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

by Gerald Posner

  Calvi saw Sindona’s problems as an opportunity for the Ambrosiano. His bank’s shares at first had suffered because of the perception that the men were close, but they stabilized as details emerged revealing that the Ambrosiano was not damaged by Sindona’s failure.140,III The same month Italian prosecutors visited the U.S. to press for Sindona’s extradition, the Ambrosiano’s board elected Calvi as president (he had effectively been running the bank from his number two position as director). He had by then even received from the President of Italy a distinguished title, Cavaliere del Lavoro (Knight of Labor).142 And the Italian press had “discovered” Calvi, covering him often in the same glowing manner in which they had once treated Sindona.

  The general social instability in Italy made Calvi conscious—some say paranoid—about business secrecy and personal security.143 Calvi now ordered scrambler telephones installed in his office and homes so his conversations could not be intercepted, and he had the bank’s executive headquarters swept weekly for listening devices. He installed separate telephone lines to talk with P2 chief Licio Gelli, as well as for another P2 member, attorney Umberto Ortolani, who had become Calvi’s trusted consigliere.144IV His fourth-floor executive suite was separated from the rest of the office with an imposing pair of bombproof doors. Later, at his Rome and Milan apartments, as well as the family’s country house, he deployed multiple alarm systems. He even carried a personal panic button that alerted the bodyguards that patrolled the buildings or the property’s perimeter. And he chose a bulletproof Mercedes as his company car. Calvi’s security bill eventually topped $1 million annually.146

  Calvi was now ready to take advantage of his former partner’s downfall: to get all of Sindona’s business with the Vatican for the Ambrosiano. He met with Marcinkus and urged him to protect the church from further losses. He said the IOR’s problems were not the result of bad trades and excessive speculation, but rather matters specific to Sindona: investing too much in America, a country about which he knew too little; spreading his money too thin and acquiring too much debt; and not monitoring his operations carefully enough.

  Calvi told Marcinkus that the church’s best option was to obscure its trail of investments and arrange for companies without significant assets to be responsible in case its investments turned sour. This conversation was possibly an inflection point when it came to the IOR’s reliance on so-called men of confidence.

  Did the financial losses and public embarrassment over Sindona make Marcinkus skittish about further relying on men like Sindona and Calvi? There is no evidence it did. Marcinkus later said he had “no reason . . . to question [Calvi’s] honesty, integrity,” since he still had “a tremendous reputation . . . was well respected in the banking community . . . [and] was a decent fellow.”147 (Only years later Marcinkus would say that although he had “nothing to apologize for . . . I might be ashamed of one thing, if you want to call it that. Maybe I trusted Calvi, maybe, too much.”148)

  Marcinkus was simply too intertwined with Calvi to consider distancing the IOR. Under his tenure thus far at the IOR, the Vatican had loaned tens of millions of dollars to Cisalpine, the Calvi-owned Bahamian bank of which Marcinkus was a director. Marcinkus had already informally given Calvi a three-year extension on the first $45 million due.149 By the close of 1975, the church had active banking relationships with almost a dozen Calvi-controlled shell companies in Panama, the Bahamas, Liechtenstein, Luxembourg, and Switzerland.150 One of the Luxembourg-based shells that had been created with the approval of the IOR, Manic, had borrowed $35 million from Calvi’s Nassau bank.151 When a Swiss banker—at Calvi’s direction—sent the IOR’s Luigi Mennini a copy of Manic’s balance sheet and asked for a written “agreement and ratification of our actions,” Marcinkus ordered Mennini not to respond. The IOR chief instead convinced Calvi to write a letter to the Vatican Bank guaranteeing that Cisalpine “assumed full responsibility, exonerating the Institute from each and every charge and responsibility.”152

  In the middle of the year, the IOR bought its first public stake in the Ambrosiano. The Vatican paid $16.8 million, a 30 percent premium to the market, for 4.6 percent of the bank. Marcinkus was acting as a proxy for Calvi, who had promised to eventually buy back the shares from the church at an even higher price.153

  For nearly two years, the IOR had earned a tidy profit for running questionable back-to-back operations in which it “loaned” tens of millions in U.S. dollars and Swiss francs to Calvi’s banks and companies to bolster their balance sheets when private and government audits came due. In those instances, the companies passed the financial inspections since they had enormous cash deposits. None of the auditors knew that most of that cash would be wired out of the firm usually the same day the review finished. The money was returned to the IOR, through a maze of offshore banks to mask its trail. For its efforts, the Vatican took a tiny percentage of the total sums moved as a commission, or sometimes made its profit by inflating the exchange rate at which it swapped the currencies.154 Ethics and banking regulations aside, it was easy money for the church. Moreover, Marcinkus was so stung by the financial beating the IOR had suffered in the Sindona debacle that he made a mistake common to many inexperienced investors: he had little patience in recovering the church’s losses. Consequently his appetite for risk was increased. He doubled down with Calvi.155

  That decision would prove far more disastrous for the Vatican Bank than any of the fallout from il crack Sindona.

  * * *

  I. Another reason Sindona may have left Italy is that he had lost faith that a strong, pro-capitalist, pro-American government would be in power anytime soon. John McCaffrey, Hambros Bank’s Italian representative and a wartime British espionage agent, was a close Sindona business colleague. In a sworn 1981 statement, McCaffrey said that Sindona had approached him “with his plan for a coup” to install a conservative government and purge all socialist and communist parliamentarians and ministers. “It was clear to me from these conversations with Sindona,” said McCaffrey, “that he was the key to the entire operation.” According to McCaffrey, the coup failed in large part due to “the lack of know-how, courage, and conviction on the part of Italian politicians . . . [and the] lack of courage on the Italian military leaders.”30

  II. Sindona did more than just help his friend Paul VI by contributing to political referendums. That same May, a French cardinal, Jean Daniélou, was found dead in the apartment of a twenty-four-year-old nightclub stripper whose husband had a criminal record as a pimp. Police discovered that the cardinal, appointed by Paul VI five years earlier, had about $10,000 in cash on him. The Pope sent a clandestine message to Sindona to ask if his French business contacts might prevent the story from becoming a scandal. Sindona called on banking colleagues who evidently convinced the Parisian detectives that their dossier was best kept secret.37

  III. In fact, the Ambrosiano did lose some $9 million in failed Cisalpine loans to a Sindona shell company, but Calvi wisely did not write that off for more than a year, long after the initial fear in the markets over the Sindona fallout had passed.141

  IV. Sindona thought Ortolani “was an excellent lawyer, but not much of a banker.” In October 1975, Calvi used Swiss-based United Trading (in which the IOR had a stake), to pay $3.25 million to an account at Geneva’s Union Bank of Switzerland in the name of Ortolani’s daughter-in-law. Calvi also sent another $3 million later that year to an account in the name of Ortolani’s son Piero. Over the next six years, Calvi sent some $250 million to Ortolani-controlled bank accounts. Italian investigators believe that Ortolani served as a conduit to other powerful Italians, even kicking some money back to Calvi and possibly even to the IOR. “If it did, I never saw it,” Marcinkus later declaimed to author John Cornwell.145

  18

  The Battle of Two Scorpions

  On February 4, 1976, Marcinkus flew to Geneva to attend his tenth Cisalpine board of directors meeting. The IOR by this time had loaned or invested $175 million in Calvi-backed offshore
companies.1 Marcinkus knew that Cisalpine was reporting the Vatican’s loans as deposits from independent banks. He was also aware the IOR money accounted for more than three quarters of the Bahamian-based company’s cash balance. As the minutes reflect, he said nothing at the Geneva board meeting. Nor did he object to a proposal to increase Cisalpine’s stake in yet another Ortolani-controlled bank, Bafisud.2 Instead, he agreed to provide 10 percent of the new venture’s money.3

  The Ambrosiano and the Vatican Bank were shuffling back and forth tens of millions of dollars between their many offshore companies. Typical was a transfer made just two weeks after Geneva. The IOR opened its fourth account at the Ambrosiano’s Milan branch, and transferred from it another $2.5 million to one of its accounts at Rome’s Banco di Santo Spirito. It then moved the money to a new Ortolani company in Switzerland.4 Calvi increasingly relied on the IOR’s help with the furious transfers between accounts, which were used to cover losses at some of the firms and to hide the money trail from Italian tax inspectors and banking regulators.

  In late March, Calvi took advantage of a 20 percent increase in the price of the Ambrosiano’s stock and solicited shareholder approval to raise another $46 million in capital. By April, the Bank of Italy gave Calvi permission to double to $50 million the Banca Cattolica’s line of credit to Cisalpine. Within just two months of the Geneva directors meeting, the IOR had funneled another $20 million to Calvi.

  An Italian law enacted on April 30 encouraged the duo to believe they were poised for even greater profits. Since the lira had fallen by more than 30 percent during the first four months of the year, Italy stiffened its currency export penalties, including for the first time jail sentences.5 Wealthy Italians who wanted to move money out of their unstable country looked to the IOR. Since it was the central bank of a sovereign it was not subject to the tough new regulations. The Vatican’s role was more important than ever in the convoluted Ambrosiano network. And it allowed Marcinkus to negotiate a higher commission for moving Calvi’s money around the globe.6

  Whatever the two men did, they were incapable of doing it simply. In April, the Ambrosiano agreed to buy for $32 million a Vatican-controlled property company, Società Immobiliare XX Settembre. The transaction took a mind-numbing eleven months to complete, and at different times involved byzantine bank transfers, inflated currency conversions, phantom loans, questionable back-to-back financial arrangements, the use of escrowed funds to manipulate a tiny Florentine bank, and the last-minute replacement of the Ambrosiano as the buyer with Pantanella, a former Vatican company that went bankrupt after stepping into the contract.7 When the Bank of Italy inspectors eventually investigated the XX Settembre sale, they were utterly bewildered.

  That summer, Calvi renamed Compendium—the Luxembourg shell that he originally used to register Cisalpine—to Banco Ambrosiano Holding (BAH). The Bank of Italy approved a transfer of more than $100 million from the Ambrosiano to BAH. He also got the approval to swap his 40 percent stake in the Banca del Gottardo (worth another $100 million) for BAH’s share in La Centrale Finanziaria, an ex-Sindona holding company. There was a purpose beyond just obfuscation in the flurry of activity: although it was not obvious, Calvi was trying to streamline his labyrinthine financial web by directing all his foreign operations through a single company, BAH. Even he sometimes had trouble keeping track of the multitude of transactions on hundreds of pieces of hastily scribbled notepaper that he carried inside his locked attaché case.

  It was not, however, in Calvi’s DNA to do things straightforward. The following July (1977), Cisalpine transferred $30 million to the IOR, under an agreement by which the Vatican Bank used that money to buy a stake in BAH. Marcinkus agreed to hold the shares in trust since Cisalpine did not want to be the on-the-record buyer (none of this activity was ever recorded, as legally required, in Cisalpine’s books or discussed at subsequent board meetings attended by Calvi and Marcinkus).8 Calvi also convinced Marcinkus to put into the IOR’s name “as a fiduciary” all the shares of the Panamanian United Trading Corporation, Cisalpine’s parent. In return, Calvi sent him a July 26 letter, on the Ambrosiano’s letterhead, in which he assured the Vatican Bank that United Trading was operating legally and swore to indemnify it from any liability.9,I

  That same day, Calvi sent a second letter, this time on Cisalpine’s letterhead, offering similar assurances about Intermax, another shell for which the IOR had a management contract and was also the apparent owner.11 For helping Calvi manage his maze of companies, the IOR earned on these deals only one thousandth of the monies transferred, about $100,000 annually.12 It was not much, but it seemed to Marcinkus to be safe and easy. That was further evidence that he had learned nothing about managing risk from his troubled experience with Sindona. Marcinkus later told author John Cornwell that when the IOR invested its money with Calvi, he did not want to know the details.13

  For Marcinkus, his frenetic work with Calvi helped the IOR scandal with Sindona recede into memory. Italy’s extradition request for Sindona had languished for over a year at the State Department before it was sent to Justice, which also seemed in no rush to do much about it. Milan’s prosecutor visited the U.S. Attorney to encourage him to hurry along the process.14 And Italy hoped the United States might take the charges more seriously after a Milanese court sentenced Sindona in absentia to three and a half years in prison on twenty-five counts of bankruptcy fraud.15

  Marcinkus and Calvi had no idea that Sindona was growing restless in America. As the Franklin denouement had played out, Richard Nixon had resigned because of Watergate. When Democrat Jimmy Carter became president in 1976, Sindona’s Republican power connections seemed useless.16 Italian communists had also made strong electoral gains in 1976 and Italy’s ruling coalition soon ratcheted up the campaign for Sindona’s return. Carter’s Justice Department was more receptive and persuaded a court to issue an arrest warrant.

  Sindona surrendered in September 1976 at the federal courthouse in downtown Manhattan. On the witness stand he swore that he had only $800,000 in assets. The judge allowed him to stay free pending a $3 million bail (he secured it with $150,000 in cash and Treasury bills as well as the deed to his Pierre co-op).17 Sindona’s defense team soon filed a motion to dismiss the extradition request. In their seventy-two-page brief they argued that Sindona’s leftist enemies wholly concocted the charges. His life was in danger, they contended, if he were extradited to Italy. The Chief Justice of the Italian Supreme Court, Carmelo Spagnuolo (a P2 member), submitted an affidavit in support of the notion that Sindona might be killed if he returned to Italy.18

  The Sicilian financier considered the extradition battle a sideshow to his chief concern: a possible American criminal indictment. In March, the same judge who presided over the extradition hearing sentenced six former midlevel Franklin executives on fraud charges.19 When they received reduced sentences in return for their cooperation, many legal observers assumed that meant a U.S. indictment against Sindona was imminent.20 But nothing had happened by the fall of 1977.

  Meanwhile, some of Sindona’s family and friends thought he might be better off simply returning to Italy. Investigators there charged he had looted $225 million from these banks.21 If Sindona could somehow pay it back, he could void his absentia guilty verdict. To raise the cash, Sindona sued the Bank of Rome claiming he had a verbal agreement by which the bank had promised to cover up to $254 million of his debts in exchange for a lien on his interest in SGI. Marcinkus cringed when that suit was filed. It pitted Sindona against the Bank of Rome’s Mario Barone, a banker with a close working relationship with the IOR.22 To Marcinkus’s relief, it did not take long before a Roman judge tossed the case, declaring it “inconceivable” that there would not be a written record of a commitment for such an enormous sum.23 Sindona reached out in desperation to Gelli and the P2. Gelli worked frantically, even raising the matter with Prime Minister Giulio Andreotti, hoping to convince Italy’s central bank to bail out Sindona.24

  As far as Sindon
a was concerned, a central bank rescue was the only option left for a business comeback.25 But Giorgio Ambrosoli, the court-appointed liquidator of his Italian banks, frustrated every effort by Gelli and his well-placed cohorts. Ambrosoli was opposed to using any public money to rescue Sindona from his misdeeds. In heated exchanges he threatened more than once to go public if the government reached a deal to pay off the debts. Two Bank of Italy directors sided with Ambrosoli and resisted any P2 strong-arm lobbying.26

  Sindona told colleagues he was frustrated that Ambrosoli had thwarted his appeal to Italy’s central bank. However, his friends thought he seemed more preoccupied with an all-consuming jealousy he had developed about Calvi’s flourishing relationship with the Vatican Bank.27 Calvi was ungrateful for all he had done for him, Sindona complained to colleagues, and he often groused that Calvi owed him millions of dollars for the Ambrosiano shares Sindona had secretly bought for him.28 In the early fall of 1977, Rodolfo Guzzi, Sindona’s chief Milanese attorney, called on Calvi. Sindona needed money for his spiraling legal bills. Sindona wanted Calvi to buy one of his villas for $500,000. There would be no change in title. It was just a means by which Calvi could send his beleaguered friend half a million dollars.

  Calvi wanted to stay as far away from Sindona as possible, but he also did not want to turn him into an enemy. So he vacillated. Guzzi called daily looking for a yes. Calvi dodged him.29 After a couple of weeks, one morning as Calvi drove to work, he was stunned to see bright white and blue posters plastered across the pale yellow-fronted Ambrosiano headquarters and several adjoining buildings along the narrow Via Clerici.30 In bold, large print Calvi was accused of “fraud, issuing false accounts, unjustified appropriation, export of currency and tax swindles.” The posters declared that Calvi “has transferred tens of millions of dollars into the following Swiss accounts.” They even listed the correct names in which he held two Swiss bank accounts.31 Someone had tipped off L’Espresso, which got a photographer there to snap pictures before Calvi’s security team ripped down the posters.32