Thursday July 04 2013

Vatican: Rotten to the core

The money-laundering scandal has confirmed that Vatican corruption cannot be put down to isolated individuals, writes Toby Abse

Previous popes involved in cover-up

On June 28 monsignor Nunzio Scarano,1 along with Italian intelligence agent Giovanni Zito2 and broker Giovanni Carenzio,3 were arrested. They were caught illegally attempting to bring back into Italy from Switzerland €20 million in cash allegedly belonging to two brothers, Cesare and Paolo D’Amico, from a family of rich Neapolitan ship owners. The affair was initially presented by Scarano’s boss, cardinal Domenico Calcagno, the president of Apsa (the Vatican department that administers the Holy See’s real estate), as a case of unsuccessful money-laundering4 by one isolated ‘rotten apple’5 in the Vatican. But it is rather more than that.

By the end of last week it was already quite clear that both Apsa and the Institute for the Works of Religion - or IOR, generally known as the Vatican Bank - are now facing a much more serious challenge, from both Italian investigative magistrates (in Rome and Salerno, engaged in two separate, but overlapping inquiries), on the one hand, and the new Argentinian pope, Jorge Mario Bergoglio, on the other, than they have ever previously been subjected to. Monsignor Scarano had had many telephone conversations with IOR director general Paolo Cipriani and his deputy, Massimo Tulli, discussing financial matters, while the investigating magistrates were tapping Scarano’s phone. Now, with the enforced resignation of both Cipriani and Tulli on July 2, this challenge has intensified.

Whilst the money-laundering activities of the IOR have been notorious for decades, any desire on the part of a minority of more conscientious Italian magistrates to put a stop to them has generally run into massive Vatican opposition - usually based on claims that the Vatican City was beyond Italian jurisdiction - as well as a singular lack of enthusiasm on the part of large sections of the Italian state apparatus and political class. On at least one occasion there have been fatal consequences for the investigator - Giorgio Ambrosoli and Emilio Alessandrini both met violent ends after starting to look into scandals linked to the IOR, even if the executors in the second case came from the ‘red terrorist’ group, Prima Linea. Whilst the Italian state has had to face more pressure from the European Union to curb the IOR’s money-laundering activities than would have been the case in the 1970s and 80s in the heyday of archbishop Paul Marcinkus (the notorious cleric from Chicago, sometimes known as ‘the Gorilla’, who headed the IOR from 1971 to 19896), it is the current pope’s apparently quite sincere desire to clean up the Vatican finances that has allowed some courageous Italian magistrates to take such vigorous action.

It certainly looks as if the Vatican hierarchy is facing a threat to its authority on a scale it has not had to endure since the days of John XXIII, the pope of the Second Vatican Council. It was always obvious that Joseph Aloisius Ratzinger’s bizarre and - in terms of his own proclaimed belief system, with its emphasis on duty and the imitation of Christ - cowardly decision to retire could not have just been because of advancing age (there is as yet no sign of any mortal illness or rapid physical deterioration of the kind apparent in the last years of Karol Józef Wojtyła’s papacy). In reality mounting financial and sexual scandals could no longer be suppressed or ignored. But it is hard to believe that the conservative cardinals appointed by Wojtyła and Ratzinger really imagined that root-and-branch reform was in the offing, even if pope Francis’s election did to some degree represent a revolt against the curia whose financial skulduggery and protection of paedophile priests had done so much to weaken the hold of Catholicism in the advanced capitalist world.

After all, there had already been a major change at the very top of the IOR, with Ettore Gotti Tedeschi being sacked in May 2012 because of alleged negligence and the appointment, two days after the shocking announcement of Benedict XVI’s resignation, of German lawyer Ernst Von Freyberg as the new president of the IOR. This followed nine months of total paralysis at the bank’s summit, probably due to Ratzinger’s loss of confidence, as the number of leaks by Vatican insiders to secular journalists mounted by the week. The appointment of Von Freyberg (on the prompting of the Vatican second-in-command, the secretary of state, cardinal Tarcisio Bertone7) during the interregnum had not met with Francis’s approval and the Argentinian was even more annoyed by the recent media campaign, in which the now disgraced leadership of the IOR claimed it was “necessary” for the church to have a bank - words which contradicted a recent and often cited homily of the pope , who said: “The IOR is indispensible, but only up to a certain point.”8

The pope is only too aware that the investigation of the Roman prosecutor’s office that led in September 2010 to the sequestration of €23 million (subsequently returned to the IOR) and the formal registration as suspects in a criminal investigation of the IOR’s two leading figures at the time - Gotti Tedeschi, who was only sacked in May 2012, and Cipriani, finally forced out this week - is still ongoing. Both Tedeschi and Cipriani are accused of money-laundering; the two men are not on good terms, as each blames the other for the IOR’s problems. If the Italian prosecutors do not drop the charges and decide to bring them to trial, the Vatican’s already considerable embarrassment over the affair will deepen still further. This explains why on June 26 the pope set up a commission to thoroughly investigate the problems of the IOR as a preliminary to far-reaching reforms.9

It is widely believed that the existing IOR may well be wound up and replaced by an ‘ethical bank’, which will look after the deposits of religious institutions and individual churchmen, and there will be a separate ‘external foundation’ to look after the Vatican’s important investments accumulated over decades. This week’s appointment of Rolando Maranci as interim deputy director general and of Antonio Montaresi to the new post of ‘chief risk officer’10 is an indication of the changes afoot - both of them were brought in from an external company called Promontory by Von Freyberg in February. This reform programme is the only course of action that would represent a concrete response to the requests of Moneyval, the committee of the Council of Europe which evaluates national measures to combat money-laundering and the funding of terrorism.

There is no doubt that the pope will meet with much opposition, indeed outright sabotage, on the part of those under attack. The papacies of Wojtyła and Ratzinger saw an enormous increase in the relative weight of Opus Dei and Communion and Liberation within the Catholic church and these two very secretive groupings have been at the centre of many recent Italian corruption scandals, particularly in the regional governments of Lombardy and Lazio.

Francis’s recent attack on the ‘gay lobby’ in the Vatican has to be seen in this context. The carabinieri first took an interest in monsignor Scarano when they visited his apartment as a result of a false accusation of the theft of works of art. To use the rather coded language of La Repubblica, “But this opened his bedroom doors to the police, revealing a very private inclination” (June 29). Whilst some of these scoundrels are linked by other networks, such as the Constantinian Sacred Military Order of St George, at whose meetings Scarano first met Carenzio,11 Francis’s contention that there exists a close-knit band of closeted gay clerics engaged in financial malfeasance cannot be ascribed to homophobia pure and simple.12

The failure of Ratzinger - notorious for his strident public denunciations of homosexuality - to take any action against this grouping, raises many questions, some of which the Argentinian Jesuit may not even want to ask, eager as he may be to discredit his opponents in a major power struggle over the running of the IOR and perhaps the direction of the church as a whole.



1. Scarano had a late vocation for the priesthood, being ordained at 32 years of age, after a brief career working at the Banca d’America e d’Italia.

2. It seems likely that Zito was exploiting his skills in clandestine operations for personal financial gain rather than acting in his official capacity on behalf on Aisi - the latest name for the Italian internal intelligence service. However, it is worth noting that Francesco La Motta, the former deputy head of Aisi, was recently arrested, accused of being responsible for the disappearance of a very substantial sum - €10 million - from a religious fund held by the ministry of the interior. La Motta is a ‘Gentleman of his Holiness’ (Gentiluomo di sua santita), giving him the right to open an account with the IOR, a privilege granted to very few laymen, and up until now account holders have been beyond the reach of the Italian tax authorities. This apparent coincidence might suggest that Zito and La Motta were part of a group within Aisi with mutually beneficial connections with dubious elements within the Vatican. Sections of the Italian intelligence services have been involved in all sorts of operations with no obvious connection with national security over the whole of the post-war period, often bringing them into alliance with neo-fascist terrorists or the Mafia. This has given rise to an interminable debate amongst both journalists and academic historians as to whether there were ‘deviant’ sections of the intelligence services or whether the Italian intelligence services as a whole could be considered ‘deviant’. Most of the frequent name changes and restructurings of the Italian intelligence services represent attempts at rebranding after what purported to be a thorough purge of the ‘deviant’.

3. Carenzio had previous convictions for fraud in the Canaries, where he had had financial dealings as a result of his connections with the Spanish nobility.

4. Zito got €400,000 from Scarano to rent a private plane that flew from Padua to Locarno and was intended to pick up the cash. The gang seem to have double-crossed each other and the money never came back from Switzerland. Some details are a bit hazy, since, although Scarano seems to have made a partial confession to the magistrates after his arrest, claiming that he was only helping the D’Amico brothers out of friendship, not a desire for gain, and that Zito extorted the €400,000 at gunpoint, the others appear to have remained silent so far. The D’Amico brothers claim that the €20 million was not theirs and that they have nothing to do with the whole affair - see La Repubblica July 2 for this very tangled web of contradictory explanations.

5. See interview with Calcagno in La Repubblica June 29.

6. Whilst the original European Economic Community founded in 1957 was dominated by Catholic states, whose governments generally sought to avoid any direct conflict with the Vatican, the relaxed view of the IOR taken by international bodies in that period cannot be explained in purely confessional terms. During the latter years of the cold war the IOR was also being protected by the Americans; only the naive or self-deluding can really deny that the CIA used the IOR to funnel vast funds to Lech Wałęsa’s Solidarność as part of the final offensive against the Soviet Union. It was therefore no surprise that the Polish pope showed absolutely no desire to address the blatant criminality at the very heart of the IOR. In fact some authors - most notably David Yallop - have claimed that the early demise of his immediate predecessor, John Paul I, was a murder designed to block such an investigation into the IOR.

7. On some occasions in the past the secretary of state has succeeded to the papacy on the death of the pontiff who appointed him.

8. Cited in La Repubblica June 29.

9. It is probably correct to assume a degree of coordination with the Roman prosecutors, who are said to have delayed the recent arrests by some days to give the pope the opportunity to set up the commission before monsignor Scarano was taken away in handcuffs.

10. This title is given in English in La Repubblica (July 2), indicating how serious an effort is being made to conform to best international practice.

11. The Grand Master of the Order is Carlo di Borbone - the pretender to the throne of the ‘Two Sicilies’, the pre-1860 Bourbon kingdom of Naples - whose now deceased father-in-law, Camillo Crociani, was at the centre of the 1970s Lockheed scandal. Other members of the order include Stefano Caldoro, the current PdL president of the Campanian region, as well as his disgraced former rival, Nicola Cosentino, an erstwhile undersecretary in one of Silvio Berlusconi’s governments who is now awaiting trial on Camorra charges. The most notable of all is Berlusconi himself, initiated into the order on March 14 2003.

12. It was as a result of the tapping of the phone of Angelo Balducci - under investigation as the head of a clique that distributed Vatican building-related contracts in a corrupt fashion - that the police first learnt of an extensive male prostitution network in the Vatican palaces.

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