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The Battle of Two Scorpions

On February 4, 1976, Marcinkus flew to Geneva to attend his tenth Cisalpine board of directors meeting. The IOR by this time had loaned or invested $175 million in Calvi-backed offshore companies.1 Marcinkus knew that Cisalpine was reporting the Vatican’s loans as deposits from independent banks. He was also aware the IOR money accounted for more than three quarters of the Bahamian-based company’s cash balance. As the minutes reflect, he said nothing at the Geneva board meeting. Nor did he object to a proposal to increase Cisalpine’s stake in yet another Ortolani-controlled bank, Bafisud.2 Instead, he agreed to provide 10 percent of the new venture’s money.3

The Ambrosiano and the Vatican Bank were shuffling back and forth tens of millions of dollars between their many offshore companies. Typical was a transfer made just two weeks after Geneva. The IOR opened its fourth account at the Ambrosiano’s Milan branch, and transferred from it another $2.5 million to one of its accounts at Rome’s Banco di Santo Spirito. It then moved the money to a new Ortolani company in Switzerland.4 Calvi increasingly relied on the IOR’s help with the furious transfers between accounts, which were used to cover losses at some of the firms and to hide the money trail from Italian tax inspectors and banking regulators.

In late March, Calvi took advantage of a 20 percent increase in the price of the Ambrosiano’s stock and solicited shareholder approval to raise another $46 million in capital. By April, the Bank of Italy gave Calvi permission to double to $50 million the Banca Cattolica’s line of credit to Cisalpine. Within just two months of the Geneva directors meeting, the IOR had funneled another $20 million to Calvi.

An Italian law enacted on April 30 encouraged the duo to believe they were poised for even greater profits. Since the lira had fallen by more than 30 percent during the first four months of the year, Italy stiffened its currency export penalties, including for the first time jail sentences.5 Wealthy Italians who wanted to move money out of their unstable country looked to the IOR. Since it was the central bank of a sovereign it was not subject to the tough new regulations. The Vatican’s role was more important than ever in the convoluted Ambrosiano network. And it allowed Marcinkus to negotiate a higher commission for moving Calvi’s money around the globe.6

Whatever the two men did, they were incapable of doing it simply. In April, the Ambrosiano agreed to buy for $32 million a Vatican-controlled property company, Società Immobiliare XX Settembre. The transaction took a mind-numbing eleven months to complete, and at different times involved byzantine bank transfers, inflated currency conversions, phantom loans, questionable back-to-back financial arrangements, the use of escrowed funds to manipulate a tiny Florentine bank, and the last-minute replacement of the Ambrosiano as the buyer with Pantanella, a former Vatican company that went bankrupt after stepping into the contract.7 When the Bank of Italy inspectors eventually investigated the XX Settembre sale, they were utterly bewildered.

That summer, Calvi renamed Compendium—the Luxembourg shell that he originally used to register Cisalpine—to Banco Ambrosiano Holding (BAH). The Bank of Italy approved a transfer of more than $100 million from the Ambrosiano to BAH. He also got the approval to swap his 40 percent stake in the Banca del Gottardo (worth another $100 million) for BAH’s share in La Centrale Finanziaria, an ex-Sindona holding company. There was a purpose beyond just obfuscation in the flurry of activity: although it was not obvious, Calvi was trying to streamline his labyrinthine financial web by directing all his foreign operations through a single company, BAH. Even he sometimes had trouble keeping track of the multitude of transactions on hundreds of pieces of hastily scribbled notepaper that he carried inside his locked attaché case.

It was not, however, in Calvi’s DNA to do things straightforward. The following July (1977), Cisalpine transferred $30 million to the IOR, under an agreement by which the Vatican Bank used that money to buy a stake in BAH. Marcinkus agreed to hold the shares in trust since Cisalpine did not want to be the on-the-record buyer (none of this activity was ever recorded, as legally required, in Cisalpine’s books or discussed at subsequent board meetings attended by Calvi and Marcinkus).8 Calvi also convinced Marcinkus to put into the IOR’s name “as a fiduciary” all the shares of the Panamanian United Trading Corporation, Cisalpine’s parent. In return, Calvi sent him a July 26 letter, on the Ambrosiano’s letterhead, in which he assured the Vatican Bank that United Trading was operating legally and swore to indemnify it from any liability.9,I

That same day, Calvi sent a second letter, this time on Cisalpine’s letterhead, offering similar assurances about Intermax, another shell for which the IOR had a management contract and was also the apparent owner.11 For helping Calvi manage his maze of companies, the IOR earned on these deals only one thousandth of the monies transferred, about $100,000 annually.12 It was not much, but it seemed to Marcinkus to be safe and easy. That was further evidence that he had learned nothing about managing risk from his troubled experience with Sindona. Marcinkus later told author John Cornwell that when the IOR invested its money with Calvi, he did not want to know the details.13

For Marcinkus, his frenetic work with Calvi helped the IOR scandal with Sindona recede into memory. Italy’s extradition request for Sindona had languished for over a year at the State Department before it was sent to Justice, which also seemed in no rush to do much about it. Milan’s prosecutor visited the U.S. Attorney to encourage him to hurry along the process.14 And Italy hoped the United States might take the charges more seriously after a Milanese court sentenced Sindona in absentia to three and a half years in prison on twenty-five counts of bankruptcy fraud.15

Marcinkus and Calvi had no idea that Sindona was growing restless in America. As the Franklin denouement had played out, Richard Nixon had resigned because of Watergate. When Democrat Jimmy Carter became president in 1976, Sindona’s Republican power connections seemed useless.16 Italian communists had also made strong electoral gains in 1976 and Italy’s ruling coalition soon ratcheted up the campaign for Sindona’s return. Carter’s Justice Department was more receptive and persuaded a court to issue an arrest warrant.

Sindona surrendered in September 1976 at the federal courthouse in downtown Manhattan. On the witness stand he swore that he had only $800,000 in assets. The judge allowed him to stay free pending a $3 million bail (he secured it with $150,000 in cash and Treasury bills as well as the deed to his Pierre co-op).17 Sindona’s defense team soon filed a motion to dismiss the extradition request. In their seventy-two-page brief they argued that Sindona’s leftist enemies wholly concocted the charges. His life was in danger, they contended, if he were extradited to Italy. The Chief Justice of the Italian Supreme Court, Carmelo Spagnuolo (a P2 member), submitted an affidavit in support of the notion that Sindona might be killed if he returned to Italy.18

The Sicilian financier considered the extradition battle a sideshow to his chief concern: a possible American criminal indictment. In March, the same judge who presided over the extradition hearing sentenced six former midlevel Franklin executives on fraud charges.19 When they received reduced sentences in return for their cooperation, many legal observers assumed that meant a U.S. indictment against Sindona was imminent.20 But nothing had happened by the fall of 1977.

Meanwhile, some of Sindona’s family and friends thought he might be better off simply returning to Italy. Investigators there charged he had looted $225 million from these banks.21 If Sindona could somehow pay it back, he could void his absentia guilty verdict. To raise the cash, Sindona sued the Bank of Rome claiming he had a verbal agreement by which the bank had promised to cover up to $254 million of his debts in exchange for a lien on his interest in SGI. Marcinkus cringed when that suit was filed. It pitted Sindona against the Bank of Rome’s Mario Barone, a banker with a close working relationship with the IOR.22 To Marcinkus’s relief, it did not take long before a Roman judge tossed the case, declaring it “inconceivable” that there would not be a written record of a commitment for such an enormous sum.23 Sindona reached out in desperation to Gelli and the P2. Gelli worked frantically, even raising the matter with Prime Minister Giulio Andreotti, hoping to convince Italy’s central bank to bail out Sindona.24

As far as Sindona was concerned, a central bank rescue was the only option left for a business comeback.25 But Giorgio Ambrosoli, the court-appointed liquidator of his Italian banks, frustrated every effort by Gelli and his well-placed cohorts. Ambrosoli was opposed to using any public money to rescue Sindona from his misdeeds. In heated exchanges he threatened more than once to go public if the government reached a deal to pay off the debts. Two Bank of Italy directors sided with Ambrosoli and resisted any P2 strong-arm lobbying.26

Sindona told colleagues he was frustrated that Ambrosoli had thwarted his appeal to Italy’s central bank. However, his friends thought he seemed more preoccupied with an all-consuming jealousy he had developed about Calvi’s flourishing relationship with the Vatican Bank.27 Calvi was ungrateful for all he had done for him, Sindona complained to colleagues, and he often groused that Calvi owed him millions of dollars for the Ambrosiano shares Sindona had secretly bought for him.28 In the early fall of 1977, Rodolfo Guzzi, Sindona’s chief Milanese attorney, called on Calvi. Sindona needed money for his spiraling legal bills. Sindona wanted Calvi to buy one of his villas for $500,000. There would be no change in title. It was just a means by which Calvi could send his beleaguered friend half a million dollars.

Calvi wanted to stay as far away from Sindona as possible, but he also did not want to turn him into an enemy. So he vacillated. Guzzi called daily looking for a yes. Calvi dodged him.29 After a couple of weeks, one morning as Calvi drove to work, he was stunned to see bright white and blue posters plastered across the pale yellow-fronted Ambrosiano headquarters and several adjoining buildings along the narrow Via Clerici.30 In bold, large print Calvi was accused of “fraud, issuing false accounts, unjustified appropriation, export of currency and tax swindles.” The posters declared that Calvi “has transferred tens of millions of dollars into the following Swiss accounts.” They even listed the correct names in which he held two Swiss bank accounts.31 Someone had tipped off L’Espresso, which got a photographer there to snap pictures before Calvi’s security team ripped down the posters.32

Calvi had no doubt that Sindona was behind the smear, his desperation causing him to become reckless and more dangerous. A few days later, Calvi got a call from Luigi Cavallo. Calvi knew him, not from his former job as a U.N. translator, but as a renowned freelance agitator best known for his acquittal in a left-wing coup against Italy’s government.33 He also published a small quarterly, Agenzia A, a broadsheet devoured by journalists and politicians for its torrid mixture of offbeat news and blind gossip.II Cavallo told Calvi that unless he honored promises he supposedly made to Sindona years earlier, more mud would come. Calvi was noncommittal.

Everything was quiet for a few weeks. Calvi hoped that Sindona had called off his attack dog. But over the Christmas holidays Cavallo wrote Calvi a letter about a Ugandan parable of two scorpions in a bottle and how they “embark on a battle to the death which inevitably has a lethal outcome for both contenders.”35

Just after the New Year, Cavallo published an edition of Agenzia A in which he set forth a blistering, fictional indictment against Calvi, charging him with knowingly publishing false balance sheets for the Ambrosiano. More salacious posters appeared.36 Business associates urged Calvi to go to the police. But he could not publicly charge that Sindona was extorting money without possibly admitting that the charges were true. Calvi reached out to Gelli for help. The P2 chief told Calvi to pay the money, which he did that March, wiring $500,000 from United Trading to a numbered Sindona account at Union Bank in Chiasso, Switzerland.37

Calvi had much more on his mind, however, than just Sindona’s blackmail as 1978 got under way. Cisalpine’s accountant, Price Waterhouse, was insisting on answers about the bank’s confidential accounts. When he no longer could delay replying, Calvi dismissed them. Their replacement, Coopers & Lybrand, were only on the job a few months before they began peppering Calvi with queries about the IOR. They also complained about their “difficulty in obtaining any specific financial information” about the Vatican Bank. Calvi assured them that all the dealings between Cisalpine and the IOR were “on normal commercial terms.”38

Although none of Calvi’s regular colleagues noticed any change in his demeanor, the Coopers & Lybrand interest in the IOR agitated him. On top of that, a $20 million loan to the Vatican was due at the end of January. Calvi did not have the money. For months he had been trying to find new investors, pitching proposals to money managers on three continents. His efforts paid off with only days to spare. Calvi received the first of four loans totaling $160 million from Banca Nazionale del Lavoro and Ente Nazionale Idrocarburi (ENI), a state-owned bank and multinational run by two P2 members.39

Marcinkus, meanwhile, was so pleased with his mushrooming dealings with Calvi that he kicked off 1978 by renewing or expanding loans to the usual suspects—including Manic, Zitroppo, and Banco Ambrosiano Holding (BAH)—as well as giving fresh infusions of church money to new Panamanian-based firms, Astolfine and Belrosa. Despite the repayment of the $20 million loan, the Vatican Bank’s cash invested in Calvi’s labyrinthine global businesses in 1978 soared from $200 million to a dizzying $330 million ($1.2 billion in 2014 dollars).40,III

With Marcinkus confident that the Ambrosiano’s businesses were solid, Calvi concentrated on Sindona, who had continued to threaten him. Sindona had considered the $500,000 a down payment on what he believed was owed him. In April 1978—the same month that a dozen Bank of Italy inspectors showed up unexpectedly at the Ambrosiano’s headquarters—Sindona and Calvi met in Washington.42 Father Philip Guarino, a director of the Senior Citizens Division of the Republican National Committee, hosted a party for Sindona at the Capitol Hill Club.43 Calvi went to tell Sindona that he could not help him further. Sindona demanded more money and refused to back off. In the coming months, Calvi diverted upward of $5 million through Gelli to Sindona (the following spring, when Sindona learned that Calvi was a guest at New York’s Carlyle Hotel, he showed up and would not leave until Calvi agreed to accelerate the payments).44 Calvi at the time had no idea that it was a tip provided by Sindona about some of Calvi’s secret Swiss bank accounts that prompted the Bank of Italy investigators to swarm over the Ambrosiano.45 When Calvi called Gelli to fix the results of the probe, Gelli was powerless to help. None of the Bank of Italy inspectors were P2 members.46

The month after their Washington meeting, three years after the Italian government had asked for Sindona’s return, a federal judge approved the extradition.47 His lawyers appealed. As that worked its way through the legal system during the summer, the U.S. Attorney in New York announced indictments against three top ex–Franklin National executives. Sindona, and his former right-hand aide, Carlo Bordoni, were unindicted co-conspirators.48 The U.S. Attorney told reporters that the investigation into Franklin was continuing. For Sindona it was a dilemma: return to Italy and the fraudulent bankruptcy charges or stay in the United States and face a likely criminal indictment.


I. There later came to be a furious finger-pointing disagreement between Marcinkus and Calvi about whether the contract including the United Trading bearer stock certificates was fraudulently backdated to November 21, 1974 (which is what Marcinkus claimed), or whether it was really signed in 1974 and merely confirmed in Calvi’s letter three years later (Calvi’s assertion). Donato De Bonis, an IOR monsignor who worked closely with Marcinkus, and Pellegrino de Strobel, the Vatican Bank’s secretary and chief accountant, admitted they had signed the document, but claimed they left it undated. When the Vatican later tried to draw distance from Calvi’s business network, it contended it did not control United Trading as early as 1974, a date that marked the start of highly questionable financial maneuvering. Italian prosecutors and investigators with two parliamentary commissions concluded that the IOR was the effective owner as of 1974 and that Marcinkus agreed to the backdating as a favor to Calvi. Marcinkus could never explain why, when Calvi had sent him a copy of the “backdated” agreement in 1977, the archbishop did not complain about the supposedly wrong date.10

II. When it comes to Sindona, Calvi, and Marcinkus, even the simplest matters are often more complicated than they first appear. Was Cavallo working for Sindona? Guzzi, Sindona’s attorney, later claimed that he had hired Cavallo at Sindona’s direction. And Guzzi was later found guilty of extortion over this matter. Sindona denied having anything to do with Cavallo, telling author Nick Tosches that the provocateur was most likely working for the Italian government. And as for Cavallo? In an unsworn statement, he told prosecutors that Sindona retained him to squeeze as much money as possible out of Calvi. But later, under oath and threat of perjury, Cavallo told an Assize court that he had done it on his own and that Sindona had tried repeatedly to stop him.34

III. Another sign of the depth of Calvi’s involvement with the IOR was evident in January 1978, when the Vatican Bank gave Calvi letters falsely describing all its loans as Ambrosiano deposits at the IOR. Calvi stored the letters in case he needed them later to deflect Italian investigators.41