Vatican's new bank chief has military ship links

VATICAN CITY (AP) -- The Vatican was drawn into a new controversy over its embattled bank Friday after acknowledging that the institution's new president is also chairman of a shipbuilder making warships for Germany.

The Vatican announced to great fanfare Friday that Pope Benedict XVI had signed off on one of the last major appointments of his papacy, approving Ernst von Freyberg as president of the Vatican's bank, officially known as the Institute for Religious Works (IOR).

The Vatican spokesman was caught off-guard when a journalist noted that the German shipbuilder von Freyberg chairs, Blohm + Voss, has a military component.

The Rev. Federico Lombardi demurred and defended the selection. He later issued a statement saying the company repairs and transforms cruise ships and builds yachts — and is currently part of a consortium that is building four frigates for the German navy.

Michael Brasse, spokesman for Blohm + Voss in Hamburg, said that von Freyberg is chairman of the executive board of Blohm + Voss Shipyards, a unit that concentrates on building civilian ships.

But before Blohm + Voss Shipyards and other non-military units of Blohm + Voss were sold in 2011 to Star Capital Partners, its military shipbuilding unit, Blohm + Voss Naval, had contracted with the German Defense Ministry for four new frigates. Blohm + Voss Naval subcontracted the actual construction of those vessels to Blohm + Voss Shipyards.

Though Blohm + Voss Naval is now known as ThyssenKrupp Marine Systems GmbH, and is entirely separate from the other Blohm + Voss units, the Shipyards unit is still constructing the frigates under the legacy contract.

After they are built, however, the company plans to concentrate entirely on non-military ships.

"The focus of the business is for yachts, and on the repair side for cruise ships or the offshore oil and gas industry," Brasse said.

The revelation dominated what was supposed to have been the Vatican's triumphant appointment of a new president for the bank after its last president Ettore Gotti Tedeschi, was fired nine months ago for incompetence.

Gotti Tedeschi's stunning ouster came just as the Vatican was submitting its finances to a review by a Council of Europe committee in a bid to join the list of financially transparent countries.

The Vatican last summer passed the test by the Council of Europe's Moneyval committee, which seeks to prevent money laundering and terrorist financing. But the IOR and the Vatican's financial watchdog agency, however, received failing grades. The new president will be tasked with bringing the IOR into compliance by Moneyval's next review.

The Vatican stressed von Freyberg's Catholic credentials, noting that he was a member of the Sovereign Military Order of Malta, an ancient chivalrous military order drawn from European nobility.

The Vatican said he had been appointed by the bank's commission of cardinals and that the pope had "expressed his full consent."

The appointment may well be one of the last major decisions of Benedict's papacy given his planned retirement Feb. 28.

While the appointment was seemingly curiously timed, Lombardi went to great lengths to stress that the selection process took its own path and was to some degree irrelevant to the running of the church.

Lombardi said von Freyberg was selected after a "meticulous and articulate" seven-month search process from an initial list of 40 candidates put forward by an international head-hunting firm.