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

by Gerald Posner

  VI. It took another twelve years to resolve the dispute with Gerini’s heirs. The succeeding Secretary of State, Tarcisio Bertone, himself a Salesian, negotiated and signed the settlement. But five years after that, the Salesians were fighting hard to stay out of bankruptcy after losing a court case in which Bertone claimed he had been misled into signing an agreement that upon closer inspection was actually against the best interests of the Salesian Order. In July 2014, Rome magistrates announced charges against a Syrian businessman, an Italian lawyer, and the priest who had been the chief financial officer for the Salesians, for falsifying documents and inflating the value of Gerini’s estate so they could get a commission of more than $100 million.100

  30

  Burying the Trail on Nazi Gold

  To the considerable relief of Pope John Paul and the Curia’s hierarchy, after the Enimont scandal the IOR managed to mostly stay out of the news. Stories about anonymous accounts, political bribes fueled with church funds, money laundering, and the financing of illicit empires like those of Sindona and Calvi seemed matters of the past. When a Sicilian archbishop, for instance, was charged with extorting money from the contractors he chose to renovate a twelfth-century cathedral, it did not tarnish the bank. Although investigators found a million dollars hidden in an IOR account, Vaticanologists considered the archbishop a rogue prelate, not an instance in which Vatican officials were themselves suspected of wrongdoing.1

  The reduced amount of bad ink was good news for Caloia, whose five-year term had been renewed in 1995. Cardinal Castillo Lara and De Bonis wanted to replace him with an American, Virgil Dechant, the Supreme Knight of the Knights of Columbus. Dechant was a smart alternative. John Paul liked the garrulous American who had raised a lot of money for Solidarity. But Caloia had the support of all his lay colleagues on the supervisory panel as well as the key endorsement of Secretary of State Sodano.

  Caloia began his second term with a list of goals. At every opportunity, he reaffirmed that the IOR’s purpose was to serve the spiritual needs of the church “while excluding speculation and unethical financial transactions.”2 He urged the bank’s employees to “better select their customers” before opening accounts. Even in small ways—such as ending the unwritten rule that barred women from working in managerial positions—he tried modernizing the IOR (one press report said the ban on female executives was “apparently on the unspoken assumption that sooner or later, they would put family first”).3

  One challenge that carried over from his first five years was how to stop the abuse of the bank’s accounts. He knew there was no quick fix. Many customers legitimately handled enormous amounts of cash. Charities and ecclesiastical missions relied largely on cash donations and then disbursed it in wire transfers around the globe. Putting too many restrictions on the flow of cash would generate a pushback from genuine account holders. Better monitoring would require the IOR to be fully digital. But many records were still kept by hand.

  A couple of months after his reappointment, Caloia got a clear reminder of the hurdles he faced when it came to the bank’s accounts. A former CIA officer living in Italy, Roger D’Onofrio, was charged as a central figure in an international smuggling ring of arms, drugs, and plutonium.4 In a stunning declaration he fingered Barcelona’s cardinal, Ricardo María Carles Gordó, as the intermediary with the gangsters. D’Onofrio claimed the duo had run nearly $100 million through an IOR account.5 The money was traced to D’Onofrio’s Swiss business partner. The Italians wanted to determine why Cardinal Carles Gordó’s name was on the Vatican account and if he knew anything about money laundering.6 Thirty-six indictments had already been issued by the time Italian prosecutors notified Carles Gordó that he was under investigation.7 The archconservative Carles Gordó dismissed the inquiry as politically motivated by leftists. He had “no relations” with the motley crew of ex-spooks, mercenaries, and mobsters. The Spanish government backed the church on the question of sovereignty and blocked Italian investigators from even questioning him.8 (Carles Gordó was never charged with any crime; the following year Pope John Paul promoted him to the Prefecture for Economic Affairs of the Holy See, and he remained as Barcelona’s chief prelate until his 2004 retirement.)9

  What most bothered Caloia about the Carlos Gordó episode was that $100 million could pass through the bank without anyone asking questions. Another baffling episode soon followed. Italian police announced they were investigating the cardinal of Naples, Michele Giordano, for extortion and usury and hiding his ill-gotten gains in an IOR account. Police unearthed a trove of incriminating documents when they raided the home of the cardinal’s brother, a captain in the Camorra crime family. That evidence suggested the cardinal had used the IOR for moving mafia money. When detectives raided the cardinal’s office, the Vatican lodged a formal complaint with Italy.10 Ultimately, the Church took the unprecedented step of standing back and allowing prosecutors to bring the seventy-year-old prelate to trial as part of his brother’s loan-sharking ring (a magistrate acquitted him in 2000; in 2002 he was convicted of illegaly converting real estate bequeathed to his diocese, but that conviction was reversed in 2005).11 More important to Caloia than whether the cardinal was guilty, was why no one inside the IOR noticed that his account had quickly gone from a long-standing small balance to millions of dollars. It again heightened Caloia’s fear that what would land him and the IOR back on the front pages was something hidden in an account about which he knew nothing.

  But what soon put the IOR back on the defensive had nothing to do with the flood of cash that flowed through it. Instead, the Vatican and its bank were about to become the focus of Holocaust survivors’ groups and the World Jewish Congress, which had begun insisting on an accounting from Swiss banks and Allied countries about stolen victims’ assets.

  By 1996, the media’s attention and the public’s sympathy had been captured by the children of Holocaust survivors—who had traveled to Switzerland to collect the money left in the bank accounts of their murdered parents—only to be turned away because they could not produce death certificates. “Nazi gold” was coined to describe the wartime loot that disappeared into Swiss banks, never to be seen again (the World Jewish Congress called it “victim’s gold”). Growing pressure had pushed Switzerland to cooperate with a commission headed by Paul Volcker, former chairman of the U.S. Federal Reserve. Volcker planned a series of forensic audits of top Swiss banks to determine how much money might be missing.12 New York Senator Alfonse D’Amato held the first of five hearings before the Senate Banking Committee in which Swiss bankers were grilled about victims’ money.13

  The Swiss estimated there was about $40 million in dormant accounts; some Jewish organizations put that amount, with accrued interest, at $7 billion.14 Many Swiss banks privately considered the restitution effort a shakedown.15 They stonewalled. Their intransigence eventually prompted a threat by New York’s comptroller to divest the city’s pension funds of Swiss bank holdings and to prevent them from underwriting future city debt.16

  In October 1996 a Holocaust survivor filed a $20 billion class action lawsuit in Brooklyn federal court against one hundred Swiss banks. The suit claimed the banks had “acquired and transferred gold which the Nazis plundered from Jewish victims, including gold removed from victims’ teeth.”17 It opened the litigation floodgates, kicking off class action suits not only against the Swiss, but also banks in Austria, Germany, and France; German companies for having profited from slave labor; and museums that had art stolen by the Nazis.18

  The Vatican had initially been left out of the bruising sparring over wartime loot and missing gold. It had not been the subject of any claims for restitution by victims or their families. But its luck ran out in the summer of 1997, when the church and the Vatican Bank’s conduct during World War II came under new scrutiny. The U.S. State Department declassified an October 21, 1946, one-page memo from Treasury agent Emerson Bigelow, in which he wrote about the enormous booty that Croatia’s Ustašan fugitives had stolen
during the chaos of the closing days of the war. Bigelow concluded “approximately 200 million Swiss francs was originally held in the Vatican for safe-keeping” (about $225 million in 2014 dollars).19 He said that the Vatican had either sent the loot to Spain and Argentina through its “pipeline” or used that story as a “smokescreen to cover the fact that the treasure remains in its original repository [inside the Vatican].”20,I

  The Bigelow memo put a spotlight on the Vatican and the IOR. And that memo was only the first in what the U.S. government estimated were some fifteen million still classified documents relating to the “safekeeping of Nazi-plundered gold.”22

  Two days after the Bigelow memo was made public, Rabbi Marvin Heir, the director of the Simon Wiesenthal Center, told reporters that the gold deposited at the IOR was likely used to fund “the Vatican rat line [where] basically many leading Nazi war criminals escaped to South America with Vatican passports.”23

  Heir’s charge kicked off a frenzy of reporting about the long-forgotten alliance between the church and the Nazi-puppet government in Croatia.24 Some commentators used it to reevaluate Pope John Paul’s controversial decision the previous year to be the first Pontiff to pray at the tomb of Alojzije Stepinac, Zagreb’s wartime cardinal. Stepinac had led the Croatian church during the war and was later convicted of war crimes.25

  The church’s early response to the Bigelow memo was terse. “These reports have no basis in reality,” claimed Joaquín Navarro-Valls, the Vatican’s chief press spokesman. “The information, which is without any documentation, is only based on a reliable source [emphasis added] in Italy which, even if it existed, remains unidentified and of dubious authority.”26

  Edgar Bronfman, an heir to the Seagram’s liquor and real estate fortune, was the volunteer head of the World Jewish Congress. He requested a personal meeting with the Pope. “Everybody is going to have to get involved in answering the questions of what happened to the property of the Jews who were killed during the Holocaust,” Bronfman told reporters. “That includes the Vatican.”27 Another press release from Rabbi Heir charged that the Vatican had set up twenty-two committees after the war to help spirit wanted Nazis out of Europe.

  That May, survivors filed a class action suit against seven major European insurers for escheating life insurance policies and failing to pay claims.28 To the few Vatican insiders familiar with the IOR’s profitable and integrated partnership with Italian insurance companies that operated in Nazi-occupied Eastern Europe during World War II, there was temporary relief the church was not named as defendant. But there was no dearth of bad news about the IOR and the war. Reuters obtained newly declassified U.S. intelligence documents from the National Archives that revealed the Vatican Bank had used Swiss middlemen at least three times during World War II either to get money from the Reichsbank or to transfer funds through blacklisted companies.29 And the Holocaust Educational Trust, a British-based charity, issued a twenty-five-page report that cited new state archival documents revealing that while the Allies had returned more than three hundred tons of central bank gold to ten countries plundered by the Nazis, about 5.5 tons from concentration camp victims had never been redistributed to the victims or their families.30 In the wake of that report, the United States and a dozen European countries contributed to a Holocaust compensation fund. The Vatican refused to cooperate.

  On September 10, 1997, Shimon Samuels, the European director of the Simon Wiesenthal Center, had an audience with the Pope. Samuels was in Rome to attend an annual conference of the International Council of Christians and Jews. He was aware the Vatican had a long-planned “millennium examination of conscience” scheduled for the following month, and that its focus was the church’s history of injustice against Jews. He thought it an ideal time to ask the Pontiff to open the church’s archives to resolve the charges that the Vatican Bank had collaborated with Croatian fascists and that Nazi gold helped war criminals reach South America. Most Western countries had statutes by which documents in their archives were opened to the public after a set number of years had passed. For the Vatican and the IOR, opening such sensitive files required a sovereign decision by the Pope.

  When Samuels made the request, the Pope sat silently, refusing even to answer. When he later put the question to Monsignor Remi Hoeckman, the Secretary of the Vatican’s Commission for Religious Relations with the Jews, Hoeckman was blunt: the church would “not address the issue; it is out of the question.”31

  Samuels told reporters about the rebuff. What church leaders failed to realize was that they were in the middle of a public relations battle they could not win. Within a week, an Auschwitz survivor protested at St. Peter’s Square, wearing a striped prisoner’s uniform and carrying a placard that read: “Pius XII and the Vatican are also guilty of the Holocaust.” He collected signatures for a petition demanding an international investigation about the extent to which Pius XII remained silent during the Holocaust, tolerated Nazi atrocities, and ignored actions of pro-Nazi Catholic clergy.32

  When a Vatican symposium to address anti-Semitism in Christian society opened that November, the news was dominated not by the Pope’s address to the attendees, but by a public letter addressed to John Paul from the Wiesenthal Center calling again for the opening of the secret archives and the IOR’s wartime ledgers: “In this age of transparency, the Vatican is among the last hold-outs in not sharing its full documentation on the period of the Holocaust, thus hampering its contribution to a universal pedagogy in drawing its lessons from, and even in its practical co-operation in, the search for Nazi criminals.”33

  The international pressure built on the city-state. At the end of that month, forty-one countries gathered in London to discuss what to do about the 5.5 tons of concentration camp gold repatriated by the Tripartite Gold Commission, a body set up after the war to settle the issue of stolen assets. The Vatican initially refused to attend. There was no reason to be part of it, said a spokesman, since the church had revealed all there was to tell.34

  Few believed that. And under strong behind-the-scenes lobbying from the United States, France, and Germany, the Pope sent two representatives, Giovanni d’Anello, a diplomatic advisor to the Secretariat of State, and a Jesuit priest and history professor, Marcel Chappin.35 Other countries balked, however, when they learned the Pope sent the duo only as silent observers. Under more pressure, the Pontiff upgraded their status to full delegates.

  A day into the conference Donald Kenrick, the chief of the International Romani Union delegation, charged that gold coins and rings worth nearly $2 million were taken from 28,000 Gypsies killed in the Croatian concentration camp Jasenovac. That money, said Kenrick, was sent to the Vatican at the end of the war and deposited into the IOR.36 Although Kenrick did not provide much evidence for his shocking accusation, it was international front-page news.37

  The Vatican representatives said nothing over three days. Privately they informed the other delegates they would not be part of any joint closing statement. They refused also to discuss opening the secret archives to historians or to allow auditors into the IOR.38 At one point they almost stormed out in protest when the Americans broached the idea of expanding every country’s obligation to include hunting for stolen artworks, escheated insurance policies, and seized bank accounts, bonds, and securities.39

  The conference finished with a promise by forty-one countries to meet again the following year for a progress report. Only the Vatican and Russia refused to agree to the next meeting or to offer any interim help.40 The Vatican also rebuffed a personal entreaty from Undersecretary of State Stuart Eizenstat to “examine their documents and make them available.”41 The church’s representatives would not even commit to a deadline of December 31, 1999, to which all other countries had agreed, to submit their own historical report on any role it might have had with missing victims’ assets.42

  All the Vatican intransigence made the church seem an outlier on what appeared to be a clear-cut moral issue. It promoted banner headlines su
ch as the one in London’s Telegraph: “Vatican Comes Under Heavy Flak. World: ‘Archives Hold Key to Nazi Gold.’ ”43

  “Everyone left London just shaking their heads in disbelief,” recalled Elan Steinberg, the World Jewish Congress’s representative. “Two hundred tons of gold from the pro-Nazi Croatian government found its way to the Vatican. Here they were, one of the world’s great moral institutions, and they refused to tell us what their view was, much less to lift a finger to help recover any looted assets. It was terribly disappointing.”44

  Five days after stonewalling at the London conference, Vatican spokesman Joaquín Navarro-Valls surprised everyone by claiming that the church had performed an “exhaustive perusal of the pertinent documents and could affirm that there is nothing to add to what has already been published.” Moreover, he declared: “Regarding the gold looted by the Nazis in Croatia, searches done in the Vatican archives confirm the inexistence of documents related to the subject and thus ruling out any kind of supposed transaction attributed to the Holy See. Thus the Holy See can look to the past with serenity.”45 As for the many calls that the Vatican open its archives and those of the IOR, Navarro-Valls was clear it would not happen.46

  No one thought it likely that the Vatican had really conducted a thorough archival search. Speed was against the church’s ingrained centuries-old trait of operating at a snail’s pace. The general skepticism about Navarro-Valls’s adamant denial of wrongdoing was reinforced within a week from a new batch of declassified documents. They identified the Vatican as one of four countries that had illegally received and stored gold bars emblazoned with swastikas (those bars usually included gold from the dental fillings of death camp victims).47

  By early 1998, however, the British government was optimistic that months of secret talks with church officials had paid off in an agreement by which its investigators could access the Vatican’s archives (although the IOR was still off limits). But even that promise turned out to be empty. In March, the church’s Commission for Religious Relations with the Jews released a document, “We Remember: A Reflection on the Shoah.”48 It was further evidence of how poorly the Vatican understood the sensitivities of the controversy in which it was enmeshed. It said, “During and after the war, Jewish communities and Jewish leaders expressed their thanks for all that had been done for them, including what Pope Pius XII did personally or through his representatives to save hundreds of thousands of Jewish lives. Many Catholic bishops, priests, religious and laity have been honored for this reason by the State of Israel.” Some survivors’ groups were particularly incensed by the defense of Pius.49