Papal Impropriety: The Dark Secrets Of The Vatican Bank

March 22, 2012Vatican Cityby David Smith

Papal Impropriety: The Dark Secrets Of The Vatican Bank

The Vatican Bank has been plagued by corruption and criminality ever since it was established in 1942. Yet this is hardly a surprise, given that no bona fide legal system is currently in place to ensure check and balances for the bank of God.

The scandals surrounding the Vatican’s finances strain credulity. At the heart of the Catholic Church, we find murder, collusion with violent crime, bribery and money laundering.

But the Church has, and will, never admit to any financial wrongdoing. With an image of sanctity to protect, the Catholic Church simply cannot admit to any illegality or immorality. In this respect, there is a parallel with the Holy See’s persistent denials of sexual abuse among the clergy. This pretence of moral purity can be maintained because the tiny Vatican state is not subject to Italian law enforcement. 

Jason Berry, author of Render Unto Rome: The Secret Life of Money in the Catholic Church, said: “The Vatican has a systematic aversion to transparency. Its power structure is honeycombed in secrecy. With the abuse scandal, the bottom line is that the Pope will not punish complicit Bishops and Cardinals.

“The crux of the Vatican’s problems – whether in finance, or the abuse crisis – is they are an international state without a bona fide legal system. The Vatican cannot police itself and that’s why we see so many scandals.

Related: Vatican City (Holy See) Economic Statistics and Indicators

Related: Holy See (Vatican City) Economy

The Sins Of The Fathers

Financial controversy has dogged the Vatican Bank ever since it was formed in 1942. There is strong evidence today that the Bank accepted tainted funds and riches from the bank accounts of deceased Jews in Europe during World War II.

But the modern era of the Vatican’s financial misadventures only truly began in the late 1960s, after the Vatican Bank started to develop strong ties with violent crime. At the heart of this story was a Sicilian banker named Michele Sindona who laundered heroin money for the New York Mafia family, the Gambinos. With his proceeds, Sindona bought up banks across Italy during the 1960s. 

“Then, Sindona was hired by Pope Paul VI in 1969 to become chief Vatican financial advisor after the Italian Government said all the Vatican’s holdings in Italian banks would be taxed. That’s when the trouble started,” said Paul Williams, author of The Vatican Exposed: Money, Murder and the Mafia.

“Sindona moved the Vatican’s holdings into the international market place where it could not be taxed…Through Sindona’s Mafia connections, dirty money flowed into the Vatican Bank.”

They laundered money from gun running and drugs. Sindona began the process, and it’s not stopped to this day. New York’s five Mafia families launder their holdings through the Bank.”

But one unblemished character was determined to stamp out the corruption. He was Albino Luciani - the future Pope John Paul I - who became Archbishop of Venice on December 15, 1969. In 1972, Luciani began investigating transactions at “the priests’ bank”, Banco Cattolica del Veneto, in which the Vatican Bank owned a 51 percent interest.

Luciani had become suspicious after the bank was sold by Vatican Bank President, Paul Marcinkus, to Roberto Calvi, Chairman of Banco Ambrosiano in Milan. Calvi was known as a crook who had laundered Mafia money through his bank.

Marcinkus, on the other hand, had been an American-born Catholic priest whose nickname was “the Gorilla” because of his huge bulk. Despite having no experience of banking, he was the Vatican Bank’s President from 1971 to 1989.

But Marcinkus soon became the central figure in Vatican Bank corruption. As soon as he was appointed as the Vatican Bank President, financial irregularity started to emerge. In 1972, the US federal department questioned Marcinkus about US$14.5 million in counterfeit US Bonds delivered to the Vatican. He refused to answer, citing confidentiality, and the US government opted not to pursue the matter.

Around the same time, Albino Luciani’s investigations of Marcinkus and Calvi had led to Sindona, who turned out to be a friend of Calvi’s. Luciani quickly realised all three men were dealing with the Mafia, and in cahoots. But, for now, there was little he could do.

Then, in 1978, Luciani became Pope John Paul I and began an immediate investigation into the financial aberrations at the Vatican. On the evening of September 28, the Pope told his Secretary of State, Jean Villot, that he was going to remove Marcinkus from his post the following day. But the Pope didn’t get to make the order because he never woke up. 

“I’m convinced he was murdered,” said David Yallop, who wrote the bestselling In God’s Name about the alleged crime. “It was largely to do with money. There were a number of parties who wanted him dead. Chief among them was Marcinkus, who knew he was about to be ousted. Then there was Calvi, who was in league with Marcinkus on a fraudulent business deal. Everyone in the inner circle knew about the Pope’s plans. I’m sure he was poisoned, although because the Vatican refused to carry out an autopsy, or release a medical report, we cannot prove it.”

He added: “The Vatican said he died of a heart attack, but you would normally assess that. The Venetian doctor who’d looked after him for 15 years and came down every two weeks to the Vatican said he was in excellent health.

Pope John Paul I’s reign had lasted for a mere 33 days. The only Pope to serve less time in the entire papal history was Leo XI who ruled for just 17 days in 1605 before dying under mysterious circumstances as well. Yallop believes that the probable method of Pope John Paul I’s murder was tampering with his medications for low blood pressure – either through liquid Effortil, or Cortiplex injections. 

With the Pope’s timely death, Marcinkus stayed on and continued his rackets. In 1982, Banco Ambrosiano went bust with debts of US$1.3 billion. Embarrassingly for Marcinkus, the Vatican Bank had been a major partner in Calvi’s illicit deals, which included laundering, Mafia money and facilitating unlawful payments from corporations to Italian politicians. The Vatican bank lost US$500 million.

In June 1982, Calvi fled Italy to escape jail and landed in London. He began threatening to tell everything he knew if he was imprisoned, and was found hanging under London’s Blackfriars Bridge just days later. Few people have accepted the official police verdict of suicide.

“Of course, he was murdered,” said Jason Berry. “He was deeply in bed with Cosa Nostra. I never heard of anyone committing suicide by putting rocks in his own shoes!”

The Vatican Bank claimed innocence, though in 1984 it made a US$240 million goodwill payment to creditors of Banco Ambrosiano. The gesture however failed to satisfy Italian magistrates who issued a warrant for Marcinkus’s arrest in 1987. This would result in a long tussle between the Vatican and Italian judicial authorities, which resulted in Marcinkus spending weeks holed up within the Vatican – fearing arrest if he ever set foot on Italian territory.

Finally, the Italian Court of Cassation had to rule that the Italian courts had no jurisdiction over Marcinkus. They said major officials of the Church were exempt from Italian state law under the terms of the 1929 Lateran Pact, which had granted independent statehood to the Vatican. 

Marcinkus survived once again and his influence continued to grow. He became Pro-President, the third most powerful person in the Vatican. In 1990, Marcinkus finally retired to Arizona.

“At one time, everyone was trying to arrest him,” said Williams. “But he escaped prosecution and lived a long, happy retirement on a palatial estate, playing golf every day on, smoking expensive cigars, dining in chic restaurants.”

“I could never understand why Interpol, or the US authorities didn’t extradite him. He was the number one guy at the centre of the Banco Ambrosiano scandal, which devastated hundreds of thousands of Italians. I think powerful Catholic interests would have cried ‘foul’ and ‘sacrilege’ if he’d been prosecuted.”

Continue Reading The Next Page...The Blind Eye Of The Holy See

The Blind Eye Of The Holy See

But while Marcinkus may have departed, corruption in the Vatican remains. According to Berry, one of the most suspicious figures today is Cardinal Angelo Sodano. Sodano was Secretary of State for 16 years, and is now the Dean of the College of Cardinals. 

Sodano is a Machiavellian floorshow,” says Berry. “This is a man who defended the most notorious child molester in recent Vatican history – Father Marcial Maciel.

“Maciel gave US$15,000 in cash and gifts to Sodano so he would not be hauled before the Vatican for child molestation. It was mindboggling deceit. But it tracks back to my fundamental argument that having an institution without a bona fide legal system allows all kinds of behaviour to be rationalised.”

Sodano has also had shady dealings in the US. In 2003, Boston’s Archbishop Seán O’Malley visited Rome seeking financial help to resolve 552 abuse cases. Sodano gave him carte blanche to sell Church properties; yet thanks to this insider information, Sodano cynically saw a business opportunity. His under-secretary at the Vatican fed information on closing churches to a New York company, the Follieri Group, so they could buy cheap and sell at a profit. Folleri’s vice-president was his nephew Andrea Sodano. 

An FBI investigation revealed that Andrea Sodano received US$800,000 for engineering services the FBI deemed worthless. Follieri was convicted of fraud and money laundering. But Angelo Sodano, and other church officials, were considered “unindicted co-conspirators”.

 “Sodano saw ahead of most people in Rome what the impact of the abuse crisis would be in the US. He knew churches were going on the market so he got his nephew involved,” said Berry.   

And though Pope Benedict XVI has a reputation as a moral fundamentalist, he still turned the usual Vatican blind eye to Sodano’s transgressions.

I call Benedict ‘the Pope of Ironies’ because he has waged theological prosecution on liberal church scholars, but is unwilling to take a prosecutorial stance against his own circle of cardinals,” said Berry.

“He needs the equivalent of a grand inquisitor to remove the worms eating through the soggy wood. Some say he lacks the moral fibre; others say he can’t do anything about it.”

But there could be another explanation for the Pope’s inertia – fear. The Pope is well aware of what happened the last time a Pope tried to clean up Vatican finances.

“Everyone who has looked into Vatican finances has ended up dead. It’s a story littered with corpses,” said Paul Williams. “Roberto Calvi was murdered. Pope John Paul I was certainly murdered. In the end, even Sindana was poisoned in his prison cell. It’s a story written in blood.”

The Shroud Of Rome

Yet despite all the controversy, the Vatican’s capacity to guard secrets somehow managed to keep it off the US State Department’s list of vulnerable countries at risk of money laundering for years. This immunity came to an end this year, as the Vatican entered the list for the first time in its history.

According to US officials, “huge amount of cash” flowing into the state made the Vatican a likely target for money laundering activities. The US state department was also unconvinced by anti-money laundering legislation introduced last year by Pope Benedict XVI. 

Williams, on the other hand, is entirely convinced that large-scale money-laundering activities occur within the hallowed walls of the papal state.

“They have so many phoney trusts. Money is invested in one trust, then goes into another, then another, then it’s transferred to offshore companies. Eventually it all comes back to the Vatican Bank,” said Williams.

Related: The Vatican Is Now A Money-Laundering Risk, Says US

Similarly, the amount kept in these vaults is another closely guarded secret. When the Vatican produces its annual financial statement, the Bank’s holdings are left off the books.

“The best guess made in 1982 was around US$10 billion, but we’ve since had the boom years of the 1990s and early 20th century so the figure is probably around US$100 billion,” according to Williams.

“Officially, the Vatican loses millions of dollars a year and cannot afford to pay billions in litigation costs for thousands of paedophile cases. If the Vatican Bank revealed its enormous holdings, billions of dollars would be drained to pay for sex abuse cases all over the world.”

Since 2010, the bank and its head, Ettore Gotti Tedeschi, have also been under investigation for financial mis-dealings, with prosecutors in Rome probing two transfers totalling €23 million from the Vatican Bank to two smaller banks. Unsurprisingly, the prosecutors’ demands for information have been blocked.

“There is nothing they can do as they have no jurisdiction in the Vatican. They will be powerless to investigate further,” said Williams.

While the Vatican claims to be determined to have its bank included in Europe’s “white list” of states that comply with international standards against tax fraud and money laundering, it still has a long way to go. JP Morgan Chase recently closed its Vatican bank’s account because of concerns about a lack of transparency there; and the Vatican, of course, will not police itself.

Related: JP Morgan Shuts Down Vatican Bank’s Account Over Transparency Fears

Instead of an evolved legal system, the Vatican has tribunals - a legacy from the Inquisition started in the 12th century. These tribunals are ineffective because the Church will never admit immorality.

“The Catholic Church has a tradition of apostolic succession. This means every Bishop and Cardinal stands in direct lineage to the original apostles,” said Berry. “As a Catholic I accept that as a theological reality, but the problem is the Vatican has erased the memory of Judas. As a result, no one can be found guilty of wrongdoing and there’s no internal justice system.

Deliver Us From Evil

The Vatican, however, has come under increasing pressure to clean up its act. This year, the release of “Vati-leaks”, a series of leaked letters emanating from within the Vatican, has caused further embarrassment for the Holy See, while strengthening outsiders’ cause for greater change.

The most significant leaks – revealing corruption and money laundering – came from letters written by Archbishop Carlo Maria Vigano to the Pope and other senior figures. Vigano sent the letters in 2011 when he was the deputy-governor of Vatican City – a post that he held for two years. Since then, he has been removed from the role and is now the Papal ambassador to the US.

As deputy-governor, Vigano was responsible for maintaining the tiny city-state’s gardens, buildings, streets, museums and other infrastructure – the perfect position to witness financial corruption. In his letters, Vigano said he discovered “a web of corruption, nepotism and cronyism” linked to the awarding of contracts at inflated prices. In one letter, Vigano tried to dissuade the Pope from listening to a smear campaign by other Vatican officials who wanted Vigano transferred because he was cleaning up procedures.

“Holy Father, my transfer right now would provoke much disorientation and discouragement in those who have believed it was possible to clean up so many situations of corruption and abuse of power that have been rooted in the management of so many departments,” Vigano wrote on March 27, 2011.

In another one of his many pleas to the Pope, Vigano also expressed outrage at the inflated cost of the Vatican’s nativity scene in St Peter’s Square in 2009 was €550,000. Vigano cut this by €200,000 in 2010.

Unfortunately while Vigano’s efficiency managed to turn the budget from deficit to surplus, he treaded on too many toes. In October 2011, Vigano was finally delivered from his “trangressions”, against his will, to be papal Nuncio in Washington.

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