VATICAN CITY—A Vatican tribunal rejected attempts by two former executives of the pope’s children’s hospital to dismiss an embezzlement case, asserting Tuesday it could prosecute them on charges they diverted nearly a half-million euros in hospital donations to renovate a top cardinal’s penthouse.

Lawyers for former hospital president Giuseppe Profiti and ex-treasurer Massimo Spina argued that the Vatican court had no jurisdiction to prosecute activities of a hospital foundation that was located in Italy, not the Vatican.

But tribunal president Judge Paolo Papanti-Pelletier rejected the motion as the trial opened and set a new round of hearings for Sept. 7-9.

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Profiti has said the funds he used from the Bambino Gesu (Baby Jesus) hospital foundation to renovate Cardinal Tarcisio Bertone’s apartment were an investment, since he intended to use the flat for future fundraising events for the hospital.

Bertone agreed to host such parties, saying he would take care to ensure that “third parties” — not the foundation — would pay for any renovations needed. He subsequently said he paid 300,000 euros ($440,000) of his own money for the work because he couldn’t find anyone else to pay, and didn’t know that the foundation had also paid 422,000 euros to the same builders.

The scandal is the latest to strike the Holy See as Pope Francis works to clean up centuries of shady business dealings in the walled-in, 44-hectare offshore city state, the world’s smallest. And it comes as Francis copes with the fallout from the embarrassing exit of his top financial adviser, Cardinal George Pell, who returned to his native Australia last week to face trial on sex abuse charges.

Bertone, the former Vatican secretary of state, wasn’t charged or placed under investigation in the case, even though he personally benefited from the donations. After the scandal broke in 2015, Bertone made a 150,000-euro “donation” to the hospital for research, but insisted it wasn’t in any way repayment for the money spent on his flat.

Also spared prosecution by the Vatican were the Castelli Re construction company and its owner, Gianantonio Bandera, a longtime Bertone associate who received around 750,000 euros for the whole project.

It’s not clear if Italian authorities will launch their own investigation into the deal.

Profiti and Spina face between three and five years in prison and fines starting at 5,000 euros if found guilty of embezzlement by the Vatican court, which asserts jurisdiction over crimes committed on Vatican territory or by its public officials. The penalty can be reduced if the amount diverted is repaid before the trial starts.

Prosecutors accuse Profiti and Spina of a conspiracy to “illicitly use money belonging to the Baby Jesus foundation to benefit Bandera.” The indictment makes no suggestion of kickbacks or any other wrongdoing, merely that money belonging to the hospital foundation instead went to “completely extra-institutional” uses.

Profiti has said none of the donations used was intended for child care.

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During the hearing, Spina’s lawyer argued that his client could not have transferred money from the foundation because he did not have the authority, and said a letter Bertone wrote that is part of the court file proved it. He suggested that he might call the retired Vatican secretary of state as a witness if further clarification were needed.

Profiti resigned suddenly as president of the hospital in January 2015, nine months into a new three-year term. According to a recent Associated Press investigation, a secret Vatican-authorized task force concluded in 2014 that under his administration, the hospital’s mission had been “lost” and was “today more aimed at profit than on caring for children.”