Whether the scandal swirling around the IOR would kill a red hat for Marcinkus was answered that January (1983). John Paul appointed eighteen cardinals from six continents, including five from Communist-controlled countries.1 Among the high-profile selections were Chicago’s well-liked Archbishop Joseph Bernardin; the Patriarch of Lebanon’s Maronite Christians; and a Parisian bishop who was born a Polish Jew but raised a Catholic after the Nazis killed his mother at Auschwitz.2 The Chicago Tribune said of Marcinkus that “a year ago [he was] to be almost sure of promotion” and that as “the governor of Vatican City . . . [his] job virtually assures cardinal rank.”3 “Archbishop Marcinkus may have been passed over because of his administration of the Vatican Bank,” noted The New York Times, “which has been a subject of controversy.”4
John Paul had not passed over Marcinkus because of all the bad ink. He believed the IOR chief had made mistakes only from good intentions and that the press had unfairly mauled him. But he could not give Marcinkus a red hat since the run of bad news about the Vatican Bank was not over. Only a handful of insiders knew that the Vatican was a few weeks into intense negotiations with Italian officials and a consortium of international banks about possibly settling its liability in the Ambrosiano debacle. The church had appointed three men that past Christmas Eve—Agostino Gambino, a prominent lawyer who had represented Sindona; Pellegrino Capaldo, a university professor; and Father Renato Dardozzi, a cleric who worked in the Secretariat of State—to represent the Vatican.5 The trio hashed out the broad outlines of a palatable settlement.6 It was clear that the church would have to write a large check to make its problems go away. Worse, the Vatican had just clocked a $30 million budget deficit.7 To raise cash, John Paul declared that an extraordinary Holy Year Jubilee would start on Ash Wednesday (February 16) and run for fourteen months. Millions of the faithful would flock to Rome hoping for special indulgences and the chance of an audience with the Pope.8 The Jubilee also meant that tens of millions of dollars would flow into Vatican coffers, donations for everything from the sale of souvenirs to “pilgrim’s packets” complete with maps and walking tours. The Pontiff’s designation of a Holy Year caught many by surprise. The last one had been only eight years earlier. For more than six centuries, the church held them only every twenty-five or fifty years.9 But John Paul followed the precedent set by some early Pontiffs who called Jubilees out of sequence whenever the church was in dire financial straits.10
Not even the excitement over the Holy Year, however, could obscure the continuing bad news about the IOR. Only a few days before the Jubilee’s opening ceremonies, prosecutors in Turin announced that Monsignor Donato De Bonis, the IOR’s secretary and second-ranking prelate, was under investigation in a multimillion-dollar gasoline tax-avoidance scheme. By the time De Bonis’s name entered the scandal, dozens of Italian businessmen and government tax officials had pled guilty.11 A judge took the unprecedented step of blocking the cleric from using his Vatican passport at any Italian airport or seaport.12
De Bonis was a trusted aide to Marcinkus. He had started working at the Vatican Bank in 1954 when he was only twenty-nine years old, and spent the first sixteen years of his career as the protégé of the IOR’s chief prelate, Cardinal Alberto di Jorio. When Marcinkus rose to power in 1970, he relied on veterans like De Bonis.13
De Bonis so enjoyed working at the Vatican Bank that he passed on an appointment as an auxiliary bishop to Genoa so that he could instead remain inside the Tower of Nicholas V.14 As the bank’s secretary, he had cosigned some key documents for Calvi’s companies, including Intermax, United Trading, and Suprafin. He and the IOR’s accountant, Pellegrino de Strobel, had signed off on most of the questionable Calvi transactions, including an inflated $60 million partial sale of Vianini, a Vatican-owned company. Italian prosecutors later heatedly debated indicting De Bonis as an accessory to fraudulent bankruptcy in the Ambrosiano collapse. They concluded, however, he was a mere functionary and not a substantive decision maker.15
But now that De Bonis was under investigation in the fuel tax scheme, it added to the perception that the Vatican Bank had systematic problems.16 Marcinkus’s image was further under siege in “God’s Banker,” a Frontline documentary that aired to huge audiences in the United States and Britain in February 1983. It introduced millions of viewers to the scandal.17 It was not long before the top-rated U.S. TV news program, 60 Minutes, investigated the unfolding crisis. Reporter Mike Wallace spent several on-air minutes telephoning Marcinkus’s office, only to be given an ever-changing, evasive runaround by the archbishop’s secretary.18 (Some credited Frontline with encouraging a British court the following month to overturn the suicide finding in Calvi’s death and order a new inquest.)19
Top clerics worried that the steady drumbeat of scandal had begun souring the public about the church. When Italy forced the Ambrosiano into compulsory liquidation, it transferred the bank’s remaining good assets to a new bank (Nuovo Banco Ambrosiano). Since the government underwrote the venture, taxpayers were furious they got stuck with a $700 million bill.20 Opinion polls showed many Italians blamed the church.
In March, the IOR responded to the joint commission’s many requests for records and financial ledgers by releasing eleven thin files of internal documents that addressed in the vaguest terms its relationship to the ghost companies in the letters of patronage. It was the first time the Vatican Bank ever produced private files for the investigators of another sovereign. And that was the result of a hard-fought compromise to an Italian demand that forensic accountants be allowed direct access to the IOR archives.21 The Vatican’s limited cooperation did not prove helpful to the joint commission, whose work was already hobbled by resistance from some major banks entangled with the Ambrosiano, including the Gottardo, Cisalpine, and Kredietbank. The commission was also stymied in accessing 1,500 pages of Calvi’s working papers as a Bahamian court had frozen a safe deposit box in Nassau’s Roywest Bank.
The biggest obstacle confronting the joint commission, however, was that the Vatican had refused to allow Italian investigators to question Marcinkus, Mennini, and de Strobel.22 Hoping the church might change its mind, the commission twice postponed its original March 31 deadline. An intense struggle inside the Vatican about whether the three officials should cooperate played out during the spring of 1983.23 The compromise was a July 1, twenty-two-page memorandum signed by Marcinkus that claimed to be a “detailed description of the relationships at issue.”24 To the great disappointment of investigators, the Marcinkus memo—prepared under the close supervision of Vatican attorneys—provided little new information. It was mostly a defiant reargument of his long-standing contention that the bank did not have any responsibility for the Ambrosiano collapse.I
The joint commission hoped that Licio Gelli, the former P2 chief who was under arrest in a Swiss prison, might help unravel the mess in return for leniency on charges he faced in Italy. That was dashed on August 9 when several prison guards Gelli had bribed helped him escape. He was driven to Monte Carlo hidden in the back of a van. From there, he traveled on a fake passport to South America, taking with him many of the documents on the commission’s wish list.26,II
The joint commission was frustrated at every turn. In the preamble to its subsequent report, the members agreed, “What has emerged is a complicated web of facts, documents and opinions, from which it was extremely difficult to distinguish truth from falsehood.”28 Compounding the problem, by late summer 1983, Italian and Vatican negotiators were sharply divided. The church-appointed commissioners were unwavering that there was no evidence proving the IOR was the real owner of the ghost companies. The Vatican Bank, they argued, was an innocent “intermediary.” Their position was summarized in an August memo to Secretary of State Casaroli, concluding that Calvi had taken advantage of Marcinkus.29
The Italians meanwhile thought that the Vatican Bank and its top officials were knowing partners in the scheme. Two—lawyer Alberto Santa Maria and corporate finance professor Mario Cattaneo—were hard-liners, contending that the “IOR’s knowledge of the decisions and arrangements adopted . . . was both continuous and constant.”30 The duo admitted there was no smoking gun, but they were convinced a preponderance of the evidence buttressed that conclusion. The third, Christian Democrat chief Pasquale Chiomenti, feared that too hard a stance against the church might prevent the two sides from ever reaching a deal. He moderated his colleagues’ view of the Vatican Bank’s role.31
Chiomenti had a well-deserved reputation as an adept mediator. He feared that any deal struck by Italy with the creditor banks—clamoring for some $600 million—would fail if it did not include the Vatican. The banks had indicated that if they could not get a decent offer from the Vatican, they would sue the church in multiple jurisdictions.32 Through most of the summer of 1983, Chiomenti was crestfallen that the negotiations had stalled in a nasty round of mutual recrimination.33
On August 10, at a country house near Lucca, Chiomenti met with Ted Sturmer, a senior partner at the British law firm that represented National Westminster, one of the lead creditors. After several intense hours they had agreed that the banks should be repaid 70 percent of their losses.34 In return, both men decided to work on persuading the Vatican to pay as much of that as possible. They knew it would not be easy, but the carrot they offered the church was freedom from all lawsuits as well as no need to be publicly contrite or to admit any responsibility for the Ambrosiano affair.
Inside the Curia a fiery debate raged about how much, if anything, the church should offer to end the scandal. Marcinkus was firm that it should not pay a single cent. “You’re crazy!” he said. “Don’t even open up that conversation. If we’re not guilty, we don’t pay. And we’re not guilty. . . . If you’re preaching the truth, you’ve got to fight for it.”35
Although the IOR chief was not fazed by the possibility of years of costly litigation, at times in jurisdictions that might subject the church to embarrassing discovery, it frightened many top clerics. Marcinkus, it seemed, was the only one in a fighting mood.
The following month, when Secretary of State Casaroli met with the leaders of Italy’s newly elected socialist-led coalition, he made the church’s first settlement offer. Casaroli said that even if the church sold some assets, the most it could pay was $140 million. Although it was a huge amount for an institution that had long insisted it owed nothing, it was also far less than what the creditors demanded. That offer was rejected. Casaroli dispatched more firepower into the negotiations with his committee of “wise money men”: ex–Emigrant Savings Bank CEO Joseph Brennan; Carlo Cerutti, the vice chairman of the telecommunications giant STET; and Philippe De Weck, a Union des Banques Suisses director (the controversial Hermann Josef Abs had resigned by then).
After several meetings with the creditors, the trio advised the church to bump its figure by $10 million and insist it was “not negotiable.”36 The no-more-negotiating stance crumbled within a couple of weeks when the church raised its offer to $160 million. The creditors did not budge. Despite pressure from Italy, the Vatican fell silent. Delay was second nature to a bureaucracy that thought in terms of centuries instead of years.
The following March the stakes became much higher. Milan’s State Prosecutor, Maurizio Grigo, sent letters to Marcinkus, Mennini, and de Strobel, notifying them they were formal targets of a criminal investigation into an $86 million 1972 Vatican Bank loan to Milanese holding company Italmobiliare.37 Prosecutors contended the loan was designed to hide illegal kickbacks between church officials and financier Carlo Pesenti, who was Italmobiliare’s president as well as the Ambrosiano’s largest shareholder.38 To avoid the problem they had confronted the previous year when the Vatican refused to accept judicial communiqués for Marcinkus and his two lay assistants, this time prosecutors submitted their “notice of investigation” through formal diplomatic channels at the Italian Foreign Ministry.39
The day it arrived at the Vatican, Marcinkus told reporters, “I will have nothing to hide from the Italian judges, especially because the operation [loan] was carried out in the most absolute normality.”40 But no matter how brave a front Marcinkus put on, the criminal probe was a terrible turn of events.
The prosecutors were weighing fraudulent bankruptcy charges against the archbishop and his top aides. Italian law allowed those who suffered damages in civil matters to attach themselves as additional parties to the criminal proceedings. The creditors had so far declined to do that. They feared it might hurt their chances of reaching an out-of-court settlement with the IOR. If those negotiations failed, however, the creditors had unanimously decided to hitch their fortunes to any criminal prosecution and immediately move to obtain court orders freezing all Vatican Bank assets inside Italy.
The news kicked off a new round of speculation about whether Marcinkus could hold on to his Vatican Bank post. In April, John Paul announced seventeen significant Curial reforms, a shake-up that Italian newspapers called il terremoto (the earthquake).41 By shuffling some of the bureaucracy’s top prelates and appointing reformers, the Pope hoped to weaken the Curia’s stranglehold on power and to make it less Italian.42 The reorganization was the first signal that Marcinkus’s power was on the decline. In the reworked Curia, he no longer had unchecked administrative powers as governor of Vatican City.43
Possible fallout from the criminal probe dominated the church’s internal debate over how much money to offer the Ambrosiano creditors. If Marcinkus and his top aides were found criminally liable, it would open the floodgates to huge civil liability. Marcinkus still tried rallying his colleagues. He contended that it was hypocritical for them to say the church was short of money and plead for contributions during the Holy Jubilee, and then at the same time make a massive payout to settle the Ambrosiano. “How is it you’re telling everybody you’ve got no money [but] you’re paying out money you don’t owe?” he argued. If the church paid anything, he charged, it would be “just throwing it out the window” and create a permanent “stigma.”44 As for proposed settlement language that would require the church accept only moral responsibility, Marcinkus was incensed. It would fool no one, he said, but simply mean “we must be guilty.”45
Marcinkus was outvoted. Pope John Paul personally overrode his objections.46 In early May, the Vatican and 120 creditor banks announced a deal. The church agreed to pay a stunning $244 million as a “voluntary contribution” to acknowledge its “moral involvement” with the Ambrosiano.47 The paperwork was executed on May 25 in Rome, with De Bonis and a glum Marcinkus signing on behalf of the IOR.48 The 161-page agreement absolved the Vatican Bank of all culpability.49 It also granted Italian courts exclusive jurisdiction for resolving any disputes over its terms. It was the first time the Vatican had allowed the Italian judiciary to have control over any of its affairs.50
Although the quarter-billion-dollar payoff was only a fifth of what the IOR was committed to by the letters of patronage, it was a body blow to the city-state. It came on top of what some investigators believed were tens of millions in losses from worthless investments in the wake of the Ambrosiano’s collapse.51 The settlement consumed half of all the Vatican’s cash, forcing it to sell its remaining $35 million stake in Vianini, one of Italy’s premier construction conglomerates, as well as to borrow heavily from London banks, and to unload some stocks and real estate in France and America.52 In exchange for some wide-ranging modifications demanded by the socialist government to the church’s 1929 concordat, Italy agreed to underwrite the remainder of the $406 million settlement.53
The changes to the concordat would have once been unthinkable. The church dropped its insistence that Roman Catholicism be the state religion. Moving forward, the state had to confirm church-annulled marriages. Parents were given the right to opt their children out of formerly mandatory religious education classes. And Rome was no longer considered a “sacred city,” a classification that had allowed the Vatican to keep out strip clubs and the porn industry. Italy even managed to get the church to relinquish control of the Jewish catacombs. “The new concordat is another example of the diminishing hold of the Roman Catholic church in civil life in Italy,” noted The New York Times.54
In return, Italy instituted an“eight-per-thousand” tax, in which 0.8 percent of the income tax paid by ordinary Italians was distributed to one of twelve religious organizations recognized by the state. During its early years, nearly 90 percent of the tax went to the Catholic Church (by 2010, the church received less than 50 percent as the tax was more equitably distributed). Not only did the tax relieve Italy of its responsibility for the $135 million annual subsidy it paid for the country’s 35,000 priests, it meant the church had a steady and reliable source of much needed income.55
The eight-per-thousand tax was the only glimmer of good news for the Vatican. Despite the massive Ambrosiano settlement, Marcinkus and the IOR continued getting bad ink. On June 9, just weeks after the Vatican had struck its historic deal, the press was consumed by a prepublication leak about David Yallop’s book In God’s Name, charging that a six-man clerical cabal that included Marcinkus had murdered John Paul I. Although the church believed the book was nonsense, Yallop’s front-page disclosures—about the purported reasons some might have wanted John Paul I out of the way—seemed credible to casual readers.56 In God’s Name changed in part the lay perception of Marcinkus from a wayward IOR director with shady friends to someone now thought capable of murdering a Pope to preserve his power.
The following month a leak from the Justice Department fueled headlines about Ambassador William Wilson’s two-year-old intervention for Marcinkus with U.S. Attorney General William French Smith. A few months earlier, Ronald Reagan had overcome political opposition to establish formal relations with the Holy See and upgrade the U.S. legation to the Vatican into a small but full-fledged embassy. Now it was caught in its first firestorm.57 Reagan stood firm and resisted calls to relieve Wilson of his post.58
Although it was Wilson who took the public heat for misusing his influence, that the American ambassador to the Vatican thought Marcinkus might be under a U.S. criminal investigation was strong evidence of how low the IOR chief’s stock had fallen.III
In late August, about a month after the Wilson news broke, an Associated Press wire service story titled “Career of Once Powerful American Prelate in Decline” was widely picked up.60 It noted that just two years earlier Marcinkus had been “the most powerful American in the Vatican.” An unidentified archbishop was quoted saying that the Pope was “reluctant to slap him down.” Instead, church officials had “applied the typical Roman solution” of isolating him and limiting his power.61
It seemed possible that the Pope might “slap him down” the following month when rumors swirled that Italmobiliare’s president, Carlo Pesenti, struck a deal with Italian prosecutors to tell a court about the hidden details of an $86 million IOR loan that Pesenti had repaid at a staggering 300 percent interest. The persistent gossip was that in exchange for his cooperation, prosecutors had agreed to drop a probe into whether Pesenti had illegally obtained some of his enormous Ambrosiano stake. But Marcinkus’s luck had not run out. The day before the seventy-seven-year-old Pesenti was to appear in court, he collapsed while meeting with his attorney. He was pronounced dead of a heart attack a few hours later at a hospital.62
No matter how low a profile Marcinkus adopted, he could not manage to stay out of the news. The month after Pesenti’s death, after years of high-stakes legal wrangling, Michele Sindona was extradited to Italy.63 His return, under heavy guard, was major news in Italy. Since there was little new to initially report, newspapers and magazines filled space by rehashing stale stories about the Sicilian financier and his unprecedented role as Pope Paul VI’s hand-selected banker.64
At Sindona’s sensational trial, the Vatican seemed to be a missing unindicted co-conspirator. There were weeks of uncomfortable testimony about how the IOR lost millions through its Banca Unione investments. The following March (1985), Sindona’s conviction for fraud and his fifteen-year sentence prompted many legal analysts to wonder why no one else, especially Marcinkus, had paid a price for the more than $200 million in financial misdeeds exposed at the trial.65
The extradition treaty by which the United States sent Sindona to Italy required that he finish his prison term in America before starting his Italian sentence. But Italy wanted to keep him so they could file charges in the 1979 murder of Giorgio Ambrosoli, the court-appointed liquidator of his Italian banking empire. The U.S. Justice Department agreed. Another widely covered trial and more unwanted coverage of the salacious history of the Vatican Bank–Sindona partnership ensued. In 1986, almost a year after his fraud conviction, a panel of six jurors and two judges returned a guilty verdict on the murder charge. Sindona got a life sentence.66 The drama was not yet over. Just two days later, after he was served breakfast in his private cell in a specially constructed high-security prison wing, Sindona stumbled from the bathroom and staggered toward the front of the cell, gasping, “Sono stato avvelenato, Sono stato avvelenato!” (I’ve been poisoned, I’ve been poisoned).67 He collapsed. By the time doctors arrived a few minutes later he had slipped into an irreversible coma. He died two days later.68
The police lab pinpointed a lethal dose of cyanide as the cause of death. Investigators later determined that nearly a gram of the poison was in his espresso.69 Many thought his death suspicious, especially legal insiders who knew that prosecutors had secretly offered a significant reduction in Sindona’s life sentence in return for his cooperation on everything from P2 to Calvi to Mafia money laundering. To prevent suicide or foul play, his jailers had monitored him by video around the clock, as well as deploying twelve guards who worked in shifts (three on duty at all times). Sindona’s meals were prepared in a special section of the prison’s kitchen, watched over by a guard, and then delivered in sealed metal containers opened only inside his cell.70 It took eight months for an investigating magistrate to reach a much contested but never disproven conclusion: the jailhouse poisoning was suicide.71,IV
Even the debate over whether Sindona had been murdered became yesterday’s news by the following February, 1987. Italian magistrates Antonio Pizzi and Renato Bricchetti issued a stunning twenty-six-page arrest warrant for Marcinkus, Mennini, and de Strobel, charging them as accessories to fraudulent bankruptcy related to the Ambrosiano’s collapse five years earlier.73 The warrants were based on evidence discovered in a safe deposit box in Lugano’s Banca del Gottardo. The incriminating papers revealed the extent to which the IOR and the Ambrosiano had operated the ghost companies. The documents convinced prosecutors that the Vatican was far from the unwitting dupe in the Ambrosiano’s demise that it had tried hard to project.74 The magistrates believed the contents of the safe deposit box were enough to prove that the three Vatican officials had “full knowledge” they had helped Calvi divert the Ambrosiano’s funds to worthless foreign shells.
The arrest warrants dominated the news.75 To the mortification of many inside the Vatican, with the death of Sindona, the press now referred to Marcinkus as “God’s banker.”76 Some tabloids ran pictures of him with the banner: “Wanted: Monsignor Marcinkus.”77 The French edition of Penthouse ran a salacious story sandwiched between racy photos of naked women. Inside the city-state there was tremendous anger that the Italians had gone so far as to issue criminal indictments. The charges against the archbishop, who held dual American and Vatican passports, put a spotlight on whether Italy had a right to pursue church officials it accused of breaking Italian laws. Mennini and de Strobel were both Italian citizens who lived inside the Vatican.78 As for Marcinkus, just a couple of days earlier police had shown up at Rome’s Villa Stritch, outside the walls of the Vatican. The IOR chief kept a small apartment there and had visited only a couple of hours earlier.79
Since there was no extradition treaty between the countries, the Ministry of Justice cited Article 22 of the Lateran Treaties requiring the Vatican turn over those accused of committing crimes inside Italy.80 Some Justice officials even talked about the remarkable if unlikely scenario of requesting the United States to order the extradition of the American Marcinkus from the Vatican.81 No one in the church wanted to push the limits of its sovereignty by allowing Marcinkus, Mennini, or de Strobel to leave the city-state and risk an arrest. The three were safe only so long as they stayed inside the walls of the Vatican.82 The Italians realized that meant they would only get the men if the Pope said yes.
The church’s first public response to the indictments was “profound astonishment.”83 Within a few days it adopted an unequivocal position: it had “absolutely no intention” of ever handing over to Italy any cleric or lay official. “A tough reply from the Vatican to the arrest warrants: Marcinkus will never go to Italian prison,” noted Corriere della Sera.84
Unidentified Vatican officials condemned the warrants as politically motivated by Italy’s socialists to embarrass the church.85 The Vatican contended the prosecutors were powerless, since Article 11 of the Lateran Treaty stated, “Central organs of the Catholic Church are free from every interference on the part of the Italian state.”86 Moreover, the church added that Marcinkus had given “substantial and loyal collaboration” by “producing copious documents and notes” during the five-year probe (although it made no mention that he had refused any interviews or sworn declarations).
John Paul’s intuition that Italy’s left-of-center coalition would capitalize on the standoff to humiliate the Vatican at every opportunity was right. Police leaked to reporters innovative ways they might arrest the trio. Rome’s hospitals were put on notice to summon the carabinieri if any of the wanted men turned up at an ER. Tourists took pictures of a police car parked at the front of the exclusive Aqua Santa country club, just in case Marcinkus tried sneaking in a round of golf. And a policeman checked in regularly at one of the archbishop’s favorite Roman restaurants, where the owner got a lot of free publicity by keeping a table vacant for his return.
In the beginning of his self-imposed exile, Marcinkus went daily to a corner of the Vatican gardens and converted it into a makeshift putting green. “And soon one of the Italian cardinals sent him a letter instructing him to ‘stop ruining the grass,’ ” recalls Peter Murphy, the U.S. Deputy Chief of Mission. “There were some of his Italian colleagues who had been waiting a long time to revel in his misfortune.”87
The media coverage went into overdrive with leaks from more than four hundred pages of “confessions” by Calvi’s former fixer, Francesco Pazienza, now dubbed “Deep Throat” by the Italian media.88 Unsubstantiated stories tied the IOR to everything from millions of dollars spent on phantom consultants to an overpriced Costa Rican farm on which Nicaragua’s leftist Sandinistas trained guerrillas.
Fourteen cardinals convened an emergency meeting only a few weeks after the news broke. They had no material say over the standoff with Italy’s judiciary. Instead, their task was to find ways to cope with the largest ever Vatican City budget deficit (a $56 million shortfall in 1986, increasing to nearly $80 million in 1987).89 The $244 million payout to the Ambrosiano creditors had not only left the church with few reserves but the controversy had caused a 75 percent plunge in Peter’s Pence.90 Plus, the dollar’s steep slide against the lira meant the church took in even less by the time its American dollar contributions got converted in Italy.91
“For all its splendor, the Vatican is nearly broke,” noted Fortune in a special investigation published that December.92 A “deep financial squeeze” had resulted from skyrocketing operating expenses and a growing bureaucracy: “The Holy See spent nearly twice as much as its income.”93 In just five years, spending had doubled. Nearly 60 percent of that was labor costs. Pensions were an increasing drain.94 The normally passive Association of Lay Vatican Employees was griping about abysmally low wages and meager benefits. The Vatican’s newspaper, L’Osservatore Romano, and its radio station, were hemorrhaging money. One underlying problem highlighted by Fortune was that “financial management is practically an act of faith” since the church relied heavily on contributions for its income.
The cardinals reported back to John Paul that restoring the Vatican’s tattered image was a priority if there was any chance of encouraging ordinary Catholics to be more generous.95 If that meant making concessions about Marcinkus, the Pope let them know it was off the table.96
Marcinkus continued frustrating the cardinals since he refused to provide them with the IOR’s basic operating figures. “The institute never publishes its balance sheets,” one anonymous Vatican official told The New York Times. “The cardinals have repeatedly asked to see them, but Marcinkus was able to refuse because he enjoyed the confidence and trust of the Pope. . . . When it [the IOR] paid out $240 million, was that half or three-quarters or what percentage of its capital?”97
Still, they managed a small breakthrough by Vatican standards. Moving forward from 1987, the Holy See agreed to send out twice-a-year financial statements to the approximately three thousand bishops and heads of religious orders. They were rudimentary and did not include any data from the Vatican Bank. Yet they marked the first time that Rome revealed any of its finances to so many clerics. The cardinals thought that since the statements were dismal, those who received them could use the numbers to rally contributions to help the Pope.98
The struggle over the degree to which the Vatican Bank would assist the commission of cardinals seemed less pressing at the end of March when Italy made history again in its relations with the church, this time by formally petitioning the Foreign Ministry to request the extradition of the three bank officials.99 A few days later, John Paul made his first public comments about the matter. During a flight to South America for the start of a two-week tour, the Pontiff walked to the rear of the cabin and held an impromptu news conference with the press corps. He said that the church had studied the case with “competent authorities,” taken the matter “seriously,” and had determined that it was wrong for Marcinkus to be “attacked . . . in such an exclusive and brutal manner.”100 The Pope’s strong words left no doubt that he still believed that Marcinkus, Mennini, and de Strobel were the victims of a media witch-hunt.
As far as the Pope was concerned, Marcinkus was a decent man whose many years of solid work at the IOR had been lost in a deluge of muckraking. There was little doubt that those who worked with him saw a gentler side than the calculating bank chief portrayed in the press. His friends liked to tell how Marcinkus would climb onto scaffolding on scorching summer days to offer water to the construction workers. Or how when Munich’s Cardinal Joseph Ratzinger moved to Rome to take charge of the Congregation for the Doctrine of the Faith, Marcinkus surprised him with an entire wardrobe.101 John Paul sometimes liked retelling a story about the time when an assistant had interrupted a meeting between Marcinkus and American Bishop Robert Lynch. Mother Teresa had arrived unexpectedly at the Vatican Bank and wanted to see Marcinkus. The IOR chief looked to Lynch and smiled: “This visit will cost us a minimum of $1 million.” And it almost did. A mattress company wanted to donate twenty thousand mattresses to her Calcutta charity, but she needed money to ship them.102 It was a shame, thought John Paul, that what he judged as Marcinkus’s well-intentioned mistakes had obscured his many good deeds.
“The Pope was not alone in that view,” recalls Peter Murphy, the American embassy’s number two official at the Vatican during that time. “I, for instance, never thought Marcinkus had made a dime off any of the dealings. The problem was that he had ended up in the wrong job and he did not have the background or ability to cope with some of the sharks with whom he had to swim.” Murphy said that he and many of Marcinkus’s supporters recognized that it was Mennini who had responsibility for the bank’s day-to-day operations. If anyone might be responsible for the IOR’s problems, it was likely its senior lay executive. “Marcinkus was not the type of man,” Murphy said, “to be anything less than loyal and to take full responsibility for everything that happened under him. But there is no doubt that Mennini was very, very clever. He dealt with all the Italian and international banks and knew everyone in business and politics. Marcinkus was too trusting and just never really understood how that world worked.”103,V
The Pontiff decided to quash the Italian extradition effort with a legal assault challenging Italy’s power to make such a request. The church’s lawyers petitioned the Tribunale della Libertà, a specialized branch of the judiciary that dealt with such issues. In mid-April, the court stunned Vaticanisti by upholding the warrants.105
Any residual hope that the worst might be over was dashed in early May when Milanese prosecutors issued companion arrest warrants for twenty-five former Ambrosiano officers and board members. Nothing better illustrated the low state of Vatican-Italian relations. In the new round of warrants, the magistrates went out of their way to exempt all the accused from being arrested and enduring the humiliation of a perp walk in front of news photographers. Instead, those who lived in Italy had to check in weekly at a police station, and those abroad had to telephone regularly. Italy noted that the new defendants were “not socially dangerous nor possible fugitives.”106 Yet prosecutors offered no such accommodation for Marcinkus, Mennini, and de Strobel. The Italians insisted they were “dangerous” and should be arrested and jailed pending their trial.107
The Vatican appealed the adverse ruling to Italy’s court of last resort, the Corte Suprema di Cassazione. The church also submitted the question of whether the arrest warrants were valid to its own courts. In mid-June—to no one’s surprise—the Vatican judiciary rejected the warrants as groundless and concluded that Italy lacked the authority to issue them.108
Some commentators thought the Vatican was hypocritical by resisting Italian jurisdiction in the Ambrosiano case. “When Ali Agca, a Turk, shot Pope John Paul II in 1981, both the target and the would-be killer were well within Vatican territory,” wrote George Armstrong, the respected Rome correspondent for London’s Guardian. “The Vatican was happy to have him arrested, tried and sentenced in Italy, and under Italian law, and his life sentence will be at the expense of the Italian taxpayer. The Vatican becomes another country only when it chooses to be.”109 Armstrong even put into print a question many were asking privately: “Does the Vatican, or the Holy See, or the Pope, really need a bank of its very own? The Vatican could do its banking anywhere, including in Italy.”
During a consistory of cardinals that began on June 28, 1988, there was another heated debate over the IOR. Agostino Gambino, the chairman of the three-person committee who had led the negotiations for the $244 million settlement with the Ambrosiano’s creditors, presented a hearty defense of Marcinkus and his tenure. There had been serious blunders, admitted Gambino, but no bad intent. Secretary of State Casaroli thought the mismanagement was so great that the consistory should recommend that the Pope replace his IOR chief.
The cardinals sided with Gambino.110 The church tapped Monsignor De Bonis to counter some of the terrible press. De Bonis seemed an odd choice since he had been Marcinkus’s shadow on many of the questionable IOR transactions with Calvi and Sindona. And he was himself under investigation in a complex tax fraud.111 Whatever his shortcomings, however, De Bonis made colorful copy. He told La Repubblica that the three indicted IOR officials had been framed, “victims of an obscure and complicated situation in which someone, in bad faith, wanted to put the blame on their shoulders and without their knowledge.” He assured the reporter that the three had no idea what happened to millions of missing Ambrosiano funds. “It did not end up here [the IOR].”112 And when pressed about who might have set them up, he offered that “the real culprits are in another place and far from here.”113
When De Bonis was asked if Vatican officials had confidence that the Italian courts would resolve the standoff over the arrest warrants, he was unwavering. The church had “complete faith” in Italy’s highest tribunal.114 That seemed prescient a few days later when that court concluded that Italy had no jurisdiction since the three IOR officials were members of a “central entity” of the Vatican. It reversed the lower tribunal’s verdict and invalidated the arrest warrants.115 That unequivocal and unappealable decision left the Ambrosiano prosecutors powerless to pursue the trio.116 Monsignor De Bonis reflected a widely held sentiment inside the Curia: “We’ve finished a nightmare.”117 When a reporter reached Marcinkus for comment, the beleaguered IOR chief said, “I’m happy. My faith in Italian justice has been restored.”118 And he told a conservative Spanish church daily, Ya, that whatever he had done with Calvi had been “a simple error of judgment, but not a crime.”119 Within a week he celebrated by playing a round of golf at the Aqua Santa country club.120,VI
But the Milanese prosecutors were not yet done. In December, they broadsided the church by filing a brief with Italy’s Constitutional Court contending that the ruling to exclude Vatican officials from their jurisdiction violated constitutional guarantees of equal justice under law. Antonio Pizzi, the chief prosecutor, advanced a clever argument: the concordat provision invoked by the church was unconstitutional since it created a class of people—high-ranking Vatican officials—who were beyond the reach of the law.122 Pizzi noted that Italy had recently enacted a series of statutes that gave prosecutors beefed-up powers to seize illicit narcotics proceeds in Italian banks. But under the high court decision, if that same illegal money was deposited by Mafia bosses into Vatican Bank accounts, although it was physically in the heart of Rome, the dirty cash would be off limits to any forfeiture. As a result of the high court ruling, any criminal racketeering probe would go cold once it reached the door of the IOR. The Vatican Bank could not be served with a search warrant or an order to produce documents. Its phones were not subject to legal wiretaps. Court-ordered mail intercepts were forbidden. None of its employees could be required to testify. It was a loophole so large, argued Pizzi, that it made a mockery of Italian law enforcement.123
The Constitutional Court took five months before dismissing the prosecutor’s appeal.124 It dodged the central issue of whether the Vatican’s concordat exemption from Italy’s judicial oversight violated the country’s constitution. Instead, it concluded that the Corte Suprema di Cassazione, which had decided the case the previous year, had the final say. Moreover, it noted that the challenge by the Milanese magistrates was too late in the process.
That final chapter in the criminal investigation was only a couple of weeks old when the Pope introduced his next round of Curial reforms, many focused on finances. In 1981 John Paul had appointed a commission of cardinals to look for ways to increase the Vatican’s income.125 Now, among the changes addressed in a 111-page document, he expanded their scope to monitor the Vatican Bank and its thirteen employees.126 Part of their brief was to try to stem some of the large deficits. Simultaneous with the changes at the IOR, the Vatican disclosed that it had suffered another record operating loss (about $78 million, prompting a new worldwide plea for more Peter’s Pence contributions).127,VII The church was still spending far more than it took in and had almost depleted its Peter’s Pence reserves.129 Dioceses around the world, covering thousands of parishes, struggled to keep up with their own expenses, and had little extra money to send to Rome.130 The Kirchensteuer, the German tax on Catholics that helped fuel the Vatican’s coffers during World War II, was generating more than $3 billion annually, but was now consumed mostly by the German dioceses.131 Italy’s eight-per-thousand tax was bringing in a lot of money, but not enough to pull the church into the black. Although some religious orders were financially comfortable, they did not have large enough surpluses to bail out the Vatican.
Several proposals to cut the deficit were floated but rejected. Some of the oversight cardinals thought Peter’s Pence would produce more money if it got a new name that did not imply small change. “I don’t like names that don’t reflect what’s happening,” said Toronto’s Cardinal Gerald Carter. Some of the names floated included Papal Charity, Aid to the Holy Father, and Papal Support.132 None stuck. Other proposals that got serious consideration included selling some of the IOR gold Nogara had accumulated or streamlining the Curia’s lay employees (when the Vatican did sell some of its gold four years later, its timing was bad since bullion prices had dropped almost 40 percent).133 There was also a debate about renting some of the nearly 2,000 church-owned apartments in prime Roman neighborhoods at market rates instead of subsidizing rents of lay workers and clerics. Italy’s rent control law—widely ignored by ordinary Italians—prohibited such a move by the church. So that idea was shelved.134
Beyond the question of how to best cut the deficit, Philadelphia’s Cardinal Krol was the first to suggest it was time to retain an internationally recognized accounting firm to perform an annual audit of all the church’s finances.135,VIII
Not everyone was impressed by the Pope’s reforms. Some critics had hoped he would fold the Vatican Bank into the Curia. A new commission of cardinals seemed only to add another layer of bureaucracy. Nothing diminished the bank’s power, made it more transparent, or put in place autonomous lay experts who might transform it into a compliant central bank. Compounding the problem, none of the oversight cardinals had the financial training to figure out how to break free of the Vatican Bank’s morass. Giuseppe Caprio, the cardinal who ran the Prefecture for the Economic Affairs of the Holy See, told a journalist, “The changes provided are more formal than substantive.”137
To the satisfaction of the reformers, however, the restructuring did spark another round of press speculation about whether Marcinkus might be finished.138 But his staying power, and the Pope’s lasting faith in him, confounded the Vaticanologists who had half a dozen times incorrectly predicted his imminent ouster. The fifty-nine-year-old Monsignor Donato De Bonis, whose father was a successful banker, was instead elevated as a prelate of equal rank to Marcinkus.139 De Bonis, whose career had been boosted by his reputation for discretion, had emerged from the shadows. He was now the link between the supervisory committee of cardinals and the Vatican Bank.140
Massimo Spada, the IOR’s chief before leaving in the 1960s to work with Sindona, took notice of the power shift. “De Bonis is clever compared to Marcinkus,” Spada told author Benny Lai. “Marcinkus has been downgraded. . . . His power in the IOR is almost dried up.”141
I. In June, a fifteen-year-old girl, Emanuela Orlandi, disappeared after leaving her family’s Vatican City apartment for a music class. She was never found and theories about her disappearance have gripped Italy for decades. In 2008, a mistress of a deceased Mafia don stunned authorities by claiming that her former lover’s gang had kidnapped the girl. According to this account, the mobster had been procuring young girls for sadistic sex parties at Marcinkus’s request. Since police could not substantiate her claim, her story serves as an odd footnote to the Marcinkus tale.25
II. Gelli evaded capture for four years before being nabbed and returned to Italy. There, tried on numerous charges, he was convicted of fraud in the Ambrosiano collapse. He again disappeared in 1998 from the confines of house arrest. He was returned to Italy the following year after being tracked down to the South of France. Incredibly, a judge ordered him returned to house arrest.27
III. Wilson resigned in 1986 after it was disclosed that he had an unauthorized secret meeting with Libyan leader Colonel Muammar Gaddafi.59
IV. Ivan Fisher, the prominent New York criminal defense counsel who had been one of Sindona’s attorneys, told the author: “Given what I knew about Michele, I believe that he arranged to have himself poisoned. My entire sense of him, of how his head worked, was that he honestly believed he would beat the fraud and murder charges in Italy and get back his reputation. Once that did not happen, once he realized he was going to just die in prison, I think he decided to take control of his own exit.”72
V. Murphy was sitting with Marcinkus one day when the IOR chief took a call. Marcinkus got angry quickly. “He’s a jailbird. What were you thinking? Why did you recommend him?” Within a minute he slammed down the phone. Murphy asked what had happened. An Italian cardinal had recommended a young accountant to take the number two position in the Governorate. Marcinkus had learned that he had a criminal record and had just been released from prison. He demanded to know from the cardinal why he suggested the youngster. “Because he is my sister’s son, my nephew,” was the answer. “That is so typical of the Italians who made up most of the Curia,” Murphy told me. “And there were a lot of them who did not like that Marcinkus applied his American standard of morality when it came to doling out favors, especially to family.”104
VI. A month after the good news from Italy’s highest court, Marcinkus sought an injunction against Doubleday and author A. J. Quinnell to stop the publication in the U.S. of an espionage novel that put him at the center of a conspiracy to assassinate the Soviet Premier. Marcinkus also asked the court to order that 77,000 copies of the novel, stored in a Long Island warehouse, be destroyed. A New York Supreme Court justice rejected both requests.121
VII. In 1985, the faithful contributed $28 million to Peter’s Pence. That increased to $32 million in 1986, but produced less money for the Vatican since so many donations were from the United States, and the lira had strengthened against the dollar. It resulted in an exchange rate of 5 billion less lire. In 1987, Peter’s Pence donations jumped to $50 million, but it was not enough to stop the hemorrhaging. It was after that collection, before the 1988 and 1989 deficits, that the Vatican issued a dire warning: “Reserves have now been almost completely exhausted.” The Vatican was so stressed by its finances that in 1989 it struck a controversial deal for $4.175 million with Japan’s Nippon Television to film the renovation of Michelangelo’s Sistine Chapel frescoes. That money bought Nippon the exclusive rights to exploit the images for three years.128
VIII. Local dioceses still got stuck with bills they thought Rome should cover. The Vatican, for instance, paid the cost for the chartered plane for the Pope and a dozen in his entourage for a ten-day trip to the United States in September 1987. The U.S. government and the American church covered the rest. While the American taxpayer bore $6 million in extra Secret Service and police security costs, dioceses covered everything from stadium rentals to cleanup expenses, to the tune of some $20 million. It took them a couple of years to pay off those expenses.136