New Zealand-registered trusts held nearly $300 million in assets for a Roman Catholic order caught in an international paedophilia scandal, according to leaked records contained in the Pandora Papers.
The Legion of Christ, based in Mexico, used the trusts in a complex financial arrangement that held assets overseas while it faced lawsuits by victims of alleged sexual abuse by priests and a Vatican investigation, according to an analysis by the International Consortium of Investigative Journalists (ICIJ).
The Legion of Christ documents were among a trove of nearly 12 million confidential files obtained by the ICIJ in the biggest data leak in history. The ICIJ shared the records with 150 media organisations around the world including the Herald.
The collaboration, codenamed the Pandora Papers, has revealed the hidden offshore financial dealings of an astonishing array of rich and powerful figures, including 35 country leaders, hundreds of politicians, 133 billionaires, celebrities, and sports stars.
The ICIJ identified three New Zealand-registered trusts connected to the Legion of Christ in documents from Asiaciti Trust, a Singapore-based corporate services provider that was one of 14 professional firms whose confidential internal records were exposed in the Pandora Papers.
At the time the trusts were established, New Zealand was a popular destination for people seeking to hide money offshore using trusts.
New Zealand foreign trusts were promoted to international clients as a way of holding assets confidentially without paying tax, in a jurisdiction that did not carry the stigma of a tax haven.
The disclosure rules were tightened in 2017 after the Panama Papers, a previous major global financial investigation, raised questions about whether New Zealand had been too loose in policing overseas money flowing through its legal structures.
According to the ICIJ's analysis, the Legion's trusts invested in assets including rental properties across the United States and stakes in a chain of rehab facilities, a Texas-based medical device company, and a Mexican nutritional supplements company.
The Legion of Christ was founded in 1941 by a charismatic Mexican priest named Marcial Maciel. Over the next several decades, the order expanded internationally and established influential connections in the Vatican and elsewhere.
In 1997, reports emerged in the American press of allegations that Maciel had abused boys and young men training to be priests.
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 Maciel 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.
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.
In July 2010, two days before the Vatican-appointed official took the reins of reforming the Legion, one of its senior figures helped to establish the first of the three trusts in New Zealand that would hold money for the Legion, according to the ICIJ's analysis of the leaked documents.
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.
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 organisation".
In statements to the ICIJ, The Legion acknowledged that it had created one of the three trusts — the Retirement and Medical Charitable Trust — to receive donations that would fund the lives of elderly priests.
The Legion said it had no knowledge of the operations or the terms of the two trusts holding most of the money: the AlfaOmega Trust and Salus Trust. These two trusts hold hundreds of millions in assets devoted to the Retirement and Medical Charitable Trust.
A Legion spokesperson said it would be wrong to "attribute any decisions, investments, or activities" of the two trusts to the Legion. But the spokesperson acknowledged that the Legion sometimes requested "donations" from the two trusts, "which are free to grant or deny these requests".
Yet a review by the ICIJ of numerous leaked records shows that all three trusts are extensively linked to the Legion.
Prominent Legion officials help to govern all three trusts. The three trusts have the same addresses, the same trustees, are administered by the same trust company, and have accounts at the same Swiss banks.
In statements to the ICIJ, a spokesperson for the AlfaOmega and Salus trusts said that the trusts were intended to "help elderly priests and consecrated individuals as well as supporting social, charitable, and spiritual projects based on Catholic teachings".
The charitable giving for elderly members includes "providing funding for living expenses such as accommodation, food, and medical needs," the spokesperson said, adding that the trusts had opened Swiss bank accounts because "the financial industry in that country is well advanced and allows for open investment architecture, where banks have access to many financial products, and have the competence to understand and recommend them."
A spokesperson for the trusts said that the trusts were formed in New Zealand because the country is "professional, reliable, co-operative and serious", and said that the trusts remained there after the new regulations to "take advantage of the country's stricter legal and transparency laws rather than move to a country with less stringent laws".