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

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  Contents

  Preface

  1 Murder in London

  2 The Last Pope King

  3 Enter the Black Nobles

  4 “Merely a Palace, Not a State”

  5 An Unholy Alliance

  6 “The Pope Banker”

  7 Prelude to War

  8 A Policy of Silence

  9 The Blacklist

  10 Blood Money

  11 A Nazi Spy in the Vatican?

  12 The Ratline

  13 “He’s No Pope”

  14 The Men of Confidence

  15 “You Can’t Run the Church on Hail Marys”

  16 Operation Fraulein

  17 Il Crack Sindona

  18 The Battle of Two Scorpions

  19 “A Psychopathic Paranoid”

  20 The Year of Three Popes

  21 The Backdoor Deal

  22 “The Vatican Has Abandoned Me”

  23 “You Have to Kill the Pope”

  24 “Tell Your Father to Be Quiet”

  25 “Protect the Source”

  26 “A Heck of a Lot of Money”

  27 “I’ve Been Poisoned”

  28 White Finance

  29 Suitcases of Cash

  30 Burying the Trail on Nazi Gold

  31 “A Criminal Underground in the Priesthood”

  32 “His Inbox Was a Disaster”

  33 The Kingmaker Becomes King

  34 “As Flat as Stale Beer”

  35 Chasing the White List

  36 The World Has Changed

  37 The Powerbroker

  38 The Butler

  39 A Vote of No Confidence

  40 “A Time Bomb”

  41 The Swiss James Bond

  42 “The People’s Pope”

  43 “Back from the Dead”

  Photographs

  Acknowledgments

  About Gerald Posner

  Bibliography

  Notes

  Index

  Illustration Credits

  To Trisha, my muse and eternal love

  Preface

  In 1984, I traveled to Buenos Aires as part of my research for a biography of Auschwitz’s “Angel of Death,” Nazi Dr. Josef Mengele. I petitioned Argentina’s first democratically elected president, Raúl Alfonsin, for access to the country’s secret files on Mengele. There was no response for several weeks. Then, one night, at nearly 11:00 p.m., several uniformed police knocked on the door of my downtown hotel. I was put into the back seat of a blue Falcon, the very type of unmarked car that had become notorious under the military junta for taking away thousands of dissidents, many of whom were killed. But my trip ended at the main headquarters of the Federal Police. A grim-looking colonel informed me that he had been ordered to produce some documents. The folder I soon reviewed in an adjacent room contained a treasure trove of information about Josef Mengele and his decade as a fugitive in Argentina, everything from the original International Red Cross passport under an alias on which he had arrived from Europe to details of how he stayed one step ahead of Nazi hunters. A few of those papers raised broader questions about whether Nazi war criminals had reached safe haven in South America after World War II with the assistance of a few ranking Catholic prelates in Rome.

  A few weeks later, I was in Asunción. There, I toured the country with Colonel Alejandro von Eckstein, a military officer who was not only a good friend of the country’s dictator, Alfredo Stroessner, but who had personally cosponsored Mengele’s application for Paraguayan citizenship. With von Eckstein in tow, I reviewed a small part of that country’s sealed Mengele file. And I met a contingent of diehard neo-Nazis in Nueva Bavaria (New Bavaria), in the south of the country. Mengele had found safe haven there in 1960. Feeling safe to talk openly because of von Eckstein’s introduction, they regaled me with stories about how a local hotel in the rain forest had served decades earlier as a clearinghouse for some of the most notorious Nazis. And mixed in those stories were references once again to clerics in Rome to whom those South American National Socialists were grateful.

  After that book, Mengele, was published in 1986, I moved on to other subjects. But the story about the church and its possible ties to the Third Reich had captured my attention and I tried staying abreast of it. In 1989, The New York Times published my long letter, “Why the Vatican Kept Silent on Nazi Atrocities; The Failure to Act.” That was a response to an editorial by conservative commentator Patrick Buchanan absolving the church of any moral responsibility for the Holocaust. Two years later the Times published my op-ed, “The Bormann File,” in which I castigated Argentina for not releasing a secret dossier about Hitler’s deputy that I had seen when I was inside the country’s Federal Police headquarters.

  The last paragraph of my 1989 Times letter explained that I approached the question of any role the church might have played during World War II both as a reporter and a Catholic: “Although my father was Jewish, my mother was Catholic, and I was educated by Jesuits. I consider myself as much a Catholic as Mr. Buchanan. But I am embarrassed by his need to defend the church on every historical issue. The church has been involved in terrible undertakings, and they cannot be denied. That many individual nuns and priests exhibited great bravery during World War II to save many victims does not diminish the silence or acts of the church’s hierarchy.”

  My focus, I would discover in the coming years, was far too narrow. I had thought the story was about a volatile mixture: institutional anti-Semitism and a fear of communism exacerbated by church leaders who failed to act forcefully when confronted with one of history’s greatest horrors in the Holocaust. What I discovered instead was that what happened within the church during World War II was part of a much more complex saga. The truth could be found only by following the trail of money.

  As Elliot Welles, an Auschwitz survivor and a Nazi hunter for the Anti-Defamation League, told me, “Profits. They matter as much in the church as they do inside IBM. Don’t forget it.”

  Even in 2005, when I started this book in earnest, I still underestimated its scope. Then I envisioned reporting only the story of the scandal-ridden Vatican Bank, founded in the middle of World War II. It has operated for seventy years as a hybrid between a central bank of a sovereign government and an aggressive investment banking house. While the Vatican Bank is at the center of this modern chronicle, it is impossible to fully understand the finances of the Vatican without going back in church history.

  This story is a classic investigative tale about the political intrigue and secretive inner workings of the world’s largest religion. It is not about faith, belief in God, or questions about the existence of a higher power. Instead, God’s Bankers is about how money, and accumulating and fighting over it, has been a dominant theme in the history of the Catholic Church and often in shaping its divine mission. “You can’t run the church on Hail Marys,” said one bishop who ran the Vatican Bank.

  God’s Bankers lays bare how over centuries the church went from surviving on donations from the faithful and taxes levied in its vast earthly kingdom to a Lilliputian country that hesitatingly embraced capitalism and modern finance. During the 1800s, Catholics were barred from even making loans that charged interest. A century later the Vatican Bank orchestrated complex schemes involving dozens of
offshore shell companies as well as businessmen who often ended up in jail or dead. How and why that remarkable transformation took place is in part the tale of God’s Bankers.

  The challenge in this project was to follow the money from the Borgias to Pope Francis, all the while prying into an institution that guards its secrets and keeps massive documentation sealed in its self-described Secret Archives. Compounding the problem, as one author wrote in 1996, “Vatican officials would sooner talk about sex than money.” The story that Rome preferred I not tell had to be pieced together from documents scattered in private and public archives, information gleaned from litigation files and court records, and dozens of interviews. A handful of clerics and lay officials in Rome—who, fearing retribution, spoke only on the condition of anonymity—provided an unprecedented insight into the cutthroat infighting that has often crippled the modern Papacy. Those interviews laid out the considerable challenge confronting Pope Francis when it comes to reforming the finances of the Vatican.

  As I assembled my reporting, I realized a crucial part of the mix was missing: the inexorable quest for power that is tied to the pursuit of money. In the Vatican, it is a volatile brew. There are nearly a thousand men, most celibate, who live and work together, and wield not only great earthly power but who believe for the most part that they have inherited divine rights in safeguarding the “one and true” church. In the end, they are human, hobbled by the same frailties and shortcomings common to the rest of us. Little wonder that despite their best intentions they have often ended up in internecine wars and stunning scandals that rival those of any secular government.

  A public mythology in books, articles, and movies has grown around the church and its money. Freemasons, the Illuminati, mobsters protected by priests, murdered Popes, hoards of Nazi gold in the Vatican’s basement—the wildest theories might be entertaining but they poorly serve history. God’s Bankers cuts through the masses of misinformation to present an unvarnished account of the quest for money and power in the Roman Catholic Church. No embellishment is needed. That real tale is shocking enough.

  1

  Murder in London

  London, June 18, 1982, 7:30 a.m. Anthony Huntley, a young postal clerk at the Daily Express, was walking to work along the footpath under Blackfriars Bridge. His daily commute had become so routine that he paid little attention to the bridge’s distinctive pale blue and white wrought iron arches. But a yellowish orange rope tied to a pipe at the far end of the north arch caught his attention. Curious, he leaned over the parapet and froze. A body hung from the rope, a thick knot tied around its neck. The dead man’s eyes were partially open. The river lapped at his feet. Huntley rubbed his eyes in disbelief and then walked to a nearby terrace with an unobstructed view over the Thames: he wanted to confirm what he had seen. The shock of his grisly discovery sank in.1 By the time Huntley made his way to his newspaper office, he was pale and felt ill. He was so distressed that a colleague had to make the emergency call to Scotland Yard.2

  In thirty minutes the Thames River Police anchored one of their boats beneath Blackfriars’ Number One arch. There they got a close-up of the dead man. He appeared to be about sixty, average height, slightly overweight, and his receding hair was dyed jet black. His expensive gray suit was lumpy and distorted. After cutting him down, they laid the body on the boat deck. It was then they discovered the reason his suit was so misshapen. He had stones stuffed in his trouser pockets, and half a brick inside his jacket and another half crammed in his pants.3 The River Police thought it a likely suicide. They took no crime scene photos before moving the body to nearby Waterloo Pier, where murder squad detectives were waiting.4

  There the first pictures were taken of the corpse and clothing. The stones and brick weighed nearly twelve pounds. The name in his Italian passport was Gian Roberto Calvini.5 He had $13,700 in British, Swiss, and Italian currency. The $15,000 gold Patek Philippe on his wrist had stopped at 1:52 a.m. and a pocket watch was frozen at 5:49 a.m. Sandwiched between the rocks in his pockets were two wallets, a ring, cuff links, some papers, four eyeglasses, three eyeglass cases, a few photographs, and a pencil.6 Among the papers was an address book page with the contact details for a former official at the Banca Nazionale del Lavoro; Italy’s Socialist Finance Minister; a prominent London solicitor; and Monsignor Hilary Franco, who held the honorary title of Prelate of the Pope.7 Police never found the rest of the book.

  A city coroner arrived at 9:30, two hours after the body’s discovery, and took it to London’s Milton Court morgue.8 There they stripped the corpse, took his fingerprints, and prepared for an autopsy. Their notes reflect that the dead man oddly wore two pairs of underwear.9

  London police quickly learned from the Italian embassy that the passport was a fake. And it took only a day to discover the false name was simply a variation of the dead man’s real one: he was sixty-two-year-old Italian banker Roberto Calvi, chairman and managing director of Milan’s Banco Ambrosiano, one of Italy’s largest private banks. He had been missing for a week. A judge there had issued a fugitive warrant because Calvi had jumped bail pending the appeal of a criminal fraud conviction the previous year.

  A Roman magistrate and four Italian detectives flew to London to help British police cobble together a personal dossier.10 Calvi had risen from a middle-class family to become the chief of the Ambrosiano. He had turned a sleepy provincial bank into an aggressive international merchant bank. The magistrate informed his British counterpart that Calvi was no ordinary banker. He was involved with some of Italy’s greatest power brokers in a secret Masonic lodge and he was a confidant of the Vatican’s top moneymen.11

  Despite his criminal conviction, the Ambrosiano’s board had allowed him to remain at the helm of the bank. Although Calvi publicly promised to rescue his financial empire and restore its reputation, he knew that the Ambrosiano was near collapse under the weight of enormous debts and bad investments.12 The bank’s board of directors had fired him only the day before his body swung from Blackfriars.13

  The police began patching together how Calvi ended up in London. His odyssey had begun a week earlier when he had flown from Rome to Venice. From there he went by car to Trieste, where a fishing trawler took him on the short journey across the Gulf of Trieste to the tiny Yugoslavian fishing village of Muggia.14 The moment he left Italy’s territorial waters he became a fugitive. From Muggia, an Italian smuggler arranged for him to be driven overnight to Austria, where he shuttled between several cities for a few days before boarding a private charter in Innsbruck for a flight to London. He spent the last three days of his life in flat 881, a tiny room at the Chelsea Cloisters, a dreary guesthouse in the capital’s posh South Kensington district.15

  The number of unanswered questions grew as the investigation continued. They were not even certain how Calvi got to Blackfriars. It was four and a half miles from his guesthouse. On a walk he would have passed half a dozen other bridges, any of which would have been just as suitable for a flashy suicide. Calvi was well known for his entourage of bodyguards. But British investigators found none. Nor could they locate a black briefcase supposedly crammed with sensitive documents.16 Calvi’s waistcoat was buttoned incorrectly, which friends and family told the police was out of character for the compulsive banker.17 He had shaved his trademark mustache the day before his death, but police interpreted that not as a sign of a suicidal man but evidence that he was altering his appearance to successfully stay on the run.18

  Two men had been with Calvi in London. Silvano Vittor, a small-time smuggler, had flown with him on the charter. The other, Flavio Carboni, was a flashy Sardinian with diverse business interests and much rumored mob connections.19 They had fled London before detectives could interview them.

  The police had also to cope with a flood of false sightings. Many thought they had seen Calvi in his final days, everywhere from the Tower of London to a sex parlor to a nightclub in the company of a cocaine trafficker.20

  Police soon confirmed that Calv
i had a $3 million life insurance policy that named his family as the only beneficiaries.21 In his spartan hotel room investigators found a bottle of barbiturates, more than enough for a painless suicide. But toxicology reports revealed no trace of any drug. When police interviewed Calvi’s wife, Clara, she said that in one recent telephone call he told her, “I don’t trust the people I’m with anymore.”22 Anna, Calvi’s daughter, told the inspectors that she had spoken to her father three times the day before he died. He seemed agitated and urged her to leave her Zurich home and join her mother in Washington, D.C. “Something really important is happening, and today and tomorrow all hell is going to break loose.”23

  Another complication was that Calvi suffered from mild vertigo. The police calculated that he had to be acrobatic to reach his hanging spot. It required climbing over the parapet, descending a narrow twenty-five-foot ladder attached to the side of the bridge, rolling over a three-foot gap in construction scaffolding, and then tying one end of the rope around a pipe and the other around his throat, all the while balancing himself with twelve pounds of rocks and a brick crammed into his pockets, suit, and crotch. Not likely, thought the lead detective.24 Moreover, the police matched the stones to a construction site some three hundred yards east of the Thames. Calvi would have had to pick up the rocks there and return to Blackfriars before putting them into his clothing. But lab tests found no residue on his hands. Also, since the ladder he would have descended was heavily rusted, police expected some trace on his hands, suit, or polished dress shoes. There was none.

  The London coroner, Dr. David Paul, expressed no doubts that the cause of death was suicide. He relied on the opinion of Professor Keith Simpson, the dean of British medical examiners, who had performed the autopsy.25 A month after Calvi’s body was found, an inquest was held in the Coroner’s Court. Paul presented the details of the police investigation and autopsy to a nine-person jury. Simpson testified that in his postmortem exam he found no signs of foul play and “there was no evidence to suggest that the hanging was other than a self-suspension in the absence of marks of violence.”26 Thirty-seven others testified, mostly police officers.27 Calvi’s brother, Lorenzo, surprised the inquest with a written statement that revealed that Roberto had tried killing himself a year earlier. Carboni and Vittor, the duo with Calvi in London, refused to return to England but submitted affidavits. When they last saw Calvi late on the night he died, he was relaxed. Nothing seemed out of the ordinary. Police would not discover for another decade that Carboni had left London with Calvi’s briefcase packed with important documents.28