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

by Gerald Posner

  Only three months after taking office, John XXIII stunned everyone by calling for only the second Vatican Council in the church’s two thousand–year history.90 All its cardinals, scholars, and 2,500 bishops had to trek to Rome for wide-ranging discussions about possibly changing everything, including the liturgy, how bishops were selected, and streamlining and reducing the power of the Curia.91 Although it would not start until the following year, it confirmed the fear of Spellman, Siri, and others that the congenial John was at best unpredictable.92

  But to the relief of Maillardoz, Spada, and Mennini, the new Pope did not tinker with the IOR and Special Administration. Vaticanologists interpreted di Jorio’s elevation to cardinal as an endorsement of his oversight of the Vatican Bank. Even Pius’s titled nephews retained their positions.

  In sharp contrast to Pius, Pope John did not have a reputation as a micromanager. During his tenure as the cardinal of Venice he was known as an easygoing, hands-off overseer who had an aversion to administration and instead let capable assistants run the diocese’s bureaucracy.93 He was uncomfortable with finances and even in discussing money.94 Maillardoz, Spada, and Mennini were on their own.

  One of the first steps they took was to boost the IOR’s reserves by taking advantage of Italy’s need for land to host the 1960 summer Olympics. They sold some of the church’s Roman real estate to the Italian National Olympic Committee. The church owned about 102 million square feet of property around Rome, making it not only the largest nongovernmental landowner, but also the only sovereign state on the planet that owned more property outside its borders than within.95 The Vatican sold enough at premium prices so that Italy could build fifteen stadiums and complete the work on the Leonardo da Vinci–Fiumicino International Airport. There was criticism from the political left that the prices were too high. So when the government needed more land to build the Olympic Highway to connect the split sports complexes, the Vatican again profited but this time used a front company to provide the property.96

  But the successors to Nogara were under no illusion. They realized the outsized gains earned from the frenzied Olympics preparations were a one-off event. They would have to apply Nogara’s principles about steadily accumulating profits through conservative investments. They embraced Bernardino’s belief that the future of the Vatican’s finances lay with men of confidence. It was a decision that would lead Nogara’s successful creation to the edge of ruin and in the process tarnish the Vatican itself.

  * * *

  I. Volpi had thought it would take a generation to rebuild the war-ravaged Italian insurance industry. But the Allies wanted all of the industries, including insurance, revived faster because of the Cold War. Restarting the private sector in Italy and Germany was the best way to ensure that the communist parties in those countries could not make gains by exploiting terrible tales of postwar poverty and economic paralysis. The Allies relinquished oversight of private industry to the Italians in 1947; Generali was up and running just months later, with all of its assets reinsured by American companies. Although the U.S. military command complained that the new Generali leadership consisted of some hard-core fascists, it no longer had the jurisdiction to do anything about it.32

  II. No one inside the Vatican knew that Galeazzi-Lisi was a secret source of information about the Pope’s health and sometimes even some general church gossip for newspapers and magazines. Many had him on a regular retainer. Paul Hoffman, then a junior reporter at The New York Times Rome desk, dropped off the doctor’s “retainer fee in an envelope” at his central Rome office. “On the phone he always introduced himself as ‘Dick’ . . . because the Vatican phones were being tapped by the papal police,” Hoffman later wrote. The Times “didn’t know at the time that he was receiving more such envelopes from other clients.”53

  III. In 1944, Roncalli received a coded cable in Istanbul informing him of his appointment as the Nuncio to liberated Paris. Incredulous, he rushed to Rome. He met with Monsignor Tardini in the Secretary of State’s office. “Are you mad?” he asked. “How could you think of asking me to take such a difficult post?” The normally voluble Tardini looked at him quietly for a moment before responding: “You may be sure all of us here were more surprised than you.”70

  14

  The Men of Confidence

  A few months before he died, Nogara met thirty-eight-year-old Michele Sindona, one of the country’s preeminent tax attorneys. The lean, five-foot-ten Sindona had a widespread reputation for a rare combination of smarts and charm (a business colleague called him a “snake charmer in the business of seduction”).1 The Sicilian-born Sindona had made his reputation in Nogara’s hometown of Milan, one of the few southern Italians to carve out such success in the country’s elitist north. The eldest of two brothers born into a dirt-poor family in 1920, Sindona was a gifted student who won a full scholarship that helped lift him out of grinding poverty.2 During World War II he learned enough English to work as a translator for the U.S. Command.3 He also earned a law degree at the University of Messina and after a few years in the legal unit of Sicily’s tax department, he moved north with his wife and daughter.4 He boasted he spoke Italian without any accent that betrayed his southern roots, a plus in Milan, which offered business opportunities that matched the scope of his ambition.5 It was there in 1950 that Sindona met Monsignor Amleto Tondini. Sindona’s cousin Anna Rosa was married to the priest’s younger brother.6 Tondini was an admired Latinist, running the Secretariat of Briefs to Princes and of Latin Letters, a small Curia department responsible for Latin editions of Papal encyclicals and correspondence. He was also a close friend of Monsignor Montini, then still running the church’s refugee efforts in Rome. Sindona and Tondini instantly liked each other.7 To help the unassuming thirty-year-old attorney, who had a seemingly conservative approach to business, the monsignor suggested he consider doing some legal work for the Vatican.8 Sindona was agreeable. Tondini wrote to Massimo Spada, by then titled a Prince by Pius XII, asking that Sindona be put on Spada’s list for any legal services the IOR might require in Milan.9

  When Spada met Sindona he thought the attorney was “young, skinny and nervous” but also “a stimulating conversationalist.” He called the owners of Italy’s largest textile industrial group and a giant electrical utility, both of which the Vatican had stakes in, and asked them to send some business to Sindona. The work did not turn out to be that much. But on occasional visits to Rome, Sindona stopped by the IOR and developed a good relationship with the men in charge. His break came in 1954 from outside the IOR. Soon after Pius surprised everyone by dispatching Montini to Milan, Monsignor Tondini introduced the new archbishop to the young lawyer. They had more in common than either might have expected. They shared conservative views on a broad range of social and political issues and were pleasantly surprised to discover a mutual dislike for fascism. Montini’s father had been a politically active lawyer who was known for his distaste for Mussolini.10 When Sindona was attending university, he had refused to wear the military-style uniform Il Duce mandated for students. The school lowered his grade point average in punishment.11 It was not long before Sindona boasted to friends and family about the bond the two men had formed.12

  Montini told Sindona about his disappointment that the Milan to which he returned was an urban bastion of Italy’s communist movement. The city was one of the few that had voted for the red ticket in the 1948 elections. And it had tilted even further left since then, with a remarkable 40 percent of its 3.5 million residents registered as communists.

  Montini wanted to rally the working class for the church and its candidates. He decided to visit the area’s mines, celebrate Mass in the city’s blue-collar neighborhoods, and tour local factories. Pietro Secchia, a communist labor leader whose agenda had no room for an archbishop who might strike a populist chord, tried blocking him from offering Mass at the city’s plants.13 Montini turned to Sindona, whose fervent capitalism made him a natural anticommunist ally. Among his clients, Sindona coun
ted owners of the city’s major mills and factories. He and Montini soon stopped daily at the factories. Sindona and the archbishop tried convincing the workers that their best future was to be had by embracing capitalism and faith in God. Those visits had an impact. In a decisive vote the following year, Secchia lost control of his union to a conservative Christian Democrat rival.14 Montini owed Sindona for having proven a well-connected and effective ally.15

  The result for Sindona was a flurry of work from the IOR. His new services extended beyond Milan. He established more complicated legal structures for some of the church’s foreign transactions. Spada also arranged for Sindona some work at two Vatican-controlled firms, Società Generale Immobiliare and SNIA Viscosa.16

  In early 1959, shortly after Nogara’s death, Montini—John XXIII had made him a cardinal just a few months earlier—summoned Sindona to Milan’s lavish cathedral.17 A priest who sat a few pews behind later recounted that the men prayed before discussing business. Montini needed $2 million to build Casa Madonnina, a Catholic retirement home. Sindona said it was no problem. As he stood to leave, Sindona leaned over and assured Montini, “Don’t worry. I won’t abandon you.”18

  Sindona reportedly raised the money in a single day.19 Whether or not that was true it was an accepted fact inside Milanese business circles and Montini bragged about the young attorney’s miraculous fundraising to Spada and others at the IOR.I Italy was halfway through the postwar economic boom that Nogara had predicted. It was a founding member of the European Economic Community, a two-year-old organization of half a dozen European countries that hoped economic integration might better allow them to compete with the United States. Italians called the two decades that started in 1950 an “Economic Miracle,” a period during which the country led all European nations in per capita income (it had been a terrible laggard before the war).21 The country had a newfound confidence and no city reflected that more than Milan, the nation’s business capital. A story like Sindona raising a couple of million dollars so quickly for Montini no longer seemed improbable, but rather fit with the hubris that fueled the financial boom.

  In 1960 the Vatican and Sindona became partners. Massimo Spada had introduced Sindona to a client who wanted to sell his small Milanese bank, Banca Privata Finanziaria (BPF).22 BPF was unique since it operated as both a normal credit bank and offered services usually found only in boutique Swiss banks. BPF counted among its clients some of Italy’s leading patrician families and industrialists.23 The Vatican bought BPF through a proxy account at the Credito Lombardo and retained 60 percent while distributing the remainder to Sindona and his partners.24 At Spada’s request, Sindona arranged a front company so the IOR’s ownership remained secret.25

  Soon after that deal, the IOR started using BPF as its chief correspondent bank by which to conduct the church’s business in Milan. That October (1960), Cardinal di Jorio—who sometimes clashed with Spada over the direction of the IOR—insisted that the Vatican would be better served with only a minority stake in BPF. Sindona used his own interlocking web of Liechtenstein holding companies to become the majority owner.26 He then appointed Spada as a director.27 And no sooner had Sindona taken charge of the bank than he began buying Canadian real estate for himself and the Vatican through two Liechtenstein shells controlled by the church.28 When he sold those properties, the proceeds went to Swiss banks under the name of one of Sindona’s holding companies (Fasco). The IOR then instructed him how to reinvest the profits.29 Sindona’s legal background, plus the several years he had worked in the government tax office in Sicily, meant he knew how to thread the loopholes in Italy’s tax and money exchange laws, always minimizing the levy on any profits.30

  The following year, Sindona convinced Fidia—a holding company consisting of the IOR, FIAT, Pirelli, Generali, and the giant investment bank Mediobanca—to take an 80 percent stake in a resort development he planned along the Adriatic Riviera.31 He bought a controlling share of Geneva’s prestigious Banque de Financement. The IOR became a one-third partner.32 That became the model Sindona and the Vatican used for future bank takeovers.33

  The fast rise of a Sicilian in Milanese business circles led to backroom gossip that Sindona was Mafia sponsored.34 He dismissed it as the inevitable by-product of envy.35 Maillardoz, Spada, and Mennini knew Sindona’s record was unblemished when it came to serving the IOR. They gave no credence to the unsubstantiated rumors that found their way back to the Vatican. He had earned the right to be a man of confidence.

  When Cardinal Nicola Canali died in 1961, John XXIII was so consumed with preparations for the Second Vatican Council that he did not even initially replace him. Cardinal di Jorio was left as the chief prelate responsible for oversight of both the IOR and the Special Administration.36 Canali’s death had no effect on Sindona’s cozy relationship with the IOR.

  But another death in the Vatican did have an unintended impact on his standing with the church. On June 3, 1963, the Vatican announced the death of the eighty-one-year-old John XXIII. For months he had fought a losing battle against cancer.37 According to canon law, the Pope’s passing meant the Second Vatican Council, which had been under way for eight months, was suspended. The next Pope would have to bring it to a successful end. “It is notoriously easier to begin a Council than to conclude one,” wrote Peter Hebblethwaite, a former Jesuit turned author.38 Traditional and reformist cliques had staked out firm positions on divisive issues. The challenge was to wrap up the Council without splintering the church. The new Pontiff would also have to deal with a confrontational tone from Italy’s left-center political coalition, from proposals to tax the church to legalizing contraception to introducing sex education in schools.

  The news of John XXIII’s death was barely public when the backdoor bargaining began among the cardinals. Before Spellman left for Rome, a CIA officer who wanted to know if it were possible to elect a committed anticommunist, someone more in the style of Pius XII, visited him. The CIA thought John had undone much of Pius’s Cold War work. Soviet Premier Nikita Khrushchev felt comfortable enough in 1961 to send the Pontiff personal greetings on his eightieth birthday. The Pope replied in kind. Many at the CIA believed a rapprochement with the Eastern Bloc would unravel years of anti-red progress. In Italy’s 1962 national elections, the Pope had ignored entreaties for the church to mobilize votes for the Christian Democrats. Leftist parties surged at the polls, pulling in nearly a million more popular votes than during the previous election. CIA Director John McCone made a rare trip to the Vatican, where he met with the Pontiff.39 McCone, who was authorized to speak for President Kennedy, told the Pope that the United States worried about what it perceived as the Vatican’s turn to the left. John was amiable, as always, but not persuaded by McCone’s argument. McCone went home without the commitment to fight communism for which he had hoped.40

  Spellman told the CIA officer he would try to promote a cardinal with conservative credentials, but noted that his own influence in Rome had waned during the previous four years.41 Before their meeting ended, the officer left Spellman with the CIA’s only imperative: anyone but Milan’s Cardinal Montini.42

  When he arrived in Rome, Spellman was not surprised to learn that the conservatives had again rallied behind Giuseppe Siri, Genoa’s fifty-seven-year-old cardinal. Siri told fellow traditionalists that “it will take the Church fifty years to recover from his [John XXIII] pontificate.”43 But once Spellman had a chance to speak to other cardinals, he concluded that Siri’s chances were dim. A bloc of northern European cardinals had aligned against him.44 The bad news, at least for the CIA, was that the progressives had coalesced around Montini. This development was due to a spreading rumor: on his deathbed, Pope John had supposedly said, “Cardinal Montini would make a good Pope.”45 Some cardinal electors thought they should honor the Pontiff’s last wish. Montini, of course, was the same prelate whom Pius XII had passed over as a cardinal to ensure he would not be eligible to become Pope upon Pius’s death. Having achieved the red hat from John XX
III, the humiliation from Pius seemed a distant memory now that he was a surprising frontrunner.II

  Spellman and Montini had strained relations. Spellman criticized Montini for lack of zeal when it came to fighting communism. Montini’s personal assistant, Father Pasquale Macchi—dubbed “Montini’s Mother Pascalina” by some Curialists—was an avowed socialist and Spellman worried that Macchi carried more influence with Montini than he should given his administrative position.47 The Cold War was on Spellman’s mind. It had only been eight months since the Cuban Missile standoff. But in Montini’s favor, Spellman felt he would not lead the church too far from its centuries-old dogma. If anything, Montini was known for tormenting himself with indecision. After weighing both sides of an argument, he often vacillated long after most people had made up their minds. John XXIII once called him “our Hamlet cardinal.”48

  Spellman, ever the politician, saw a chance to refurbish his standing at the Vatican by helping put Montini over the top. The two cardinals met the day before the conclave. At the end of their three-hour caucus, Spellman had committed not only his own vote but also those of the four other American cardinals.49

  The conclave started on June 19, 1963. Montini was only a few votes from sealing the election by the fourth ballot. But according to accounts later provided by several cardinals, a few hard-liners tried hard to rally votes in opposition. Cardinal Gustavo Testa broke the conclave’s rule of silence, stood up, and announced that he wished that the cardinals sitting near him should stop their obstruction and vote instead for Montini.50 On the sixth ballot, just over two days into the conclave, the sixty-five-year-old Montini had the necessary votes.51 He took the name Paul VI.