The Annals of Unsolved Crime (10 page)

At the beginning of the nineteenth century, it had been
sufficiently weak that Napoleon was able to kidnap the pope and keep him prisoner in France for seven years. Even after the Papal States were restored to the Vatican by the Treaty of Vienna in 1815, the cost of financing its wartime debt so exceeded its paltry income that it was only saved from bankruptcy when the French government assumed part of the Vatican debt. Finally, in 1870, in the process of unifying Italy, King Emmanuel seized Rome and all the remaining territory of the Papal States and left the pope, Pius IX, barricaded in his palace, a prisoner in the Vatican. Although the new Italian parliament passed a law offering modest compensation for all the papal territories that had been expropriated, Pope Pius IX refused, saying “I need money badly but what do you bring me, a part of what you stole from me.” That statement defined the Vatican position for the next six decades, as it negotiated with a succession of Italian governments with neither sovereign status nor money.

The pope’s only source of income during this period was an annual collection from Catholics around the world called Peter’s Pence, which had been revived from the times of the Crusades. But Peter’s Pence rarely exceeded a million dollars in a year and, unable to borrow further to pay expenses, the pope had to curtail Vatican services as essential as the Sacred Roman Rota. Indeed, by 1922 the Vatican was so impoverished that it borrowed $100,000 from a local Roman bank to pay for the funeral of Pope Benedict XV.

Finally, on February 29, 1929, Pope Pius XI came to terms with the government of Benito Mussolini. In the agreement, called the Lateran Treaty, the pope recognized that the Papal States, including Rome, were now part of Italy. In return, Mussolini accepted that a small parcel of land surrounding St. Peter’s, called Vatican City, henceforth would be completely independent of the laws of Italy, and the pope would be completely sovereign over this tiny territory. In addition, Mussolini awarded the Vatican compensation for the papal property
seized in 1870 of $52.4 million in the form of long-term Italian bonds, paying 5-percent interest each year, and $39.7 million in cash.

Although the Vatican became financially solvent for the first time in over a century, it had now been officially reduced from a kingdom occupying most of central Italy to a token city-state in a patch of Rome. To make it autonomous in fact as well as in law, the pope immediately expended part of the cash from the settlement on constructing a railroad station, a telephone exchange, administration buildings, a courthouse, radio transmitters, a jail, printing presses, barracks for the Swiss Guard, and an electric power plant.

None of this left the Vatican with much money. Aside from the Peter’s Pence collection and the sale of Vatican coins, postage stamps, and museum admissions—all of which dwindled during the world depressions of the 1930s—the only income that the Vatican could count on was the approximately $2.5 million per year in interest from its government bonds, a sum that shrank with the declining value of the Italian currency. As the situation grew more desperate, the pope assigned the remainder of what the Vatican received in compensation to an investment unit called “Special Administration,” designed to use the Vatican’s unique sovereign standing to trade in the foreign-exchange markets. He retained Bernardino Nogara, a banker who was an expert in international finance, to run it. To protect the Vatican against further devaluations in the lira, Nogara bought gold, dollars, and other foreign currency, and then borrowed against them. He also engaged in complex arbitrage operations that increased the Vatican’s patrimony by more than 50 percent in ten years, while also providing the income necessary to pay the Vatican’s deficit. So the Vatican finally found a means of economic salvation: taking advantage of its sovereign exemption from regulation to trade.

World War II again put the Vatican in serious jeopardy.
Surrounded by Fascist Italy, and threatened with annihilation by the Communists who were battling to take over Italy, Pope Pius XII briefly considered moving the Vatican to America. In 1942, as an immediate expedient for safeguarding its funds during the war, the pope authorized the creation of a private bank within the walls of the Vatican, whose true function was obscured by its name, “The Institute for Religious Works.” The Vatican official charged with superintending this bank was Giovanni Battista Montini, a priest from a prominent banking family in northern Italy, who had served in the Vatican’s Secretariat of State for twenty years. Montini organized the bank not only as a safe haven for the Vatican’s own money but also as a channel through which Catholic dioceses, missions, orders, and other entities could invest their funds. Even after Montini left the Secretariat to become the Archbishop of Milan in 1954, he continued to oversee the operations of the bank as part of a three-man commission. When he became pope in 1963, taking the name Paul VI, he made the bank a key instrument of expanding Vatican financial power.

The immediate problem confronting Pope Paul VI was a new Italian law requiring foreign investors, including the Vatican, to pay a 30-percent tax on dividends. Since this tax, if paid, would further squeeze Vatican income to the point at which it would have to curtail services that it considered essential, it refused to pay the tax on the grounds that it violated the Lateran Treaty of 1929. While the stalemate continued, Pope Paul VI found a remedy that would not only avoid the issue of direct Italian taxation but also eliminate much of the pejorative publicity about its investments in Italy. The Vatican bank would transfer most of its investments to anonymous companies in Liechtenstein, Panama, and other secretive offshore centers. These companies would be separated from the Vatican by many layers of banks and other intermediaries. This move would also be invisible to Italian tax collectors, since
no worldly authority, not even the Italian government, had the right to inspect Vatican records. To effect this change, the Vatican required the help of banks that could, with utter secrecy, set up these anonymous accounts for it and assist in transferring its assets to them.

The bank in Milan that Pope Paul VI initially turned to for help was the small and, as its name implied, extremely private, Banca Privata Finanziata. It was run by a highly successful financier named Michele Sindona, who was expert at maneuvering funds offshore.

The liaison with Sindona eventually grew dangerous. His banking empire became entangled in criminal investigations, and some of the banks he controlled went bankrupt. As concerns mounted in 1969, Sindona was summoned to the Apostolic Palace in the Vatican for a meeting with Pope Paul VI; Cardinal Alberto di Jorio, the President of the Vatican Bank; and Cardinal Sergio Guerri, the head of the commission responsible for the administration of the Vatican city-state. Sindona was then told that although he would be allowed to complete the current transactions that he was undertaking for the Vatican, he would then have to step aside. Marcinkus was the man the pope put in charge of replacing Sindona’s Banca Privata Finanziata. At the time, Marcinkus was only a forty-nine-year-old American priest, with, as he put it, “not the slightest knowledge about banking.” Marcinkus first served Pope Paul VI as an English translator on his trips to America and then as his personal bodyguard. His mission now, as he saw it, was to untangle Sindona’s convoluted machinations, and to find a new bank to replace Sindona’s. The bank he found was the venerable Banco Ambrosiano, which was named after the patron saint of Milan, and located on Via Clerica in that city.

There was much that he liked about the Banco Ambrosiano. It had been originally founded and owned by priests in Milan in 1896. For decades, this bank was headed by Franco
Ratti, the nephew of Pope Pius XI, and then by Duke Gallerati Scotti, a trusted friend of Pope Paul VI’s from Milan. Aside from the personal connections, the Vatican then owned the largest single block of stock in the Banco Ambrosiano. Its new chairman, Carlo Canesi, and its general manager, Roberto Calvi, also seemed eminently trustworthy to Marcinkus. But Pope Paul VI wanted to be absolutely sure of the relationship, so Marcinkus with, as he put it, “the pope’s seal of approval,” arranged for the Vatican bank to sell the Banco Ambrosiano the controlling interest it held in the Banca Cattolica del Veneto, a Venice bank with more than 100 branches. Aside from the official price of $30 million, the Vatican bank also got a secret side payment of $6.2 million. This money, channeled into the Vatican’s subsidiaries in Liechtenstein, was then used by Calvi to buy for the Vatican enough additional shares in the Banco Ambrosiano to give it control of his bank.

Calvi, the son of a bank clerk, who would succeed Canesi as chairman, consolidated the Vatican’s anonymous holding companies under a wholly owned subsidiary in the Bahamas, called the Cisalpine Overseas Bank (Nassau). This entity, based in Nassau and controlled from a small office in Monte Carlo, became the center of a dizzying daisy-chain of money transfers and borrowing. With the pope’s approval, Marcinkus became president of the Vatican bank, and he served on the board of this subsidiary in the Bahamas.

Initially, Marcinkus continued, Calvi was able to generate huge profits for the Vatican, but there was still a problem with Sindona. In November 1977, Sindona, who had been arrested in New York for making false statements in his attempt to take over an American bank, demanded that Calvi pay him nearly $10 million. Sindona claimed that he was owed this money as a “commission” and needed it for his legal expenses in America. When Calvi refused, Sindona carried out a threat to ruin Calvi.

On November 13, 1977, employees of the Banco Ambrosiano
were stunned to find the walls of the surrounding buildings of Milan’s financial center plastered with giant white, yellow, and blue posters revealing in great detail the ultra-secret transactions of the bank. The event, which became known in Italy as the day of the “tazebas,” or Chinese banners, since the excess of colorful posters made the financial district of Milan look like Beijing, had been organized by Sindona. Since he had been privy to the secret transfers, the wall posters had revealed the numbered accounts in Switzerland through which passed the secret side payments that had been used by Calvi and the Vatican bank to get control of the Banco Ambrosiano. In addition, they contained three questions which, if correctly answered, would expose the sham transactions between the Vatican bank and the Banco Ambrosiano. Calvi ordered that the posters be ripped down, but it was too late, since Sindona had also sent an anonymous letter to the Bank of Italy detailing the transactions. The Bank of Italy, the central bank of Italy, had no choice but to launch an investigation.

To make matters worse for both Calvi and Marcinkus, the court-appointed liquidator of Sindona’s banks, Mario Ambrosoli, reported that in Sindona’s records he had found coded evidence of a $6.5-million illegal payoff to an “American bishop and Milanese banker.” The press suggested that the bishop was Marcinkus and the banker, Calvi. Before Ambrosoli could go further in unraveling the code, Ambrosoli was shot dead at point-blank range in front of his home by two unidentified men. While his evidence may have been problematic, his silencing further amplified the furor over the posters.

Marcinkus’ position was further weakened by a series of “unfortunate events,” as he put it. First, Pope Paul VI, his main supporter, died in August 1978. Shortly afterward, his successor, Pope John Paul, also abruptly died. Then the election of the first non-Italian pope in seven centuries, John Paul II, left the Curia in disarray. In addition, Luigi Mennini, who was then
the chief aide to Marcinkus at the Vatican bank, was arrested in Italy for currency manipulation. As the pressure built, the new pope appointed a commission of fifteen cardinals to study the finances of the Vatican.

Calvi was also making threats, according to Marcinkus. In May 1981, Calvi was arrested for violating Italy’s foreign-exchange regulations and convicted. He was then taken to the medieval Lodi prison and put into a cell with four terrorists, who kept him awake day and night talking and playing a radio. Calvi warned Marcinkus, “This trial is called IOR,” the Italian initials of the Vatican bank. (According to Calvi’s son, Carlos Calvi, Marcinkus sent a message back, “Our problems are your problems too.”) Calvi then attempted suicide by slashing his wrists and swallowing an overdose of barbiturates. Then on July 20, 1981, after spending two months in Lodi, Calvi was released on bail while the appeal of his four-year sentence was processed, and he resumed work as head of the Banco Ambrosiano.

But the Bank of Italy was pressing to see the books of the bank’s overseas subsidiaries, and so Calvi continued to ask Marcinkus to help. But Marcinkus could not acknowledge the debt of the anonymous companies, since doing so would bankrupt the Holy See. When Marcinkus turned him down, Calvi turned to records in the vault of the Banco Ambrosiano’s banking subsidiary in Switzerland that he claimed would establish the Vatican’s ownership of the subsidiaries. The chief accountant of the Vatican bank, Pellegrino de Strobel, was then dispatched to Switzerland to view the secret records. Since they appeared to substantiate Calvi’s claim, the fatal deal was made: Marcinkus’ deputy acknowledged that the Vatican bank controlled the eight anonymous companies, and Calvi provided the Vatican bank with the letter releasing the Vatican from any liability arising from the activities of these anonymous companies. The problem now confronting Marcinkus was that key
documents pertaining to this arrangement had vanished along with Calvi.

As it turned out, Calvi could speak from the grave. In the summer of 1982, a special committee of inquiry in Parliament eerily heard Calvi’s posthumous recollections on tape. Flavio Carboni, the Sardinian who had help organized Calvi’s escape from Italy, had kept a microphone concealed behind his lapel during his final conversations with Calvi. These tapes had been seized when Carboni was arrested in Switzerland. On them, Calvi rambled on for no less than ten hours. At one point, Calvi recounted a conversation he had had with Marcinkus, claiming to have warned him “Be careful … if it comes out that you gave money to Solidarity, there won’t be one stone of the Vatican left standing.” (He was referring to the Polish labor union movement that helped undermine the Soviet Union’s control of Poland.)