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

by Gerald Posner

Still, even if the Nogara listed on Reme’s chart was Bernardino, it does not mean he was helping the Nazis. That is because of the unusual nature of the Abwehr. Admiral Wilhelm Canaris, a devout Catholic, was its passionately pro-German but anti-Nazi wartime chief. Diehard Nazis like SS chief Heinrich Himmler challenged Canaris’s commitment to National Socialism. Canaris provided false data to Hitler to persuade the Führer not to invade Switzerland, and he did the same with Generalissimo Francisco Franco so the Spanish dictator would not allow the Nazis to use Spain for transit. To Hitler’s great rage, Canaris occasionally used Jews as agents and other times helped some escape from Germany. He appreciated the importance of recruiting agents at the Vatican, men capable of traveling with sacrosanct consular pouches, using the diplomatic passports of their own sovereign state. Canaris had appointed Munich lawyer Josef Müller to run Rome’s Abwehr office largely because Müller was good friends with Pius’s personal secretary, Father Robert Leiber.41 Vatican agents, in conjunction with a handful of German cardinals and bishops, could be useful to Canaris’s sub-rosa plans to undermine Hitler. It was Canaris’s support of the unsuccessful July 20, 1944, assassination attempt on Hitler that ended in the spy chief’s arrest, trial, and execution.

  U.S. and British intelligence knew by the late stages of the war that the Abwehr included anti-Nazi agents. Some had even passed information to the Allies. Angleton had cultivated his own low-level OSS agents inside the Vatican and had kept abreast of the city-state’s political intrigue.42 And the Yale-trained Angleton likely had a more personal understanding for what was transpiring in Italy than most of his OSS colleagues. He had been partly raised in Milan, where his father owned the Italian franchise for National Cash Register.

  In the world of realpolitik in which Angleton excelled, it was understandable that the layperson responsible for the church’s purse strings might watch out for the Vatican’s interests by being in touch with German intelligence. As a spymaster he would also have recognized the ramifications. What could a German spy at Nogara’s level do to sabotage the Allied war effort and at the same time find ways to help finance the Axis powers? Or what could he have done to sabotage the Nazi war effort by supplying the Germans false information?

  Angleton must have wondered why Nogara was still in touch with the Germans as late as October 1944, when the Axis defeat was a certainty to all but fanatics. Unless, of course, Nogara was working with the Abwehr’s Milan cell as an intermediary between the Germans and neutral governments in Madrid and Lisbon. Spain and Portugal were still trying to broker a peace deal that did not require an unconditional Axis surrender. And Nogara had financial interests to protect for the Vatican there since his interlocking joint ventures ran through Madrid and Lisbon on the way to Buenos Aires.

  Angleton’s response to Reme’s extraordinary information was to recommend that Reme be sent to the Combined Services Detailed Interrogation Centre (CSDIC) for “further interrogation.”43 CSDIC was a secret prison in Bad Nenndorf in Germany run by British military intelligence, MI5. Reme’s disclosure to Angleton that one of the most important financial men in Europe might have worked with the enemy would have kicked off a frenzied probe, or at least a flurry of paperwork documenting concerns about how any fallout might affect the Vatican. But this author has found no follow-up in the files of the OSS, Counter Intelligence Corps, or Military Intelligence.44 And although there are other references to Bernardino Nogara in other declassified U.S. and British government documents, aside from the Angleton/Reme document, none of those allude to Nogara possibly being a Nazi spy.

  The absence of any paper trail is an indication that Angleton or another intelligence officer took the matter “off-shelf.” A counterintelligence savant like Angleton would have had no incentive in exposing Nogara. Whether or not Bernardino was protecting the Vatican’s commercial and political interests—and those of clients or joint venture partners—by collaborating with the Nazis, any public disclosure would end in disgrace. How much more effective would it be to use the information to flip Nogara into an American asset? Angleton, who later became the head of the CIA’s Vatican Desk, was the ideal person to make the deal.45

  If Bernardino Nogara worked at all with Nazi intelligence, he likely had a wartime or postwar relationship with U.S. intelligence. By the account of his contemporaries, Nogara was a shrewd businessman who approached war as he did his investments: diversify and reduce the risk. During World War II that would have meant not banking on only one side to prevail, but instead developing relationships with both that facilitated the church’s ventures during the hostilities and bought it goodwill from the victors after the conflict. It is the only reasonable explanation why Angleton could have stumbled across the report pointing to Nogara and then buried the information. Short of revelations about an Allied connection in still unsealed government files, all that can be derived definitively from the Reme/Angleton memo is that the business of the Vatican during World War II ends with the question: was the church’s long-serving financial wizard, Bernardino Nogara, a Nazi spy?46

  * * *

  I. In 1997, the World Jewish Conference released a study that some five tons of central bank gold recovered by the Allies was from concentration camp victims and had never been redistributed to the victims or their families.11

  II. In 1945, the Treasury Department charged that Gisevius—who worked for the Reich Security Main Office—had laundered German money to Switzerland, and that Dulles was instrumental in moving much of the Hungarian Treasury through Nazi banks to Switzerland. Dulles denied the charges and the Treasury probe stalled amidst the confusion of the war’s aftermath.18

  III. While serving as the OSS chief of the Rome desk, Angleton forged several documents purporting to be secret Vatican telegrams. He planted them inside government files under the code name JVX. The “Vatican telegrams”—shifting responsibility away from the OSS for later helping Nazi fugitives—landed in the National Archives and journalists and historians sometimes relied on them before they were unmasked as fakes forty years later. Did Angleton insert Nogara onto Reme’s command chart to realize some unknown intelligence aim? It is highly unlikely. Although Angleton knew few boundaries when it came to what he thought were the best interests of the United States, he survived for decades in the CIA, serving under four presidents. Concocting information that could be easily disproved would have imperiled him. If Nogara was Angleton’s invention, the fabrication would be unmasked by only a single question to Reme from another American or British interrogator. Not even an intelligence school recruit would be so reckless.40

  12

  The Ratline

  The official end of the European war in May 1945 was only a technicality on a calendar for Nazi officials and leaders of the German puppet governments. They had work to do: hiding billions in stolen loot. Pilfered assets were scattered all over Europe, everything from plundered museum art and real estate to missing gold reserves.1 Many saw the Vatican as a secure repository since no country would dare violate the church’s sovereignty by demanding an inspection or accounting.

  Sturmbannführer Friedrich Schwend had directed Operation Bernhard, an ambitious wartime counterfeiting operation of British pounds (most of the fake money was made on printing presses by inmates at the Sachsenhausen concentration camp).2 The plan was to raise hard currency for the Reich as well as to sink British sterling by flooding the market with phony bills. In early 1945, Schwend set the groundwork for his eventual escape to South America by volunteering to become an informant for Allen Dulles’s OSS.3 To safeguard millions stashed in Swiss banks, he moved it all to the Vatican Bank. He avoided any possibility the Allies might track a wire transfer by sending the cash packed into several trucks (there are unconfirmed reports Red Cross ambulances made the journey through the war-torn countryside). Schwend’s Swiss drivers brought the money to a castle in Merano, an Italian town just over the Swiss border. Italians then drove it the rest of the way to the Vatican, where the cash disappeared. Shortly aft
er the Schwend shipment to Rome, OSS intercepts revealed that the Vatican was exchanging large amounts of old five- and ten-pound British notes for new ones through “agents in England” (the Vatican dismisses such charges as having “no basis in reality”).4

  As the war ended, the flow of suspect gold turned from a trickle to a flood. The Vatican did nothing to discourage it. U.S. intelligence had early reports after the formal truce that Ustašan leader Ante Pavelić and many of his henchmen had fled blood-soaked Croatia only after looting most of Zagreb’s banks, the Croatian state mint, and the National Bank.5 An American intelligence memo reported the Ustašan fugitives had stolen about 350 million Swiss francs of gold, most of it coins. In the weeks after the war, British troops seized about 150 million of the plunder at the Swiss-Austrian border.I The other 200 million (the 2014 equivalent of $530 million) entered the Vatican “for safe-keeping,” with unconfirmed rumors that it had “been sent to Spain and Argentina through the Vatican’s ‘pipeline.’ ”7 Giving credence to the possibility that the gold had been transferred to South America was a separate U.S. intelligence report. It concluded that German companies and banks such as the IOR may have moved upward of a stunning $450 million to Argentina.8 Emerson Bigelow, the investigating agent, suspected the Vatican was still somehow involved. He noted that the stories of the transfer to other countries might “merely [be] a smokescreen to cover the fact that the treasure remains in its original repository [the Vatican].”9

  William Gowen, a Counter Intelligence Corps (CIC) officer based in Rome, monitored the Vatican to see if he could develop leads on Pavelić’s whereabouts.10 Gowen was one of the CIC’s best agents. A former Ustašan colonel told Gowen that in 1946 up to ten truckloads packed with gold traveled from Switzerland to Rome, where the precious metal was unloaded at the College of San Girolamo degli Illirici, the Croatian seminary, only a mile from the Vatican. The convoy reportedly arrived with Vatican license plates, accompanied by some men wearing stolen British military uniforms and others dressed as priests.11

  Although several U.S. intelligence reports differ about the amount of gold that arrived in Rome, they agreed on a critical issue: any looted precious metal that came from Croatia ended eventually with an Ustašan Croatian priest, Krunoslav Draganović. When Gowen later interviewed Draganović, the priest admitted that the looted gold convoy had arrived in Rome under the control of an Ustašan lieutenant colonel.12

  During the war Draganović had been a senior official of the Ustašan commission dedicated to the forced conversion of Serbs.13 In 1943, Pavelić had dispatched him to Rome as the secretary of San Girolamo. In addition to being a school for Croatian seminarians, San Girolamo was the center of Ustašan intelligence operations in Rome.14 Draganović was the highest-ranking Ustašan cleric in Rome and he was informally liaison to the Vatican. He cultivated connections with both Italian and Vatican intelligence agents.15

  Josip Broz Tito and his communist rebels had come to power in a unified Yugoslavia a month before the war ended. Without a church-friendly government in Belgrade, the Vatican appointed Draganović as the Apostolic Visitator for Pontifical Assistance for Croatians. That made him a Vatican official who reported directly to Monsignor Giovanni Montini (later Pope Paul VI) in the Secretary of State’s office.16 Draganović met frequently with Montini, and the Vatican’s Pontifical Assistance Commission ensured that the Croatian had plenty of identity papers.17 When Montini learned that Gowen was snooping around looking for Pavelić and also asking about the Monsignor’s own connections to Draganović, Montini complained to Angleton about the nosy American CIC officer. The result was a CIC order by which Gowen’s team was told “hands off” when it came to Pavelić and the Croatian priests.18

  An American Foreign Service officer privately told Gowen that his probe was ordered closed because he had “violated Vatican extraterritoriality.”19 (Much later, when Gowen learned that his operation was shut down the same month that Draganović began helping U.S. intelligence, Gowen came to believe that Angleton had engineered it all as a favor to Montini).20

  Despite that directive, Gowen continued accumulating intelligence. He eventually concluded that Draganović had turned the Croatian gold and other loot over to the Vatican Bank, even driving some of it in a convoy to St. Peter’s Square.21 Before he shut down his probe, Gowen had interviewed not only Draganović but also half a dozen other top Ustašan officials. The IOR, he concluded, had accepted the Croatian gold since the church classified it conveniently as “a contribution from a religious organization,” and then hid its existence by “convert[ing] this without creating a record.”22

  At the same time U.S. intelligence was trying to determine if the Ustašan gold might still be inside the Vatican, it also was probing whether the church had received gold of questionable provenance from a prominent Italian family. Dr. Francesco Saverio Petacci had been Pius XI’s personal physician. Petacci’s daughter, Clara, was Mussolini’s longtime mistress. And Petacci’s son, Marcello, was a fascist official who was murdered in 1945 as he tried crossing into Switzerland with crates of cash (neither the killer nor the money was ever found). Allied investigators discovered that Marcello had been the middleman brokering large deals between foreign companies and Mussolini’s fascist state. The younger Petacci had earned commissions in Spain alone that totaled a then staggering 50 million pesetas (the 2014 equivalent of $340 million).23 A substantial amount of gold that Petacci had evidently accumulated was missing. American investigators followed leads to Spain to see if the family had moved the gold there, but determined it was “not likely.” Instead, Vincent La Vista, a senior Rome-based officer in the U.S. Division of Foreign Activity Correlation, concluded, “if the Petacci family had any vast hoard of gold, it would have been, and in all probability is, put away for safekeeping in Vatican City.”24 La Vista directed Operation Safehaven, the ambitious U.S. multiagency effort to retrieve looted assets. He ran into a solid roadblock of noncooperation when he tried pushing his inquiry. An informant told him why: “Petacci had, and still has, very dear and close friends high in the inner councils of the Vatican. . . . He is personally held in very high regard by influential personages close to the Holy See.”25 La Vista closed the Petacci investigation without any resolution about the missing gold.

  • • •

  After the war, the Vatican and its Roman properties served as far more than a repository for wartime loot. The war was not long over before the church got swept into the frenzy of its next secular political fight, this one against communism. If Pius XII had in part stayed silent about Nazi atrocities because he considered the Germans a bulwark against godless communism, the unintended consequences of Allied victory fueled his worst fears. On their march to topple the Third Reich, Stalin’s armies had swept over half of Europe. Instead of returning to Russia when the war ended, the Soviets stayed put and replaced the Nazi puppet governments with their own lackeys. The new regimes took orders from Moscow. The Soviets were in firm control of Catholic bastions such as Poland, Hungary, Romania, Czechoslovakia, and Bulgaria. Six Catholic-dominated nations that had won a temporary independence between the world wars—Croatia, Macedonia, Montenegro, Serbia, Slovenia, and Bosnia and Herzegovina—were united under the banner of Yugoslavia and the iron-fisted rule of its communist leader, Tito. Over time, Pius worried, the Catholic populations of those countries might lose their faith under the aegis of atheistic regimes. And Germany itself, the country for which Pius had so much affection and affinity, was sliced in two. The Soviets occupied the eastern half.

  Stalin had taunted the Pope in 1944 and early 1945 by sentencing a dozen priests to death and imprisoning hundreds in Siberia. In response to being told by Churchill that the Vatican opposed Soviet policies, Stalin shrugged and asked, “How many divisions has the Pope?”26 Pius told Myron Taylor in 1945 that he feared the Russians were infiltrating the Italian army “so it could join with the Russian army in overtaking all of Europe.”27 (As late as 1947, Pius and Monsignors Tardini and Mon
tini believed the Soviets were about to invade northern Italy. They often asked incredulous American diplomats about whether there was news of any Russian troop movements and a pending invasion.)

  Italy was home to Europe’s largest postwar communist movement, led by a charismatic leader who Pius believed was a Soviet agent.28 When Mussolini had outlawed the Bolsheviks they went underground, and many fought with the resistance. Italy had paid a price for being on the losing side of the war. Most ordinary Italians were sick of a system they blamed for creating such a terrible mess, and were willing at least to consider what the communists offered. They were the only political party that had stood firmly against fascism. Only three months after the end of the war (and six months after FDR’s death), the OSS intercepted Pius’s order to Father Norbert de Boynes, the Vicar General of the Jesuits, to dispatch his priests to uncover “documentary proof of orders given by and financial aid furnished by the Soviet Union to Italian Communists.”29 Pius watched with alarm as some Italian Catholics spoke of developing a Christian leftist government.30

  Adding to the Vatican’s high agitation, Western Europe was flooded with millions of refugees. Most were displaced from ravaged Eastern Europe. A million streamed into Italy alone.31 The Vatican had prepared itself since late 1943 for what it knew would be a human tidal wave.32 Most, as expected, were innocent civilians forced to abandon their homes in the war’s violent closing months. Pius gave Monsignor Montini full authority to run the Pontificia Commissione di Assistenza (Pontifical Commission for Assistance), which oversaw all the Vatican’s humanitarian efforts. And the Pope appointed Monsignor Ferdinando Baldelli, Sister Pascalina, and Otto Faller, a German Jesuit, to help Montini cope with the enormous numbers who clamored for shelter, food, and other assistance.33