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

by Gerald Posner

  30 Conclusion Former Reference regarding the Foreign Secretary: WM (40) 99, 65/6/44, 388, Cabinet Papers, National Archives, Kew, UK.

  31 Foreign Office files, 37150078, Financial Activities of the Vatican, John Crump, Ministry of Economic Warfare, to Peter Hebblethwaite, Foreign Office, March 29, 1945, National Archives, Kew, UK; see also Nechama Janet Cohen Cox, “The Ministry of Economic Warfare and Britain’s Conduct of Economic Warfare, 1939–1945,” King’s College London, 2001, online at https://kclpure.kcl.ac.uk/portal/files/2935689/246631.pdf; see Pollard, Money and the Rise of the Modern Papacy, 190.

  32 Maurizio Pegrari, Dizionario Biografico degli Italiani, Vol. 78, (Rome: Istituto della Enciclopedia Italiana, 2013).

  33 “Italy’s Money Mart Here Shut by U.S. Order,” New York Herald Tribune, June 22, 1941.

  34 RG 84, Safehaven Files, Banca della Svizzera Italiana, memo from managing director to United States consul in Berne, March 30, 1943, Entry 323, Box 6, NARA. In 1947, Banca della Svizzera Italiana formed a partnership with the Bank of Rome and opened the Banco di Roma per la Svizzera. One of Pius XII’s nephews, Prince Marcantonio Pacelli, was appointed as President. See Hoffman, Anatomy of the Vatican, 181.

  35 Sudameris was actually a collection of eight banks operating in five countries. Phayer, Pius XII, the Holocaust, and the Cold War, 108; see generally Chernow, The House of Morgan, iBooks edition, 795–96. The Sudameris banks had shares in Nogara’s interlocking network, the same one he used to help German firms move assets to South America.

  36 RG 226, Research and Analysis Branch, Letter from R. Fenton, UK, Entry 19, Box 90, XL6425, NARA; see also Pollard, Money and the Rise of the Modern Papacy, 191; and Leigh et al., “Mussolini, a Vatican Vow of Silence and the Secret £500m Property Portfolio.”

  37 After the war Malagodi served as secretary to Italy’s Liberal Party and in the 1980s was the President of the Italian Senate. Pegrari, Dizionario Biografico degli Italiani.

  38 Fondo AD2 (Nogara), Cart. 15, fasc. 40–45, telegram of Giovanni Malagodi to Bernardino Nogara, May 15, 1943, ASBCI, cited in Pollard, Money and the Rise of the Modern Papacy.

  39 Phayer, Pius XII, the Holocaust, and the Cold War, 110–11; Confidential cable dated December 21, 1945, RG 59, Department of State, Rome Embassy, File 851, Box 161, NARA.

  40 The State Department Report that covers Sudameris, Nogara, and the Vatican is the “Report of Recent Activities of the Banque Francaise et Italienne pour L’Amerique du Sud (Sudameris),” by Virginia Marino of the Economic Warfare Section of the War Division of the U.S. Department of Justice, May 9, 1944, Entry 16, Box 850, File 70712, RG 226, Location 190/2/28/6, NARA.

  41 Ministry of Economic Warfare, letter to Berne Embassy, April 10, 1945, National Archives, Kew, UK; see also Pollard, Money and the Rise of the Modern Papacy, 192; see also Phayer, Pius XII, the Holocaust, and the Cold War, 110.

  42 See generally Pollard, Money and the Rise of the Modern Papacy, 192.

  43 Nogara to J. P. Morgan & Co., New York, November 10, 1941, T 231, 140, National Archives, Kew, UK; see also McGoldrick, “New Perspectives on Pius XII and Vatican Financial Transactions During the Second World War,” 1039.

  44 General Ruling No. 17, 8 Federal Register, 14, 351, 1943; Reeves, The Control of Foreign Funds by the United States Treasury, 42–43; US Treasury Department, “Documents Pertaining to Foreign Funds Control,” Washington, March 30, 1943, 6–17, 19–20; Treasury Department, Office of the Secretary, April 13, 1943, General License No. 68A, As Amended, 67, 106, Papers of Bernard Bernstein, Subject File, Box 23, Harry S. Truman Library, Independence, MO.

  45 Journal entries for January 2, 1942, and March 19, 1942, Series T 231, 141–42, National Archives, Kew, UK.

  46 Reeves, The Control of Foreign Funds by the United States Treasury, 31. It is also possible that the Vatican investigation merely got lost in the volume of cases into possible evasions of the economic warfare laws that flooded into the Treasury Department. Treasury received nearly 600,000 reports of violations over four years.

  47 U.S. Treasury Department, “Documents Pertaining to Foreign Funds Control,” Roman Curia—Generally Licensed National—General License No. 44, Washington, March 30, 1943, 44–45, Papers of Bernard Bernstein, Subject File, Box 23, Harry S. Truman Library, Independence, MO.

  48 Germany and Japan were excluded from the list of countries from which it could operate. In the spring of 1943, U.S. officials were furious to intercept an SS cable that reported the Vatican had sent $45,000 to Japan to care for wounded soldiers. Treasury threatened to terminate the church’s special status, but the Vatican was spared any punishment after claiming the money was sent to the church’s Apostolic Delegate there for “relief of prisoners of war in Japanese hands.” Phayer, Pius XII, The Holocaust, and the Cold War, 103–5; see also Memorandum, U.S. Treasury Department, regarding the transfer of sums in U.S. currency to the currency of European countries, Box 5690, RG 59, Location 250/34/11/1, NARA. Records at the National Archives, RG 59, IWG (Nazi war crimes working group), FBI Secret Intercepts, has hundreds of pages of government tracking of transfers between Vatican-owned bank accounts in the U.S. and banks abroad, as well as details about the dividends earned on shares and bonds, from the company stocks held by the church in its U.S. accounts.

  The presence of church missions in otherwise blacklisted or sanctioned countries continued as a problem between the U.S. and the Vatican long past World War II. Information contained in a WikiLeaks cable shows that as late as 2002, the Treasury Department had blocked Vatican funds sent to Cuba, prompting a furious response from the church’s Secretary of State. Treasury, as it did in World War II, backed off and released the money: https://www.wikileaks.org/plusd/cables/02VATICAN83_a.html.

  49 The IOR’s roots go back to an 1887 commission of cardinals appointed by Pope Leo XIII. Their role was to use some cash donations from the faithful to buy property. That commission morphed in 1904 under Pius X into the Commission of Religious Works. And in 1908, the Pope removed its “cardinal only” status, and renamed the small group the Prelate’s Administrative Commission for the Works of Religion. His successor, Pius XI, approved in 1934 some expanded powers that allowed the commission to act as a financial clearinghouse for other Vatican branches. In 1941, a year before he created the IOR, Pius XII had placed the commission under the oversight of a panel of cardinals, and gave it limited rights to accept deposits from some clerics, only for the “works of religion and Christian piety.” The commission was subsumed by the IOR. See generally Raw, The Moneychangers, 53.

  50 See Reese, Inside the Vatican, 205–6.

  51 See J. Paul Horne, “How the Vatican Manages Its Money,” Institutional Investor, January 1971, 78. Canon lawyers made a point that the IOR was “in Vatican City” not “of the Vatican.” That seemed to create some distance between the IOR and the Pope in case the bank ended up in any difficulty. See Hoffman, Anatomy of the Vatican, 185.

  52 “Marcinkus Comments,” Il Sabato, October 22, 1982.

  53 Martin, Rich Church, Poor Church, 45.

  54 Pollard, Money and the Rise of the Modern Papacy, 200; see also Martin, Rich Church, Poor Church, 45.

  55 Raw, The Moneychangers, 53.

  56 The countries that share a border with Italy are France, Switzerland, Slovenia, Austria, San Marino, and the Vatican.

  57 “Declaration of attorney, Franzo Grande Stevens, in support of the IOR’s motion to dismiss plaintiff’s third amended complaint,” October 30, 2000, Turin, Case No. C-99-4941 MMC, United States District Court, Northern District of California, § 21: “It is the custom and practice of the IOR not to retain records after ten years.”

  58 Raw, The Moneychangers, 54.

  59 For examples of U.S. intelligence efforts to keep track of Vatican financial transactions, see in general Federal Bureau Investigation, Secret, Interagency Working Group (IWG), Nazi War Crimes, FBI Secret Intercepts—Vatican, RG 59, NARA.

  60 Executive Order 8785, 6 Federal Register, 2897, 19
41.

  61 The Allies also had learned that a fascist finance official had thanked one of the IOR’s lay officers, Massimo Spada, for the IOR’s purchase of fascist-issued bonds that helped support Mussolini’s government. Lai, Finanze Vaticane, 24–25.

  62 Susan Headden, Dana Hawkins, and Jason Vest, “A Vow of Silence: Did Gold Stolen by Croatian Fascists Reach the Vatican,” U.S. News & World Report, March 22, 1998.

  63 The British were the first to put the Bank Swiss Italianne of Lugano on the blacklist in 1940 and the Americans followed late the following year.

  64 “Papers Link Vatican to Illegal Deals with Nazis Swiss Bankers Used as Conduit, U.S. Intelligence Documents Say,” The Toronto Star, Reuters, August 4, 1997, A3; see also Arthur Spiegelman, “Vatican Bank Dealt With Reichsbank in War-Document,” Reuters, International, August 3, 1997.

  65 The accounts in Germany were not significant investments, but that the church could maintain them without discovery is evidence that the Allies were not fully capable of following the money trail. Files maintained at Entry 1069, Box 287, RG 59, Location 250/48/29/05, NARA; see also Phayer, Pius XII, the Holocaust, and the Cold War, 103–6.

  Chapter 10: Blood Money

  1 When I was far enough along on my research—which had started in 2005—to know precisely what IOR-related information might be in the Secret Archives, I sought access from the Vatican. The Archbishop of Miami, Thomas Wenski, formally passed my request for access to Archbishop Carlo Maria Viganò, the Apostolic Nuncio to the United States. Viganò in turn forwarded my request to Archbishop Jean-Louis Bruguès, the Archivist of the Secret Archives. After several weeks, my request for access was formally denied in 2013.

  2 Feldman, Allianz and the German Insurance Business, viii–ix.

  3 Ibid., xii.

  4 Joseph Belth, ed., “Life Insurance and the Holocaust,” The Insurance Forum, Special Holocaust Issue 25, no. 9 (September 1998): 81, 92–93.

  5 After the war, Italian and German businessmen feverishly tried convincing the Allies that their collaboration with the fascists had only been for business expediency, not because of ideology. See, for instance, interrogation of Kurt Schmitt, Allianz’s General Director, July 8, 1947, Office of Military Government, RG 260, Folder 2/58/2-7, NARA. The same was true in Germany, see generally Feldman Allianz and the German Insurance Business, 51. During the war, the business relationships were incestuous between a handful of the largest companies. For instance, U.S. intelligence uncovered that Schmitt secretly owned shares in Generali’s American subsidiary. See “The Pilot Reinsurance Company of New York Shareholders of Record,” February 4, 1942, RG 131, Box 26, Folder 230/38/110/5, NARA.

  6 Ranking Officials, Assicurazioni Generali, also Washington Reports 1943, RG 59, Department of State, Rome Embassy, File 851, Box 161, NARA.

  7 Webster, “The Political and Industrial Strategies of a Mixed Investment Bank,” 329.

  8 The company was Galata, a mining and mineral exploration firm. See Transactions of the Institution of Mining Engineers, ed. Percy Strzelecki, Vol. 34, (Newcastle-upon-Tyne, UK: The Institution, 1908), 234.

  9 Webster, “The Political and Industrial Strategies of a Mixed Investment Bank,” 329.

  10 Webster, Industrial Imperialism in Italy 1908–1915, 111; Romano, Giuseppe Volpi, 18. At that time, BCI was more than simply a bank. It had equity and management stakes in many companies, with its largest interests in armaments, shipping, and steel. Italy sometimes committed public money or gave special tax breaks to BCI-led industries that were considered critical to the nation (such as the chemical industry in central Italy in 1912). The Bank of England, the Morgans, and the Mellons had minority shares in some BCI industrial syndicates.

  11 Romano, Giuseppe Volpi, 52, citing Carte Nogara, correspondence between Nogara and Volpi between 1912 and 1914. The BCI archives have two files dealing with the Merkur Gewerkschaft (German) and Monte Amiata (Italian) mines: that correspondence covers from 1919 to 1926 and includes an attempt by Nogara, then a BCI executive and mining engineer, to get the Amiata corporation to take an interest in Anatolian mining (Turkish) from 1920 through 1922. When Volpi became the chief Italian representative in peace talks with the Turks, he tapped Nogara to fill his vacant spot on the Ottoman Public Debt Administration. “Italy: Volpi’s Commission,” Time, November 2, 1925; Donald Quataert, The Ottoman Empire, 1700–1922 (Cambridge: Cambridge University Press, 2000); see also Memorandum, Treaty of Peace with Turkey from the Supreme Council of the Allied Powers, February 17, 1920, 24/98/65, 253, Cabinet Papers, National Archives, Kew, UK.

  12 Webster, “The Political and Industrial Strategies of a Mixed Investment Bank,” 359.

  13 Franco Amatori, “Entrepreneurial Typologies in the History of Industrial Italy (1880–1960),” The Business History Review 54, no. 3 (Autumn, 1980): 371.

  14 Bosworth, “Tourist Planning in Fascist Italy and the Limits of Totalitarian Culture,” 13, n. 62.

  15 Volpi was not only a power with which to be reckoned in Italy, but he was a respected businessman in other Western countries. In 1928, Time, in covering Volpi’s decision to peg the weak lira to the gold standard and undertake a comprehensive renegotiation of Italy’s debt, said he “epitomizes the best type of self-made Italian business man” and described his work for Mussolini as “brilliant.” He was also famous for a glittering social life. His fifteen-thousand-square-foot palace surrounded by formal gardens, at the foot of the Spanish Steps at Via del Quirinale, was widely acknowledged as one of the most sumptuous homes outside Vatican City. There, at dazzling parties, his regular guests included everyone from the Duke and Duchess of Windsor, Cole Porter, Jean Cocteau, Cecil Beaton, Maria Callas, and Orson Welles. His 1933 launch of the Venice Film Festival was in keeping with his outsized personality.

  16 It was not easy to be successful in private industry in Italy under fascism. By the mid-1930s only the Soviet Union owned a larger share of private industry than the Italian government. The capitalism that was the backdrop for businessmen like Nogara and Volpi thrived on a steady stream of preferential state policies and government subsidies that would have defied the words “free market” in many countries. See Franco Amatori, “Entrepreneurial Typologies in the History of Industrial Italy (1880–1960),” The Business History Review 54, no. 3 (Autumn 1980): 361; and L’Italia di Fronted alla Prima Guerra Mondiale by Brunello Vigezzi, review by Richard Webster, The Journal of Modern History 41, no. 4 (December, 1969): 626.

  17 Webster, “The Political and Industrial Strategies of a Mixed Investment Bank,” 329.

  18 “The Regeneration of Tripolitania,” La Rinascita Della Tripolitania: Memorie e studi sui quattro anni di governo del Conte Giuseppe Volpi di Misurata, The Geographical Journal 71, no. 3 (March 1928): 280–82; “Italy: Volpi Out,” Time, July 16, 1928.

  19 The company’s full name was Compagnie Internationale des Wagons-Lits. Bosworth, “Tourist Planning in Fascist Italy and the Limits of a Totalitarian Culture,” 17–18; see Pollard, “The Vatican and the Wall Street Crash,” 1087.

  20 Romano, Giuseppe Volpi, 218. Volpi had an edge in Croatia over his Italian counterparts. Mussolini had chosen him to be the lead negotiator in a 1941 economic pact the fascist government signed with Pavelić. It meant that Volpi had a status in Catholic Croatia that competitors could not match. Srdjan Trifković, “Rivalry Between Germany and Italy in Croatia, 1942–1943,” The Historical Journal 36, no. 4 (December 1993), 886.

  21 Everyone in Italy refers to the holding company as Bastogi, named after Pietro Bastogi, the first Finance Minister of the Italian Republic, who founded the company in 1862. Its official name is Italiane Strade Ferrate. Luciano Segreto, “Models of Control in Italian Capitalism from the Mixed Bank to Mediobanca, 1894–1993,” Business and Economic History 26, no. 2 (Winter 1997): 652. See also Parliamentary Commission Report of Inquiry on the Case of Sindona, Chamber of Deputies Senate, VIII Legislature, Doc. XXIII, Read 22 May 1980, n. 204, June 23, 1981, 27–28.

  22 Marco Pa
renti was a cofounder and had business links to the Rothschilds. Other Jewish founding members of Generali included: Vidal Benjamin Cusin, the grandfather of two future directors of the company; a lawyer, Giambattista Rosmini; a competing insurance executive, Alessio Paris; shipbuilder Michele Vucetich; and a Frankfurt native, Giovanni Cristoforo Ritter de Zahony. Morpurgo’s father was a banker who was all too familiar with institutionalized Italian anti-Semitism. On a few occasions under the Papacy of Benedict XIV, when he entered the Vatican for business, he was required to pin a small piece of colored fabric on his suit so that those who dealt with him knew he was Jewish. John Authers and Richard Wolffe, The Victim’s Fortune: Inside the Epic Battle over the Debts of the Holocaust (New York: HarperCollins, 2002), 108–9.

  23 Pollard, Money and the Rise of the Modern Papacy, 171; Segreto, “Models of Control in Italian Capitalism,” 652; Tom Weiss, interviewed by Brendan Howley, November 13, 2005.

  24 Maura Hametz, “Zionism, Emigration, and Anti-Semitism in Trieste,” 126–32.

  25 The resignation of Edgardo Morpurgo caused an international outcry, but the Italians ignored the criticism.

  26 The new chairman of RAS was a strident fascist, Fulvio Suvich, the ex-ambassador to the United States, and a Trieste native who was good friends with Volpi. Italian Jewish insurance executives were not the only ones being shoved aside by race laws. The Nazis set the example by excluding Jews from all German business life, including their removal as shareholders and directors of insurance companies. They were excluded from the industry by the time the violence against Jews had created financial problems for insurance companies. State-organized hooliganism, for instance, in Germany culminated in Kristallnacht—the Night of Broken Glass in November 1938—in which Jewish businesses and synagogues were torched and vandalized nationwide. German insurers were on the line for tens of millions of dollars in insurable losses. But those executives worked with the Third Reich to devise ways to avoid paying most of the claims. They used several pretexts to cheat their customers, with the most common excuse being that the riots and vandalism were a public disturbance and therefore not subject to compensation. Some insurers fretted that their failure to pay the claims were a “black spot on the coat of honor of the German insurance industry,” so they conspired with the Nazis to levy a one-billion-mark fine on the Jews, from which some funds would be recycled back to the victims as payments for broken glass and stolen goods. Ultimately, German insurance companies started a massive repurchase of life insurance policies from Jewish clients as it became clear that Jews were not insurable under the race laws.