16

Operation Fraulein

Only months after helping Calvi incorporate Cisalpine in the Bahamas, Sindona embarked on a period of aggressive expansion. In Italy, he and Calvi bought La Centrale Finanziaria, a financial holding company that had long been on his wish list.¹ And at the behest of Graham Martin, the American ambassador to Italy, Sindona purchased an influential Rome-based English-language newspaper, The Daily American. Martin wanted to keep the paper—in which the CIA had a covert 40 percent share—out of the hands of a socialist publisher.² At a lavish reception at Rome’s Grand Hotel to celebrate the acquisition, Martin joined the city’s mayor, several cabinet ministers, and Marcinkus in toasting Sindona.³ An article two days later in The Wall Street Journal dubbed Sindona “Italy’s Howard Hughes,” noting, “Bishop Marcinkus’ attendance at the reception was taken as proof of Mr. Sindona’s strong ties with the Roman Catholic Church.”⁴ The Journal also predicted that it was likely only a matter of time before Sindona would “make a substantial increase in his American investments.”⁵

Five months later Sindona proved the Journal right when he made a successful $40 million bid to buy a controlling stake in America’s eighteenth largest bank, the Long Island–based Franklin National.⁶ The New York Times noted that while Sindona “was a substantial investor in a variety of American enterprises,” the Franklin purchase meant “he [had] moved into the big time in the United States.”⁷

Laurence Tisch, a principal in Loews Corporation, sold Sindona his shares in the $3.4 billion bank. Franklin was under earnings pressure for nearly a year. Arthur Roth, its former chairman, had been trying to buy back the bank he had founded. But Sindona, using his Luxembourg holding company, Fasco, outbid Roth by $8.25 a share, a 25 percent premium to the stock’s trading price.⁸ He raised the cash by selling two successful holding companies to Calvi. Sindona dismissed some critics who thought he overpaid: “I have never lost money on the stock exchange.”⁹ (Later, when Franklin turned out to have financial problems, he’d complain that he had “trusted the American system . . . I [should] have done an audit myself.”)¹⁰

Roth challenged the Tisch-Sindona sale. He asked New York’s Superintendent of Banks to withhold approval until the state was fully satisfied that Sindona’s character was “above reproach.”¹¹ And as part of a public relations campaign to reverse the sale, Roth released an open letter to Tisch in which he asked: “Do you know enough about Michele Sindona to unconditionally recommend him as a person who will be good for the bank? Will there be a full disclosure of his finances, his backers, and detailed biographies?”¹²

Roth, who had been ousted in 1970 in what he called a “palace revolution,” cited a Wall Street Journal investigation the previous year into Sindona’s purchase of two American companies, Interphoto and Oxford Electric. The Journal reported that the deals were marked by a clear “conflict of interest.” The paper concluded that Sindona’s maze of Liechtenstein holding companies was “a tangled web of interlocking ownerships, directorships and debt.”¹³ But that incident proved of little help to Roth’s effort to discredit Sindona. The SEC cleared those purchases and dismissed any concerns after a two-day hearing.¹⁴

In challenging the Franklin acquisition, Roth also complained to federal officials, asking they bar Sindona from taking a controlling interest since his Liechtenstein-based Fasco had previously purchased shares in other U.S. industrial firms. Federal law then prohibited companies from holding banks at the same time they had stakes in other commercial businesses. Sindona, however, turned out to be exempt as he was buying Franklin as an “individual purchaser.”¹⁵

A month after the successful bid, Franklin appointed Sindona, and one of his top executives, Carlo Bordoni, to its board.¹⁶ Sindona encouraged Calvi to join him in the American market. The Ambrosiano bought $16 million of convertible bonds in Cleveland’s Union Commerce Bank.¹⁷ The two developed solid business connections, counting ex–Texas Governor John Connally as a friend and advisor. Calvi became a frequent guest at Connally’s sprawling Texas ranch.¹⁸ David Kennedy, Nixon’s Secretary of Treasury, was a close Sindona friend and had done business with him when Kennedy had been chairman of Continental Illinois Bank.¹⁹

Sindona retained the Wall Street law firm of Mudge, Rose, Guthrie & Alexander. It was there he had met Richard Nixon, one of the firm’s partners, in April 1965.²⁰ Now, only a few days before Election Day, flush with the success of his Franklin buyout, Sindona called Maurice Stans, the chairman of Nixon’s 1972 reelection campaign. He offered a stunning million-dollar personal contribution ($5.4 million in 2014 dollars). Sindona asked only for anonymity. Stans reluctantly said no. The deadline for disclosing contributions had passed. (When the secret offer became public a couple of years later, it kicked off congressional and IRS investigations to determine whether the mere offer and the failure to disclose it might have broken any laws; it had not.)²¹

Although Sindona was focused on opportunities in the United States, he kept making deals in Italy. That summer he sold to Calvi—in a convoluted $119 million deal—most of his stake in La Centrale Finanziaria.²² At the same time, the two used Suprafin S.p.A., a company partly owned by the IOR, plus two offshore companies and accounts at three Swiss banks, to accumulate shares of the Ambrosiano. Neither of them seemed bothered that it was illegal in Italy for a bank to buy its own shares on the open market.²³ Their goal was to acquire control of the bank, but to do so in small enough increments that no government regulator or Ambrosiano official would notice.²⁴

But the matter that most consumed their time was a year-long deal over whether to buy one of the church’s most prestigious holdings, the Banca Cattolica del Veneto. It was Sindona’s idea. He discussed it first with Massimo Spada, before encouraging Calvi to make a formal bid.²⁵ The Cattolica was the Ambrosiano’s sister bank in Venice, one of Italy’s most important Catholic institutions since its 1878 opening, and intertwined historically with the Venetian clergy and Black Nobles.²⁶ Sindona and Spada thought Banca Cattolica was a natural fit with the Ambrosiano’s expanding empire. But they also knew that the two banks were fierce competitors.²⁷

Calvi thought it unlikely that the church would part with the Cattolica. Albino Luciani, Venice’s Patriarch, whose archdiocese owned a minority share, was almost certain to object. Nevertheless Calvi pitched the idea to Marcinkus in 1971. In a letter, Calvi offered to purchase up to 50 percent of the bank at a hefty premium.²⁸ The offer posed little downside risk. If the Vatican was receptive, Calvi’s prestige at the Ambrosiano would be enhanced. If Marcinkus declined because such a move would cause too much of an uproar inside the Curia, no one at the Ambrosiano would blame Calvi since it was a long shot in the first place.

Marcinkus, however, liked the idea and raised it with Paul VI. The Pope was hesitant. The bank was one of the church’s crown jewels. As was his style, for months he vacillated between okaying or prohibiting the sale. Marcinkus arranged a private meeting between Calvi and the Pope.²⁹ It was there that Calvi was his most persuasive, arguing that the Ambrosiano would be not only a superb caretaker for the church by maintaining Cattolica’s traditions and integrity, but that the bank’s outdated methods would be modernized, leading to higher profits. Calvi told the Pontiff that he wanted a large enough share so he controlled the bank, and the Vatican would own the rest, thereby benefiting from any surge in earnings.

A week later Marcinkus met Calvi and shared the news that the deal was approved.

“Are you sure,” Calvi asked. “Is it available to you? Is the boss [the Pope] in agreement with it?”³⁰

Marcinkus assured him Paul VI had personally given his consent.

In March 1972, the IOR announced the transfer to the Ambrosiano of a 37.5 percent interest of Banca Cattolica for $46.5 million.³¹ The executed contract between the church and Calvi was top secret even by IOR standards. Few officials saw it. Marcinkus did not want anyone outside the Vatican Bank to know he had unilaterally decided to sell Calvi a 50 percent stake, 18,060,000 shares, not the 37.5 percent, or 13,500,000 shares of the announced deal.³² And to address the Pope’s concerns about the integrity of the bank, the contract contained a clause that the new owners must preserve the Cattolica’s “high social, moral and Catholic aims.”³³

The parties followed Sindona’s advice to complete the deal. The Vatican Bank’s shares went to a Sindona-owned Liechtenstein holding company, which held them as a fiduciary for the Ambrosiano. The money was paid in five installments, in a convoluted back-and-forth of offshore transfers that had become a hallmark of Calvi, Sindona, and Marcinkus deals (the IOR put all its proceeds into Calvi’s Bahamian bank, bringing Marcinkus’s deposits in Cisalpine to a dizzying $112.5 million).³⁴

Not everyone was happy with the sale of a controlling block of Banca Cattolica. Venice’s Luciani complained to Pope Paul and to the influential deputy Secretary of State, Archbishop Giovanni Benelli, that the deal was against the church’s long-term interests. Luciani reminded Benelli that not only was he the chief prelate of the diocese that owned part of the bank, but that the Cattolica was also headquartered in Venice. He felt he should have been more involved in the decision over whether to sell. Luciani was also upset since Calvi canceled the bank’s preferred interest rates to Catholic institutions.³⁵

Benelli tried palming Luciani off to Marcinkus. During the one time they talked about it, the IOR chief listened to Luciani’s plea that the deal be undone.

Marcinkus told him it was too late. Luciani persisted.

“Eminence, don’t you have anything better to do?” Marcinkus asked.³⁶

The discussion was over. Luciani returned to Venice simmering at the cavalier way in which Marcinkus had dismissed him. All he could do to protest the sale was to move the accounts of the Venetian diocese from Banca Cattolica to the tiny Banco San Marco. The entire affair meant Luciani became yet another in a growing list of ranking prelates now hoping that Marcinkus would trip up.³⁷ And much to the horror of those who detested Marcinkus, that summer some American newspapers speculated not only that Pope Paul might retire when he turned seventy-five in September, but that Marcinkus “was an outside possibility for election to the papacy.”³⁸ While Vaticanologists thought that was laughable and revealed the extent to which the American press did not understand church politics, that Marcinkus could even be mentioned publicly as the next Pontiff infuriated his foes. That October, at a Cisalpine director’s meeting held at London’s tony Claridge’s Hotel, Marcinkus joked with Calvi that he was accumulating enemies faster than the IOR was gaining depositors.³⁹

In March 1973 some of his opponents thought there might be an opportunity to bring Marcinkus down a couple of notches when the Vatican Bank got embroiled in a spat with the U.S. Securities and Exchange Commission. The SEC obtained an injunction against an unregistered California-based investment advisor who had acquired options to buy 27 percent of an American oil and gas equipment firm, Vetco Offshore Industries. The disclosure statements mandated by the SEC for such a large holding had not been filed.⁴⁰ After some further investigation, the American Stock Exchange suspended trading in the company because “unusual activity in Vetco stock raised questions as to whether the market in the stock may have been artificially influenced.”⁴¹

The Vatican’s secret role came to light when the SEC discovered that the unlicensed California investment advisor, a former liquor salesman, Irving Eisenberger, was acting on behalf of Liechtenstein-based Fiduciary Investment Services A.G. Its only client turned out to be the IOR.⁴² Before that disclosure, Vetco was unaware it was the Vatican that had benefited in the $35 million in option trades and some short swing profits.⁴³ The company’s share price had doubled as a result of Eisenberger churning the stock since the previous summer. Under U.S. securities regulations, insiders—defined as anyone controlling 10 percent or more of a company—were banned from excessive trading. Vetco demanded the Vatican return its improperly earned profits.⁴⁴

Marcinkus reached out to Sindona for help since he had ten years of investing experience in the United States. Sindona advised Marcinkus to resolve the dispute immediately to keep it off the media’s radar. Marcinkus reached a fast agreement with the Vetco directors. There was not a lot of money involved (the IOR turned over $320,000 it had earned in profits).⁴⁵ Eisenberger signed a consent decree with the SEC.⁴⁶ The story got little traction in the Italian press and it did not prove useful to the bishop’s enemies.

Marcinkus had another close call that same year, one that at first seemed to have the potential to put a stop to his career momentum.⁴⁷ A few months after the Vetco news, U.S. Justice Department investigators met with Marcinkus in Rome as part of a criminal probe into an international counterfeiting ring involving the Mafia and stolen or counterfeit American securities.⁴⁸ They had questions about whether the IOR—and possibly even Marcinkus himself—had played a role.

The Justice Department visit to the Vatican was the culmination of a broad eighteen-month racketeering investigation into the Genovese crime family that had started in the Manhattan District Attorney’s office. In its early stages, the DA’s probe had focused on Vincent Rizzo, a Genovese soldier thought to be a middleman in a South American drug cartel that fed the Northeast (soldiers are the lowest-ranking mobsters in a crime family).⁴⁹ Rizzo lived on Avenue A, not far from a Little Italy social hall that served as a hangout for a lot of New York mobsters. Joe Coffey, the lead Rackets Bureau detective, obtained court-ordered wiretaps for some of Rizzo’s regular haunts, including the social hall.⁵⁰ When the police learned that Rizzo was planning a trip to Germany in February 1972, Coffey got permission to follow him. Through Interpol, German police agreed to bug Rizzo’s Munich hotel room.⁵¹ Rizzo met two men there: Alfred Barg, an apparently legitimate German director of a Swiss investment firm, and Winfried Ense, a self-described “facilitator” whom Interpol had investigated a year earlier for a possible role in the sale of stolen U.S. Treasury certificates.

The trip had nothing to do with narcotics. Over a couple of days, Coffey learned that Rizzo had somehow come into a large cache of Triple-A corporate bonds, stock certificates, and some U.S. Treasury bonds. Included among the companies were AT&T, Coca-Cola, Chrysler, and Pan Am.⁵² It was not clear from what Coffey heard whether the securities were stolen or counterfeit.^I Rizzo had come to Barg and Ense because a Philadelphia-based mobster had vouched that the two Germans could move an enormous quantity of black-market securities.⁵⁴ At one point, Ense said that they knew an Austrian, Leopold Ledl, with contacts in the Vatican. “They [the Vatican] want all they can get,” he told Rizzo.

Coffey would soon discover that Ledl was a con man and swindler with a thick Interpol dossier.⁵⁵ He owned a multimillion-dollar estate outside Vienna and ran an Austrian-based construction firm and a Liberian shipping company. He also had two Liechtenstein holding companies. Interpol suspected he had earned his fortune in everything from arms trafficking to stolen securities to narcotics. In legit business circles he used the title “Honorary Consul,” something he falsely claimed Michel Micombero, the President of the African Republic of Burundi, had bestowed on him (investigators later learned Ledl had sold at least three hundred “Honorary Consul” titles, for up to $100,000 each, throughout Europe).⁵⁶

As a veteran New York City detective, Coffey liked running his own investigation. He knew that by bringing in federal authorities he would lose control. But he had no choice. He had stumbled across an international conspiracy about fake or stolen securities that included U.S. Treasuries, plus a possible link to the Vatican.⁵⁷

“Coffey came and asked us to work the investigation with them,” recalls William Aronwald, then deputy chief prosecutor for the Justice Department’s Organized Crime and Racketeering Strike Force. “I had been in the Rackets Bureau in the DA’s office so the New York detectives felt comfortable with me. We entered into a joint venture consisting of the District Attorney, their Detective Squad, as well as the FBI.”⁵⁸ Aronwald dubbed the strike team Operation Fraulein because of the German connection.

Based on additional wiretaps, the investigators suspected that Rizzo was only a front man for Matteo de Lorenzo, a Genovese captain. And the conspiracy to sell the illegal securities was widespread, including mobsters from Buffalo to Beverly Hills as well as a group of swindlers, and even a few crooked stock and options traders.⁵⁹

In May 1972, de Lorenzo joined Rizzo on another trip to Munich. This time, a New York detective, Mario Trapani, accompanied Coffey. The German police again bugged the phones in the mobsters’ suite at the Bayerischer Hof Hotel, and also placed a bug in the bedroom lamp. But the mobsters met with Barg and Ense in the suite’s living room, frustrating the detectives, who were unable to decipher anything on the muffled recordings.⁶⁰

Shortly after returning from that trip, the strike team arrested in the U.S. a British con man and swindler, Hyman Grant. In return for leniency on possible drug charges, he provided details about the still evolving scheme.⁶¹ Grant tied Ledl to Rome’s Mario Foligni, an extraordinary poseur who claimed to be a count and an owner of half a dozen successful businesses. Although many were skeptical of Foligni’s claims to nobility and his boasts of great wealth, he had sterling contacts inside the Vatican, including passing friendships with ranking prelates like Archbishop Benelli and Bishop Marcinkus.⁶²

That November, Coffey, this time accompanied by an FBI agent, Richard Tamarro, flew to Munich (the first time the FBI had ever sent an operational agent overseas to investigate an open case).⁶³ Their assignment was to convince Barg and Ense to cooperate. They first met with Barg. Over a couple of bottles of Chivas Regal in their hotel room, the two strike team members pressed him hard. Since he was the only legitimate businessman among the conspirators, they were confident he would be the most likely to fear the consequences of not cooperating. It took ten hours before Barg reluctantly agreed to become a government informant in return for a grant of full immunity. Tamarro and Coffey next took Barg to meet with Ense. After another half day of heated negotiations, Ense also agreed to help the American investigators.⁶⁴

Both Germans swore they were victims of the American mobsters, who they claimed were blackmailing them to sell counterfeit bonds and common stocks. But the real story, according to them, was what Ledl and the gangsters had been up to.⁶⁵ The corporate bond and stock certificates held by the New Yorkers were near-perfect copies. Ledl had arranged a buyer: the Vatican. According to Ense, some high-ranking prelates in Rome—in partnership with crooked officials at Italy’s central bank—had agreed to pay $650 million for $950 million of the phony paper. The New York mobsters agreed to later kick back $150 million as a “commission” to the Vatican, still leaving the American mob with a profit of nearly half a billion dollars.⁶⁶

As best the FBI could later determine, someone in the Vatican Bank intended to use the fraudulent securities as collateral for obtaining dollar-for-dollar financing (banks might finance $950 million or more for the church so long as $950 million in cash equivalents—the bonds and stock certificates—were pledged as escrow). Rizzo had already used stolen Coca-Cola and Chrysler securities as collateral to finance a luxury residential development in the South of France.⁶⁷ Ledl later said that the IOR wanted to help fund Sindona’s ultimately unsuccessful hostile takeover of Bastogi, Italy’s largest holding company (a bid supported by both Calvi and P2’s Gelli, among others).⁶⁸

The banks making the loans against the phony paper would have no idea the collateral was worthless. If the IOR’s investments were profitable, it would pay off the loans and no one would ever discover the bonds and stock certificates were fake.⁶⁹ But if the IOR’s investments went sour, the lenders would demand the collateral to cover any unpaid balance. Only then would the counterfeits be unmasked and the entire plot collapse. The IOR could then claim that it had itself been an innocent victim of a complex fraud.⁷⁰

When pressed for specifics, Barg and Ense claimed that during a telephone call, Ledl said the recently deceased Cardinal Eugène Tisserant knew the details and approved of the scheme.⁷¹ The previous July, Ledl went to Rome with $14.5 million in counterfeit AT&T, GE, Pan Am, and Chrysler bonds. Ense met him and was present when Ledl telephoned Tisserant’s private secretary to say they had samples of the securities for the cardinal’s approval (Vatican logs showed Ledl had signed in on several occasions, listing Tisserant as the person he was visiting).⁷²

Ense also described a trip he took with Ledl to Turin. They drove to a monastery on the edge of the city limits. Ledl went inside while Ense waited in their rental car. A BMW soon pulled up, and a tall priest, wearing a long black coat, went inside the monastery. Aronwald’s strike team later came to believe the priest was Marcinkus, matching the car described by Ense to one used by the bishop. Ense also picked Marcinkus from a photo lineup.⁷³

Back in the States, Aronwald’s squad worked to confirm whether the Austrian con man and the late Cardinal Tisserant had known each other. The U.S. investigators discovered that Ledl had frequently traveled to Rome, stayed in room 338 of the Vatican-owned Hotel Columbus, and met not only with Tisserant, but also with Cardinals Egidio Vagnozzi, chief of the Prefecture for the Economic Affairs of the Holy See, as well as Giovanni Cicognani, Dean of the College of Cardinals.⁷⁴

Aronson dispatched Coffey and Tamarro to Vienna to offer Ledl the same immunity deal to which Ense and Barg had agreed. They stopped in Frankfurt on the way to convince Rudolf Guschall, a Frankfurt attorney they suspected of providing notary stamps for the securities, to cooperate. When they started questioning Guschall, he panicked, began crying, and yelled that he wished he were dead. He then ran to a large window and tried opening it before Tamarro restrained him. Once calm, he began talking, filling in some missing details for the investigators.⁷⁵

Before getting to Vienna, the two Americans made one more detour, this time to Luxembourg. There, Ernest Shinwell, the black sheep son of a British lord, was in jail for having defrauded some banks in the duchy.⁷⁶ Shinwell, it turned out, knew other elements of the plan. He talked to them for hours.⁷⁷

In Vienna, Tamarro and Coffey discovered that Ledl was not at his turn-of-the-century office but instead at a local prison. Austrian police had arrested him, not for his role in any grand scheme, but on fraud charges related to the sales of the fake Burundi Honorary Counsel titles. When the Austrians had searched his office and home they found, among other incriminating items, stock certificates that turned out to have been stolen from a Petaluma, California, doctor two years earlier. They also learned that Ledl had been in possession of counterfeit IBM common stock.⁷⁸

Gathered in a small interview room, Ledl asked that the Austrians not monitor the conversation, afraid that what he shared with the Americans might add to his legal problems in his native country. After the Austrians left, Ledl began talking. In his July 1971 visit to Rome, he said he met with Tisserant inside the Vatican. Tisserant directed him to bring the $14.5 million in the fake securities as a deposit for the overall deal to a monastery in Turin.⁷⁹ There, Tisserant’s private secretary, and Monsignor Alberto Barbieri, a writer and lecturer for the Vatican’s publishing house, greeted him.^80,II When Bishop Marcinkus soon arrived, said Ledl, they discussed the quality of the counterfeits and the next steps.⁸²

Ledl refused the offer of immunity to testify in the United States about what he knew. He had told them enough, he said, and wanted to be left alone.⁸³

Possibly the most important evidence Ledl directed them to were two letters, dated June 29, 1971, on original letterhead for the Vatican’s Sacra Congregazione dei Religiosi (the Sacred Congregation for Religion, a little known Curia division responsible for setting guidelines so bishops kept separate their religious and secular duties). The letters confirmed the IOR’s intent to buy the securities in five installments over several months.^III

“These were very powerful charges,” says Aronwald. “We knew Ledl had a record for one con after another, so we weren’t going to rely on him unless we could independently corroborate everything he told us. And as for Ledl meeting with Marcinkus, we had only him and Ense vouching for it.”⁸⁵

Aronwald wanted his two investigators to head to Italy to interview “Count” Mario Foligni. But the Italian police did not cooperate. Instead of just having them wait in Austria while the paperwork churned through the Italian bureaucracy, Aronwald called Coffey and Tamarro home.⁸⁶

The FBI, meanwhile, confirmed that Marcinkus was in Turin the day that Ledl claimed to have met him in the monastery.

Aronwald had to get approval for the next stage of his investigation at the highest level of the Justice Department. The Attorney General, Richard Kleindienst, was preoccupied with the unfolding Watergate scandal. Kleindienst still had jurisdiction over the investigation into the just reelected president (a Special Prosecutor would be appointed the following May).

“It was time to approach the Vatican,” says Aronwald. “This was all very unusual, and highly sensitive, and especially since Marcinkus had become a target in the investigation.”⁸⁷

Aronwald was worried that the case might stall at the swamped Justice Department. To his great relief, after a couple of weeks they got permission to move forward.

Aronwald and Whitney North Seymour Jr., the U.S. Attorney for the Southern District of New York, arranged a meeting with New York’s Cardinal Terence Cooke.⁸⁸ Because it was so sensitive—its details are set forth here for the first time—the government investigators and church officials did not meet at the archdiocese headquarters nor any government building, but at a private conference room inside the New York Public Library’s main research branch at 42nd Street and Fifth Avenue.

“We explained some of the details of our investigation to Cardinal Cooke,” recalls Aronwald. “It was very awkward because he was friendly with Marcinkus.”⁸⁹

Cardinal Cooke agreed to contact the Papal Delegation in Washington, D.C. A few weeks later, the Papal Nuncio, Archbishop Jean Jadot, told the American investigators that he had arranged an off-the-record meeting with officials at the Vatican.

The Justice Department, relying on advice from the FBI, selected as its team Aronwald, Tamarro, and William Lynch, the Washington, D.C.-based chief of the Justice Department’s Organized Crime and Racketeering Division. Coffey was furious he was left out. New York police detectives had started the investigation. Coffey knew it as well as anyone. But the order from the Justice Department was unequivocal.⁹⁰

On April 25, 1973, Tom Biamonte, the FBI liaison officer at the American embassy in Rome, and a good friend of Marcinkus, brought the men to the Vatican. Archbishop Benelli, the martinet Deputy Secretary of State, greeted them.

“It was my first time ever to Europe,” recalls Aronwald, “and it was a little unnerving since I was a Jewish kid from Brooklyn.”⁹¹

“First, he told us the Cardinal Secretary of State was busy,” recalls Tamarro. “And although we were in a big chamber, we were all told to sit on one small couch, no table, nothing to spread out our documents.”⁹²

Benelli introduced them to three monsignors on his staff. Eduardo Martínez Somalo, the assessor in the Secretary of State’s office (later a cardinal), led the Vatican delegation. The interpreters were Monsignor Justin Rigali (currently the cardinal emeritus of Philadelphia) and Karl Josef Rauber (later an archbishop and Nuncio to both Liechtenstein and Luxembourg).

“We started off by setting out the broad parameters of the investigation,” says Aronwald, “and what we were looking for. It pretty quickly became a contentious meeting. It was awkward in some ways because Bill Lynch—a great guy—is a Catholic in every sense of the word. And he did not seem very comfortable.”

Tamarro had the least seniority. But he was the one tapped to explain the details of the probe.

“I laid out some file folders on my lap,” he says. “Whenever I would say, ‘We need to know this or that,’ they would not really answer.”⁹³

Tamarro asked Martínez to authenticate or debunk the letters on Vatican letterhead that Ledl had provided. He refused. When shown a list of some counterfeit bonds and securities, and asked if he had ever heard of any of them, Martínez demurred.⁹⁴

“At one point,” says Tamarro, “I said we need to know something specific. Because we were there to get some help, but it seemed they had just come to listen. And this time he answered and I could make it out because it was so short and succinct. He said, ‘Absolutely no.’ And the translator told us, ‘We are here to assist you in any way we can.’ I was so fucking pissed. I slammed my folders and papers shut and started to get up to leave. But Lynch ordered me to stay put.”⁹⁵

The standoff continued for only a few minutes.

“Then we were told very curtly that the meeting was over,” remembers Aronwald. “We could tell they were not at all happy because they knew this entire matter could be a great embarrassment to the Vatican. But the good news was that we were told we could meet the next day directly with Marcinkus.”⁹⁶

“They had simply kissed us off,” says Tamarro. “And just as we were about to leave that room, Lynch said to them that he couldn’t go back to his kids unless he had a rosary blessed by the Pope. Rigali said that was no problem and asked Aronwald and me if we wanted one. Aronwald said, ‘Sure, I’ll have one.’ I said, ‘Absolutely not!’ I was so pissed off I didn’t want anything from them. That night, when we were back at our hotel, we all had a little too much to drink. I said to Lynch and Aronwald, ‘How could you take anything from them when they gave it to us up the ass today?’ ”⁹⁷

The trio had to wait three days before they were summoned back to the Vatican. This time they were escorted past the Church of Sant’Anna dei Palafrenieri and the Swiss Guard barracks, toward the Apostolic Palace, and into the Tower of Nicholas V that housed the IOR. Vittoria Marigonda, Marcinkus’s secretary, led them into his large office. Marcinkus came around from his desk to greet each of them with a hearty handshake.

In their first descriptions ever of that encounter, Aronwald and Tamarro told the author they found the bishop “disarming, totally charming,” “a regular guy,” and “very cool” about why they were there.⁹⁸ They thought he looked more like a “bodyguard than a bishop,” and one of the first things he did was offer them a drink. He talked nostalgically about America. And he regaled them with stories about Rome and the Vatican. But when the talk got to the criminal investigation, Marcinkus became guarded. For a moment he changed his congenial tone: “Look, I don’t have to tell you anything!” Then, after a long pause, he again smiled. “But I will, because I want to cooperate with the FBI.”⁹⁹ He dismissed the charges as “wild” and said those who had instigated them were likely enemies inside the Curia who were jealous that he, an American at that, had risen to run the IOR and had such a close personal relationship with the Pope. He told them that Ledl’s friend, “Count” Mario Foligni, and Monsignor Mario Fornasari had tried to interest the IOR in two large deals.¹⁰⁰ After he passed, Marcinkus claimed, Foligni had started spreading rumors about corruption inside the Vatican Bank.¹⁰¹ As for Sindona, Marcinkus admitted knowing him and told the U.S. investigators that he thought the Sicilian financier was “ahead of his time as far as financial matters were concerned.”¹⁰² The bishop denied ever meeting Ledl.¹⁰³

Marcinkus answered many questions with a general denial, dodged pointed ones, and at times claimed he could not provide any information because of banking secrecy laws and fiduciary obligations. When asked about specific securities, he produced a list he had prepared, purporting to show those owned by the church. Of course, it included none that were on the Justice Department list, which had been shown just a few days earlier to the uncooperative monsignors from the Secretary of State’s office.¹⁰⁴ Near the end of the meeting, he leaned forward and assured the trio that he would never be part of a conspiracy to deposit counterfeit securities into the IOR.^105,IV

“We left without any conviction whether there was truth to the allegation or the other way around,” Aronwald told me. “We didn’t leave the Vatican with evidence that added to our case, and we didn’t have any exculpatory material either. All we had was Marcinkus’s protestation of innocence. We had laid out to him a lot of what we knew, wanting to judge his reaction. Our hope was that he might be able to explain things or that he would slip and say something that would help us. He didn’t do either.”¹⁰⁷

The men knew the investigation was stalled. There was little they could discover without Marcinkus’s cooperation. The bishop was not willing to let the American investigators have access to the IOR’s records. Tamarro felt that Marcinkus had done what he set out to: charm the investigators without providing any information that would help them.¹⁰⁸

Back in the States, the prosecutors put the finishing touches to their probe. Aronwald presented the government’s case to the grand jury.^V On July 11, 1973, sixteen defendants (nine Americans and seven Europeans) were charged in a twenty-page indictment with conspiring in “a pattern of racketeering activity” to distribute stolen and counterfeit securities in Italy, Switzerland, Germany, Belgium, Panama, and California.¹¹⁰ Ledl, Rizzo, and “Count” Foligni were all named (by the time the indictment was issued, Rizzo had been sentenced to twenty years on an unrelated cocaine-trafficking case).¹¹¹

Conspicuous by his absence was Matteo de Lorenzo, the Genovese crime captain. The investigators did not produce enough evidence to charge him. The same was true of Marcinkus.¹¹² On background, Aronwald told a Wall Street Journal reporter that an unindicted and unnamed “man of the cloth” inside the Vatican was suspected of having a material role in the illegal scheme.¹¹³

“In the end, we just didn’t have enough to indict Marcinkus,” says Aronwald. “Our investigation never cleared him, but it also never proved it. The allegations were just left hanging out there. . . . We could never give Marcinkus a clean bill of health.”¹¹⁴

Inside the Vatican, Marcinkus’s detractors used the investigation’s potential embarrassment to lobby for his ouster as the IOR chief. The Pope refused even to contemplate it, instead assuming that since he was not indicted, the Americans had cleared him of all the scurrilous rumors.

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I. A congressional committee at the time estimated the size of the black market in counterfeit and stolen U.S. securities to be about $50 billion. Large blocks of Coca-Cola stock were stolen in late 1970 in New York and Los Angeles. Two years later, around the time of Rizzo’s German meeting, some of the missing Coke stock started surfacing in Europe, Lebanon, and Panama.⁵³

II. Barbieri was well known around Rome for his vintage Maserati and tailor-made vestments. He also kept a secret mistress. The Vatican later defrocked him.⁸¹

III. The FBI later compared the signature in the letter to that of Marcinkus. While it was similar, it was too illegible for a conclusive match. The bureau did not ask for signature samples of anyone inside the Sacra Congregazione dei Religiosi. Nor did the FBI ask for permission to test typewriters to see if they could locate the one used to type the letters. The name of the congregation on the letters had been modified in 1968 to Sacra Congregazione per I Religiosi e gli Istituti Secolari. But Curia departments sometimes used existing supplies of letterhead until they were exhausted, even after a name change. This congregation produced so little paper correspondence that investigators concluded the letters could be authentic.⁸⁴

IV. When the story of the Justice Department’s meeting with Marcinkus broke nine years later in 1982, the archbishop was much firmer, telling a Wall Street Journal reporter, “I had never heard of any of the names. I never met or talked to them in my life. There is no foundation to this in any way.” Of course, by then he had the benefit of hindsight to know that he had never been charged with a crime and others had gone to prison for the counterfeit conspiracy. He was also embroiled in a new scandal over Calvi’s Ambrosiano, so he had additional incentive to try to quickly quash the counterfeiting story when it became public.¹⁰⁶

V. Ense and Barg came to the United States as part of their immunity deal and testified before the grand jury. “Their testimony was critical,” recalls Aronwald. German prosecutors later asked U.S. authorities for a copy of that sealed testimony. “I took the position we should not betray them,” says Aronwald. The Justice Department, however, complied with the German request, concluding that the grant of immunity covered only American prosecutions. Barg was convicted in Germany of crimes based on his statements before the U.S. grand jury. “That was disgraceful,” says Aronwald. “We had given him our word. That decision is much to the federal government’s everlasting discredit.”¹⁰⁹