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

by Gerald Posner

  96 See Nostra Aetate, Declaration on the Relation of the Church to Non-Christian Religions Proclaimed by His Holiness Pope Paul VI on October 28, 1965.

  97 Cardinal Siri quoted in Hebblethwaite, The Year of Three Popes, 142.

  98 James Franklin, “John Paul and Changes in Vatican,” The Boston Globe, August 27, 1978, 11.

  99 “Catholics Plan Aid to Hanoi,” The Boston Globe, April 1, 1967, 1; “Pope Eyed Trip to Hanoi,” The Boston Globe, November 22, 1968, 3. The two monsignors sent were Pope Paul’s personal secretary, Don Pasquale Macchi, and Paul Marcinkus, then an up-and-coming American cleric in the Secretary of State’s office. “2 Papal Aides Visited Viet, Vatican Says,” Chicago Tribune, October 29, 1966, 5. When reporters found out about the trip and asked Marcinkus why he had gone, he replied simply, “Vacation.”

  100 Flamini, Pope, Premier, President, 6. In 1973, Paul VI dispatched one of his diplomats, Monsignor Agostino Casaroli, to visit Moscow. Two years later Casaroli (later Secretary of State) made a state visit to Cuba and Fidel Castro. Conservative Curialists had reservations about each journey.

  101 See http://www.vatican.va/holy_father/paul_vi/encyclicals/documents/hf_p-vi_enc_26031967_populorum_en.html; see also Horne, “How the Vatican Manages Its Money,” January 1971, 30.

  102 The Pope kept moving further to the left. He caused an uproar when he said that Mao Tse-tung’s atheistic philosophy shared “Christian values” with Catholicism. Paul Hoffman, “Vatican Sees Christian Ideas in Maoism,” The New York Times, April 19, 1973, 3; Flamini, Pope, Premier, President, 5. See also for the full encyclical: http://www.vatican.va/holy_father/paul_vi/encyclicals/documents/hf_p-vi_enc_26031967_populorum_en.html.

  During his tenure, Paul VI expanded the College of Cardinals from the record number of eighty that he had inherited from John XXIII, to 136. He “internationalized” the Curia with many non-Italian appointees and ensured they had no connection to the traditional Roman bureaucracy. In some cases, as in Benin’s Bernardin Gantin, Brazil’s Alosio Lorscheider and Paulo Evaristo Arns, Argentina’s Eduardo Pironio, the Philippines’ Jaime Sin, and Senegal’s Hyacinthe Thiandoum, he picked avowed progressives, not only rankling traditionalists, but most of the Curia, who did not like to see their Italian-centric power diluted. And he tried to tilt any future conclave toward choosing a younger Pope by his ruling that all cardinals had to submit their resignations by seventy-five. Even in instances in which the Pope asked them to continue to serve, they had to step aside on their eightieth birthday. After eighty they no longer could cast a vote in the conclave. When Pope Paul issued the decree in 1970, it meant that twenty-five of the 127 cardinals were automatically excluded from electing the next Pontiff. The edict caused considerable griping from those affected. See generally Hoffman, Anatomy of the Vatican, 72–73; and “Roman Catholics: Princely Promotions,” Time, April 4, 1969.

  103 See “The Deception of the Century,” http://www.tldm.org/News3/impostor.htm.

  104 Lo Bello, The Vatican Empire, 108–22. Although the investments sound straightforward, they were usually done through holding companies and proxy subsidiaries. For instance, the Vatican had, among other banks, an interest in a small regional bank near Genoa, Banca Naef Ferrazzi Longhi of Spezia. Its ownership there was hidden under the Istituto Bancario Italiano, a financial holding company established in 1967 by the cement company Italcementi. The only tangential evidence of the church’s role in newly acquired banks such as Naef Ferrazzi Longhi was when Italcementi’s president appointed Massimo Spada as vice president and a director of the new financial consortium.

  105 Lo Bello, The Vatican Empire, 168–69.

  106 Lewin, “The Finances of the Vatican,” 194–95.

  107 The wealthiest Italians continued to avoid any tariff by holding their stocks in foreign shell companies through proxies. The foreign agent who held the stock would be listed as the owner for Italian tax purposes and pay only the 15 percent rate. The foreign agent would then deduct a service commission, but still the Italian taxpayer would pay far less than Italy’s punitive 30 percent tax. A flourishing part of Sindona’s law practice was the use of Swiss fiduciary contracts to evade taxes for wealthy clients. See Commissione Parlamentare D’inchiesta Sul Caso Sindona E Sulle Responsabilita Politiche Ed Amministrative Ad Esso Eventualmente Connesse, hereinafter Parliamentary Commission of Inquiry into the Case of Sindona and Responsibilities and the Political and Administrative Connected to It), Chamber of Deputies of the Senate, VIII Legislature, Doc. XXIII, May 22, 1980, n. 204, and June 23, 1981, n. 315, 44–45, 49–50.

  108 Lai, Finanze vaticane, 139; Lo Bello, The Vatican Empire, 132.

  109 Lo Bello, The Vatican Empire, 126.

  110 Sindona interview in Tosches, Power on Earth, 87.

  111 Lewin, “The Finances of the Vatican,” 195.

  112 Horne, “How the Vatican Manages Its Money,” 31–32; Lo Bello, The Vatican Empire, 127–28.

  113 Robert C. Doty, “Vatican Is Stunned by Plan to Tax It,” The New York Times, July 13, 1968, 1.

  114 Before there was a press office, the Vatican unofficially allowed some prelates to sell to reporters a daily typewritten list of Papal audiences and other tidbits of Vatican news. Monsignor Emilio Pucci’s onionskin paper bulletins—although not always reliable—were required reading by news organizations for more than a decade. Pucci was forced to resign from his Secretariat of State position after World War II when he was exposed as a paid informant for Mussolini’s secret police. A successor to the business, a layman, Virgilio Scattolini, ended up in jail after he was unmasked for fabricating stories and passing them along as news (his fake stories ended up in U.S. and British newspapers). See Hoffman, Anatomy of the Vatican, 255–61.

  115 “An Official Press Office Is Established by Vatican,” The New York Times, October 19, 1966, 27. Another early issue Vallainc addressed was publicity over the publication of Robert Katz’s critically acclaimed Death in Rome, in which Katz contended that although Pius XII knew some nineteen hours in advance about the Nazi plan to massacre civilians at the Ardeatine Caves, he did nothing. “This is not a book of history but a polemic in which the special interests of the author are dominant and in conflict with the interests of research presentation for the facts,” said Vallainc. This type of generic dismissal, without contesting facts or providing additional information, became the template for how the press office handled subsequent questions raised by historians over the wider issue of Pius’s silence during the Holocaust.

  116 Doty, “Vatican Is Stunned by Plan to Tax It,” 3.

  117 Reese, Inside the Vatican, 204–5. The subsidy amounted to $280 million annually when it was finally terminated ($506 million in 2014 dollars). See also Lai, Finanze vaticane, 46.

  118 “Finance: Diversification at the Vatican,” Time, January 25, 1971; Horne, “How the Vatican Manages Its Money,” 31.

  119 Lewin, “The Finances of the Vatican,” 187.

  120 Maillardoz had helped run the Special Administration, under Nogara. Some of its liquid assets had been moved to the Vatican Bank over the years, leaving mostly the real estate that was at the core of the newly formed APSA.

  121 Horne, “How the Vatican Manages Its Money,” 31; Lai, Finanze vaticane, 43–44; Raw, The Moneychangers, 52.

  122 Lai, Finanze vaticane, 44.

  123 Ibid., 122, Lai interview with Massimo, April 3, 1972.

  124 James Franklin, “John Paul and Changes in Vatican,” The Boston Globe, August 27, 1978, 11.

  125 Lewin, “The Finances of the Vatican,” 189.

  126 Hoffman, Anatomy of the Vatican, 176.

  127 Cardinal Egidio Vagnozzi, the new chief of the Prefecture, at least claimed he could read a balance sheet. And one of his early goals was to initiate a single balance sheet that would cover all Vatican departments that had anything to do with money. The staunchly independent IOR put a quick stop to such talk. See Horne, “How the Vatican Manages Its Money,” 32.

  128 Lo Bello, The Vati
can Empire, 32.

  129 Francis Xavier Murphy, “City of God,” The Wilson Quarterly (1976), 6. no. 4 (autumn 1982): 110–11.

  130 Lo Bello, The Vatican Empire, 31–32.

  131 Lai, Finanze vaticane, 46–47, 57.

  132 Francis Xavier Murphy, “A Look at the Earth’s Tiniest State,” Chicago Tribune, August 31, 1982, 11; Murphy, “City of God,” 111. Vagnozzi soon added an additional two more cardinals as aides, Chicago’s John Cody and Cologne’s Joseph Höffner. Although they were in theory more adept at financial administration since they ran their own dioceses, both were so far removed from day-to-day events at the Vatican that they afforded little guidance.

  133 Reese, Inside the Vatican, 203–4.

  134 Walter Scott, “Personality Parade,” The Boston Globe, October 12, 1969, C2; Thomas and Morgan-Witts, Pontiff, 140; Lewin, “The Finances of the Vatican,” 199; see also Hoffman, Anatomy of the Vatican, 177.

  135 Horne, “How the Vatican Manages its Money,” 80.

  136 Grilli, La finanza vaticana in Italia, 149.

  137 Pope John XXIII had established a commission to study what policy was best for the church to adopt about birth control. The advent of a daily pharmaceutical pill in the early 1960s had made birth control both affordable and widely available. The church’s only previous pronouncement had been Pius XII’s 1951 declaration that the church would sanction the use of the rhythm method as a “natural” means of birth control. Before that, the only approved option was abstinence. Pope John’s committee finished its work after his death. Its recommendation to Paul VI was that the church should consider liberalizing its ban on all forms of artificial birth control. The conservatives on the committee leaked word of the panel’s suggestion. Traditionalists raised a fury, so much so that Paul felt compelled to issue a blanket ban in Humanae Vitae. See http://www.vatican.va/holy_father/paul_vi/encyclicals/documents/hf_p-vi_enc_25071968_humanae-vitae_en.html.

  The bishop who later run the IOR, Paul Marcinkus, claimed—without proof—that the church’s stake in the manufacturer of birth control was only “one share, that somebody had left in a will.” See Marcinkus interviewed in John Cornwell, A Thief in the Night: Life and Death in the Vatican (New York: Penguin, 2001), 134. Marcinkus also asserted that after he took control of the IOR in 1969, “I gave orders: no pharmaceuticals, no armaments, no luxury buildings of any sort.” Marcinkus also claimed that under his direction, the IOR had “no exposure in South Africa,” which was then off limits because of international sanctions over the white-controlled apartheid government. “But some of our clients do.” Handwritten notes by Philip Willan of audiotaped interviews between John Cornwell and Marcinkus, February 8, 1988, 6b, 7a, provided to author courtesy of Willan.

  138 “Investment: Low Profile for the Vatican,” Time, November 28, 1969; Andrew Blake, “Financier’s Fall Costly to Vatican,” The Boston Globe, February 2, 1975, 21; see also Martin, The Final Conclave, 24.

  139 Thomas and Morgan-Witts, Pontiff, 146–47. After Paul VI’s death in 1978, Macchi worked to move along the church bureaucracy responsible for putting Paul on track for sainthood. During those years, Macchi claimed to reporters that Paul had never met Sindona. To others he said they met only once, “at a formal dinner in New York.” As author Giancarlo Galli wrote, Macchi considered a Sindona friendship with Pope Paul VI to be “shadows best deleted.” Finanza bianca, 71.

  140 Neal Ascherson, “Revolution on World’s Campuses: Students’ Target: The Bureaucratic State,” The New York Times, May 27, 1968, 13; “Students in Rome Gain Supporters,” The New York Times, March 4, 1968, 8.

  141 Wynn, Keepers of the Keys, 155.

  142 “Investment: Low Profile for the Vatican,” Time; Wynn, Keepers of the Keys, 156; see Raw, The Moneychangers, 52; Hoffman, Anatomy of the Vatican, 190; and Lai, Finanze vaticane, 47.

  143 DiFonzo, St. Peter’s Banker, 11–12.

  144 Cardinal Vagnozzi interview, in Horne, “How the Vatican Manages Its Money,” 32.

  145 Ibid., 30

  146 “Paul VI considered Sindona a great genius of finance,” noted Giuseppe D’Alema, a member of parliament who was later a member of inquiry in Sindona’s affairs. See Gurwin, The Calvi Affair, 13.

  147 Clyde H. Farnsworth, “Michele Sindona, the Outsider as Insider in Worldwide Finance,” The New York Times, May 20, 1974, 47. Malachi Martin in Rich Church, Poor Church claimed that Pope Paul had signed a document “giving Sindona total control over all Vatican investments.” There is no source for the charge, and the author has not found any independent proof that such a document was executed.

  148 “Investment: Low Profile for the Vatican,” Time.

  149 Thomas and Morgan-Witts, Pontiff, 147; Andrew Blake, “Financier’s Fall Costly to Vatican,” The Boston Globe, February 2, 1975, 21.

  150 Years later, when the wisdom of that sale was under attack, the IOR’s chief cleric, Archbishop Paul Marcinkus, disingenuously said, “APSA sold him [Sindona] the shares for Immobiliare. . . . I had nothing to do with it.” Cornwell, A Thief in the Night, 131–32. For details of the sale, see Horne, “How the Vatican Manages Its Money,” 80. As for Spada’s role, see Lai, Finanze vaticane, 48.

  151 “Investment Shift by Vatican Seen,” The New York Times, June 19, 1969, 19. The sale technically came from APSA. When Nogara ran both the IOR and APSA’s predecessor department, the Special Administration, he had blurred the separation of responsibilities and duties between the two. In the restructured Vatican the company investments and stocks were sold by APSA, but the reinvested monies were directed by the IOR. See also “Hear Vatican Disposing of Italy Stocks,” Chicago Tribune, June 19, 1969, A6.

  152 “Vatican Stock Sale Hinted,” The Boston Globe, June 19, 1969, 3; see also “Vatican Confirms Sale of Holdings,” The New York Times, June 21, 1969, 9. As for the Sindona purchase of the church’s shares, see Cornwell, God’s Banker, 40–41.

  153 No reporter knew that Sindona himself had bought the church’s SGI shares. He did so in typically convoluted Sindona-style. He first arranged for the Vatican Bank’s shares to be sent to Paribas Transcontinental of Luxembourg, a wholly owned subsidiary of Banque de Paris et des Pays-Bas (Paribas). Paribas then transferred the shares to Sindona’s Luxembourg holding company, Fasco. Two different Swiss holding companies acted as the owner at different stages of the transfer. As for the money, Fasco joined British merchant bank Hambros in forming Distributor, a Luxembourg holding company. Most of the funding passed through that new entity, coupled with some fiduciary deposits from Sindona’s Banca Privata. See generally “Sindona, Self-Made Man of 53, Rules a Vast Industrial Empire,” The New York Times, May 13, 1974, 48; Farnsworth, “Michele Sindona, the Outsider as Insider,” 47; see also Raw, The Moneychangers, 59; and Lai, Finanze vaticane, 48; see also Parliamentary Commission of Inquiry into the Case of Sindona and Responsibilities and the Political and Administrative Connected To It. SGI soared 300 percent in the year after Sindona bought the church’s stake, and it doubled in just six weeks in 1972: “Italian Bourse: Is Now the Time?,” The Economist, July 6, 2002, 104.

  154 Farnsworth, “Michele Sindona, the Outsider as Insider.”

  155 Horne, “How the Vatican Manages Its Money”; “Finance: Diversification at the Vatican,” Time, January 25, 1971, 32, 35. The Prefecture for the Economic Affairs of the Holy See had some assets, but far smaller than that what the IOR or APSA controlled. The interview by Horne was trumpeted by Institutional Investor as “the first time key Vatican financial officials have talked so freely with a reporter.” The then IOR chief Bishop Marcinkus refused to meet Horne, but did talk to him by phone. The journalist described him as “reticent.” Marcinkus said it would take time for the IOR to implement any changes and he downplayed the size of the IOR’s holdings.

  156 The Institutional Investor article erred on the low side of the Vatican’s net worth because Horne had been blocked from getting any accurate information about the IOR. But other reports wildly inflated the church’s w
ealth. An Episcopalian bishop, James Pike, who had formerly worked with the SEC, wrote an article in Playboy in which he asserted—without any evidence—that the Jesuits alone owned 51 percent of Bank of America. They also had a majority stake, claimed Pike, in Phillips Petroleum and owned large portions of Boeing and Lockheed. Pike declared that the Jesuits’ investments returned $250 million annually. Gollin, Worldly Goods, 12–13.

  157 The estimates of the size of the Vatican’s investment assets ranged in the Italian press from $5 billion to $13 billion. The Vatican newspaper, L’Osservatore Romano, went even further than Vagnozzi, estimating the church’s total investment capital only as $128 million. The newspaper provided no details or sources for how it reached its low conclusion. See Horne, “How the Vatican Manages Its Money,” 35.

  158 As of 1971, when Vagnozzi spoke to Institutional Investor, the Vatican still had small stock positions in fifty-eight public Italian companies. It was a fraction of its ownership just a year earlier. Horne, “How the Vatican Manages Its Money,” 35.

  159 Even inside the IOR, laymen dominated. Of the sixty employees at the time of this sea change in investment policy, only four were clerics. Horne, “How the Vatican Manages Its Money,” 78; see also Gurwin, The Calvi Affair, 13.

  Chapter 15: “You Can’t Run the Church on Hail Marys”

  1 The name on his birth certificate is Paulius Casimir Marcinkus, but it appears that family and friends always called him Paul, the Anglicized version of his first name.

  2 Hoffman, “Bishop with Chicago Roots Is Managing Pope’s Travels.” The New York Times, October 1, 1979.

  Marcinkus later said, “You read these books about me and you get the impression I was raised by Al Capone in the streets. That’s because of Cicero, see?” Marcinkus interviewed in Cornwell, A Thief in the Night, 81. The Al Capone/Cicero connection even found its way into a Chicago Tribune profile about an eighty-five-year-old barber who ran a Cicero barbershop for almost seventy years. He boasted to the Tribune that his two most famous customers were Marcinkus and mobster Ralph “Bottles” Capone, Al’s brother. Kristen Scharnberg, “A Traditional Cut Above the Rest,” Chicagoland, Chicago Tribune, March 18, 2001, 1.