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

by Gerald Posner

  To his family and friends Calvi insisted that he had only carried out the actions at the heart of the indictment on behalf of the Vatican Bank. Marcinkus, Mennini, and the IOR’s chief accountant, Pellegrino de Strobel, were aware of every transaction. The evidence he said, was in the files of one of the Ambrosiano’s Swiss banks, the Banca del Gottardo. Papers there proved the deals were actually masked transactions for the IOR. Swiss privacy laws, however, barred releasing documents about a third party without their consent.

  “My father really wanted the Swiss bank to disclose the IOR information,” Carlo Calvi told the author, “because he knew it would immediately shift the responsibility for the offshore deals from him to the Vatican. But they wanted none of it.”6

  What was at the Banca del Gottardo showed that the Vatican Bank—through its secret ownership of United Trading and Manic—owned all the offshore companies named in the indictment.7 Key Gottardo executives had played more than just an intermediary role; they had in some cases assumed director’s positions on companies like United Trading.8

  Calvi could not do much as he was in jail since the court had refused him bail.9 One day after visiting him in prison, his wife, Clara, and daughter, Anna, got into a waiting car to return home. Calvi had given Clara some papers on which he had written: “This trial is about the IOR.” He had told her to go to Marcinkus and ask for his help.10 Clara later claimed that Luigi Mennini’s son Alessandro jumped into the car before they drove off and warned her: “You must not mention this name [IOR] even in confession.”11

  Calvi, meanwhile, had hired Francesco Pazienza as a “special consultant” for a huge retainer of 600 million lire (about $500,000).12 The thirty-four-year-old ex-intelligence officer was a nonpracticing physician and adventurer who boasted contacts in Italian and American politics as well as good ties to U.S. and French spy agencies.13 He was also close with Marcinkus. Although he was not a P2 member, he was a top Gelli ally and a friend to many others in the Masonic lodge.14

  Pazienza had a reputation for digging up dirt. That was why Secretary of State Casaroli had tapped him the previous year to look for any scandal about Marcinkus. And in 1980, conservative Republicans had hired him as a freelancer to investigate President Jimmy Carter’s brother, Billy. “I uncovered everything,” Pazienza told the author.15 He discovered that the “first brother” had taken $50,000 from Libya’s Muammar Gaddafi, and had also visited Yasir Arafat of the Palestinian Liberation Organization as well as wanted terrorist George Habash, of the Popular Front for the Liberation of Palestine.16 Pazienza’s findings became a 1980 presidential campaign issue after the explosive story was published that October in The New Republic.17 And Pazienza had added to his own allure with a series of dramatic and ever-changing claims. At times he said he had given the Vatican a six-month advance warning about the attempted assassination of the Pope; and that he was the founder of Gran Italia, a group headquartered on New York’s Park Avenue whose stated goal was to unite all 120 million Italians worldwide for a “second Risorgimento.” Pazienza later claimed Gran Italia was a cover for an intelligence operation to nab Italians linked to terrorism.18,I

  “My father had personally hired Pazienza,” recalls Carlo, “because he was recommended by the former Secretary of the Christian Democratic Party. He was close to military intelligence officials and top industrialists as well as other men my father respected. He was one of those people who acted as a fixer.”20

  Pazienza’s ambitious brief from Calvi was to work to resolve the Ambrosiano’s mounting problems.21 “I start all my work diplomatically,” he told the author, “but if you want to get destroyed, okay, then I can destroy you.” But he also had another goal: to use his connections with Middle Eastern oil sheiks and Western investors to find a buyer willing to pay up to $1.2 billion for 12 percent of Ambrosiano. The deal seemed tantalizingly close at times but ultimately never happened.22

  With Pazienza working in the background, Calvi requested that his son, Carlo, then living in Washington, D.C., fly to the Bahamas to look for any exculpatory evidence. The senior Calvi had arranged for his son to access his personal safe deposit box at the Nassau bank Roywest.23

  “When I opened the safe box,” recalled the younger Calvi, “there were lots of papers, most of them hard to figure out. But one that seemed clear was on the letterhead of the accounting firm Coopers & Lybrand. It asked whether the Vatican was good for the money behind the deals, whether the money was recoverable from the IOR.

  “And here I was, caught between my father wanting the Vatican to release the Swiss files, and the church saying no. I was excited because I thought I finally had found a document to force the Vatican’s hand.”24

  In a pre–cell phone and email business era, telexes were often used for fast and reliable international communications. An afternoon storm had knocked the bank’s telex machine out of order. So Carlo walked through a tropical downpour to a public station next to the courthouse. From there he sent a telex to Marcinkus: “Call me after 3 p.m. Carlo.”

  Back at his hotel, he took a nap. At 3 p.m. when the phone woke him he was so groggy that he had forgotten who was calling until he heard Marcinkus’s voice.

  “Why are you bringing up our problems with the bank?” Marcinkus asked. “Our problems are also your problems.”25

  Marcinkus called Pazienza and told him that the young Calvi was trying to pressure the church. Pazienza got on the next flight to Nassau. “I put a stop to Carlo’s craziness,” he told the author. “I told him if he tried to use any telex machine again, I would personally smash it with my fists.”26

  Carlo thought that the Banca del Gottardo should issue a statement about his father’s innocence.27 “They agreed to answer some interrogatories,” says Carlo, “and promised they would help. But in the end, they released almost no information. It all stayed in Switzerland.” The Italian court rejected the Gottardo proclamation about Calvi because it was so generic, and crippled by too many caveats and legal disclaimers.28

  Pazienza called the younger Calvi and said he was “authorized” to arrange a personal meeting between Carlo and Archbishop Giovanni Cheli, the president of the Vatican’s Council for Migrants and Travelers and also its United Nations observer in New York.29 Calvi had no idea that Cheli had secretly been angling to replace Marcinkus as chief of the IOR.30 At a predetermined time, the young Calvi flew to New York and took a taxi to a Manhattan address supplied by Pazienza.

  Two men were waiting inside an Upper East Side apartment. One was Sebastiano Lustrissimi, a businessman who worked for Italy’s largest construction company, Condotte d’Acqua (a company in which the Vatican had sold its controlling interest to Sindona in 1969).31 He was a friend of Pazienza (the young Calvi mistakenly thought he was either a mobster or an Italian intelligence agent).32 The other man was Lorenzo Zorza, a middle-aged priest. Zorza was living at Manhattan’s St. Agnes parish and was an energetic volunteer to the Vatican’s Permanent Observer Mission to the United Nations.33

  “When I met him—Zorza—he was dressed like a priest,” Carlo Calvi recalled, “but he did not behave like one. I can’t really explain it, but I had doubts about him right away.”34

  Zorza had a nervous habit of twitching his head from side to side. And Calvi’s instincts about having some “doubts” were good. Zorza was no ordinary priest. A favorite with parishoners, the voluble Zorza always seemed to be part of some grandiose scheme that promised to blend religion and commerce. At Pazienza’s urging, Zorza had asked the senior Calvi for $5 million from the Ambrosiano to develop a huge project in Brazil. Half of that loan would have been a kickback split between Pazienza and “the people at the Banca.”35,II

  That early summer evening in 1981, Calvi sat between Lustrissimi and Zorza. They did almost all the talking. “Be polite to Monsignor Cheli,” Zorza cautioned Calvi. “And listen carefully. And be certain to pay attention to his advice.”37

  Lustrissimi drove Zorza and Calvi to the United Nations. There they met Archbis
hop Cheli in a hallway. Cheli talked to Calvi in a hushed tone so no one nearby might overhear. He said, “Tell your father to be quiet, not to reveal any secrets, and to continue to believe in providence.”

  “Unfortunately,” recalls Calvi, “providence was not something I could then believe in.”38

  Carlo Calvi called Marcinkus several more times. “He kept brushing me off.”39

  After the senior Calvi’s indictment, Pazienza could not derail his trial. It got under way in a Milan courtroom that June. On the stand Calvi was hesitant, speaking in broad generalities. He tried shifting the blame for any wrongdoing to one of his codefendants, Alessandro Canesi, the bank’s ex-chairman and his longtime mentor. Canesi was also a former chief of La Centrale Finanziaria, now headed by Calvi, which was allegedly behind the entire illegal export operation. Conveniently, Canesi was unable to answer the charges since the eighty-four-year-old had died at his villa near Lake Como on June 15, a few days after the trial started.40

  While the courtroom drama played out, on June 30, at Calvi’s insistence, two senior Ambrosiano executives, Filippo Leoni and Carlo Olgiati, met at the Vatican with Marcinkus, Mennini, and de Strobel. They were frustrated that the Vatican officials refused to tell them what the IOR might do if questions arose about its ownership of the ghost companies.41

  On July 9, a defense attorney told a stunned courtroom that Calvi had failed to show up for the trial that morning because he had tried killing himself by swallowing ninety barbiturate pills and cutting one of his wrists.42 Calvi’s family cited it as startling evidence of his melancholy. His prison warden cast doubts on it, claiming that the wrist wound was superficial and that Calvi had not taken a lethal dose. “We’re dealing with a suicide attempt that failed at birth,” he told the press.43

  Carlo Calvi thought his father’s botched suicide was a sign of his desperation over the Vatican’s refusal of the Ambrosiano’s pleas for help.44 The next day, the Ambrosiano’s Leoni Olgiati and deputy chairman Roberto Rosone met again at the Vatican with Marcinkus and his top two deputies. They all later gave slightly different accounts of what transpired but agreed the discussion was about whether the IOR would continue cooperating with the Ambrosiano.45 By this time, the Vatican officials worried that the fallout from the Calvi affair might result in their own criminal problems. Only five days before that meeting, de Strobel had traveled to Lugano, Switzerland, to review files at the Banca del Gottardo. Marcinkus needed some documents there. But de Strobel was concerned that if he returned with photocopies, he might be stopped and searched by Italian authorities. Instead, the Papal Nuncio in Berne later forwarded the Gottardo papers by diplomatic pouch.46

  Meanwhile, Calvi’s suicide attempt was serious enough to land him in the prison hospital. There he developed pneumonia and was too ill to attend the trial that continued while he recovered. He was still in the infirmary when the three-judge panel issued its verdict on July 20, 1981: guilty as the mastermind of illegally exporting $26.4 million to Switzerland. His sentence was four years in prison—more than the prosecutors requested—plus an $11.7 million fine.47 Calvi was released on bail pending his appeal. His wife picked him up from the hospital in their armored Mercedes. The security motorcade—two cars with bodyguards—took the convicted banker home.48 To Calvi’s detriment, word leaked that before his release, he had met with prosecutors and discussed possibly cooperating in return for vacating his sentence.49 Nothing was firm, but such news was a potentially ominous sign for those who had profited from Calvi’s many ventures.

  Only eight days after his conviction Calvi chaired a meeting of the Ambrosiano’s board of directors. The Bank of Italy thought he should resign but was powerless to remove him. And the Ambrosiano’s directors voted unanimously to keep him as chairman, saying there had been no suggestion at the trial that Calvi ever profited from his wrongdoing.50

  Maybe even more surprising was that Calvi’s felony conviction did not scare off Marcinkus. When asked why a few years later, Marcinkus offered a weak justification: “When Calvi was in jail, I asked somebody, ‘Hey! What’s going on?’ And the fellow says, ‘Nah, if you’re not caught, you’re not worth anything.’ ”51

  For the remainder of 1981, the Ambrosiano’s stock price climbed.52 Some market analysts suggested that investors were voicing their confidence in Calvi’s savvy running of the bank and a widespread belief that his talented legal team would prevail on appeal.53 Others concluded that between the P2 revelations and the string of powerful politicians who had testified to his good character, small investors believed they were investing in a company protected by the so-called sottogoverno (the secret government).54

  No investor then knew that the Ambrosiano’s foreign subsidiaries in Peru, Nicaragua, Panama, the Bahamas, and Luxembourg had borrowed over a billion dollars from other banks and the IOR, much of which Calvi had recycled to buy the Ambrosiano shares, thereby inflating the stock price. The IOR was still on the line for about $140 million.55

  The greatest problem facing Calvi by the end of 1981 was that the Ambrosiano’s many offshore subsidiaries had fallen behind on servicing its back-to-back loans and accumulated debt.56 He was desperate because if he could not raise money his convoluted ghost company network would unravel.57 So Calvi turned to Marcinkus, the only person he trusted.

  Calvi broke his holiday in the Costa Smeralda and flew to Rome on a Learjet owned by United Trading.58 On August 26, he met with Marcinkus at the IOR headquarters and pleaded for help. Marcinkus agreed to give Calvi two official IOR letters, known in the banking industry as “letters of patronage” or “letters of comfort,” documents meant to assure third parties that the Vatican stood behind the Ambrosiano. Written in English on Vatican Bank stationery and dated September 1, 1981, the letters read, “This is to confirm that we directly or indirectly control”—it then listed ten of the Panamanian, Luxembourg, and Liechtenstein ghost companies. “We also confirm our awareness of their indebtedness towards yourselves as of 10 June 1981 as per attached statement of accounts.”59 One letter was addressed to Nicaragua’s Banco Comercial and the other to Peru’s Banco Andino.60 The language was vague, not constituting an express guarantee of the debt, but rather intended to convey the impression that the IOR was somehow endorsing the $1.4 billion in unsecured debt the Ambrosiano had issued to the ghost companies. Read with a lawyer’s eye, the letters did not represent that the IOR had any intention of honoring the debts. Luigi Mennini, as the IOR’s chief administrator, and Pellegrino de Strobel, the Vatican Bank’s chief accountant, signed for the Vatican.61

  Attached to the letters was a purported assets and liability summary for seven of the ten companies. According to that eight-page document, the companies owed $867 million to the Nicaraguan and Peruvian banks, but had assets of $1.21 billion. This balancing act was accomplished by inflating the value of the Ambrosiano shares and also omitting $217 million of back-to-back debts between the Cisalpine and Banco Andino (or, as a Wall Street Journal investigation concluded six years later, “In essence, the Vatican bank had borrowed money . . . and lent it to itself”).62 Marcinkus would have known the figures on Calvi’s attachment were wrong. The financial statements he had just received from Switzerland’s Banca del Gottardo showed the true and far more sobering numbers.63

  As a condition of giving the letters of patronage, Marcinkus insisted that Calvi give the IOR a secret counter-letter—backdated to August 26—absolving the Vatican of any obligation to repay the loans. Calvi agreed that no matter what the patronage letters said, the IOR would incur “no further damage or loss.”64 A one-page attachment listed all the outstanding back-to-back loans and stated that $300 million was owed to the Vatican.65 That Calvi letter also had an important clause upon which Marcinkus had insisted: the IOR’s role in the ghost companies would terminate in another ten months, no later than June 30, 1982.66 Marcinkus had belatedly concluded that it was time for the Vatican to extricate itself from Calvi’s offshore empire. The best the IOR chief could do was to sta
rt the clock running.

  Calvi assured Marcinkus he would only share the patronage letters inside the Ambrosiano with his fellow directors. He did not keep that promise. Calvi needed the letters to calm the Ambrosiano’s jittery foreign lenders.67 Marcinkus would later aver that he gave Calvi those letters as an “assistance to a friend” because “Calvi comes out of jail . . . and he says, ‘I’m having trouble and I’ve got to get this thing all set up.’ ”68 Sindona told author Nick Tosches, “Calvi—no one knew this, but it is true—paid the Vatican through Marcinkus, $20 million for those two letters of comfort.”69 (Two parliamentary investigations failed to find evidence of such a payoff.) What was proven was that the day after Calvi got the patronage letters, Mennini transferred $3.5 million from an IOR subsidiary in Lugano to a Swiss lawyer, who in turn sent it along to an account in Lausanne controlled by Pazienza, Calvi’s crisis manager.70

  The following month, October 26, Mennini and de Strobel—with Marcinkus’s approval—signed revised patronage letters to the Banco Comercial and the Banco Andino.71 The new language suggested that any money raised from the sale of assets would not necessarily be used to reduce the debt of the ghost companies. Most incredibly the letter appointed Calvi as the “attorney in fact” for “all relevant purposes” under the agreements.72 (Lawyers for the IOR subsequently contended that the power of attorney had been given to Calvi only at his “express request, to formally empower him to manage the companies which the IOR de facto controls, though unwittingly so.” In essence, the church’s unlikely explanation was that once it discovered it was the unknowing owner of the ghost companies, rather than protesting, it recorded a power of attorney appointing Calvi as the administrator of the ten shells.)73