The Annals of Unsolved Crime

by Edward Jay Epstein

  The immediate problem confronting Pope Paul VI was a new Italian law requiring foreign investors, including the Vatican, to pay a 30-percent tax on dividends. Since this tax, if paid, would further squeeze Vatican income to the point at which it would have to curtail services that it considered essential, it refused to pay the tax on the grounds that it violated the Lateran Treaty of 1929. While the stalemate continued, Pope Paul VI found a remedy that would not only avoid the issue of direct Italian taxation but also eliminate much of the pejorative publicity about its investments in Italy. The Vatican bank would transfer most of its investments to anonymous companies in Liechtenstein, Panama, and other secretive offshore centers. These companies would be separated from the Vatican by many layers of banks and other intermediaries. This move would also be invisible to Italian tax collectors, since no worldly authority, not even the Italian government, had the right to inspect Vatican records. To effect this change, the Vatican required the help of banks that could, with utter secrecy, set up these anonymous accounts for it and assist in transferring its assets to them.

  The bank in Milan that Pope Paul VI initially turned to for help was the small and, as its name implied, extremely private, Banca Privata Finanziata. It was run by a highly successful financier named Michele Sindona, who was expert at maneuvering funds offshore.

  The liaison with Sindona eventually grew dangerous. His banking empire became entangled in criminal investigations, and some of the banks he controlled went bankrupt. As concerns mounted in 1969, Sindona was summoned to the Apostolic Palace in the Vatican for a meeting with Pope Paul VI; Cardinal Alberto di Jorio, the President of the Vatican Bank; and Cardinal Sergio Guerri, the head of the commission responsible for the administration of the Vatican city-state. Sindona was then told that although he would be allowed to complete the current transactions that he was undertaking for the Vatican, he would then have to step aside. Marcinkus was the man the pope put in charge of replacing Sindona’s Banca Privata Finanziata. At the time, Marcinkus was only a forty-nine-year-old American priest, with, as he put it, “not the slightest knowledge about banking.” Marcinkus first served Pope Paul VI as an English translator on his trips to America and then as his personal bodyguard. His mission now, as he saw it, was to untangle Sindona’s convoluted machinations, and to find a new bank to replace Sindona’s. The bank he found was the venerable Banco Ambrosiano, which was named after the patron saint of Milan, and located on Via Clerica in that city.

  There was much that he liked about the Banco Ambrosiano. It had been originally founded and owned by priests in Milan in 1896. For decades, this bank was headed by Franco Ratti, the nephew of Pope Pius XI, and then by Duke Gallerati Scotti, a trusted friend of Pope Paul VI’s from Milan. Aside from the personal connections, the Vatican then owned the largest single block of stock in the Banco Ambrosiano. Its new chairman, Carlo Canesi, and its general manager, Roberto Calvi, also seemed eminently trustworthy to Marcinkus. But Pope Paul VI wanted to be absolutely sure of the relationship, so Marcinkus with, as he put it, “the pope’s seal of approval,” arranged for the Vatican bank to sell the Banco Ambrosiano the controlling interest it held in the Banca Cattolica del Veneto, a Venice bank with more than 100 branches. Aside from the official price of $30 million, the Vatican bank also got a secret side payment of $6.2 million. This money, channeled into the Vatican’s subsidiaries in Liechtenstein, was then used by Calvi to buy for the Vatican enough additional shares in the Banco Ambrosiano to give it control of his bank.

  Calvi, the son of a bank clerk, who would succeed Canesi as chairman, consolidated the Vatican’s anonymous holding companies under a wholly owned subsidiary in the Bahamas, called the Cisalpine Overseas Bank (Nassau). This entity, based in Nassau and controlled from a small office in Monte Carlo, became the center of a dizzying daisy-chain of money transfers and borrowing. With the pope’s approval, Marcinkus became president of the Vatican bank, and he served on the board of this subsidiary in the Bahamas.

  Initially, Marcinkus continued, Calvi was able to generate huge profits for the Vatican, but there was still a problem with Sindona. In November 1977, Sindona, who had been arrested in New York for making false statements in his attempt to take over an American bank, demanded that Calvi pay him nearly $10 million. Sindona claimed that he was owed this money as a “commission” and needed it for his legal expenses in America. When Calvi refused, Sindona carried out a threat to ruin Calvi.

  On November 13, 1977, employees of the Banco Ambrosiano were stunned to find the walls of the surrounding buildings of Milan’s financial center plastered with giant white, yellow, and blue posters revealing in great detail the ultra-secret transactions of the bank. The event, which became known in Italy as the day of the “tazebas,” or Chinese banners, since the excess of colorful posters made the financial district of Milan look like Beijing, had been organized by Sindona. Since he had been privy to the secret transfers, the wall posters had revealed the numbered accounts in Switzerland through which passed the secret side payments that had been used by Calvi and the Vatican bank to get control of the Banco Ambrosiano. In addition, they contained three questions which, if correctly answered, would expose the sham transactions between the Vatican bank and the Banco Ambrosiano. Calvi ordered that the posters be ripped down, but it was too late, since Sindona had also sent an anonymous letter to the Bank of Italy detailing the transactions. The Bank of Italy, the central bank of Italy, had no choice but to launch an investigation.

  To make matters worse for both Calvi and Marcinkus, the court-appointed liquidator of Sindona’s banks, Mario Ambrosoli, reported that in Sindona’s records he had found coded evidence of a $6.5-million illegal payoff to an “American bishop and Milanese banker.” The press suggested that the bishop was Marcinkus and the banker, Calvi. Before Ambrosoli could go further in unraveling the code, Ambrosoli was shot dead at point-blank range in front of his home by two unidentified men. While his evidence may have been problematic, his silencing further amplified the furor over the posters.

  Marcinkus’ position was further weakened by a series of “unfortunate events,” as he put it. First, Pope Paul VI, his main supporter, died in August 1978. Shortly afterward, his successor, Pope John Paul, also abruptly died. Then the election of the first non-Italian pope in seven centuries, John Paul II, left the Curia in disarray. In addition, Luigi Mennini, who was then the chief aide to Marcinkus at the Vatican bank, was arrested in Italy for currency manipulation. As the pressure built, the new pope appointed a commission of fifteen cardinals to study the finances of the Vatican.

  Calvi was also making threats, according to Marcinkus. In May 1981, Calvi was arrested for violating Italy’s foreign-exchange regulations and convicted. He was then taken to the medieval Lodi prison and put into a cell with four terrorists, who kept him awake day and night talking and playing a radio. Calvi warned Marcinkus, “This trial is called IOR,” the Italian initials of the Vatican bank. (According to Calvi’s son, Carlos Calvi, Marcinkus sent a message back, “Our problems are your problems too.”) Calvi then attempted suicide by slashing his wrists and swallowing an overdose of barbiturates. Then on July 20, 1981, after spending two months in Lodi, Calvi was released on bail while the appeal of his four-year sentence was processed, and he resumed work as head of the Banco Ambrosiano.

  But the Bank of Italy was pressing to see the books of the bank’s overseas subsidiaries, and so Calvi continued to ask Marcinkus to help. But Marcinkus could not acknowledge the debt of the anonymous companies, since doing so would bankrupt the Holy See. When Marcinkus turned him down, Calvi turned to records in the vault of the Banco Ambrosiano’s banking subsidiary in Switzerland that he claimed would establish the Vatican’s ownership of the subsidiaries. The chief accountant of the Vatican bank, Pellegrino de Strobel, was then dispatched to Switzerland to view the secret records. Since they appeared to substantiate Calvi’s claim, the fatal deal was made: Marcinkus’ deputy acknowledged that the Vatican bank controlled the eight anony
mous companies, and Calvi provided the Vatican bank with the letter releasing the Vatican from any liability arising from the activities of these anonymous companies. The problem now confronting Marcinkus was that key documents pertaining to this arrangement had vanished along with Calvi.

  As it turned out, Calvi could speak from the grave. In the summer of 1982, a special committee of inquiry in Parliament eerily heard Calvi’s posthumous recollections on tape. Flavio Carboni, the Sardinian who had help organized Calvi’s escape from Italy, had kept a microphone concealed behind his lapel during his final conversations with Calvi. These tapes had been seized when Carboni was arrested in Switzerland. On them, Calvi rambled on for no less than ten hours. At one point, Calvi recounted a conversation he had had with Marcinkus, claiming to have warned him “Be careful … if it comes out that you gave money to Solidarity, there won’t be one stone of the Vatican left standing.” (He was referring to the Polish labor union movement that helped undermine the Soviet Union’s control of Poland.)

  Marcinkus stonewalled Italian regulators, stating that Calvi was the sole author of the machinations. Italian authorities then issued subpoenas, but they were returned unopened on the basis that the Vatican was not subject to the laws of Italy. Finally, on August 6, 1982, the minister of finance, Beniamino Andreatta, ordered the Banco Ambrosiano liquidated and all its assets turned over to a new consortium of banks. The Vatican’s controlling block of stock in the bank was worthless. The missing $1.2 billion was never recovered.

  Why had the Vatican engaged in these massive transactions? “You can’t run the church on Hail Marys alone,” Archbishop Marcinkus told me. As for the details of the transfers, he said the pope had entrusted two lay bankers with this task: Sindona, with whom the Pope had met personally, and Calvi. “They and they alone know,” he concluded. Calvi was dead, but Sindona was in prison in the United States.

  I went to see Sindona in Otisville Federal Prison in upstate New York in April 1984. Born in Patti, Sicily, in 1920 and educated by Jesuit priests, Sindona had become one of the most successful financiers in Europe and the principal financial advisor to the Vatican by the time he was forty-three. Then, in March 1979, he was indicted by a U.S. federal grand jury on charges of fraud proceeding from his 1972 takeover of the Franklin National Bank. Although released on bond, he was required to remain in New York. Sindona instead staged his own kidnapping and fled in disguise to Italy. When arrested three months later, he was tried, convicted, and sentenced to twenty-five years in prison.

  When I met him in the Otisville prison visiting room, the grey-haired financier appeared frail and nervous. After asking me to buy him a vanilla ice cream, we began the one-hour interview. He came right to the point, saying that he had only done what Pope Paul VI had instructed him to do: shift the Vatican’s Italian assets to tax-free offshore havens. When I asked him about the formerly anonymous entities, some of which had been found to have the code-names “Suprafin,” “Zitropo,” and “Manic,” he said that they themselves were merely vehicles to hide the transfers of money. It was, as he described it, purely a money laundering scheme, which he said was “legal” because the Vatican was sovereign. With the help of Calvi, the money had been deposited in dozens of letter-box companies, which then borrowed against them from the Banco Ambrosiano and sent the proceeds to other offshore entities.

  If so, why couldn’t the funds be recovered? Sindona answered that the Vatican, again with Calvi’s help, had used these funds to make “questionable investments.” As an example, he cited the Vatican’s attempt to buy control of Rizzoli, which owned Italy’s largest newspaper, the Corriere della Sera. “I don’t know how much was lost,” he said; by that time, Sindona said, he was no longer advising the Vatican.

  He claimed to know nothing about Calvi’s death, but added, as I was leaving the room, that he might have a similar fate if he was ever sent back to Italy. It was the last time I saw Sindona. On September 25, 1984, he was extradited to Italy, and on March 18, 1986, he died in a prison in Rome from a dose of cyanide in his coffee, a death ruled a suicide.

  IV.

  When Calvi was arrested the year before his death in Milan, it was on a questionable technicality about an incident that had occurred a decade earlier. His bank had arranged legal currency transfers in 1971 that were held by a magistrate to violate a retroactive 1976 foreign-exchange law. Along with Calvi, six other former and present executives of the Banco Ambrosiano were arrested. Mass arrests of bankers by magistrates on technical offenses had by the 1980s become common in Italy. Because Calvi spent two months in Lodi prison, on getting out, he was determined to pay whatever was needed to be paid to get political protection against future imprisonment. “It is a question of surviving in a climate that is becoming like a religious war,” he said in a newspaper interview. “It is an atmosphere that favors every sort of barbarism.”

  The person who offered Calvi such protection in this “religious war” was Licio Gelli. A mattress-spring manufacturer and poet from Arezzo, Gelli claimed to run a powerful web of influence in the form of a Masonic lodge in Rome called Propagandi Due, or P-2. This secret society, according to a sixty-four-volume investigation by a commission of the Italian Parliament, included forty-three members of Parliament, forty-eight generals, the heads of Italy’s intelligence service, the top magistrates in the judiciary system, the civil servants running various state-owned enterprises (including the energy company ENI), key bank regulators, and leading businessmen.

  The report concluded that P-2 was a veritable “state within a state.” The commission had come to these conclusions largely based on the files of Gelli and his close associates, but most of those named in them denied any such membership in Gelli’s secret lodge. Nor did P-2 ever hold meetings or conduct ordinary Masonic business, as is prescribed by Freemasonry. Whether any of powerful individuals were actually members of P-2 or whether the lists were part of a con game staged by Gelli, as long as people believed it existed, P-2 provided a highly profitable clearing house for businessmen interested in buying influence or protection from government officials. For these transactions, Gelli acted as the go-between, deal-maker, and record-keeper. Gelli extracted a heavy price from Calvi for arranging political protection, which, as it turns out, was never provided.

  In accordance with Gelli’s instructions, Calvi transferred $21 million to a South American bank. Calvi later told three magistrates investigating the P-2 lodge that Gelli was funneling the money through intermediaries to top officials of Italy’s Socialist Party, who presumably would intervene with bank regulators on the behalf of the Banco Ambrosiano. There were also much larger diversions that he elected not to tell the magistrates about. In 1982, Juerg Heer, the executive director of the credit section of Zurich’s powerful Rothschild Bank, witnessed some extraordinary transfers from Calvi’s Luxembourg subsidiary to a Gelli-controlled corporate shell in Panama called Bellatrix. According to Heer, these loans, which amounted to $142 million, were temporarily deposited by Bellatrix at the Rothschild Bank, and then were used by Bellatrix to buy shares in Rizzoli at ten times their market value from Gelli and his associates. By this trick, almost 90 percent of the $142 million of the Banco Ambrosiano loan went into the pockets of Gelli and his associates, according to Heer. This diversion became so blatant by the spring of 1982 that the Rothschild Bank director assisting Bellatrix warned Heer, “We have to find a solution or I will end up in Lake Zurich.” The solution Heer found was to temporarily put the Bellatrix money into two different accounts at the bank. One was called Zirka; the other Reciota. They both supposedly were controlled by an independent fiduciary agent. Nevertheless, the money was released into other numbered accounts controlled by Gelli and then disappeared. All that Calvi’s Luxembourg subsidiary had as collateral was the Rizzoli shares, which were now worth only a small fraction of the money it had loaned. Making matters worse for Calvi, Italian law had been changed in 1982 and now blocked the transfer of these Rizzoli shares to the bank’s Luxembourg s
ubsidiary. So Calvi informed Gelli that the Rizzoli deal had not been consummated and that the $142 million loaned to the Gelli entities still belonged to his bank. According to Calvi’s personal assistant, as late as June 1982, Calvi counted on this diverted money as a “reserve fund,” and part of Calvi’s purpose in secretly slipping out of Italy in 1982 was to get the Bank Rothschild in Zurich to return the Bellatrix money from the numbered accounts. It was a destination he never reached.

  The only further instructions Heer received in Zurich came from one of Gelli’s associates shortly after Calvi’s body was identified. According to Heer, he was requested to carry out a “secret operation.” It involved some $5 million in cash packed in a suitcase that was delivered to him at the Rothschild Bank. The money supposedly had come from one of Gelli’s numbered accounts in Geneva. Heer also received, along with the suitcase, one-half of a $100 bill. Following Gelli’s associate’s instructions, he gave the suitcase to two strangers who later arrived at the bank with the matching half of the bill, and who left with the suitcase in an armored limousine.

  Less than three months later, on September 13, 1982, Gelli was arrested in Switzerland after making a $55-million withdrawal from the same numbered account in Geneva. The subsequent investigation uncovered records showing that this money had come from the money Calvi had diverted through Bellatrix, confirming Heer’s account of the Rothschild transactions. (Heer was subsequently sued by the Rothschild Bank for exceeding his authority in arranging these loans, and, as a result, imprisoned for two months.)

  Gelli then escaped from the Champ-Dollon Prison outside of Geneva and went to Argentina. In Italy, Gelli was sentenced in absentia to eight years for financing terrorism in Florence, and another fourteen months for money-laundering in San Remo. In 1987, Gelli surrendered in Chile and was sentenced to two months in prison in Switzerland. In February 1988, he was extradited back to Italy, accompanied by two armored cars and one hundred soldiers, to face trial in Bologna for slander. Although an appeals court threw out his conviction for slander, in 1992 he was convicted and sentenced to eighteen years and six months for fraud in connection with the diversion of money from Calvi’s Banco Ambrosiano. Before he could be imprisoned, he fled to France. By the time he was found on the Riviera, he was over eighty, and under Italian law, too old to be imprisoned in Italy. Finally, in 2005, at the age of eighty-six, he was implicated in the murder of Calvi, but acquitted in a subsequent trial.