God's Bankers: A History of Money and Power at the Vatican

by Gerald Posner

  Generali’s paperwork on this matter is missing. Allied intelligence concluded, however, that Generali began escheating some policies as early as 1942 in occupied Eastern European countries, where the company held more Jewish policies than all other firms combined.84 Other Italian insurance companies soon followed. Postwar investigators believe Generali cloaked the income from the misappropriation of Jewish annuities into reinsurance issued by subsidiaries, such as Romania’s Generali Asigurari.85

  All the insurers must have realized this opportunity for theft was possible only during the confusion of war. Is it merely a coincidence that Generali and others began escheating Jewish life insurance policies only after Nogara had formed the IOR? The Vatican Bank was critical from its inception to business titans such as Volpi, men who recognized that since the IOR was not answerable to any country’s central banking authority, it was the world’s best offshore bank.

  Did Volpi and Nogara strike such a deal? Did the IOR provide that service for its own insurance company, Fondiaria? The answers, if any, are likely inside the sealed archives of the Vatican. But the church has refused even to acknowledge that it maintains any relevant financial and business records for those years. (In response to a request from the author to access the files, Bishop Sergio Pagano, the Prefect of the Secret Archives, said that a researcher “would not find material” in the Secret Archives about “the financial dimension of the Holy See.” That documentation, said the bishop, might be at “the Institute for Works of Religion [IOR] which, of course, by its very nature excludes outside public access.” The Vatican is the only European nation that denies historians general access to its archives.)86

  What is undeniable is that the Vatican’s stakes in Generali, RAS, Fondiaria, and other insurance firms provided a high rate of return in part because some of the profits were from the escheatment and nonpayment of life insurance and annuities to Jewish policyholders. Since the Vatican itself was not a direct insurer, however, it was never included in any postwar restitution paid by the insurers to the victims. After the war, the U.S. military office in charge of Operation Safehaven—the Allied program to retrieve plundered assets and illegally obtained profits—admitted that when it came to the Italian insurers and their strategic partners, “we know absolutely nothing.”87

  When Mussolini was forced from office in July 1943, the web of interlocking business directorates and cloaked companies that Italian businessmen had carefully created began disintegrating. The new Prime Minister, Pietro Badoglio, dissolved the Fascist Party only a couple of days after assuming power. Nogara cut all ties with Generali. Croatia, Hungary, Romania, and Bulgaria moved to seize the insurance business for themselves.88

  Volpi, ever the survivor, denounced fascism and donated to socialist and republican political parties.89 But events turned against him when the Nazis occupied northern Italy in September 1943, and reinstated Mussolini as the titular head of a puppet government. Il Duce wanted payback for Volpi’s flip-flop. The Nazis were agreeable since they accused Volpi of deploying dirty tactics when competing against German industrialists in the Nazi-occupied territories (his real “crime” was that he often beat the Germans for the business). Volpi beseeched Nogara for protection, but his Vatican friend could not help. The church-state was still fretting about its own security and independence in the wake of the Nazi occupation.90

  On September 23, 1943, SS Obersturmbannführer Herbert Kappler—who the following month would round up the Jews of Rome—arrested Volpi at his Roman palazzo. In one of the great ironies of the war, the Nazis detained him on generic charges that he was “an agent of the Jews” and that Generali was a Jewish company that had been instrumental in spreading “the worst news . . . over Germany, on its internal situation and the military.”91 Volpi in fact had implored Mussolini to protect Michele Sulfina, a Jewish Generali executive who survived the war in Rome.92,III That race charge allowed the Nazis to plunder Volpi’s personal accounts, even seizing his wife’s jewelry. His important collection of art and furniture—and even some collectible tombstones from the family cemetery—went by train to Field Marshal Hermann Göring.94

  There is no written record of the two-day SS interrogation of Volpi, or of his months in a Nazi-run prison in northern Italy. But to friends and family who later saw him, he seemed broken. Once the Vatican was confident the Germans would not move against the Pope, Nogara intervened and with the help of the Papal Nuncio in Switzerland, the Swiss agreed to patriate the Volpi family. The Germans, convinced they had gotten all they could from him, allowed them to go to Switzerland in 1944. Volpi spent most of the rest of the war in a Lausanne hospital where he was treated for exhaustion. He died in 1947 at the age of sixty-nine from a heart attack, shortly after returning to Italy.95 Knowing by then that a new history was being written about the Vatican and its wartime role, Nogara did not attend his friend’s funeral.

  * * *

  I. When Baron Robert Snoy, the aristocratic president of Wagons-Lits, later sent Volpi a new order further restricting Jews in any form of commerce, Volpi was required to declare his race and religion. On December 1, 1940, he wrote: “I hereby declare that I am . . . of the Aryan race, as are my ancestors since time immemorial, and I have always professed the Catholic faith.”27

  II. The venture with Fondiaria was one of Nogara’s riskiest. If the U.S. or Britain had learned of the Vatican’s controlling interest in a blocked company of an enemy nation, it would have meant instant freezing of the church’s bank accounts in both countries. An even riskier venture is discussed by Professor Michael Phayer in his book Pius XII, the Holocaust, and the Cold War. Phayer makes a provocative case suggesting that Nogara might have used money—cleared by the U.S. Treasury for “food exports” in Spain and Portugal—to buy tungsten carbide. Prices for that metal had spiked because of low supply and widespread use in military hardware and steel production. Phayer’s case is suggestive, but pending release of still classified documents, it is not yet conclusive.60

  III. During the war, Sulfina and his family were designated “undiscriminated,” meaning the race laws were not enforced against them. While Sulfina trained a new general manager to take his place at Generali, he lived at a Vatican-owned Roman property. After the war, there was a heated internal debate between U.S. intelligence and the State Department about whether Sulfina was a collaborator or merely the recipient of Volpi’s kindness. The same debate raged over several other Jewish businessmen, including the former RAS chairman. The consensus was that Sulfina was a likely Nazi collaborator, but the United States ultimately failed to convince the Italians to remove him from postwar Generali. He effectively ran Generali from 1948 to 1953 together with a well-connected ex-fascist, Gino Baroncini.93

  11

  A Nazi Spy in the Vatican?

  In addition to his labyrinthine business web with Volpi, Nogara’s other wartime safe haven had been gold. Bullion was the first hard asset Nogara had protected at the brink of war when he transferred much of the Vatican’s British and Italian gold reserves to America. The metal had a stable value (then about $35 an ounce), was not as volatile as national currencies, was universally accepted, and could be transformed easily to disguise its origin. By the middle of the war, the Allies had recognized that the Axis powers were not only looting the gold reserves of occupied countries, but that the metal was critical in financing their war effort.1 The vast amount of plundered bullion and the shady ways it was often disposed of meant that Nogara’s concentration on it proved as morally problematic for the church as the Vatican’s insurance stakes.

  The gold reserves of most Nazi-occupied countries were relocated during the war, often with the crucial help of the Swiss-based Bank for International Settlements (BIS). BIS was almost as much a financial outlier as the IOR. Formed in 1930 through an intergovernmental arrangement between the Rothschilds and eight countries, BIS was a facilitator between Western central banks, an analogous predecessor to the IMF. It was the one organization on whose board British
and German directors served together throughout the war.2 As a multinational consortium, BIS, like the Vatican Bank, had no accountability to any national government. Notwithstanding its mix of international delegates, and even though it boasted an American president, it was firmly under Nazi control from 1940 on.3

  The German BIS representatives were Baron Kurt von Schröder, a leading banker and Gestapo officer; Hermann Schmitz, the chief of the industrial conglomerate I. G. Farben; Walter Funk, Reichsbank president; and Emil Puhl, an economist and vice president of the Reichsbank.4 Under their influence, BIS became a central clearinghouse for emptying gold reserves from countries such as Austria, Belgium, and Czechoslovakia.5

  “Washing gold” was the euphemism for how BIS described bringing bullion covertly into Switzerland and converting it into untraceable cash, usually Swiss francs.6 About 80 percent of all Reichsbank gold sent abroad was laundered through Switzerland.7 In early 1942, Puhl—who oversaw BIS’s gold program—shared with Funk that the Gestapo had begun depositing gold from concentration camps into the Reichsbank.8 By that November, an internal Reichsbank report noted that it had received an “unusually great” amount of smelted dental gold.9 In 1943, the Reichsbank received the first packets of gold stamped “Auschwitz” (it is impossible to determine precisely how much gold the SS sent to the Reichsbank since the records of those shipments that were seized by the U.S. military later disappeared; the United States failed to make copies before returning the documents to the predecessor of the Bundesbank, where the files were destroyed, allegedly as part of routine maintenance).10,I

  BIS was involved in far more than washing gold. Once it purchased $4 billion in gold from the Nazis, a fair amount of which was looted from the national reserves of Belgium and the Netherlands.12 And in 1942 it received advance intelligence about the November 8 Allied invasion of North Africa.13 That information proved profitable. BIS bet on a Nazi defeat and used Vichy-controlled banks to pledge billions in gold reserves to Algeria’s Central Bank. BIS used its gold as collateral to take an enormous stake against the Reichsmark. After the invasion and the Allied battlefield successes, BIS pocketed $175 million (the 2014 equivalent of $2.4 billion).14 The leaked intelligence about the Allied invasion came from the Vatican’s espionage unit, clerics working under the cover of a peace delegation.15

  It is little wonder that the Vatican played an intelligence role with BIS.16 The glue between the two was Allen Dulles, a senior partner in the Wall Street law firm of Sullivan and Cromwell, who had moved to Switzerland during the war to run the OSS. Dulles employed a network of agents, including Hans Bernd Gisevius, a Nazi operative who worked at the Reichsbank.17,II An integral part of Dulles’s wartime financial operations involved the Vatican Bank. Clerics protected by diplomatic immunity and a bank that answered only to Pius and Nogara was tailor-made for Dulles. Allen’s brother, John Foster, who remained in the United States, was the American lawyer for BIS.

  “Sullivan and Cromwell’s investors [clients] needed the Vatican bank to launder their profits under the watchful eyes of both the Nazis and their own governments,” according to John Loftus, a former Justice Department prosecutor in the Office of Special Investigations, “while the Vatican needed the Dulles brothers to protect its own investments in Hitler’s Germany.”19

  Was this nebulous juncture of intelligence and business—where espionage was utilized as much for outsized profits as it was for strategic military or political advantages—the Vatican domain of Bernardino Nogara? Historians have mostly judged Nogara as an apolitical financial manager who did not choose sides during the war. However, a 1945 OSS intelligence report discovered by this author in the National Archives suggests for the first time that Nogara might have been more partisan than widely accepted. James Jesus Angleton, then chief of the Rome desk for the OSS’s elite X-2 Counter Espionage Branch, compiled the intel report, which is marked Secret on every page. It raises the startling possibility that Nogara was a wartime spy for the Germans.20

  Angleton, the report’s author, would become one of America’s most storied spymasters. At the time he was responsible for eradicating foreign intelligence agents in Italy and recruiting the better ones for the Allies.21 The looming Cold War with the Soviet Union meant that any Italians or Germans who had valuable information, or themselves might prove useful, were a priority for Angleton and other OSS warriors. Germany had surrendered just weeks before Angleton wrote his report. Many Nazi officers, including top intelligence agents, were still underground. Angleton and X-2 agents unsparingly believed that Allied interests trumped justice for wartime crimes.

  The possibility that Nogara was more than a political spectator is revealed in an attached one-page appendix to a summary of an interrogation of Reinhard Karl Wilhelm Reme, a German intelligence (Abwehr) officer who disguised his wartime spying under a cover job as a partner at the German insurer Jauch and Hübener.22 Angleton included a chart displaying the Abwehr hierarchy in Italy as of October 1944. By that time, the Allies had liberated most of the country. The Nazis, still entrenched in the north, were desperate to slow the war’s momentum by directing sabotage cells in Allied-occupied central Italy.23 The Abwehr used Vicenza as its headquarters and ran four divisions from other cities, including one from Slovenia. Beneath Reme’s Milan-based außenstelle (remote branch) was a cell under the control of someone named Nogara.24 Angleton did not include a first name.

  Reme admitted to being an Abwehr recruiter. He tried downplaying his role, averring that he had been drafted into the army only in the spring of 1943 and after some basic training sent to Milan for German intelligence. Angleton was skeptical, noting that Reme had a law degree, spoke German, English, and Italian, and had traveled extensively before the war to Spain, Greece, and England.25 To Angleton, that meant it was “possible Reme was working for the Abwehr before the war.”26

  After his first interrogation Angleton concluded that Reme was “head of the recruiting center in Milan for [the] Abwehr.”27 Reme had arrived in Milan pretending to be simply a supply officer for the German army, when in fact he ran the local intelligence effort from his Piazzale Cadorna office.28

  Angleton realized Reme’s position meant he was familiar with the identity not only of German agents in the country but also the civilian informant network still in place. Through Abwehr surveillance on partisans in Italy, Reme might even be able to identify many of the Soviet agents operating there.

  Reme’s 1943 arrival in Milan coincided with the height of a brutal internal power struggle between the Abwehr and the SD (Sicherheitsdienst), the SS’s intelligence service. Hitler had sided with the SS and began to dissolve the Abwehr in February 1944.29 By July, its operations and agents had been transferred almost entirely to the control of the SD’s Ämter VI (Group 6), SD-Ausland (intelligence outside of Germany) division.30 The only exceptions to this transfer of power were the Abwehr’s Italian operations.31 Those cells, such as Reme’s unit, retained their independence and operated covertly, since they did not want to risk any intercept of their communications to SD’s German headquarters.32 After the war, the chief of Ämter VI, SS-Brigadeführer Walther Schellenberg, bemoaned to his British captors that his own office had “sparse” contacts in the Vatican. But Schellenberg admitted that the Abwehr “had many men in the Vatican.”33

  Reme gave his interrogators the names of fifty-eight agents he and his Italian-based spy unit had recruited during the war. Nogara is not among them.34 But he provided the name to Angleton on the supplementary Abwehr chart, meaning the Nogara on that chart was almost certainly recruited before 1943, and likely before the war.

  Bernardino Nogara had two prewar opportunities to strike up a relationship with German spies. When he was with BCI before World War I, he lived in Constantinople. The Turkish capital swarmed with spies, informants, and double agents working for European powers and their spy agencies.35 Nogara had directed a loose-knit web of informers that helped Italian companies gain an upper hand in the race against Germany and the
Austro-Hungarian Empire to capture some of the enormous business opportunities in the crumbling Ottoman Empire.36 Moreover, Schellenberg told Angleton that he knew the Abwehr had recruited a network of foreigners from Constantinople—including the butler to the British ambassador—during the years Nogara lived there. An unnamed Italian was a key “link” during World War II. But Schellenberg was adamant he did not know his name.37

  Another opportunity for the Germans to have recruited Nogara was during the late 1920s, just before he began working at the Vatican. As the Italian representative running the division of the Inter-Allied Commission charged with rebuilding German industry, he spent considerable time in Germany over a five-year stretch beginning in 1924.

  Schellenberg, as did Reme, gave up the names of his foreign agents. No one, especially Angleton, believed that someone as ambitious and calculating as Schellenberg would divulge all his prime connections. In defeat, Schellenberg and other Nazis knew that information was their only bargaining leverage. They needed ways to trade intelligence for leniency. Angleton and other OSS agents realized that operatives like Schellenberg and Reme were reliable only when it suited their interests.38

  Could the Nogara listed as running a cell for German intelligence be one of Bernardino’s relatives? His siblings did not have intelligence value for the Abwehr. One was a museum superintendent at the Vatican. Two were provincial archbishops. None would have been as important a coup for the Germans as Bernardino. And none had such clear prewar opportunities for connecting to German intelligence. As for unrelated Nogaras, it is not a common surname in Italy. The author has not found any reference to an unrelated Italian with that name in U.S. and British wartime archives.39,III