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

by Gerald Posner

  The wayward Paulines had retained the services of a disbarred attorney—who had served jail time for federal tax evasion—as their chief financial advisor. The Vatican auditors also uncovered a trail of secret investments in private companies in five states, all designed as “tax-avoidance schemes.”21

  Guilfoyle and Boyle found the monks’ accounting so convoluted that they retained Peat, Marwick & Mitchell to make sense of it. Typical of what they discovered was the monks’ purchase of the local Westminster Cemetery at a “grossly inflated price” from the order’s attorney.22 In less than a year, the monks had emptied the cemetery’s legally mandated $500,000 perpetual care fund, improperly withdrawn $120,000 of its operating revenue, pledged its ninety-seven acres to borrow another $660,000, and even padded its payroll with friends.23 To the anger of local parishioners, the Paulines took another $100,000 to allow Sun Oil to build a gas station at the cemetery’s entrance, although it meant relocating many existing graves.24 The monks had appointed two friends of their disbarred advisor at $1,000 a week each to manage the graveyard. When Guilfoyle and Boyle interviewed the managers, they claimed they were forced to kick back half their salaries to Father Michael Zembrzuski, the shrine’s seventy-year-old vicar-general. Zembrzuski kept a mistress with church money (one of the managers later told reporters Zembrzuski avoided criminal charges only by threatening to go public with what he knew).25

  When Guilfoyle and Boyle ordered the Paulines to turn in their televisions, high-end stereos, credit cards, and car keys, half the monks left the order.26 The report that made its way to the Vatican was several hundred pages and crammed with supporting details.II The unwavering recommendation from Guilfoyle and Boyle—backed by Philadelphia’s Cardinal John Krol—was that Zembrzuski tender his resignation and that the offending priests be “severely disciplined.”27

  Before any news broke, Zembrzuski had traveled to Poland to discuss with his close friends—the country’s top prelate, Cardinal Stefan Wyszyński, and Kraków’s cardinal, Karol Wojtyla—what he should do. Wyszyński oversaw the entire Pauline order. The meetings took place by coincidence just before John Paul I died. With his death, and the ensuing focus on the conclave, any action on the Pauline scandal was postponed.

  Once Wojtyla became Pope, the Paulines appealed directly to him. Only seventeen days after assuming the Papacy, John Paul reversed the recommendations of the investigating committee. The following May he issued a Papal Decree ending all investigation into the Paulines and vacating the original findings.28

  The problem facing John Paul was that most of the Polish American faithful who had loaned money to the monks had resisted efforts by the church to forgive the debt and write it off as a donation. Many were elderly parishioners. In some instances they had put their entire savings into the low-interest bonds issued by the Paulines. Since the bonds were unsecured, they were last on the list for repayment. Some devout Catholics were so furious with the loose operations by the monks that they consulted attorneys about suing. There was even talk of possible criminal charges, and the SEC was probing whether there was fraud in the sale of bonds to build a 1,700-seat cathedral that never got off the drawing board.29

  Only one thing could put the mess to rest. Money. John Paul knew the American church had already spent considerably on cleaning up after the Paulines. Cardinal Krol of Philadelphia had used emergency diocese funds to pay off $722,000 in bank loans.30 But individual bondholders clamored for another $4 million, far more than Krol could spare. So, John Paul raised the matter with Marcinkus at their December 1 meeting. The beleaguered IOR chief saw it as a chance to ingratiate himself further with the new Pontiff. Over the next several months, Marcinkus directed more than $5 million to Cardinal Krol, all of which paid creditors—from additional banks to most of the faithful—as well as to reimburse the Philadelphia diocese for much of the money it had spent.31

  The backdoor deal over the Paulines was the initial glue in the John Paul–Marcinkus friendship.32 In the coming months, as they prepared for the Mexico trip, Marcinkus spent hours alone with John Paul. Marcinkus then had no idea of just how dramatic a turn his fortunes had taken. John Paul II saw in him a trustworthy ally capable of finding the money to bolster nascent pro-democracy movements. And he knew from Marcinkus’s service to Pope Paul VI that the American prelate prided himself on loyalty and secrecy. His help in resolving the Pauline payments without garnering any additional publicity was a good sign, indicating how quietly he could operate. The new Pope knew he would need those traits as a buffer against the undercutting Italians that dominated the Curia.III

  Three months after assuming the Papacy (January 1979), John Paul II flew to Mexico. Marcinkus handled all logistics and security. During that trip, Marcinkus told the new Pope who he believed had planted the rumors about foul play in the death of John Paul I: the KGB, to create mischief in the church.34 For John Paul, a prelate who had fought for decades the communist efforts to destabilize the Polish church, it made sense. Had the KGB also fanned the rumors about the Vatican Bank and Sindona in order to hurt the church further? The two men had little doubt it was possible. John Paul assured Marcinkus that under no circumstances would he allow the KGB or any other disinformation effort to ruin the reputation of the IOR or Marcinkus.35

  By the time they returned to Rome, Marcinkus was joking with the Pope, about how the Curia would soon punish him for not being servile enough. Marcinkus’s long-entrenched enemies were disappointed at the obvious friendship. The bishop from Cicero had lived to serve another day.36

  His foes did not know that in March, Marcinkus received an inquiry from the FBI about the possible criminal misuse of a Vatican Bank account. The author has discovered that the U.S. Deputy Presidential Envoy to the Holy See delivered a three-page telex to Marcinkus from Benjamin Civiletti, the Deputy Attorney General. It provided details about a Justice Department probe into whether “a United States corporation appears to have defrauded the United States Government and others, by concealing millions of dollars in the Institute of Religious Works.”37 According to Civiletti, a federal contractor, American Training Services, had gone bankrupt owing the government more than $1 million. That debt was settled for 10 cents on the dollar before the government learned “ATS concealed millions of dollars in foreign bank accounts” including that “$7.7 million is in two accounts in the Institute Per Le Opera di Religione.” Those had been opened five years earlier by American officers of ATS or its subsidiaries.

  Civiletti was straightforward: “There is evidence indicating that much of the money may originally have been obtained by fraud.” Civiletti wanted Marcinkus to provide “any assistance you could render to temporarily immobilize these funds.”

  It would seem a simple matter. Bank officials routinely work with law enforcement to freeze funds while a criminal probe is under way. It was not clear why the two IOR accounts listed by Civiletti even existed at the Vatican. Neither had a cleric or religious order as an account signatory, and neither had as its stated purpose religious philanthropy or service.38

  Marcinkus replied a month later about what he called “the deplorable situation created by American Training Services,” but claimed he could not help since he had gone through all the relevant records and could not find any of the names or companies listed in Civiletti’s letter. Marcinkus said with considerable understatement: “First of all, let me explain our organization to you. The Institute for Religious Works is not a bank in the ordinary sense of the word.”39 Marcinkus disingenuously said he was confident that such accounts did not exist at the IOR, since the $7 million of deposits pinpointed by the Justice Department were such “large sums . . . we would have been very much aware of any such operation. Ours is a modest organization and any operation involving large sums would not go unnoticed.” That statement was contradicted by the tens of millions of dollars that had transferred back and forth with Sindona and Calvi. But Marcinkus said “to be on the safe side” he had checked to see if he could match the “sums
of the size you mention coming from the U.S. in the period indicated in your letter.” He found nothing. “I am at a loss to know how I can be of assistance to you on this matter.”40

  Blocked by Marcinkus from examining the records at the Vatican Bank, Civiletti had no choice but to accept the bishop’s denial as the final word.41 Justice Department officials complained privately about the IOR’s failure to conduct a more thorough search for records and transactions. When word of their displeasure reached Marcinkus several weeks later, he sent off a missive to Civiletti in which he said he was “perplexed.” But most of his two-page, typewritten letter was a rebuke—revealed here for the first time—of how the FBI handled sensitive information it gathered as part of the bureau’s 1973 investigation into counterfeit bonds and securities that had climaxed when two federal prosecutors and an FBI agent visited Marcinkus at the Vatican.

  “Now I come to the point,” Marcinkus wrote before launching into his diatribe. He set the background with the origin of the “investigations concerning a gigantic fraud, which involved the sale of some $900,000,000 worth of stocks and bonds, made up of stolen and counterfeit denominations.” The IOR got swept into it, he said, because of the stories told by some “confidence people.”42

  He emphasized that he had voluntarily met with the American investigators and answered their questions to the “best of my ability.” The reason Marcinkus was so furious is that he had learned that in the German trial of one of the defendants, an FBI memo summarizing the agents’ talk with Marcinkus had been submitted into evidence.

  “Much to my surprise and stupefaction,” he wrote, “the memorandum . . . was inaccurate in many respects, [and] it seemed to me to be even tendentious. I feel if good relations are going to exist, confidence must be respected and above all accuracy of statements must be maintained. I feel injured by this testimony and I wish to be assured that the F.B.I. will make amends.”43

  The Justice Department ignored Marcinkus’s outburst. No one had any intention of apologizing to the IOR prelate. Those who ran the 1973 probe felt he was somehow involved, but they simply never found the evidence to charge him.44

  * * *

  I. Just after the war, the twenty-six-year-old priest faced an unusual situation. A Catholic family had hidden a Jewish boy from the Nazis, and had learned that the Germans had murdered the child’s parents. They brought the youngster to Wojtyla and asked him to baptize the child. In contrast to Pope Pius IX and his abductions and forced baptisms of two Jewish boys, Wojtyla refused. The boy should be raised Jewish in the tradition of his parents, Wojtyla told the parents.6

  II. The Vatican has never released the complete report, and this author’s requests to review it went unanswered.

  III. Wojtyla’s election was as fortuitous for Cardinal Cody as it was for Marcinkus. After reading the Cody file, the new Pope decided not to do anything until he visited Chicago, a trip planned for October 1979. Ultimately, when John Paul got there, Cody presented him with a reputed $1 million gift and lobbied hard to defend himself. Although John Paul repeatedly told his aides he intended to move Cody out, he never did. Instead, a lay insider from the Chicago diocese got in touch with the U.S. Attorney the following year. The tales of financial impropriety were enough for a grand jury to be impaneled. And the Chicago Sun-Times soon assigned a team of investigative reporters to chase the many Cody rumors. In 1981, that resulted in one of the most carefully vetted investigations in the paper’s 137-year history. It was a devastating tell-all that showed that Paul VI and John Paul II were wrong when they did not insist Cody step down.33

  22

  “The Vatican Has Abandoned Me”

  Marcinkus quickly solidified his position at the IOR with the new Pontiff. He not only fended off tales of scandal over the Sindona affair, but he managed John Paul—Pope only a month—when a new government probe put the Vatican Bank on the defensive. In November 1978, after seven months of examining Ambrosiano’s records, Bank of Italy investigators finished a five-hundred-page report that raised troubling questions about Calvi and whether the Ambrosiano was capitalized properly.1 After Sindona’s collapse, the Bank of Italy was risk-averse. But the inspectors could not gather enough information to determine if their concerns were justified. Calvi’s multiple layers of foreign shell companies did what he intended: prevented the authorities from figuring out who controlled which entities and where the money went.2 The report—named after its chief inspector, Giulio Padalino—devoted twenty-five pages to questionable dealings between Ambrosiano and the Vatican Bank.3 It chided Calvi for failing to disclose the details of his business with the Vatican.4

  A few copies of the Padalino Report leaked to reporters.5 Fortunately for the Vatican, it was written in the dense language of government bureaucrats and was hobbled by numerous caveats about missing evidence. The inspectors did not seem to understand fully the relationship among the Ambrosiano, Calvi, and his spider’s web of offshore companies.6 Its convoluted dissertations fell far short of a persuasive case.7 Many reporters did not read much further than the obtuse summary.

  Milan’s criminal prosecutors, however, carefully read the Padalino Report. Although they recognized it asked far more questions than it answered, they also realized it made a strong circumstantial case that Calvi had profited by violating Italy’s currency control laws. That December (1978), one of the office’s most aggressive prosecuting magistrates, Emilio Alessandrini, opened a criminal probe into Calvi and the Ambrosiano. He enlisted the help of the Guardia di Finanza, an Italian law enforcement division that specialized in white-collar crimes.8 The goal, Alessandrini instructed them, was to develop enough evidence to charge Calvi with manipulating the share prices of public companies and passing any profits through different countries to circumvent taxes and restrictions on the export of the lira.9 Calvi was stunned to learn he was under criminal investigation when a few weeks later he flipped open a January 21, 1979, issue of L’Espresso. Prosecutors had leaked news of the probe instead of giving Calvi and his lawyers a heads-up.10

  Eight days after L’Espresso’s scoop, five masked men walked up to an orange Renault stopped at a traffic light in the center of Milan. The prosecuting magistrate, Alessandrini, was inside. As part of his daily routine, he had dropped off his son at a school a few blocks away just minutes earlier. The masked men dragged him from his car, forced him onto his knees, and executed him in front of horrified witnesses. They escaped in a small car, throwing smoke bombs as they sped away.11

  Calvi was not the only major investigation on which Alessandrini had been working. He also was responsible for building a case against a suspect in the assassination of former Prime Minister Aldo Moro. Alessandrini’s gunmen later turned out to be from Prima Linea (Front Line), an even more violent offshoot of the Red Brigades. But in the weeks before that became clear, there was speculation the murder was tied to Calvi.12

  The government’s Christian Democratic coalition, headed by Prime Minister Giulio Andreotti, had been criticized for having failed to stop domestic terrorism. Now, it collapsed two days after the assassination. It was the fortieth government in thirty-four years.13 Luca Mucci, an earnest white-collar crime specialist, took over the Calvi probe. He lacked Alessandrini’s ability to cut through the judicial bureaucracy. It would take six months before the Guardia di Finanza returned his calls. And even then it was to inform Mucci they could find no evidence of criminal wrongdoing. No one then knew that Raffaele Giudice, the Guardia di Finanza’s chief, was a P2 member whom Gelli had lobbied on Calvi’s behalf.14 Uncertain about what to do next, Mucci reached out to the Ufficio Italiano dei Cambi, the Italian government department responsible for enforcing currency laws.15

  None of this gave Calvi any pause in his frenetic deal making. Despite the questions raised by the Padalino Report, Calvi persuaded four prominent Catholic businessmen—all with close Vatican ties—to serve on the board of La Centrale, his Italian holding company. And to a few colleagues he seemed more distracted by events affec
ting his empire in Latin America than he was about the Bank of Italy report. The civil war in Nicaragua had taken a turn against strongman Anastasio Somoza’s government forces. The Marxist Sandinista National Liberation Front was on the verge of capturing the capital. Calvi worked to move the core of his Latin American operations from Managua to Lima.16 He renamed his new venture Banco Ambrosiano Andino and promised in the Italian press that the new firm would become partners with leading South American banks in offering financial services throughout the Southern Hemisphere.17 In fact, the Ambrosiano owned Banco Andino. When South American banks did buy small stakes in the new company, Calvi supplied the funds for those investments.18 Calvi transferred to Andino more than $100 million in back-to-back loans that the Vatican Bank had made with United Trading and Cisalpine.19 The following year, emboldened by the lax banking regulations prevalent throughout Latin America, Calvi launched Banco Ambrosiano de America del Sud, headquartered in Buenos Aires.20

  While Marcinkus did not know all the details of Calvi’s South American deals, he thought the expansion was a good idea. Sindona later told reporters: “I had told Calvi to tell Marcinkus that if they [the IOR] can help, it is in their own interest. South America is Catholic. They don’t want to lose this big a part of their account.”21