexual abuse by its priests were seeking financial compensation from the order through lawsuits and through a commission overseen by the Vatican.
In response to questions about whether the Legion disclosed the trusts to the Vatican, the order told ICIJ that “religious institutes do not have an obligation to send detailed information to the Vatican regarding their internal financial decisions or organization.”
In statements to ICIJ, the Legion acknowledged it had set up one of the three trusts, but distanced itself from the other two, which held the majority of the funds designated for the Legion. The Legion said it had no knowledge of the other two trusts’ operations. The two trusts were funded by scions of a prominent industrialist family in Mexico, including Father Luis Garza Medina, one of the Legion’s top leaders. A spokesperson responding to ICIJ’s questions for Father Garza said that Garza has no control over the trusts.
A review of leaked documents by ICIJ shows deep connections to the Legion in all three trusts, which share the same New Zealand address and have the same trustees managing them.
The spokesperson for Garza said the secret trusts were strictly charitable and devoted to the support of elderly priests and other Catholic causes, and that the trusts have only made charitable distributions.
The leaked documents are part of the Pandora Papers, the millions of secret files at the heart of a global investigation by ICIJ and its media partners, including the BBC, the Washington Post, L’Espresso in Italy, El Pais in Spain and the Mexican publications Quinto Elemento Lab and Proceso. The records involving the Legion of Christ come from Asiaciti Trust, a Singapore-based corporate services provider that helped administer the New Zealand trusts.
The trove contains large amounts of data on various wealthy investors who used offshore entities to channel money into real estate.
They are part of a growing class of international investors in real estate ventures that often use hardball tactics to maximize the rate of return from properties occupied by low- and mid-income renters.
Dozens of current and former tenants at Pensam-owned buildings interviewed for this article described problems with their units, including flooding, mold or mildew, broken appliances and dangerous elevators. Pensam routinely partners with Iowa-based BH Management Services, which takes on the day-to-day administration of its buildings.
A review of more than 100 court cases in Florida showed that the property managers added steep penalties on late rental payments and pursued rapid evictions of tenants unable to pay their rent. Tenants said customer service was difficult to reach and eviction notices appeared to be a go-to tool to manage tenants. In a statement, BH Management said it coordinates rent collection “under strict adherence of lease agreements and the law, including the CDC order on evictions.”
The high returns that financial firms promise their wealthy investors inevitably lead to vulnerable renters being squeezed, according to Jim Baker, the executive director of the Private Equity Stakeholder Project, a nonprofit organization that monitors private equity firms and other large investors.
“This is the problem of growing global wealth inequality crystallized in one industry,” Baker said.
In 2013, Pensam and BH Management evicted Collette Northrop and her children from a Dunedin, Florida, apartment after the family missed an $895 payment, according to court records. Just months before, the trusts holding money for the Legion of Christ had secretly invested at least $1 million toward Pensam’s purchase of the apartment complex. Northrop said that the family moved into a motel and that her children switched to a new middle school. “We were homeless at that point,” Northrop said. “The kids asked: ‘How are we going to tell people we live in a hotel?’ The whole thing is devastating for a family.”
‘The millionaires of Christ’
In 1941, a charismatic Mexican priest named Marcial Maciel founded the Legion of Christ, a Catholic order that would become known for its intense focus on courting wealthy patrons. Some would come to call Maciel’s order “los millonarios de Cristo” — “the millionaires of Christ.”
Over six decades, a cult of personality grew up around the group’s founder. Members of the Legion were taught that Maciel was a “living saint.” His creation grew and became a global force as it cultivated ties to Vatican officials, very wealthy Catholics and conservative Republican luminaries in the U.S. such as Domino’s Pizza founder Tom Monaghan, former Florida Gov. Jeb Bush and former Sen. Rick Santorum of Pennsylvania.
[PHOTO: Marcial Maciel embraced by Pope John Paul II in a 1991 ceremony marking the 50th anniversary of the Legion of Christ order. Image: Photo by Maria Dipaola/MCT/Tribune News Service via Getty Images]
Maciel became “the greatest fund-raiser of the modern church” — and “its greatest criminal,” according to Jason Berry, an investigative reporter who delved deeply into the Legion and its leader.
In early 1997, Berry and a reporter at the Hartford Courant wrote a front-page story that exposed Maciel’s decades of sexual predation, reporting that nine men had come forward to accuse him of sexually abusing them when they were boys or young men training to be priests.
Before the story was published, Berry later reported, one of Maciel’s confidants, the Rev. Luis Garza, “traveled to Legion houses in several countries to warn of the forthcoming article, claiming it would be based on lies and telling Legionaries … not to read the report should they see a copy.”
In 2006, after being plagued for years by accusations against the Legion’s founder, the Vatican investigated nearly 100 abuse allegations against Maciel and removed him from ministry with an order that he adopt a “life of prayer and penitence.”
When Macial died in 2008, the scandal didn’t die with him. Revelations that he’d fathered several children with different women brought more negative attention to the Legion of Christ. The Legion was increasingly viewed as a liability to the Vatican.
Amid the continuing scrutiny, much of the order’s leadership passed to Garza, known as an architect of its complex finances. Garza came from the family that has controlled Mexico’s Alfa conglomerate for decades. Garza joined the Legion after graduating from Stanford University, and he quickly rose through the ranks to become one of Maciel’s most trusted lieutenants.
On May 1, 2010, the Vatican announced that it would seize control of the Legion’s operations, the church’s most dramatic action against a Catholic order during the global abuse scandal. The Vatican would examine the Legion’s finances and possible sex crimes and establish a commission to compensate its victims.
The following month, one of Maciel’s sons filed a high-profile lawsuit against the Legion, alleging that the order had knowingly allowed Maciel to abuse him and other children.
In July 2010 — two days before the Vatican-appointed official took the reins of reforming the Legion — Luis Garza quietly helped to establish the first of the three secretive trusts in New Zealand that would hold money for the Legion.
The Vatican did not directly respond to questions about the trusts, but said that its effort to reform the Legion was mostly focused on issues around its founder and its structure.
During its investigation, the Vatican appeared to be operating on the belief that the Legion was low on money. The Vatican overseer of the Legion, Cardinal Valasio De Paolis, wrote in September 2011 that the Legion’s financial situation was “serious and challenging” and that some victims were asking for “enormous sums that the Legion absolutely cannot afford,” according to a 2014 book by Italian journalist Gianluigi Nuzzi based on leaked Vatican sex abuse records.
At the time the trusts were established, New Zealand was a popular destination for people seeking to hide money offshore using trusts. The trusts holding money for the Legion maintained four Swiss bank accounts, including one at a Geneva-based bank, Lombard Odier, that the U.S. Justice Department later found had helped American clients conceal assets from U.S. tax authorities.
Garza’s sister, Roberta Garza, who left the Legion’s lay branch after high school, told ICIJ that historically the Legion used offshore structures to divert religious and charitable money to more self-serving purposes, including Maciel’s lavish lifestyle, his secret children and his drug habits. “A lot of their money was held outside the Legion by their financiers, by people with power of attorney who are completely faithful to the Legion,” Roberta Garza said. “So you’re never going to find it.”
“We are not aware on what bases Roberta Garza makes her affirmations,” Father Aaron Smith, a spokesperson for the Legion said in response. “We have found no proof of use of offshore structures to divert religious and charitable money from the Congregation to finance what we know about Maciel’́s double life.”
As the New Zealand trusts quietly built their investment portfolios, the Legion faced legal threats on multiple fronts.
In civil litigation that began in 2011, Luis Garza and other Legion members were accused of defrauding an elderly Catholic woman out of $60 million in charitable donations to the order. According to The Associated Press, Garza was one of the Legion leaders responsible for distributing money from the woman’s trusts, although he was not a defendant in the case. The Legion at the time said that it did not unduly influence the widow. The case was later dismissed by a Rhode Island judge who said the woman’s niece did not have standing to sue.
Police in Milan opened a criminal investigation in 2013 into whether senior Legion clergymen offered a bribe to induce an Italian sexual abuse victim to recant testimony he had given prosecutors. Four Legion members were charged with attempted extortion and obstruction of justice. The case is pending.
Garza was himself accused of child molestation in a 2016 suit that attracted media attention, but it was withdrawn in 2019. At the time, a spokesperson for the Legion said Garza “categorically denies his involvement in this or any other abuse.” The Legion’s own internal investigation cleared Garza. In May, lawyers for the alleged victim told L’Espresso, an ICIJ partner in Italy, that they are exploring ways to refile the suit.
In November 2017, L’Espresso published an investigation into a portion of the Legion’s offshore finances, revealing that $300 million had moved through a Legion-owned company in Bermuda more than a decade before. Although the New Zealand trusts were active when this information became public, they remained a well-kept secret. Responding in 2017 to disclosures of its financial activities in Bermuda and other tax havens, the Legion declared that it “does not own offshore companies, nor does it own resources in offshore companies.”
The order characterized the offshore accounts as a relic of Maciel’s bygone reign.
In February 2020, Pope Francis told the Legion that the order had been tainted by the cult of personality surrounding its founder, and, even after a decade of heightened supervision from the Vatican, the order was still not fully reformed.