by David Yallop
At the 1929 rate of exchange this package represented 81 million dollars. A 1984 equivalent figure is approximately 500 million dollars. Vatican Incorporated was in business. It has never looked back.
To handle the windfall, Pope Pius XI created on June 7th, 1929 The Special Administration. He appointed to run the Department the layman Bernardino Nogara. Apart from having many millions of dollars to play with, Nogara had another very important asset. One hundred years earlier the Roman Catholic Church had completely reversed its position on money lending. The Church can rightfully claim to have changed the meaning of the word usury.
In the classic sense usury means all gains from money lending. For over eighteen hundred years the Roman Catholic Church had dogmatically stated that the charging of any interest on a loan was absolutely forbidden as being contrary to Divine Law. The prohibition was restated in various Church Councils: Arles (AD 314), Nicea (325), Carthage (345), Aix (789), Lateran (1139) – at this Council usurers were condemned to excommunication – various State Laws made the practice legal. It was still heresy, that is, until 1830. Thus, by courtesy of the Roman Catholic Church, usury now means lending money at exorbitant rates of interest.
Self-interest produced a total reversal on the Church’s teaching with regard to money lending. Perhaps if celibacy was no longer the rule for priests it might move the Roman Catholic Church’s teaching on birth control.
Nogara was a member of a devout Roman Catholic family; many of its members made in a variety of ways significant contributions to the Church. Three of his brothers became priests, another became director of the Vatican Museum but Bernardino Nogara’s contribution was by any standards the most profound.
Born in Bellano, near Lake Como, in 1870, he achieved early success as a mineralogist in Turkey. In 1912 he played a leading role in the peace treaty of Ouchy between Italy and Turkey. In 1919 he was again a member of the Italian delegation that negotiated the peace treaty between Italy, France, Britain and Germany. He subsequently worked on behalf of the Italian Government as a delegate to the Banca Commerciale in Istanbul. When Pope Pius XI was seeking a man capable of administering the fruits of the Lateran Treaty, his close friend and confidant Monsignor Nogara suggested his brother Bernardino. With that selection Pius XI struck pure gold.
Nogara was reluctant to accept the job and did so only when Pope Pius XI agreed to certain conditions. Nogara did not wish to be trammelled by any traditional views the Church might still hold about making money. The ground rules Nogara insisted upon included the following:
1 Any investments he chose to make should be totally and completely free of any religious or doctrinal considerations.
2 He would be free to invest Vatican funds anywhere in the world.
The Pope agreed, and opened the doors to currency speculation, and to playing the market in the Stock Exchange, including the buying of shares in companies whose products were inconsistent with Roman Catholic teaching. Items such as bombs, tanks, guns, and contraceptives might be condemned in the pulpit but the shares Nogara bought for the Vatican in companies which manufactured these items helped to fill the coffers in St Peter’s.
Nogara played the gold market and the futures market. He bought Italgas, sole supplier of gas in many of Italy’s cities, placing on the Board on behalf of the Vatican Francesco Pacelli. Pacelli’s brother became, in time, the next Pope (Pius XII) and the nepotism which stemmed from that Papacy was manifest throughout Italy. The rule became ‘if there is a Pacelli on the Board, six to four it belongs to the Vatican’.
Among the banks that came under Vatican influence and control through Nogara’s purchases were Banco di Roma, Banco di Santo Spirito and Cassa di Risparmio di Roma. The man clearly not only had a way with money, he was fairly gifted in the art of persuasion. When Banco di Roma was floundering and threatening to take with it a large amount of Vatican money, Nogara persuaded Mussolini to take over the bank’s largely worthless securities and transfer them to a Government holding company, IRI. Mussolini also agreed that the Vatican should he reimbursed, not at the current market value of the securities, which was virtually nil, but at their original purchase price. IRI paid Banco di Roma over 630 million dollars. The loss was written off by the Italian treasury, which is another way of saying the ordinary people picked up the bill, just as they had been doing for the clerics since the Middle Ages.
Much of the speculation Nogara indulged in on behalf of the Vatican certainly contravened Canon Law and probably Civil Law, but as his client was the Pope, who was not asking questions, Nogara remained untroubled by such niceties.
Using Vatican capital, Nogara acquired significant and often controlling shares in company after company. Having acquired a company he rarely sat on the Board, preferring to nominate one of the trusted Vatican elite to look after the Church’s interests.
The three nephews of Pius XII, Princes Carlo, Marcantonio and Giulio Pacelli, were among the inner elite whose names began to appear as directors on an ever-growing list of companies. These were the Church’s ‘uomini di fiducia’, men of trust.
Textiles. Telephone communications. Railways. Cement. Electricity. Water. Bernardino Nogara was everywhere. When Mussolini needed armaments for his invasion of Ethiopia in 1935, a substantial proportion was supplied by a munitions plant which Nogara had acquired on behalf of the Vatican.
Realizing, before many, the inevitability of the Second World War, Nogara moved part of the assets then at his disposal into gold. He bought 26.8 million dollars’ worth of gold at 35 dollars per ounce. Later he sold 5 million dollars’ worth on the free market. The profit on the sale was in excess of the 26.8 million dollars he had paid for the entire original quantity. His speculations in gold continued throughout his control of Vatican Incorporated: 15.9 million dollars’ worth bought between 1945 and 1953; 2 million dollars’ worth sold between 1950 and 1952. My research indicates that 17.3 million dollars’ worth of that original purchase is still held on deposit on behalf of the Vatican at Fort Knox. At the current market price that 17.3 million dollars, originally purchased at 35 dollars per ounce, is now worth a figure approaching 230 million dollars.
In 1933 Vatican Incorporated again demonstrated its ability to negotiate successfully with Fascist governments. The Concordat of 1929 with Mussolini was followed with a Concordat between the Holy See and Hitler’s Reich. Solicitor Francesco Pacelli had been one of the key figures in the Mussolini agreement; his brother Cardinal Eugenio Pacelli, the future Pius XII, had a leading role as the Vatican’s Secretary of State in concluding a treaty with Nazi Germany.
Hitler saw many potential benefits in the treaty, not least the fact that Pacelli, a man already displaying marked pro-Nazi attitudes, might prove a useful ally in the approaching World War. History was to prove that Hitler’s assessment was accurate. Despite a great deal of world pressure, Pope Pius XII declined to excommunicate either Hitler or Mussolini. Perhaps his refusal was based on an awareness of just how irrelevant he was. His was a Papacy which affected neutrality, which talked to the German episcopate about ‘just wars’ and did precisely the same to the French bishops. This resulted in the French bishops supporting France and the German bishops supporting Germany. His was a Papacy which declined to condemn the Nazi invasion of Poland because, he said, ‘We cannot forget that there are forty million Catholics in the Reich. What would they be exposed to after such an act by the Holy See?’
For the Vatican, one of the major assets to emerge from the very lucrative deal with Hitler was confirmation of the ‘Kirchensteuer’, Church Tax. This is a State tax which is still deducted at source from all wage-earners in Germany. One can opt out by renouncing one’s religion. In practice few choose to. This tax represents between 8 and 10 per cent on income tax collected by the German Government. The money is handed over to the Protestant and Catholic Churches. Substantial amounts derived from the Kirchensteuer began to flow to the Vatican in the years immediately preceding the Second World War. The flow continued through
out the war, 100 million dollars in 1943, for example. In the Vatican Nogara put the German revenue to work alongside the other currencies which were pouring in.
On June 27th, 1942, Pope Pius XII decided to bring another part of the Vatican into the modern world and into the ambit of Bernardino Nogara. He changed the name of the Administration of Religious Works to the Institute for Religious Works. The change did not capture the front pages of the world’s newspapers; they were rather preoccupied with the Second World War. The IOR, or the Vatican Bank as it is known by all but the Vatican, was born. ‘Vatican Incorporated’ had sired a bastard child. The original function of the Administration, set up by Pope Leo XIII in 1887, had been to gather and administer funds for religious works; it was in no sense a bank. Under Pius, its function became ‘the custody and administration of monies (in bonds and cash) and properties transferred or entrusted to the Institute itself by fiscal or legal persons for the purposes of religious works, and works of Christian piety’. It was, and is, in every sense a bank.
Nogara took to reading the terms of the Lateran Treaty very closely, particularly Clauses 29, 30 and 31 of the Concordat. These dealt with tax exemptions and the formation of new, tax-exempt ‘ecclesiastical corporations’ over which the Italian State would have no control. Interesting discussions began about the meaning of the phrase ‘ecclesiastical corporations’. Doubtless distracted by other events of the time, Mussolini took a liberal view. On December 31st, 1942, the Finance Ministry of the Italian Government issued a circular stating that the Holy See was exempt from paying the tax on share dividends. It was signed by the then Director General of the Ministry, who was called quite appropriately Buoncristiano (Good Christian). The circular specified the various organizations within the Holy See which were exempt from the tax. The list was long and included The Special Administration and the Vatican Bank.
The man whom Nogara selected to control the Vatican Bank was Father, later Cardinal, Alberto di Jorio. Already functioning as Nogara’s assistant in The Special Administration, he kept a foot in both sections by retaining that position and assuming the role of First Secretary, then President, of the Vatican Bank. Apart from the controlling interests in many banks outside the Vatican walls which Nogara acquired, he now had two in-house banks to play with.
Nogara, applying his mind to the task of increasing the Vatican’s funds, went from strength to strength. The tentacles of ‘Vatican Incorporated’ spread world wide. Close links were forged with an array of banks. Rothschilds of Paris and London had been doing business with the Vatican since the early nineteenth century. With Nogara at the Vatican’s helm the business increased dramatically: Crédit Suisse, Hambros, Morgan Guarantee, The Bankers Trust Company of New York – useful when Nogara wanted to buy and sell stock on Wall Street – the Chase Manhattan, and Continental Bank of Illinois among others, became Vatican partners.
Nogara was evidently not a man with whom to play Monopoly. Apart from banks, he acquired for the Vatican controlling interests in companies in the fields of insurance, steel, financing, flour and spaghetti, mechanical industry, cement and real estate. With regard to the last named his purchase of at least 15 per cent of the Italian giant Immobiliare gave the Church a share of an astonishing array of property. Società Generale Immobiliare is Italy’s oldest construction company. Through its ownership of the building firm SOGENE, Immobiliare, and therefore to a significant degree the Vatican, owned after its 15 per cent acquisition: the Rome Hilton; Italo Americana Nuovi Alberghi; Alberghi Ambrosiani, Milan; Compagnia Italiana Alberghi Cavalieri; and Soc. Italiani Alberghi Moderni. These are just the major hotels in Italy. The list of major buildings and industrial companies also owned is twice as long.
In France they built a huge block of offices and shops at 90 Avenue des Champs Elysées, another at 61 Rue de Ponthieu, and another at 6 Rue de Berry.
In Canada they owned the world’s tallest skyscraper – the Stock Exchange Tower situated in Montreal – the Port Royal tower, a 224-apartment block, a huge residential area in Greensdale, Montreal . . .
In the United States they had five huge apartment blocks in Washington, including the Watergate Hotel, and in New York a residential area of 277 acres situated at Oyster Bay.
In Mexico they owned an entire satellite city of Mexico City called Lomas Verdes.
This list of properties is by no means exhaustive. Nogara also bought into General Motors, Shell, Gulf Oil, General Electric, Bethlehem Steel, IBM and TWA. If the shares moved, and moved upwards, it was men like Nogara who created the movement.
Although Nogara retired in 1954, he continued to give the Vatican his unique brand of financial advice until his death in 1958. Scant mention was made of the man’s passing by the Press, as the majority of his activities on behalf of the Roman Catholic Church had been cloaked in secrecy. This one man who demonstrated that, wherever Christ’s Kingdom might be, that of the Catholic Church was most assuredly of this world, was given a memorable epitaph by Cardinal Spellman of New York. ‘Next to Jesus Christ the greatest thing that has happened to the Catholic Church is Bernardino Nogara.’
Starting with 80 million dollars, less the 30 million dollars that Pius XI and his successor Pius XII held back to spend on regional seminaries and parish houses in South Italy, the building of Santa Maria and the massive building projects in Rome, including the setting up of the Vatican library and art gallery, Nogara had created Vatican Incorporated. Between 1929 and 1939 he had also had access to the annual world-wide collection of Peter’s Pence. With the ‘pennies’ of the faithful plus the lire from Mussolini and the Deutschemarks from Hitler, he handed on to his successors a complex array of financial interests worth at a very conservative estimate 500 million dollars controlled by the Special Administration, 650 million dollars controlled by the Ordinary Section of the APSA, and assets in the Vatican Bank in excess of 940 million dollars, with an annual profit from the Bank averaging 40 million dollars going directly to the Pope. In capitalistic terms, Nogara’s service in the cause of the Roman Catholic Church was an incredible success. Viewed in the light of the message contained in the Gospels it was an unmitigated disaster. The Vicar of Christ was now Chairman of the Board.
Four years after Nogara’s death in 1958 the Vatican had urgent need of his expertize. The Italian Government of the day had raised the spectre of taxing share dividends again. What followed has a direct bearing on a sequence of disasters for the Vatican, including Mafia involvement, financial mayhem and murder. That would begin in 1968.
In any list of years purporting to be the worst in the Church’s history, 1968 should feature very near the top. It was the year of Humanae Vitae. It was also the year when The Gorilla and The Shark, as they were known, were let loose on the two Vatican banks. The Gorilla is Paul Marcinkus; the Shark, Michele Sindona; and the events which led to their control of Vatican finances make salutary reading.
Benjamin Franklin said, ‘But in this world nothing can be said to be certain except death and taxes.’ Not many have chosen to argue with that statement. Among the few who have are the men who control the Vatican’s finances. They have made strenuous attempts to eliminate taxes.
In December 1962 the Italian Government passed legislation taxing the profits on share dividends. Initially the tax was set at 15 per cent. Then it went the way of all taxes and was doubled.
The Vatican at first raised no objection to paying the tax, at least not publicly. Privately, through diplomatic channels, it advised the Italian Government that: ‘In the spirit of our Concordat and considering the Law of 2nd October 1942, it would be desirable that a favourable treatment be granted to the Holy See.’ Negotiations had begun.
The secret letter from Vatican Secretary of State, Cardinal Cicognani, to the Italian Ambassador to the Holy See, Bartolomeo Mignone, goes on to detail exactly what the ‘favourable treatment’ should be: tax exemption for a list of departments as long as a cardinal’s arm, including of course the two Vatican banks, The Special Administrati
on and the IOR.
The Vatican wanted to play the market but not to pay for the privilege. The minority Vatican-backed Christian Democrat Government of the day touched its forelock, kissed the Papal ring and agreed to the Vatican’s request. No reference was made to the Italian Parliament or to public opinion. When the minority Government fell, to be replaced by Christian Democrat Aldo Moro with a coalition of Christian Democrats and Socialists, the post of Finance Minister went to Socialist Roberto Tremelloni. He was disinclined to approve what was clearly an illegal agreement made by his predecessor, made furthermore without being ratified by Parliament and, even more important, made eight days after the government had resigned.
Aldo Moro, confronted with a Finance Minister threatening to resign on the one hand and an intransigent Vatican on the other, sought a compromise. He asked the Vatican to submit a statement of its shareholdings as a prelude to obtaining exemption. Not unreasonably, the Prime Minister felt that the Italian nation should know of just how much money they were being deprived. The Vatican refused to reveal the details and talked loudly about being a Sovereign State. Apparently it is perfectly permissible to exploit the stock market of another Sovereign State and make profits from the exploitation, but the exploited State is not allowed to know by just how much it is being exploited.
Various governments came and went. The issue was discussed from time to time in the Italian Parliament. At one point in 1964 the Vatican indicated just how far they had abandoned Christ’s dictum ‘my kingdom is not of this earth’ and had embraced instead the teachings of Bernardino Nogara: ‘Increase the size of your Company because fiscal controls on the part of Government become advantageously difficult.’ The ‘Company’ to which Nogara was referring was Vatican Incorporated, the ‘Government’ those unfortunates across the Tiber, who were obliged to deal with an off-shore tax-haven in the middle of Rome.