He ignored that for the moment. In his line of work, he was used to being in danger. “Then who did?”
“Probably the Archangeli.”
Michael gave a slight nod, accepting his answer. He’d thought of that possibility himself. “So what is the Rota?”
“The Rota is a new court founded within the Jesuit community.” Father Herzog paused.“We intend to use it to take over the administration of the Catholic Church.”
Stunned, Michael was tempted to ask if he had heard correctly. No wonder James had been unwilling to talk about it. The Jesuits were powerful in their own way, but had never been part of the religious clique that ran the Church. They had worked largely unimpeded for centuries because they avoided just this sort of conflict. Yet Father Herzog had just announced his intention to supplant the very authority that could disband the Jesuits. He shook his head. “You’ll be excommunicated. Not just the three of you; the entire order.” Yet even as he said it, he felt a flare of hope. If they succeeded…
“I will meet with the Pope on Friday,” Father Herzog continued. “He will continue as spiritual leader, of course.”
For a few moments Michael was speechless. “And if the Pope does not go along with your plan?” he said finally.
“Then we will have lost everything.”
Michael still couldn’t believe it. This would cause the biggest upheaval in the Catholic Church in centuries. Could they pull it off? It didn’t’ seem possible. Michael leaned forward. “You’re risking your life’s work and the global Jesuit community. Why are you doing this? Why now?”
“Because the Catholic Church is dying from the evil within.” Father Herzog’s face turned profoundly sad. “The number of men studying to be priests has dropped to one-third of what it was forty years ago. In Europe, the average age of priests is over 65. In the United States, major contributors have cut off funds out of disgust over sex abuse charges and the Church’s cover-ups. We must challenge these evils and take action against them.”
“But why now?” Michael asked. “There have been scandals in the Church for centuries. Yet you intend to move within days.”
Father Herzog glanced at Father Heilman and James. “We are in imminent danger of exposure,” he said. “Two weeks ago, a member of the Rota—Father Mark Manion—was killed before he could testify against top leaders in the Vatican. This past Saturday, Father Matteo Pintozzi was killed in the Vatican Museum. He was our mole in the Archangeli. The leaders of the Vatican surely know that, which means we are nearly out of time.”
“Father Manion and Father Pintozzi were collecting evidence? What sort of evidence?”
“We can implicate many high-level administrators of the Catholic Church in sexual and financial misconduct that would earn them long prison sentences or worse,” Herzog said. “The Catholic Church in the United States is in deep financial trouble. Everyone knows about the huge financial judgments against us to settle sexual abuse cases; what isn’t known is how much of the scandal we repressed. As more payments are required, we will lose more schools, more churches and more land. We may even become insolvent.”
Shock flooded through Michael. He knew the situation in the United States was bad, but this meant the death of the Catholic Church in North America. Contributions were down, along with enrollments in the priesthood. But instead of fixing the problem, the Church was throwing money at it. The Church spent $102 billion a year just on its U.S. operations; it couldn’t afford the drop in donations compounded by expensive lawsuits. Three U.S. dioceses had already gone bankrupt because of the sex abuse cases.
Father Herzog continued. “The Archangeli are desperate for money. In the past, they laundered money for the Mafia and European embezzlers. After the Banco Ambrosiano scandal, they curtailed their illegal financial operations, but now they are up to their old tricks and they have turned to aiding tax evaders. As a sovereign state, the Vatican is offshore with respect to the rest of Europe. The Archangeli use additional offshore vehicles in the Caymans so the cash is untraceable.”
“You have proof?” Michael asked.
“Yes. I’m prepared to confront the Pope. But we may not prevail.”
Michael let out a slow breath. Father Herzog, the Superior General of the Society of Jesus, intended to blackmail the Pope. He couldn’t help admiring the man’s audacity. But it meant taking a terrible risk.
Within the Vatican, I have no jurisdiction. What can I do?”
“We’ll give you the evidence to prosecute high-level clerics in the Vatican, and we want that evidence made public as soon as possible.”
Michael shook his head. “I cannot press charges while these priests are inside the Vatican.”
Father Herzog nodded. “First we’ll excommunicate them. Then we’ll expel the offenders from Vatican soil and you can prosecute them under Italian law. We also have evidence implicating high-level Italian industrialists, political leaders and Mafia leaders. You will have it all.”
The prospect dazzled Michael. All these years of fruitless effort, and now these three brave men—along with all those who had helped them—were offering to drop a miracle into his lap. “There’s just one thing,” he said. “The killings of Father Manion and Father Pintozzi may mean that the Archangeli have a mole within the Rota.”
Father Herzog’s eyes grew bright, as if with unshed tears. “Yes,” he agreed. “We believe we’ve been betrayed.”
“By Father Pintozzi?”
“No.” Father Herzog sounded vehement. “We know he was loyal. We think it is a member of Father Pleurre’s code group. Perhaps Pleurre himself, or Father Graf, or Father de Aragon. Father Pintozzi never met the leader, but the Archangeli gave him a high-level Jesuit code to access our computer files. They didn’t know he was our mole. We only allowed infiltration of the lowest level files, and we did not inform Father Pleurre of our plan.”
“But if Father Pleurre has access to the information anyway, how can you suspect him?”
“We wanted to see his reaction. Father Pleurre is head of our finances and our computer security. He is brilliant, and may have been testing Father Pintozzi to see if he would turn over valuable information to the Archangeli. If Father Pleurre turned over the information himself, it would be instantly traced back, but using Father Pintozzi as a blind conduit would avert suspicion.”
“What about the others?”
“Both Father Graf and Father de Aragon know enough about our systems and finances to do the same thing. Father Pleurre encoded critical information, but he used the code developed in his group. Only his code group and mine have access to our passwords. The truth is, we don’t know who is guilty.”
“But you have a plan to find out.”
“Not anymore. Matteo was our only mole. We fed some good information to the Archangeli so they would believe in his sincerity. Only the priests in this room knew he was our mole, and now you know.”
Michael looked at the three men. Father Heilman and Father Herzog were the leaders of the Society of Jesus and of the Rota. It was a testament to their high regard for James that they trusted only him with their most sensitive secrets. Michael knew they were only revealing so much to an outsider because they had no other choice, and because James vouched for him.
“After we clean up the mess in the Vatican, we’ll give foreign authorities dossiers on other wrongdoers that we’ve ‘borrowed’ from various religious orders. Criminals will no longer hide behind the robes of the Church.” Father Herzog’s gaze bored into him. Michael once again had the feeling of being probed, only much stronger this time. His head began to throb slightly.
“Will you help us?” Herzog asked.
Michael hesitated. He needed the Jesuits as much as they needed him. The Specialists had worked for over a decade to get hard evidence on the men involved in the Vatican Bank scandals, yet the culprits were still free and up to their old tricks of bribery, embezzlement, and violent vendettas. If Michael agreed to help the Jesuits, he’d finally get the ev
idence he needed.
He also knew Father Herzog was right about the Church. Michael had lost much of his own faith after Irena died, but the Jesuits had given back enough to keep him going. He found, to his surprise, that the fate of the Church mattered to him. If the Jesuits took it over, the Church would come back to its better self. The Jesuits weren't perfect, but they were fundamentally good men. Jesuits had taught Michael how to think independently. He owed them that, and for helping him learn to go on living after Irena's death.
He looked at James, who sat expressionless, as if willing Michael to make his own decision. Then he met Father Herzog’s gaze. “I will help you,” he said.
Father Herzog relaxed and he nodded with visible relief. “Then James will introduce you to Father Pleurre. He can give you all the information we have on what we’ve discussed.”
“Can I trust him?” Michael asked.
“To an extent, yes. But keep your eyes open.” Father Herzog rose to leave, and Father Heilman followed suit. “You must excuse us now.”
The departing priests stood straight and moved easily, as if they were decades younger. They looked as if they had lived a life hiking in the mountains instead of running a holy order. Michael realized they must practice both a strict mental and physical regimen. He turned to James. “Let’s go.”
CHAPTER X
Vatican City
Monday, June 17
James shepherded Michael out the door, through the reception area to another room filled with computers. A priest about the same age as Father de Aragon, mid-fifties or so, stood in the center of the room. He glanced around, saw James, and hurried over with a frown. “This is Visconte, then?” he said, eying Michael suspiciously. He had the distinguished look of an elderly French duke, right down to the petulant expression of a nobleman forced to deal with peasants.
“This is Father Pleurre,” James said, ignoring his fellow priest’s rudeness. “He can show you what you need to know.”
Michael nodded. “The first thing I want to see is the last trade Father Matteo Pintozzi executed.”
Father Pleurre looked ready to protest. Father James’s genial expression didn’t change, and after a moment, Father Pleurre gave a sharp sigh. “This way,” he said.
Michael and James followed him down another corridor. James murmured an explanation as they walked: “Father Pleurre tracks the revenues coming into and leaving the Society through the work of the global Jesuit community. Donations and estate gifts from the faithful are also included. Networks of corporations controlled by the Society keep the true ownership of these funds out of the public eye.”
They reached a set of carved wooden double doors. Two Swiss guards stood on either side. They clearly recognized the priests and swung the heavy doors open, then closed them after the three men walked through.
They crossed a small inner chamber and went toward another set of doors, this one flanked by two young Jesuit priests seated on chairs and working on laptops. “Another precaution,” James explained. “These priests ensure that only authorized Jesuits enter the computer area. High-ranking Vatican clergy might be able to get past the Swiss guards, but not past these two.”
He gave them a signal, and the priest on the left opened the inner set of doors. The room beyond contained five rectangular tables supporting dozens of computers, screens and printers.
Father Pleurre approached a table in the middle. “This was Father Matteo’s workstation. If you give me a moment, I will access his last trade.” Still looking reluctant, the priest tapped out a series of keystrokes. Then he stepped back.
Michael moved forward and peered at the screen. Father Pintozzi had done a classic hedge fund trade, a convertible arbitrage. The arbitrage involved a relatively unknown Spanish company, Resorts Azore. They were building a new hotel. Three years earlier, the price of the stock had dropped to 16 euros per share. At that time, Matteo bought warrants giving him the right to buy the shares at a price of 40 euros. The warrants were selling for almost nothing, about 0.25 euros, since the odds of the shares rising above 40 euros were slim. Matteo’s computer model said the warrants should be worth about 5 euros, given the volatility in the stock price. Matteo had bought all one million warrants, all that were available, for a cost of 250,000 euros and hedged by selling short 74,000 shares of Resorts Azore stock at 16 euros per share.
Smart move, Michael thought. Theoretically Matteo was hedged and also had instant income. Then a year after Pintozzi put on the trade, the stock dropped below 2 euros per share. Matteo bought back the 74,000 shares he had shorted for a total cost of 2 euros apiece, including fees and expenses, locking in a profit of 1,036,000 euros. Subtracting the original cost of the warrants left him with a net profit of 786,000 euros, and Matteo still owned the warrants free and clear. After that, Resorts Azore issued debt and expanded. It became the go-to destination for wealthy Europeans and Latin Americans. The stock soared. Just before he died, Matteo had sold the warrants for 98 euros each net of fees and expenses, making 98,000,000 million euros. On the combined trades, Pintozzi made 98,786,000 euros in three years on an initial out-of-pocket investment of only 250,000 euros: a phenomenal average annual return of 633 percent per year.
“I wish I had known Father Pintozzi,” Michael said. “Was this typical? And how did he do it? No model can predict these results.”
Father Pleurre shrugged. “This was an unusually profitable transaction. The bulk of his trades had annual returns of more than 42 percent and some of them much more. Occasionally, very rarely, we lose money on a trade. Most of our trades are very profitable, and our annualized returns have been quite large.”
Michael frowned at the computer screen. He had hoped to discover that Matteo was losing money. That might have been a motive for murder. This didn’t make any sense. Who would want to kill the golden goose?
“Did he do any naked short selling?” Michael was casting about for anything that might shed some light.
Pleurre actually sneered. “I’m not saying he did, but I’ll remind you that the Vatican is a sovereign state, and there is no law against it here.”
Michael knew he was intelligent, if not quite a match for Father Pintozzi, with an excellent education in mathematics and finance. Computers tended to be a great equalizer, too. Yet he couldn’t have pulled off a transaction record like Pintozzi’s. “How did he manage to consistently make such profits?” he murmured, almost to himself.
James spoke up then, his voice low. “Father Pintozzi had a singular advantage,” he said. “Years ago, Father Herzog translated an obscure work written in Russian by Daniel Bernoulli in 1738. Bernoulli said risky ventures should be evaluated using the geometric mean, not the arithmetic mean of the outcomes. Father Pintozzi understood what this meant and based his work for the Society on it.”
“Meaning?”
“Suppose you can make a bet in the markets. You start out with $1 billion, and the outcomes are that you could end up with either zero or $2 billion. If you try to predict the outcome using the arithmetic mean, the expected value of your portfolio is zero plus $2 billion divided by two, or $1 billion. This answer is not useful. Would you make a bet with $1 billion knowing you might lose it all?”
“No,” Michael said.
“The geometric mean gives you a more sensible answer. You compute it by multiplying the outcomes and taking the number of outcomes as the root. In this case, since there are only two outcomes, you take the square root of $2 billion times zero. Since zero times anything is zero, the expected value is zero. A competent money manager would be crazy to make this bet, but Father Pintozzi was intrigued with the idea of assessing the odds of a payoff and scaling the investment based on the likelihood of a favorable outcome and the size of the portfolio. When he decided on a choice of trades, he always chose investments with the highest geometric mean of outcomes.”
“Even with a computer model, I don’t see how he could be this consistent and this profitable for six years,” Michael said.
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Father Pleurre gave him an enigmatic smile. “You are correct. The real investment world is too complicated to be reduced to a model.”
“Then how did he pick his trades?”
The smile became a smirk. “That was mostly my invention.”
“Your invention?”
“I showed you what you wanted to see,” Father Pleurre said. “Now—”
A voice, clipped and tense, came from across the room. “Our visitor’s back.”
James hurried over to where the speaker was, by the main computer banks. A dark-haired priest in his mid-thirties sat in front of a large computer screen. He pointed. James muttered something under his breath, then called for Michael to come over. Father Pleurre hung back, his mouth a thin line.
“Here’s where we have the problem,” James said as Michael reached him. He nodded toward the computer screen. “Someone’s trying to break into our data files. Clever little demon. Clever enough to be a Jesuit.”
Michael turned his attention to the screen, where lines of code had spontaneously appeared. He frowned at them. “This isn’t the work of an ordinary hacker. What’s the security like on your system?”
Security was the best available, James explained. The Society never used a public access data superhighway, since a good hacker could pirate passwords and invade a user’s computer network. The Society kept its own financial databases as well as cataloguing everything the Jesuit Society learned. Catholic record keeping ate up another huge chunk of memory. E-mail was the weakest link, but sensitive information was always sent in code. Often, the Jesuits had better political intelligence than the CIA.
As an added safeguard, the Society coded each priest’s password information so other priests on the network could not view it. Even Jesuit hackers couldn’t get each other’s passwords. “We’re protected by a Byzantine labyrinth,” James concluded. “You almost need a guided code to find your way out of it. Father Pintozzi gave the Archangeli access to the two lowest of the seven security clearance levels. Our intruder is accessing that level now.”
Archangels: Rise of the Jesuits Page 9