BAGGING THE BROADCASTER
When the deal was announced, Jack Begon, a journalist for ABC in Italy, aired a report stating that concrete evidence had been established to show that Michele Sindona was involved in the heroin trade with American and Sicilian Mafia families.19 This report should have raised enough suspicions for the US regulatory agencies to disallow the transaction. But the purchase was approved without questions from any regulator.
Several months after the broadcast, Begon was contacted by Angelo Sorino, a Palermo police detective, who told him that he possessed documents concerning Sindona's ties not only to the Mafia but also the CIA. Begon arranged to meet Sorino on July 22, 1973. On the day of the meeting, Begon was kidnapped from his office by two thugs. He appeared two months later in a clinic in Rome. Exhausted and frightened, Begon told the police that he had been forced to fly to the United States and had been transported to several cities, including St. Louis, New Orleans, and Las Vegas, where he was grilled about the source of his story. Begon said that he had pledged never to seek further information about Sindona or to “follow up the story in any way.” This was a pledge, the journalist said, that he intended to keep.20
Thinking that Begon's story was fishy, an Italian magistrate charged him for simulating a crime and ordered a full-scale investigation. The authorities ultimately gathered enough evidence to support Begon's story. Unfortunately, they were unable to question Angelo Sorino. The detective had been shot to death, Mafia style, on a street in Palermo in January 1974.21
UNLETTER UNANSWERED
The only questions came from Arthur Roth. In an open letter, dated July 18, 1972, which he sent to the regulatory agencies and national newspapers, including the New York Times, Roth, who remained a minority Franklin shareholder, wrote the following to Laurence Tisch:
The newspapers of July 13, 1972, reported Loews Corp. (of which you are its Chief Executive Officer), sale of 1 million shares of stock of Franklin New York Corporation for $40,000,000.00. The sale was to a company controlled by Michele Sindona of Milan, Italy.
Your sale of this stock…raises some serious questions for the stockholders and depositors of the Franklin National Bank.
Do you know enough about Michele Sindona to unconditionally recommend him as a person who will be good for the bank?
Will there be a full disclosure of his finances, his backers, and detailed biographies?
Why would he pay $40.00 a share for stock that is currently selling for $32.00, having run up from $28.00 per share apparently as a result of rumors of this sale?
What are his intentions regarding additional purchases and what role will he play in the operation of the bank?22
Tisch never responded to the letter. Neither did the regulatory agencies. Arthur F. Burns, chairman of the Federal Reserve, opted to turn a blind eye to the transaction, as did Peter G. Peterson, the secretary of Commerce, and CIA directors Richard Helms and James Schlesinger. All four men, along with Tisch and David Kennedy, were prominent members of the Council on Foreign Relations.23
THE TRILATERAL COMMISSION
If the situation was being manipulated by the CFR, the puppeteers most probably were the elite group within the organization who formed the Trilateral Commission in 1973. David Rockefeller became the chairman of the new commission, which openly sought to create a new world order controlled by multinational corporations and banks. During Operation Condor, Rockefeller traveled throughout South America, telling the newly installed dictators how to run their governments.24 The effects of his visits south of the border were crystallized in Chile, where in 1976 the military regime under General Augusto Pinochet ignored international condemnation and the congressional cut-off of American aid (due to its terrorist activities), thanks to $927 million in loans from Chase Manhattan, Citibank, Morgan Guaranty Trust, and other US banks. The Trilateral Commission, in effect, had made American bankers a higher authority than the elected representatives of the American people.25
THE FINANCIAL NIGHTMARE
In keeping with Gladio's game plan, Sindona's purchase of Franklin National created a financial nightmare. By April 1974, less than two years after the acquisition, the bank was in a tailspin, announcing a net operating income of two cents a share for the first quarter, compared to the previous year's sixty-eight cents a share. But even this report had been falsified. The reality was that Franklin had suffered a $40 million loss and the bleeding still needed to be clamped.26 By August, the Federal Reserve, knowing that Franklin was on the brink of collapse, granted the ailing institution unlimited access to federal funds.
One of the most bewildering questions in the sordid saga of Franklin National remains the rationale behind the Federal Reserve's decision to shell out hundreds of millions to the Sindona bank. Surely, the Fed officials knew that the bank could not survive. Warning notices about Franklin's terminal condition had been issued by Morgan Guaranty Trust and a host of other international financial institutions. But the money kept pouring into Franklin until the Long Island bank finally collapsed on October 8, 1974. By that time, the Fed had shelled out $2 billion to Franklin without any hope of recovery. It was the largest bank failure in American history at that time and the first since the Great Depression.27
THE FALL GUYS
In 1975, Peter Shaddick, the former executive vice-chairman of the bank's international division, pled guilty to fraud. He was sentenced to three years’ imprisonment and fined twenty thousand dollars.28 Following their 1979 trial in the Federal District Court of New York, Paul Luftig, the bank's former president and chief administrative officer, and J. Michael Carter, a former senior vice president, were convicted of falsifying financial records. They ended up serving a year at the Allenwood Federal Prison Camp in Pennsylvania.29
But no charges were raised against David M. Kennedy, who remained the pivotal player in the plot. Kennedy's complicity in the crime was not only evidenced by his position as a director of Fasco AG, but also his voting control over the controlling shares owned by Sindona. The scam probably could not have been undertaken without his cooperation. Kennedy was well-connected to Arthur F. Burns, the chairman of the Federal Reserve. Both Kennedy and Burns were key appointees of the Nixon administration and both were prominent members of the CFR and the Trilateral Commission. Kennedy was also closely tied to James E. Smith, the Comptroller of the Currency, who neglected to conduct the legally mandated inspections of Franklin after Sindona acquired it and approved Franklin's overseas expansion even when the bank was in dire straits.30 For many years, Smith had served as Kennedy's undersecretary of the Treasury.
BANCA PRIVATA COLLAPSE
Throughout 1974, the crack within the Sindona overseas operations continued to widen into a cleft. Having raided the assets of Banca Privata Finanziaria and Banca Unione, Italy's national union bank, which he purchased with the Vatican in 1970, Sindona merged the two firms into a new financial institution called Banca Privata. The two large holes now became a massive crater that even the most myopic bank examiner in Milan could not ignore. By July 1974, Sindona's new institution displayed a loss of 200 billion lire.31 Somehow, Sindona managed to convince the directors of Banca di Roma to sink $200 million into Banca Privata.
The Sicilian obviously possessed a silver tongue because even a second-rate accountant would have been aware that Sindona's financial empire was about to tumble. The ill-advised loan, no doubt, was due to his position in the Vatican and his powerful American associates. By September 1974, less than three months after its creation, Banca Privata went into compulsory liquidation with losses over $300 million, causing Banca di Roma to teeter on the brink of bankruptcy.32 The loss to Holy Mother Church, according to Swiss estimates, was in the range of $1 billion.33 But such estimates failed to take into account the massive amounts of drug money flowing into the Vatican's coffers from the drug trade. Nor did they realize that the massive disappearance of funds was necessary to further the strategy of tension and the cause of Gladio.
After th
e collapse of Banca Privata and Franklin National, the sound of Sindona's falling financial institutions reverberated throughout Europe. In a matter of weeks, Bankhaus Wolff of Hamburg, Bankhaus Herstatt of Cologne, and Amincor Bank of Zurich lay in financial ruins.34 Untold billions fell through a massive crater that became known in the Italian press as Il Crack Sindona.
THE MIDNIGHT CALL
Shortly after the stroke of midnight on October 4, 1974, Licio Gelli made a call to Sindona, who was staying at a chalet in Switzerland, to inform him that the Italian government was preparing two warrants for his arrest: one for a false 1971 balance sheet and the other for filing a fraudulent statement of bankruptcy. “Leave Switzerland before they notify Interpol,” Gelli said. “Get out of there so that they can't extradite you. If you don't, our enemies will torture you. They may even kill you…. It is very dangerous, Michele. Things have changed.”35
Things, indeed, had changed. Throughout Europe, prominent bankers had lost a fortune, thanks to Sindona's financial shenanigans, and were now demanding the arrest of “the pope's banker.” Sindona heeded Gelli's advice. He packed his bags and headed back to New York, where he could remain under the protection of the Mafia and the CIA within his luxurious suite in the discreetly elegant Hotel Pierre on Fifth Avenue.36
THE GOOD LIFE
Life was good in the Big Apple. Sindona's daughter, son-in-law, and two granddaughters moved in with him. Every night they dined at the Café Pierre on the ground floor of the Hotel Pierre, where chefs prepared special dishes for the honored guest. Sindona became the financial consultant for Johnny Gambino's G & G (Gambino and Genovese) Concrete Company.37 He also became a lecturer in economics at many leading American universities.
At the University of Pennsylvania, Sindona waved the American flag and spoke as a democratic idealist. He began his address by saying, “The aim, perhaps, an ambitious one, of this brief talk is to contribute to restoring the faith of the United States in its economic, financial, and monetary sectors, and to remind it that the free world needs America.”38
At Columbia University, several days after he was sentenced in absentia by a Milan court to three and a half years in prison for embezzlement, Sindona upheld the importance of high morals and fiscal accountability by saying, “When payments are made with the intent of evading the law in order to obtain unfair benefits, a public reaction is clearly called for. Both the corrupted and the corrupter should be punished.”39
ST. PETER'S DENIAL
Sindona may have been an honored guest at Ivy League institutions and private social clubs in Little Italy, but the bronze doors to the Holy See were closed to him. As Italian investigators uncovered the Vatican's ties to Banca Privata, Pope Paul VI became an object of scorn and derision. Stories appeared in the press claiming the Holy Father had lost up to $1 billion because of his clandestine deals with Sindona. On the left of the theological spectrum, the Jesuits attacked the pope for his interference in Italian politics and “the placement of the Church's future in the hands of the devil.”40 On the right, Tridentine conservatives, including French archbishop Marcel Lefebvre, demanded Paul VI's abdication. The Traditionalist, a Catholic weekly newspaper, after publishing a detailed account of the Sindona affair in February 1975, called the pope “a traitor to the Church.”41
Archbishop Marcinkus was forced to submit to the indignity of intensive questioning by Italian officials about his transactions with Sindona on a personal basis and as a representative of the Vatican. The archbishop performed as expected. In April 1973 he had told US investigators: “Michele and I are very good friends. We've known each other for many years.”42 Two years later, when questioned by the Italian magazine L'Espresso, Marcinkus said: “The truth is that I don't know Sindona. How can I have lost money because of him.”
Sindona was shut off not only from Marcinkus and the Holy Father but also from Roberto Calvi, the new direttore generale of Banco Ambrosiano in Milan, who refused to receive his telephone calls.43 What's more, Calvi and Marcinkus advanced Sindona's scheme of raiding the assets of the Milan bank by setting up a string of shell companies as unofficial subsidiaries of the Roman Catholic Church in Panama and the Bahamas. These companies began to receive massive loans from Banco Ambrosiano in Milan and Banco Ambrosiano Holding in Luxembourg. Such investments seemed secure since the Church was the Rock against which “the gates of hell could not prevail.” As an added insult to their former mentor, Calvi and Marcinkus removed Sindona's name as a director of Cisalpine, the Nassau financial front, which now became known as Banco Ambrosiano Overseas.44
THE PURPLE FUNK
Pope Paul VI fell into a purple funk. His behavior became erratic. He spoke with his confidants about the possibility of resigning. Before he would agree to set aside his tiara, the pope said that he would have to make amends for the financial loss he had caused Holy Mother Church. He wished to retain the right to name his successor, and he requested the abolition of the four-hundred-year old decree that prohibited popes from selling their sanctified positions as Vicars of Christ to the highest bidders among the College of Cardinals.45 This return to the time-honored practice of simony would permit Paul VI to raise a fortune for the Church—the fortune he had lost thanks to his dealings with Sindona and the Mafia.
The Holy Father complained of lack of sleep. He wandered through the corridors of the papal apartments in the Apostolic Palace in the wee small hours of the morning, often complaining to guards and attendants of an ominous presence within the Holy See. “The smoke of Satan has entered the Church,” he said. “It is all around the altar.”46
EXTRADITION HEARING
On September 7, 1976, the United States, acting on behalf of the Republic of Italy, initiated an extradition proceeding against Sindona in the District Court for the Southern District of New York. Distinguished individuals appeared in court to plead on Sindona's behalf. Carmelo Spagnuolo, president of the Supreme Court in Rome, swore that the charges against Sindona were part of a Communist plot to undermine leading industrialists of Italy. He claimed that left-wing extremists within Italy's judiciary had concocted a plot and that Sindona—“a great protector of the working class”—would be killed as soon as he arrived on Italian soil.47 Few in the court room were aware that Spagnuolo was a leading member of P2. It was small wonder, therefore, that the testimony of the Italian judge was supported by Licio Gelli, who in a signed affidavit to the court, said: “The Communists’ hatred of Michele Sindona is due to the fact that he is an anti-Communist and that he has always been favorable to the free enterprise system in a democratic Italy.”48
Although Judge Thomas P. Griesa held Sindona extraditable, the Sicilian don prevailed with an appeal that claimed his case fell within the ambit of Article VI(1) of the Treaty on Extradition between the United States of America and Italy, 26 UST 493, TIAS 8052, which bars extradition “(w)hen the person whose surrender is sought is being proceeded against or had been tried and discharged or punished in the territory of the requested party for the offense for which his extradition is requested.”49 By the time the appeal was granted, Sindona was facing similar charges of fraudulent bankruptcy in the United States creating a situation in which extradition, according to his lawyers, would place him in “double jeopardy.”
THERE WILL BE BLOOD
While Sindona remained free due to this bizarre interpretation of habeas corpus, the Italian government continued to press for his arrest. This pressure prompted the pope's banker to initiate action against his adversaries, including Giorgio Ambrosoli, the Italian lawyer who served as the liquidator of Banca Privata Italiana. In 1979, Ambrosoli began to provide damning evidence about Sindona's role in the collapse of Franklin Nation to John Kenney, a prosecutor with the US Department of Justice. The evidence included transcripts that proved Sindona had pilfered funds from his Italian banks to purchase the shares from Tisch. In addition, Ambrosoli obtained checks and documents from Giorgio Giuliano, deputy superintendent of the Palermo police department, which showed th
at Sindona was laundering heroin profits through the IOR and Amincor, his Swiss bank, for the Gambino-Inzerillo-Spatola crime syndicate.50 He also had secured information from Lt. Col. Antonio Varisco, who was investigating P2, concerning Sindona's close relationship with Licio Gelli.
On July 11, 1979, only hours after conferring with Kenney, Ambrosoli was shot and killed in Rome after parking his car in front of his apartment.51 Two days later, Varisco and his chauffeur were killed by a hit man wielding a sawed-off shot gun.52 On July 21, Giorgio Giuliano was shot dead while having a drink at the Lux Bar in Palermo.53 His replacement at the Palermo police department was Giuseppe Impallomeni, a member of P2.
THE SICILIAN COUP
While Mafia assassins eliminated the problem of his Italian adversaries, Sindona continued to plan a coup that would mark the culmination of the years of lead: the annexation of Sicily from mainland Italy. This plan, initially approved by the Nixon administration in 1972, called for an armed invasion of the island by Gladio units and the installation of a right-wing government. It was drafted in response to the anti-American policies of Ugo La Malfa, minister of the Italian Treasury, and the steady rise of support for the Italian Communist Party in the general elections. John McCaffery, the Hambros representative in Italy and the chief of the European Resistance Movement for Europe during World War II, teamed up with Sindona and Graham Martin, the US ambassador to Italy, to become one of the principal planners of the coup.54 The coup failed to take place during the Nixon years, according to McCaffrey, because of “the lack of security” for the Gladio units and “the emergence of the Watergate upheaval.”55
But plans for the coup were revived after Aldo Moro, Italy's Prime Minister, announced his intent to create a new Italian coalition government of Communists, Socialists, and Christian Democrats. The notion of such a coalition prompted Sindona to meet with Dr. Joseph Miceli Crimi, the chief surgeon for the Palermo Police Department, a prominent P2 member, and a CIA operative, and Rear Admiral Max K. Morris, a prominent Naval intelligence official. Admiral Morris advanced the notion of the coup with Admiral Stansfield Turner, the CIA director, and preliminary plans got underway. An American aircraft carrier was deployed off the coast of Sicily with a ship full of soldiers ready to provide military assistance. The ship allegedly was placed under the command of Count Edgardo Sogno, a World War II resistance hero with a long record of involvement in American-backed coup attempts.56
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