God's Bankers: A History of Money and Power at the Vatican
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Even Montini’s most avid supporters knew it was impossible for the new Pope to be as popular with the faithful as John. He lacked his predecessor’s charisma. Catholics had embraced John as a grandfatherly figure. He had built an enthusiastic following among the faithful. From the start of John’s reign he had gone out of his way to disabuse anyone of the idea that the Papacy was a “self-imposed imprisonment.” In contrast to Pius XII, John invited reporters to follow him everywhere, from visiting the malodorous “Queen of Heaven” prison (where he kissed and blessed a convicted murderer) to a wildly popular sixteen-hour whistle-stop train tour across Italy to pray at shrines from Assisi to Loreto (the first time a Pope left Rome since 1857).52 In an era where personal security was not yet stifling, he often visited schools and hospitals. The Vatican’s old guard thought his casual mingling was unseemly for a Pope and a diminution of the office’s regal power.53 They cringed when on Holy Thursday in 1960, at a ceremony meant to recall Christ washing the feet of his apostles at the Last Supper, he included black, Japanese, Polynesian, and West Indian seminarians.54
In contrast, most who met Montini described him as detached, somber, and brooding. He carried out his duties but seemed joyless about doing so. When he redecorated the Pontiff’s private quarters in a sleek “Milan modern” style, some thought that the cool design matched his personality.55 Montini seemed to disdain even mixing with others inside the Vatican.56 The effect of the change in personalities from outsized to restrained was evident in the drop-off in contributions to Peter’s Pence. In the last year of John XXIII’s tenure, the donations peaked at $15 million. In the first year of Montini’s reign they plunged to $4 million.57
Montini—the third son of an upper-middle-class family from the Lombardian village of Concesio—was a career prelate whose ambition had long been obvious to his colleagues. While few could have guessed that he could rebound from Pius XII passing him over as a cardinal, none doubted he long believed he was what insiders dubbed papabile, having the qualities necessary to become Pope.58 Montini, who had a doctorate in canon law, had a fast career in the Secretary of State’s office. And he long chafed at what he thought was the lack of appreciation that Pius and others showed for his decades of service. He was not overwhelmed by the challenge of being the Pope but was instead eager to make his mark on the church. One of his first acts was to reconvene the Second Vatican Council.
There were few people happier at the news of Montini’s election than Sindona. Having the Pope as a friend meant that Sindona’s Vatican credentials were now unimpeachable. Some newspaper reports included him as part of what was dubbed “the Milan Mafia” that Paul VI brought with him to Rome.59
Inside the IOR, Spada was the biggest beneficiary since Montini was a longtime friend. He knew that the new Pope, who had a reputation for “taking a personal interest in budgetary matters,” would be much more involved than his predecessor when it came to administering the church’s finances.60
A few months after his coronation, the Christian Democrats formed a ruling coalition with the country’s two largest socialist parties. It was Italy’s most left leaning postwar government.61 Aldo Moro became Prime Minister. When Sindona spoke to the new Pope, he shared his fear that fresh government proposals for increased state ownership of public utilities and some financial institutions would likely stop the long Italian economic expansion. Since Nogara had so intertwined the Vatican with Italian industry, any fallout from an economic downturn could be disastrous for the church. Montini directed Maillardoz and Spada to work with Sindona to develop a strategy to protect and diversify the Vatican’s vast Italian holdings.III
Sindona was tailor-made for such work. By the time of Montini’s election, Sindona was attracting name-brand partners for his diverse ventures. Switzerland’s Nestlé and France’s Paribas Bank worked with him to acquire the Chicago-based food-processing firm Libby, McNeil & Libby.63 General Foods became his partner in an Italian candy company. Sindona convinced Bank of America to help him obtain a stake in a premier luggage manufacturer. With strong bank financing, the forty-three-year-old attorney had become a key figure in dissimilar industries from publishing to petrochemicals to textiles. He was president at seven companies and on the board of several dozen. Except for the Italian branch of Condé Nast, on which the Vatican did not have a director, he served on those boards with an IOR director.64
That same year, Sindona used his Luxembourg holding company, Fasco, to buy a controlling interest in Brown Company, a major American-based pulp and paper producer. Over the next couple of years Sindona went on to buy interests in Crucible Steel; a chemical company, Pachetti; a real estate firm, Sviluppo; the largest Italian luxury hotel chain, Ciga; Paris’s luxe Hotel Meurice (Nazi headquarters during World War II), and Rome’s opulent The Grand.65
One of his most ambitious launches was an international currency brokerage firm, Moneyrex.66 Sindona thought there was an undeveloped market for a private clearinghouse to service banks. He envisioned balancing the currency accounts of financial institutions around the world—locating, for instance, a bank with excess deposits of dollars and then matching it with another bank short of dollars. The banks already did this themselves. But given the enormous size of the international currency market, Sindona was confident that a private company would be far more effective. And he proposed that Moneyrex’s fee would only be 1/32 of 1 percent of the money it handled. It took a couple of years before most banks saw the benefits in outsourcing the work. To make certain that Moneyrex had enough capital to survive, Sindona had large partners, including America’s Continental Illinois National Bank, British-based Hambros Bank, and the IOR.IV Moneyrex would become the largest company of its kind, eventually serving some 850 banks worldwide, and handling about $200 billion annually in revenues.68
With the Pope’s blessing, Sindona further intertwined himself in Vatican finances. He expanded his banking empire by acquiring some of Italy’s healthiest regional banks.69 The IOR took a substantial minority stake in each.70 Sindona appointed Spada as the president of BPF, the first bank he had acquired in 1960. In 1962, Spada had retired from the IOR, at the time telling L’Espresso that he had “reached[ed] the limits of age,” although he was only fifty-seven.71 To most Vatican insiders it seemed as if Spada was merely changing the technical status of his employment as he moved across town and started working at the Sindona Group, involved in many of the same projects that consumed his time at the Vatican Bank.72 Pope Paul VI tapped Luigi Mennini to serve as Maillardoz’s deputy. Sindona’s business with the church continued uninterrupted.
It was a heady time for the church in which the Vatican Bank and its finances had always been far in the background. Father Richard Ginder, the American editor of a prominent Catholic weekly, captured the excitement in one of his 1963 columns: “The Catholic Church must be the biggest corporation in the United States. We have a branch office in almost every neighborhood. Our assets and real estate holdings must exceed those of Standard Oil, A.T.&T. and U.S. Steel combined. And our roster of dues-paying members be second only to the tax rolls of the United States Government.”73
By this time Sindona was getting great international press coverage. Dubbed “the Shark” for his aggressive take-no-prisoners business style, Time called him a “dedicated free trader” and noted that few Italian businessmen “have had more spectacular success than Milan Financier Michele Sindona, who founded and heads a corporate complex of manufacturing firms in nine countries and real estate firms in five.”74 Business Week dubbed Sindona “Italy’s most successful and feared financier.” He is “one of the world’s most talented traders,” noted Fortune, while The New York Times said he was a “Milanese version of a Texas tycoon.”75 The Economist proclaimed him “a financial wizard.”76
A test of his investing philosophy came in 1966 when he met Licio Gelli, a wealthy businessman who had a widespread reputation as a fixer. To outsiders, the forty-five-year-old Gelli, with dual Italian and Argentine citizenship, e
njoyed the pampered life of the country’s super-rich, splitting his time at grand villas in Milan, Monaco, and Buenos Aires. Gelli’s opulent parties were covered in the social pages.77 But few knew that his real role was as the chief of an underground Masonic lodge, Propaganda Due (P2).78 By the time police ultimately disbanded it in 1981 over suspicions it was plotting a coup, its nearly 1,000 members included four sitting cabinet ministers, more than fifty generals and admirals, and some of Italy’s most important industrialists, financiers, journalists, public prosecutors and judges, and even intelligence operatives.79 That membership roster was such a stunning collection of who’s-who that Italian journalists dubbed it a “parallel state within a state.”80 In many countries a Masonic lodge such as P2 might have been considered just an exclusive club. But in Italy, starting in 1738, eight successive Popes had condemned Freemasonry and tried eliminating any vestige of it. The church was suspicious of everything, from the rituals of the Masonic initiation ceremony to its promotion of naturalism and religious tolerance. Italy’s nineteenth-century republicans and anticlerics who wrested away the Papal States were themselves Freemasons. Masonic flags flew in the streets when Garibaldi marched into Rome to liberate the city from Papal rule.81 Mussolini shared a distrust of Masons. Il Duce outlawed all lodges in 1925 and even removed their symbols from public buildings and monuments.82 Postwar Italy had few Freemasons.83
There was considerable personal risk for Gelli in running such a lodge. The titans who joined knew that public disclosure would be at the very least embarrassing. Since almost all who joined were Catholic, they were subject to automatic excommunication under Canon Law 2335.84 But the risks seemed small compared to the potential benefits of being part of such a powerful clique. Gelli spoke to new recruits about his dream that one day a right-wing, authoritarian government—composed of the P2 men—might replace the never-ending stream of weak coalition governments that had become a depressing staple of postwar Italy.
Gelli raised the subject of P2 when he thanked Sindona for having helped “a dear and important fellow Mason,” General Vito Miceli, a senior officer in the army’s intelligence service.V “Until then I hadn’t known that General Miceli was a Mason,” Sindona later recounted.86 Gelli talked to Sindona about issues important to the Sicilian businessman, emphasizing P2’s anticommunist credentials, and touching on shared matters of interest, including free trade and too powerful trade unions. Sindona realized from just a sampling of names mentioned by Gelli that being aligned with such men could only be good for his business.87 Gelli was confident he could trust Sindona. The attorney had bragged to a group of American businessmen, “Ninety-five-percent of my clients come to me because they know I can keep a secret.”88
At Gelli’s request, Sindona drafted proposals for reenergizing Italy’s economy and for improving its currency and credit status abroad. Gelli distributed them to some other P2 members, with Sindona’s name redacted.89 And he introduced Sindona to a few of his fellow Masons, most of whom were anxious to do business with him.
When Sindona turned his attention back to the Vatican in 1967, it was for more than another joint venture with the IOR. Henri de Maillardoz had announced his retirement as the Vatican Bank’s Delegato. The former Credit Suisse banker had benefited by staying the course with Nogara’s postwar investments in the expanding Italian economy. By the time he stepped down, he was on a remarkable winning streak. SGI, the moribund construction company in which the IOR had invested in the late 1940s, was now run by Count Enrico Galeazzi. It had become an international conglomerate with significant or controlling stakes in more than fifty real estate and urban development companies.90 The Vatican had four seats on the board.91 A major SGI subsidiary, SOGENE (Società Generale per Lavori di Pubblica Utilità), had become the country’s largest public works contractor. During Maillardoz’s tenure, SGI had won the bid to build the Watergate residential and office complex in Washington, D.C., the largest luxury apartment tower in Canada, and a planned city of 100,000 people on 1,300 acres outside Mexico City.92
One of Nogara’s early favorites was Montecatini/Edison. It had expanded beyond electric power into pharmaceuticals and mining, and its annual revenues had reached nearly a billion dollars. Italcementi had grown to 6,500 workers and had become Europe’s second largest cement producer. SNIA Viscosa now produced 70 percent of Italy’s textile fabrics. Italgas had become the exclusive gas supplier for thirty-six Italian cities, including Rome, Venice, Florence, and Turin.93 Maillardoz had ensured that Vatican investments tied the church to a postwar alliance with America as great as any it had during World War II with Germany and Italy. Beginning in the mid-1960s, the Vatican purchased stock in IBM, General Motors, General Electric, Shell, Gulf Oil, Chase Manhattan, Procter & Gamble, and Bethlehem Steel, among other blue chips.94
Luigi Mennini, by then given the honorary title Gentleman of His Holiness, replaced Maillardoz.95 Mennini formalized Sindona’s relationship as the Holy See’s special financial consultant. Sindona was pleased that the men who ran the church’s finances had such unfettered faith in him. But he also shared with some confidants that he was somewhat disappointed that Montini had taken a liberal turn since becoming Pope.
Montini had reconvened the Second Vatican Council only three months after his election. A month later, twelve fundamental changes to the liturgy, the largest revision in church history, were approved. The most notable to lay Catholics was the end of the Latin Mass.VI Traditionalists were irate. Genoa’s conservative Cardinal Siri said it was “the greatest disaster in recent ecclesiastical history.”97 Many in the Curia were incensed at moves they viewed as diluting their powers. Decisions that used to be the exclusive province of Rome were delegated to the countries where the issues originated. Local dioceses would now decide contested marriage court cases that previously went straight to Rome. Moreover, foreign bishops joined the boards of directors of most Curial agencies. The Curia now sent its proposals to local bishops for review before making any final directive. And regional meetings of those bishops meant more could be accomplished independent of the Vatican.98
Beyond controversy over the Council there had been a noticeable political shift to the left by the Pope. Paul increasingly criticized the American bombing of North Vietnam that had started in 1965. In 1966, Cardinal Spellman and other conservative clerics were incensed when the church announced $15 million in aid for North Vietnam at the same time it dispatched two Vatican officials to visit Vietnam (Pope Paul had himself wanted to go as a symbol of support, but it was deemed too dangerous).99 His 1967 reception for Soviet President Nikolai Podgorny marked the first state reception for a communist official at the Vatican, and it sent a chill through entrenched anticommunist warriors in the Curia.100 That same year, Paul issued an encyclical, Populorum Progressio. It was a clarion call for economic and social justice and set a goal of “just distribution” of wealth in Third World countries to help bridge the gap between rich and poor.101 The Wall Street Journal scorned that Papal decree as “souped-up Marxism,” but it would become the rallying cry for a generation of activist priests in Central and Latin America who advocated liberation theology, a volatile mixture of left-wing politics and Catholicism.102,VII
Populorum Progressio at first concerned Sindona since it also attacked unrestrained capitalism: “Free market competition, however, should not be abolished, but simply maintained within moral limits.” The Pope, however, did not intend that his message about economic equality in any way limit a buying binge that Sindona had planned with the IOR. Mennini, Spada, and Sindona rolled out their expansion plan in early 1967. The church increased its investments in the country’s largest passenger shipping line (Finmare), Italian insurers Generali and RAS, and more regional banks and credit unions.104,VIII
But the IOR-Sindona strategy would be forced later that year to take a sharp detour from its Italian-centric focus. It would result from a long-simmering political row between the Vatican and Italy’s government over investments and dividend tax
es. Four years earlier, in 1963, a socialist minister of Italy’s Treasury had first questioned why the Vatican was not subject to a new government dividend tax.106 It was a 15 percent levy so long as the owner registered the shares with the tax office, or 30 percent if the owner did not disclose them and the government found out about it. It was thought that all taxpayers would gladly disclose their stock ownership to avoid the much higher tariff for secrecy.107
Under Clauses 29, 30, and 31 of the 1929 Lateran Treaty, Mussolini had exempted the church from paying taxes for “ecclesiastical corporations.” Nogara lobbied the fascist government to interpret ecclesiastical so broadly that over time the exemption included everything done by the Special Administration and the IOR. Even when Mussolini levied two special taxes (corporate and real estate) in 1936 to offset the enormous costs of the Ethiopian war, a special decree excluded the Vatican.108
The church also got a special exemption in 1937 when Italian companies had to pay a new tax on common stock. When a national sales tax went into effect in 1940, Italy’s finance minister announced it did not apply to the church. In 1942, just four months after the IOR’s founding, the fascist government waived any money the Vatican would have owed under another dividend tax. That December, the Finance Minister published a list of all exempt Vatican organizations. The IOR and Special Administration were free from any tax.
Now Prime Minister Aldo Moro tried appeasing his socialist coalition partners by requesting that the Vatican at least demonstrate good faith. As a first step toward possibly obtaining a further exemption, Moro asked the church to provide the government a list of all its stock holdings. Secretary of State Cardinal Amleto Cicognani refused, asserting that Italy had no authority to ask for such information or to impose any tax because the Vatican was a sovereign country. Any tax violated the Lateran Pacts.109,IX