CHAPTER TWENTY-TWO Clearing up the Mess
If the chairman of Banco Ambrosiano had few friends in his life, he had fewer still after his gruesome death. Usually, when a prominent figure dies in Italy, the obituary columns are filled with the condolences of those who knew and worked with him. Quite fortuitously, a strike prevented Italian newspapers from being published on either Saturday June 19 or Sunday June 20. And so the country had to rely on radio and television alone to learn that the missing Calvi had been found dead, hanging beneath a bridge in London.
Only on the Monday could the papers proclaim the news in banner headlines. But the Corriere, the paper Calvi partly owned, and the voice of the Milanese bourgeoisie to which—however uneasily—he belonged, carried just one four-line notice. It was placed by Goffredo Manfredi, the Roman builder who had joined Ambrosiano's board earlier in the year, and who had been one of the three directors to side with Calvi when it voted against him a fortnight earlier. The next day, two more appeared. One was from Marino Mariani, a small shareholder who had stayed with Ambrosiano to the end. He remembered Calvi's "hardworking and talented" life. The other came from the family of Umberto Ortolani, Gelli's lieutenant in the P-2 but on much warmer personal terms with Calvi than was Gelli. And that was all.
The politicians who had received much from Calvi'were silent. Even before the last Ambrosiano board meeting and Calvi's death, Banca del Gottardo in Lugano announced that he was being removed from its board. Former colleagues at the bank insisted that Calvi alone had known what had gone on. A scapegoat for the disaster was to hand. Calvi could be blamed for everything, and as quickly as possible forgotten. Even the Vatican, through those elusive "reliable sources" who profess to speak for it at awkward moments, was letting it be known that it was "extraneous" to the Ambrosiano crisis, underlining that its shareholding was just 1.6 per cent. But just how reliable those sources truly were, was to be proved in a matter of hours.
For on the morning of Monday June 21, the economic and financial weekly Il Mondo carried a remarkably detailed account of the events of the previous week in Milan, and the visit in extremis to the IOR by Leemans and Rosone. Above all it identified the colossal loans advanced by Ambrosiano's affiliates in Peru and Nicaragua to companies controlled by the IOR, and revealed the existence not only of the letters of comfort, but also of Calvi's own earlier letter absolving the Vatican bank from responsibility. The scandal of which Leemans had warned Marcinkus just four days earlier was out in the open, in all its tawdry splendour.
Events were now to move at an astonishing pace. Whatever may be said of the authorities' legalistic approach to Ambrosiano before, they now acted with lightning speed. Vincenzo Desario was in charge of Banco Ambrosiano for hardly 24 hours. By the weekend three permanent commissioners had been named. Technically the central bank had a fortnight to choose, but the risk of political meddling and the urgency of Ambrosiano's plight meant that no time could be lost.
The three made an oddly contrasting, but nicely complementary group during the 46 days of life left for Banco Ambrosiano. Youngest of them, at just 42, was Alberto Bertoni, Professor of Corporate economics at Milan's Bocconi university, an expert in accounting, and, as the following weeks were to prove, an indefatigable optimist. Giovanni Arduino was different, a courteous commercial banker of an older school, with a distinguished career at Credito Italiano stretching back to 1936, primarily on the international side. To him fell the ticklish task of dealing with the 250 foreign banks desperate to recover their money from the stricken Ambrosiano. But most senior and most redoubtable of the three was Antonino Occhiuto, a stocky 70-year-old Neapolitan who until the Ambrosiano affair thought he had seen all there was to see of the dark face of Italian banking.
Occhiuto belonged to Baffi's generation at the Bank of Italy, a stickler for discipline. "A law, even if it's a bit mad, must be obeyed or else you have anarchy," he once typically remarked. At the central bank he had been head of the vigilance department between 1969 and 1976, the predecessor of the unfortunate Sarcinelli. As one who had handled the death-throes of Sindona, he knew more about collapsing financial card castles than almost anyone.
From the first, it was obvious that the bank would take some saving. Only Bertoni, mindful of the valuable Italian assets of the Ambrosiano group believed that the line could be held. Occhiuto was the gloomiest, feeling privately that the old Ambrosiano board should not have asked for the Bank of Italy to take over on June 17, but applied directly to go into liquidation. Nor was Arduino hopeful, but he felt that something could be saved. But what all three instantly realized, as had Leemans a week earlier, was that salvation lay only in agreement with the IOR.
For despite the soothing reassurances issued daily by the commissioners, an old-fashioned run on the bank was under way. The confidence of depositors, and of the Italian and foreign banks who had lent money to Ambrosiano, had all but disappeared when Calvi vanished from Italy on June 12. His death and the placing of the bank in the commissioners' hands destroyed it completely. Everyone wanted their money back.
And as the commissioners and Ambrosiano's staff juggled desperately to meet the claims as they fell due, Occhiuto and Arduino sought an appointment with the IOR. Marcinkus stalled, but finally on July 2 the encounter took place. With the difference only of the shorter patience of the commissioners it was to be a repeat of the vain efforts of Leemans and Rosone to sway Marcinkus, Mennini and De Stroebel a fortnight before. Predictably, no detailed information about the IOR's overall finances was forthcoming. Occhiuto turned to the letters of comfort. The debts were the Vatican bank's, he insisted, and it had to help. Marcinkus replied that the letters of comfort had been issued after the debts had been contracted, as a favour to Calvi. Then he produced the standard trump card, the disclaimer from Calvi.
Occhiuto, however, was not one to be easily persuaded. As far as he was concerned, the "counter-letter" simply proved that the IOR had collaborated with Ambrosiano's chairman in perpetuating a fraud. Not only that, but the absolving letter was in Calvi's capacity as chairman of Ambrosiano Overseas in Nassau, of which Marcinkus had been a director. And what about the letter, dated October 26 1981, from the IOR giving Calvi full powers of attorney for the debts to Lima and Managua?
Arduino then tried a gentler approach. For two weeks, he told Marcinkus, he had given no formal confirmation to creditor banks pressing for payment that the IOR was involved, despite the reports in Italy. He had spoken merely of "an important debtor through various affiliates". But from Monday July 5, the IOR's name would be on the desk of every foreign bank in London, Paris and New York.
Marcinkus gave a resigned shrug. "Too bad," he said. Well then, Arduino retorted, "All I can say is that I'm awfully sorry. For this bloody mess is your responsibility."
The meeting ended, and with it, to all intents and purposes, hopes of a peaceful solution to the Ambrosiano crisis. The commissioners were to have other contacts with the IOR, but with similar lack of success. What exactly happened inside the Vatican during that fortnight between the final detonation of the Ambrosiano crisis, and the blunt refusal to help on July 2 can only be guessed at: the Holy See is not generous with information. One must presume, however, that Marcinkus had managed to satisfy Cardinal Casaroli, and through him the Pope himself, that the IOR was guilty only of naivety, that it had been deceived by Calvi. That line of argument, indeed, was to remain basically the same through the stormy months ahead.
Ironically, some believe that Ambrosiano could perhaps have been saved for much less than the full $1,287 million outstanding. If $300 or $400 million had been available to satisfy creditors, that might have been enough to restore confidence—had it been provided at once. Instead, confident of its case, the Vatican played for time, with the habit born of a long contemplation of eternity.
Only on July 13 did it announce appointment of its own three "wise men", to examine relations between the IOR and Ambrosiano. The three were Philippe de Week, a recent chairman
of UBS, one of the largest Swiss banks, Joseph Brennan, from the Emigrant Savings Bank of New York, and Carlo Cerutti, a senior executive at STET, the Italian state telecommunications company, as well as a trusted financial counsellor of Popes since Pius XII. The decision was unprecedented and was partly the consequence of something hardly less unusual—a Christian Democrat Minister who spoke out against the Vatican.
One reason, perhaps, why the Vatican had escaped comparatively lightly in the Sindona affair, was that the Government was firmly in the hands of sympathetic Christian Democrats. This time, however, things were different. Spadolini, a Republican not a Christian Democrat, was Prime Minister. Andreatta, meanwhile, had watched Ambrosiano with growing concern since his arrival as Treasury Minister in October 1980. But not even his visit to the Vatican to warn about Calvi in April 1981 had produced much effect. And that July 2, as the commissioners were receiving their decisive rebuff, Andreatta made a Parliamentary statement on the affair. The IOR, he declared, had in some instances been Calvi's business partner. The Italian Government was therefore expecting "a clear acceptance of its responsibility". Such forthrightness was typical of Andreatta; at around this time he seriously considered going to see the Pope in person about the IOR's behaviour. Ambrosiano, however, was rapidly moving beyond deliverance.
The run on deposits was growing worse, and the bank alone could no longer cope. At that point the commissioners took two crucial decisions. On July 5, following the peremptory refusal by the IOR, the Milan parent bank stopped helping its affiliates to meet their own debts as they fell due. The enfeebled children were left to die, and they did so rapidly. On July 16 Ambrosiano Overseas in Nassau had its banking licence suspended, after failing to repay $8 million due that month.
A week earlier the board of Ambrosiano Holding of Luxembourg met for the last time, to vote to place the company under special administration. For Ruggero Mozzana, the 79-year-old predecessor of Calvi at Banco Ambrosiano itself, the occasion was understandably heart-breaking: "I've been alive too long," he said in tears. "Why are you crying," replied Carlo Olgiati, still on the Luxembourg board: "You don't have to worry, you're too old to go to prison."
Such was the human dimension of disaster. More important by far, however, were the international implications of that first decision of July 5. Deprived of the support of the Milan parent, the foreign affiliates of Ambrosiano were forced to default on their own repayments to the international banks which had lent them money. The Bank of Italy's arguments for withdrawing support were two: first, that only by adopting an uncompromising policy could it exert pressure on the IOR; and second, that the Rome authorities could not be responsible for debts contracted by offshore subsidiaries of Ambrosiano, beyond all control. For the ambiguous "Basle Concordat" of 1975, agreed by leading central banks at their "club", the Bank for International Settlements in Basle, to deal with such circumstances, obliged a central bank to come to the aid of a bank on its own territory. It was not necessarily obliged to act as "lender of last resort" for subsidiary holding companies like Ambrosiano Luxembourg, and their further appendages. From a legal viewpoint, the Bank of Italy may have been correct, but the decision was to draw a venomous response.
The second decision of that week would also not be without controversy. Discreetly the Bank of Italy had started to sound out leading Italian banks about taking part in a "lifeboat" arrangement to prevent Ambrosiano going under. On July 6, the three commissioners warned Ciampi that Ambrosiano could no longer manage on its own. The choice, they said, lay between a huge injection of new capital, or immediate liquidation. Rapidly, it became clear that the price of the first was the second. Other Italian banks were not prepared to commit unspecified sums without certainty of compensation. And the most obvious compensation was the two highly attractive banks controlled by Ambrosiano; Credito Varesino and above all Banca Cattolica del Veneto, the most profitable single bank in the country.
On July 9 representatives of more than 50 banks belonging to the Italian Banking Association (ABI) met in Milan, but could not agree. In the meantime, however, a select group of major banks had drawn up their own rescue-cum-takeover scheme for Banco Ambrosiano, with the tacit prior endorsement of the Bank of Italy. On that same evening of July 9, after the Milan meeting produced no solution, the plan was launched.
That evening the chairmen and general managers of the six (later to become seven) banks in this secret second group were summoned by Ciampi to the Bank of Italy. The banks involved were a carefully balanced assortment. From the public sector there was the Banca Nazionale del Lavoro (BNL), the largest commercial bank in Italy, the Istituto Bancario San Paolo di Torino, and Istituto Mobiliare Italiano (IMI). The much smaller private sector was represented by Credito Bergamasco of Bergamo, Banca Popolare di Milano and— most fitting of all—Banca San Paolo from Brescia.
History had come full circle, for the Brescia bank was founded in 1889 by that same Monsignor Giuseppe Tovini, who later set up Banco Ambrosiano. Like Ambrosiano, San Paolo di Brescia was profoundly Lombard and "Catholic". Its deputy chairman, Giovanni Bazoli, shared a law practice with Lodovico Montini, the younger brother of the former Pope Paul VI. Tradition, even in this grim hour, had to be respected.
A sombre reception committee awaited the group at the Bank of Italy. It consisted of Andreatta, Ciampi, his deputy Dini, and the commissioners and special auditors down from Milan. The Treasury Minister led off with a stark warning. Without immediate help, Ambrosiano could collapse. But even such aid might not be enough. Ambrosiano could well have to be placed into liquidation—in which case it was essential that a new bank be ready to take its place at once, to avoid the disruption that complete closure would cause for depositors, borrowers and staff of the old Ambrosiano.
For six hours the discussions dragged on, interrupted only by a break for sandwiches. To make matters worse the heat was stifling, as for some reason of "austerity" the central bank's air conditioning had been turned off. The two commissioners Occhiuto and Arduino did not hide their opinion that Ambrosiano was doomed. Bertoni, ever the optimist, argued, however, that conceivably the bank might be salvaged. Some were inclined to believe him, most were more than doubtful.
At last, close to midnight, agreement was reached, and the "pool" was born. The Bank of Italy issued next day a laconic communique, recording the guarantee given by the "pool" banks to make available resources to meet the "possible" short-term needs of Banco Ambrosiano. The statement also noted their readiness to "safeguard the continuity of the bank's activities."
Everyone, with the possible exception of the cheerful Bertoni, knew in fact that liquidation was well-nigh inevitable, and attention shifted to the shape of its successor, to be called Nuovo Banco Ambrosiano. No more than 50 per cent of the new bank's capital would be held by the three state banks, to preserve as much as possible Ambrosiano's tradition of private ownership. The number of the private banks involved meanwhile rose from three to four. Banca Popolare di Milano would hold twenty per cent of the new Ambrosiano, and the other three (including San Paolo of Brescia) ten per cent apiece. The blend was as subtle as the forces which previously played upon both Ambrosiano and the Corriere, in the eyes of the politicians its most important asset. The Christian Democrats' say was assured primarily through the private banks, above all Banca Popolare di Milano and its chairman, a formidable lawyer called Piero Schlesinger. The other parties had a voice through the state banks. The Social Democrats were represented through San Paolo di Torino, by its deft chairman Luigi Coccioli; the Socialists in the person of Nerio Nesi, admired for both his political and banking judgement as chairman of Banca Nazionale del Lavoro.
But the agreement did little to lift spirits at Calvi's dying Ambrosiano. The mood was of bleak bewilderment. Ordinary staff were fearful for their jobs; middle and senior management, who had always believed they were employed by the soundest of banks, now found that that remote, rarely glimpsed figure deferentially referred to as Signo
r Presidente had tricked them, like a husband who cheats on his wife. Even those who knew, like Leoni, Botta, and in the last stages Rosone, had probably deluded themselves—as maybe Calvi had—that with "the priests' guarantee", everything would be all right. But what God giveth, he can also take away.
For the priests were becoming if anything still more uncompromising. In the early stages there were signs that the Vatican might at least accept responsibility for the $200 million apparently lent by Calvi's banks in Nassau and Lima directly to the IOR. But on July 23, when the commissioners met for the last time with de Week, Brennan and Cerutti, even that small comfort was removed.
The three investigators appointed by Cardinal Casaroli made clear that the IOR disowned not just the indirect borrowings through Panama, "covered" by the letters of comfort, but the apparently direct ones as well. More letters had been discovered from Calvi, dating from 1976, confirming that the IOR would act merely as a nominee for such deposits from Calvi's banks. The Vatican bank would lend on an equivalent sum to that other Panama shell company, the United Trading Corporation, established back in November 1974. Once again, the Vatican was maintaining it had been duped.
All of this only added to the difficulties facing Arduino, the commissioner who was dealing with the foreign creditor banks. Severance of the financial life support system for Ambrosiano's offshore subsidiaries had its first international effect on July 12, when the Midland Bank in London called Ambrosiano Luxembourg into default on its $40 million loan of 1980, after the first repayment of principal was not met. Under the standard "cross-default" clauses contained in such loans, Banco Ambrosiano Holding was automatically held to have defaulted on the $75 million financing arranged by National Westminster in 1981, and other borrowings as well.
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