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

by Gerald Posner

  A supplementary 180-page U.S. government report issued that spring (June 2, 1998) provided more evidence that neutral countries, including the Vatican, had profited by hiding Nazi gold in their central banks.50 In addressing the church, the report noted that since “the postwar disposal of the wartime Croatian treasury remains obscure. . . . There are questions about aspects of the Vatican’s record during and immediately after the war, to which the answers may only exist in Vatican archives.”51

  During a press conference at which the report was released, Stuart Eizenstat urged the church and the IOR to open its archives.52 The Clinton administration gave the Vatican yet another chance that month to contribute to a fund for Holocaust victims, not because it was legally obligated to do so, but as a “moral gesture.”53 That was in keeping with the vague language—“moral involvement”—that had been acceptable to the church when it settled the Ambrosiano case. The Vatican, however, was dismissive. “I don’t have anything to add to what was said in the past,” said Joaquín Navarro-Valls.54 By the end of that month, several dozen nations launched a collaborative initiative to identify the size of missing Nazi gold, ascertain the amount of unpaid life and property insurance claims, as well as catalogue artworks.55

  By late August, a consortium of nations released a progress report. Thirty-one countries had declassified documents. New information came from private banks as well as the Allies’ postwar gold commission. There was a joint call for further international cooperation to locate and distribute money to aging Holocaust victims by the end of the century, only eighteen months away. Britain’s Lord James Mackay singled out the Vatican and castigated it for not opening its files or providing any assistance about what its bank did with the loot it received.56 The theme of “Vatican Under Fire over Nazi Gold” dominated the news cycle.57

  In August 1998—on the eve of the first class-action trial—the Swiss banks settled all pending litigation for $1.25 billion.58 It was the then largest human rights settlement in history. With the Swiss banks out of the line of media fire, the Vatican moved front and center.

  “The Swiss very reluctantly worked with us, kicking and screaming all the way to the negotiating table,” said the World Jewish Congress’s Steinberg. “But in comparison, when we later tried to get information from the Vatican, the Swiss were an open door. The Vatican told us to get lost.”59

  At the end of September, the World War II–era Tripartite Gold Commission disbanded after more than five decades. Its remaining archives were made public. They revealed that the commission had been unable to account for a stunning 177 tons of gold that went missing from Nazi-occupied territories. And it could not estimate how much privately held gold from victims had been mixed in with bullion it had returned at the end of the war to the central banks of eleven nations. Undersecretary of State Stuart Eizenstat cited that report to implore again the Vatican to open its records.60

  Seemingly oblivious to the controversy, the ailing seventy-eight-year-old Pope John Paul visited Croatia again and this time beatified Zagreb’s wartime archbishop, Aloysius Stepinac. The Pope rebuffed last-minute appeals from the Simon Wiesenthal Center to postpone the beatification “until the completion of an exhaustive study of Stepinac’s wartime record based on full access to Vatican archives.”61 Instead, a source identified only as a “Croat inside the Vatican” was quoted in press reports dismissing questions over Stepinac’s wartime role as “old claims that had since been disproved” and that “these untruths continue to be recycled by the media.”62 (That Christmas when Croatian prelates offered two special requiem Masses to honor the Ustaša’s murderous leader, Ante Pavelić, the Pope did not issue any criticism or rebuke.)63

  Pressure built on the Vatican that November when Argentina, which had long refused to open its World War II archives, began making them public. It was the final stage of a multiyear review by an international commission of historians.64,II In the United States, work conducted by the Holocaust Assets Presidential Advisory Commission, combined with more aggressive intervention by the Clinton administration over the continuing declassification of American intelligence records, rewrote the history about the extent to which neutral countries had aided the Nazis in the wholesale theft of billions in victims’ assets.66 It was a watershed moment for historians.67

  Even the Swiss had gotten into the spirit of transparency over their unsavory past. Switzerland formed an Independent Commission of Experts not only to release their own files, but to shine a light on what other neutral nations like the Vatican did through Switzerland during the war.

  In November 1998, Israel published a list of a dozen Holocaust-era archival collections that it charged “have refused or have been uncooperative in sharing information.”68 They included the national archives of the Vatican, France, Russia, and Poland’s State Archives, as well as smaller, more targeted collections such as Britain’s MI5, the British Custodian of Enemy Property, and documents held by Prague’s Jewish Museum.

  “We appeal to each institution listed to open their files so that we may learn why civilized society failed in its basic commitment to ensure the safety, lives, liberty and property of our people,” the Israelis appealed.69

  The Vatican ignored the request.

  In December, forty-four nations gathered as they had promised a year earlier for a four-day conference in Washington, D.C., to “redress unjust confiscation” by the Nazis and “ways to find prewar owners and make restitution, whether or not heirs are found.” The first day marked a breakthrough when Russia announced that it would at long last cooperate with historians and Holocaust organizations in finding looted assets and releasing its files. U.S. Secretary of State Madeleine Albright, who was raised a Catholic but learned only the previous year that her Czech grandparents were Jewish victims of the Nazis, made an emotional appeal to the Vatican representatives. “We cannot restore life nor rewrite history,” she said, her voice at times cracking. “But we can make the ledger slightly less out of balance by devoting our time, energy and resources to the search for answers, the return of property and the payment of just claims.”70 Albright’s plea ended in another dead end. Navarro-Valls reminded reporters that the church had no relevant files about the Holocaust and nothing at all about Croatian gold.71

  By now the church had extra motivation to stay mum. The previous month a class action lawsuit filed in San Francisco federal district court named the Vatican Bank and the Franciscan religious order with having enriched themselves from the Ustašan gold.72 That lawsuit was the first to name the IOR. Jonathan Levy, a solo practitioner with a PhD in political science, filed the complaint. It relied on declassified wartime State Department reports that linked the IOR to the disappearance of hundreds of millions of dollars of cash, gold, and silver looted by the Ustašans from Serbian and Jewish victims.

  “I had submitted hundreds of Freedom of Information requests to every government and military department I could think of,” Levy said.73 He was initially uncertain whether he could even serve the Vatican Bank. He mailed a copy of the complaint to Angelo Caloia. “It was a Hail Mary of sorts,” Levy confided. “After a couple of weeks he [Caloia] wrote back telling us to cancel our lawsuit, and in the margin of the complaint he had written notes about what he claimed we supposedly had wrong. So we argued to the court that his marked-up version constituted the proof of service. The judge agreed.”74

  Some of the early Freedom of Information documents prompted Levy to amend his complaint to include Swiss banks as defendants. Levy’s expanded lawsuit charged that the IOR, together with a Chicago-based Croatian Franciscan group (Croatian Franciscan Custody of the Holy Family), had knowingly sent Nazi gold and cash through Swiss banks to Ustašan war criminals in Argentina.75 A 1948 U.S. Army Intelligence report confirmed that 2,400 kilos of Ustašan gold were covertly transferred from the Vatican Bank to one of the church’s secret Swiss bank accounts. The CIA tracked 5 million Swiss francs from Switzerland to Argentina in 1952. That likely included, contended Levy, t
he Vatican’s Ustašan gold. That blood money ended up with war criminal Ante Pavelić in Buenos Aires.

  In December 1999, the German government and private industry reached a $5 billion deal with the plaintiffs over slave labor claims. It eclipsed as the largest human rights legal settlement the $1.25 billion settlement of the previous year by Swiss Banks.76 A highly critical final report from the Volcker Committee and the Independent Commission of Experts prompted the Swiss to take additional measures to compensate victims.77 The London Conference on Nazi Gold raised $61 million in contributions. Former Secretary of State Lawrence Eagleburger led the International Commission on Holocaust-Era Insurance Claims (ICHEIC). It had made substantive progress on relaxing the standards of proof required for claims filed by victims’ families.78

  The Vatican was the only nation that still refused to do anything. Church officials had even less incentive to cooperate since the IOR had been named as the chief defendant in a class action. Caloia steered clear of expressing any opinion about whether the IOR should examine its old records and ledgers. It was history in which he had played no role, and although he was generally sympathetic to the request for open archives, he could not afford to waste any political capital in fighting for it.

  The church did not even budge when newly declassified American documents revealed that priests at the Portuguese Shrine of Our Lady of Fatima, where hundreds of thousands of the Catholic faithful make an annual pilgrimage, had hidden 110 pounds of Nazi gold. Each bar had been stamped with a swastika and the words Preußen Staatsmünze—Berlin—1942 (the Prussian State Mint in Berlin). They were smelted from gold stolen from Dutch Jews (the 2014 equivalent of $2.8 million).79 The Fatima clerics had stored their Nazi gold in safe deposit boxes at a local bank. The church’s initial response to the news was silence. A Portuguese bishop, Januário Torgal Ferreira, tried to shift the blame when he told local reporters that while the Fatima gold “had a savage past” it was “money [that] is the true devil.”80 The Vatican, on background only, assured reporters that whatever happened with the Nazi gold at Fatima, none of the swastika-emblazoned bars had found their way to the IOR. The Fatima bishops tried quelling the story by announcing they had sold all their Third Reich bullion a decade earlier to pay for an expansion of the shrine’s sanctuary. There were no records since the bank was out of business. In response to an outcry from Holocaust survivors and the World Jewish Congress, the bishop of Leiria promised to donate some unspecified amount of money to “social causes in order to purify the memory of those Nazi ingots.” (The author has not been able to confirm what, if any, contribution the local church made.)

  Ultimately, all the Vatican gave to survivors and Jewish groups was John Paul’s personal statement of regret over the church’s long role in fostering anti-Semitism. In March 2000, at Yad Vashem, Israel’s Holocaust Memorial, the Pope said: “As bishop of Rome and successor of the Apostle Peter, I assure the Jewish people that the Catholic Church, motivated by the Gospel law of truth and love, and by no political considerations, is deeply saddened by the hatred, acts of persecution and displays of anti-Semitism directed against the Jews by Christians at any time and in any place.”81

  “What it was not was an apology,” Elan Steinberg, who had spearheaded much of the restitution campaign for the World Jewish Congress, told the author. “He was very careful not to say he was sorry for anything the church had done or failed to do when it came to the deaths of millions of Jews and other innocent victims during World War II.”82

  Despite more diplomatic pressure, the Pope left Israel without even so much as a promise to consider opening Vatican archives (in 2003 it released documents about its assistance to prisoners of war, and in 2005 some files about Pius XII’s time as a Nuncio to Berlin).83 Measured by the notable progress of other nations both in assisting historians as well as helping victims and their families, the Pope’s remarks rang hollow. By the time of John Paul’s statement, the large class actions had been settled against the Swiss banks and German companies. French banks had reached a settlement in their litigation at the beginning of that year, as had Austria’s banks and private companies.84 The two major remaining lawsuits were Levy’s class action against the Vatican Bank and another filed against Italian and German insurers. When Germany soon signed a broad agreement to address outstanding restitution complaints, German insurance firms were removed from that lawsuit.III

  In November 2000, the IOR’s American attorneys asked a federal court to dismiss Levy’s lawsuit for lack of jurisdiction. “Plaintiffs lack standing to bring a general challenge to the wartime political decisions of a foreign sovereign,” the church’s lawyers argued in their forty-one-page motion.86

  “It was clear to us,” recalls Levy, “that the Vatican did not want to have to go through any discovery. The idea of discovery really scared them. They would not even entertain having a U.S. government representative act as an intermediary to determine whether or not we could reach a settlement.”87

  In the interim, Levy had launched an effort to get more evidence about the IOR and its role with looted assets by filing lawsuits against a dozen U.S. government agencies, including the CIA. He hoped to force the release of documents that the agencies had either withheld or heavily redacted in answering his earlier Freedom of Information requests. And over the Vatican’s objections, Levy convinced the District Court to permit some preliminary discovery to assist in determining the question of whether the court had proper jurisdiction.

  The court would not rule on the question of whether the Vatican Bank was immune from the claims of victims for another decade.

  * * *

  I. The Bigelow memo was released on the heels of the 212-page Eizenstat Report, named after Stuart Eizenstat, the Assistant Secretary of State whom President Bill Clinton had chosen to coordinate a review of still-classified wartime files in the archives of eleven government agencies, including the CIA, NSA, Defense, State, and Treasury. That report was a bombshell. It blasted Switzerland for its wartime business with the Nazis and laid bare the extent to which that neutral nation had profited. It concluded that the Nazis stole about $580 million in gold alone ($7.6 billion in 2014 dollars) and sent about half to Switzerland. Beyond the gold, the Eizenstat Report estimated that the Swiss hid an equivalent amount in non-gold-looted assets.21

  II. This author played an indirect role in the opening of Argentina’s Nazi files. In a New York Times op-ed, “The Bormann File,” on November 13, 1991—timed to coincide with a visit by Argentine President Carlos Menem to President George H. W. Bush—I wrote about my failed efforts over seven years to get Argentina to release a file about Hitler’s secretary Martin Bormann. I had seen that folder when I was in the secret archives of the Federal Police in 1984 while researching a biography of Auschwitz’s Dr. Josef Mengele. At the time, the Argentines denied my request to examine the file. In The New York Times, I called on Argentina to “release the Bormann papers. There should be no safe haven for the files of mass murderers.” Argentine officials initially denied having any such documentation but after several years of stonewalling, they admitted its existence. It took until 1997 for Argentina to establish the Commission for the Clarification of Nazi Activities.65

  III. Austrian and Swiss insurers also got their lawsuits dismissed or settled. Only Italy’s Generali—which had contributed $100 million to the International Commission for Holocaust-Era Insurance Claims—litigated for nearly another decade. Generali ultimately settled by paying another $35 million to the victims, bringing its total payment for 5,500 claims to $135 million. “They got off lightly,” Elan Steinberg told the author. “They made billions and they paid back pennies on the dollar sixty years after the war. For those insurance companies, crime did pay.”85

  31

  “A Criminal Underground in the Priesthood”

  All the attention on Holocaust restitution claims distracted many Vaticanologists who might have otherwise kept a better watch on what was happening inside the IOR. But for those pa
ying close attention, there were warning signs that the bank was still plagued by systemic problems. In 1999, the $232 million fraudulent empire of American financier Martin Frankel unraveled. The FBI tracked down Frankel and arrested him in Germany. Prosecutors discovered a troublesome IOR link. Frankel had established the St. Francis of Assisi Foundation to Serve and Help the Poor and Alleviate Suffering, a British Virgin Islands company through which he ran millions of offshore dollars, much of it stolen from clients. A seventy-nine-year-old monsignor, Emilio Colagiovanni, had allowed Frankel to use his separate foundation at the Vatican Bank so that Frankel’s money transfers stayed off the radar of financial watchdogs.1

  That Colagiovanni had any connection to a swindler like Frankel surprised prosecutors. The elderly monsignor was a scholar who edited a Vatican-approved canonical law quarterly and served as an emeritus judge on the Roman Rota, the Pope’s prestigious court of appeals. Seventy-three-year-old Peter Jacobs was another priest dragged into the scandal. Father Jacobs was president of Frankel’s offshore foundation, and had himself been suspended from his priestly duties for having earlier defied his archbishop by running a popular Manhattan restaurant that was supposed to send its profits to the poor, but was the subject of press stories about how it fueled lavish lifestyles for shady characters.2