The Secret of the Vatican (page 2)


September 1987

by Edward Jay Epstein

Even though the Vatican is probably the oldest--and most fascinating--institution in the western world, it had two depend on two meager forms of income for it survival: The once a year Peter Pence contributions-- a tradition that dated back to the Crusades-- which brought in anywhere from $10 to $20 million; and the dividends and interest it earned on its "patrimony"-- which was its investment portfolio (that grew out of the $90 million settlement to it by the Italian government in 1929 as compensation for its seizing of Rome and other Papal properties in the nineteenth century. With the expenses of administrating the Holy See growing by leaps and bounds, and its income fixed, there was no way of avoiding what amounted to a permanent deficit. The financial crunch became even more desperate in the early 1960s when Italy instituted a withholding a 15 per cent tax of dividends that would further reduce their income.

While protesting that this tax violated its treaty with Italy, the Vatican moved to moves all its Italian investments off-shore, and out of the reach of Italian taxes. This was completely legal since the Vatican is a sovereign state, unrestricted by the laws of Italy on anyone else. Unfortunately, the financier chosen to help it make this move, Michael Sindona (now also dead via poisoning), turned out to be involved in bank-rigging legerdemain--the so called "Crack Sindona" that landed him in prison. Pope Paul next turned to a completely reliable bank, founded by priests, which the Vatican was the single largest stockholder-- the Banco Ambrosiano. He put his trusted bodyguard in charge, even though he was, as he acknowledged, "no banker" so he could make sure, unlike the "Sindona situation", the Vatican never again lost control.

Marcinkus, to this end, sat on the Board of the Banco Ambrosiano's subsidiary in Nassau (the one that controlled the Monte Carlo telex conduit). Control also came through the secrete purchase of the bank's stock by dummy corporations, through a daisy-chain of Swiss companies (Though Marcinkus refused to comment on such machinations). By the mid-1970s, the Vatican's "Institute For Religious Work" had become willy-nilly a fairly aggressive off-shore bank in the Caribbean-Liechtenstein- Luxembourg network, borrowing, lending and taking rich commissions. By taking full advantage of its sovereign status, which made it free from any regulations, the Vatican greatly increased its income-- making more than $20 million on a single deal (which was more than Peter's Pence some years); and this money in turn allowed Pope Paul, and his successor, Pope John to carry out many of their laudable reforms.

Calvi, the son of a bank clerk, undertook to be the intermediary, and organized the clandestine connections-- including those through which the money could be funneled into the Panamian phantom companies. He was regarded by Marcinkus as "simply an honest functionary."

Somewhere along the line, Calvi, whether or not Marcinkus knew it, began using the off-shore bank, and the Vatican's phantom companies in Panama, to make other investments-- such as buying the Rizzoli newspapers. The assumption may have been that if the investments failed, the Panamian companies to whom the money was loaned, would quietly go bankrupt, and the banks would absorb the losses. Since the Vatican ownership of these the companies was supposed to be an irretrievable secret, written only in one sealed document in Luxumburg, no one would be able to hold it responsible. On the other hand, if the investments proved profitable, as everyone believed they would, the Vatican would make an immense profit, and be able to continue its worthy social programs.

What those involved in the scheme failed to anticipate was how everything that could go wrong would go wrong. Sindona, who was arrested in N.Y. on an unrelated matter, also began blackmailing Calvi by plastering posters up in Milan asking questions about the Banco Ambrosiano's relations with the Vatican. This in turn focussed the Bank of Italy's attention on Calvi's activities. Calvi was jailed on an unrelated (and probably unfair) currency charge; and, thrown in a cell with terrorists, he attempt suicide. Calvi, desperate to get political influence, then joined an illegal Masonic lodge, P-2, which was exposed as trying to pull a coup d`etat-- and Calvi's name appeared on its roll call. The bank, newspapers and other financial investments collapsed in the stock market-- wiping out,along with interest charges, most of the borrowed 1.4 billion. In his last interview with the press before fleeing,Calvi said "It is a question of surviving in a climate that is becoming like a religious war...It is an atmosphere that favors every sort of barbarism." Finally, half-mad, he fled Italy to London-- and his mysterious death.

Suddenly, with banks around the world left holding the bag, the scandal became inevitable. The Vatican begrudgingly agreed to pay back $250 million to the banks. This required it to go further into debt, worsening its already precarious situation.

Behind this all was a simple secret, the secular world had left the Vatican with great responsibilities-- but no money.

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