The Secret of the Vatican (Short Take)


September 1987

by Edward Jay Epstein

The Supreme Court of Italy did well to finally quash the extraordinary warrant to arrest Archbishop Paul Casimir Marcinkus, the head of the Vatican bank and the second most powerful man in the Vatican after the pope, on charges that he had been a principal conspirator in an international banking scandal that has never been resolved. I met with Monseigneur Marcinkus at the height of the crises in 1983, in his office below the Pope's apartment, behind the walls of the Vatican, and, from the story he told, became convinced that such an arrest not only would violate the sovereignty of the Holy See, but, by making him the scapegoat, divert from what had really happened.

The entire tangle of intrigue began to unravel five years ago in June when a well-dressed corpse was found hanging by a red nylon noose from scaffolding under Blackfriars Bridge in London. His pants were stuffed with large bricks, his feet washed by the Thames--in what seemed to be a masonic ritual murder or suicide (The Coroner's Jury was never unable to decide which it was). He was Roberto Calvi, the chairman of the twenty billion dollar Banco Ambrosiano in Milan, and who had vanished from Rome three 3 days earlier, and was, even as he dangled from the bridge in London, the object of a manhunt by Italian authorities. His personal assistant, Graziela Corrocher, had plunged to her death from a high window in the bank's headquarters leaving a note behind cursing the missing banker. As soon as the Italian counsel identified the corpse, he cabled Rome "They have our banker." But $1.2 billion of his bank's money was also missing.

Government investigators traced the missing funds to a one-room branch office of a Bahamian subsidiary of the bank on the Avenue Des Citronniers in Monte Carlo. The mysterious transfer orders, which moved billions from Europe and South American subsidiaries to letter-box companies in Panama, had been typed out over a telex machine that had been specially constructed to leave no duplicate copy or other trace of the transaction. And the machine's operator, within a few hours of Calvi's death, had been ordered to close the office--and leave.

Then, documents recovered from a vault in the principality of Luxembourg revealed, to the astonishment of Italian banking authorities, that the Panamian companies which had received the money were secretly owned by the Vatican through Marcinkus' bank, "The Institute For Religious Work."

In theory, these dummy companies, through a maze of subsidiaries, had borrowed the $1.4 billion from the Banco Ambrosiano's subsidiaries, which through back-to-back loans had borrowed the money from banks in Europe. What these companies had done with the money, among other things, was to buy a controlling block of stock in the very bank that was arranging the loans, Banco Ambrosiano, and one of the most politically-powerful media empires in Italy, Rizzoli. Both of these companies were now insolvent ( because of the scandal in the case of the Banco Ambrosiano), and there was no way that the dummy Panamian companies could repay the loans. In fact, when the value of the stock was subtracted from the loans, at least $900 million had disappeared.

If the Vatican really owned--and controlled-- these Panamian shell companies, it might appear that it had used them to attain secret control over strategic banking and media corporations in Italy-- and, under the assumption they were untraceable, didn't repay their loans. But the Vatican insisted that their ownership was only nominal, and Calvi and others used its name for their own purposes. Archbishop Marcinkus claimed that he had made a mistake, out of his personal; naivety, in signing documents, obligating the Vatican to repay the loans (though other Vatican officials had in fact signed the documents).

Aside from taking personal blame-- which answered none of the questions of who had responsibility for the missing billion-- Archbishop Marcinkus flatly refused to speak to Italian authorities. And there was no way he could be subpoenaed from his sanctuary in the Vatican. The only people outside the Vatican who could explain why the bank had arranged these massive transfers, Calvi and Corricher, were dead.

When I met with the Archbishop Marcinkus-- a 6 foot 3 inch giant of a man--I found him an unlikely banker. The son of an immigrant window washer in Cicero, Illinois, he had come to the Vatican in l950 as a 28 year old student priest, and, because of his size and loyalty, became a bodyguard to Pope Paul, who had organized the bank.

He had a very different version of the "mess", as he called it, then what the world press was presenting as the "Calvi Thriller." As he explained it, the "mess" proceeded from a century-old financial problem. It was money. Contrary to myth, the Vatican had insufficient resources to pay for all the needs of modern life--pensions for its nuns, hospital care for its employees, multi-language press and radio operations, re-training its Swiss Guard to cope with world tourists, and international travel for its Nuncios and other ambassadors. (All it got from Italy was free telephone privileges-- which helped). "You can't run the church on hail marys alone", the Archbishop pointed out-- nor can a city state be run entirely by payer. Yet where was the money to come from? The Vatican had no taxing authority. The sale of stamps and museum admissions hardly paid the running expenses of its great museum. And the diocese around the world, although they may had cash surplus, did not pay tribute to the Vatican (not in money--at least).

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.