From running on donations to becoming an international holding company, the Catholic Church’s financial past is littered with secrets.
So much that author Gerald Posner wrote hundreds of pages chronicling the institution’s financial scandals in his new book, God’s Bankers.
A little history:
Years ago, the Vatican financed its operations with donations and indulgences, free passes for sins in exchange for money. In the early days, the Vatican made little effort to keep track of finances, which meant the institution was rife with extravagant spending and embezzlement.
After teetering on the edge of bankruptcy several times, the Vatican appointed Bernardino Nogara as its new financial advisor in 1929, who straightened out the church’s finances and grew a $US92 million investment from Benito Mussolini into almost $US1 billion.
World War II also played a huge role in the creation of the Vatican Bank, as well as the unique power it held. As the Allies imposed restrictions on bank accounts, it became harder to move money around. Nogara created the bank, called the Institute for Religious Works, in 1942 to avoid having financial transactions tracked through Western Banks. Because it resided in Vatican City, it was exempt from all wartime restrictions and became “the world’s best offshore bank.”
The quest to hold onto the money and power that followed resulted in shady deals, cover-ups, and scandals within the Vatican.
Among them, here are some of the craziest schemes revealed in Posner’s book.
1. Making money directly off the murder of Jews during the Holocaust
A German officer admitted to having many war-time spies in the Vatican, one of them potentially being Nogara, the acclaimed and able financial advisor. During the war, Nogara began investing in Italian insurance companies which “developed into stakes that profited from the ongoing murder of Europe’s Jews,” Posner wrote.
These companies made money by keeping all financial assets from life insurance policies of deceased Jewish policyholders, and refusing to pay for those still living. But because the Vatican was not a direct insurer, it was never required to pay restitution after the war.
Many financial records were destroyed during the war, and the Vatican refused access to its own records. Therefore, the full scope of the scheme remains unclear.
Meanwhile, the pope at the time refused to publicly denounce anything the Third Reich was doing, even though the Vatican was one of the most informed institutions on the mass killings, long before the Allies discovered anything.
The Vatican Bank was the perfect place to hide billions in stolen wartime loot. The church also aided and saved many Nazi war criminals after the war.
2. Trying to buy fake securities from a Mafia-linked counterfeit ring
In 1973, the U.S Justice Department began looking into a potential role the Vatican Bank played in a counterfeit and stolen securities operation.
According to an 18-month FBI investigation, New York mobsters were planning to sell counterfeit corporate bonds and stock certificates to the Vatican, a $US900 million payment in five installments over several months.
A Vatican cardinal planned to use the faked securities as collateral in order to obtain financing. The counterfeit bonds would be undetectable unless the Vatican Bank lost money on its investments and was unable to pay back the loans, at which point the Vatican could claim ignorance of an outside scam.
When confronted with the accusation in a secret meeting in New York, representatives of the Vatican refused to answer any questions. The then-president of the Vatican Bank, Paul Marcinkus, denied any wrongdoing. The investigation could not come up with enough information to charge Marcinkus or anyone in the Vatican.
3. Using $US5 million to cover up monks who were squandering donations
After hearing reports that a group of Pauline monks in Philadelphia were involved in a financial scandal, church officials discovered that the monks in question had spent almost $US20 million in charitable donations on a life of luxury.
The monks would raise funds for religious projects, yet would spend the money on cars and personal expenses. Despite their high lifestyle, they also defaulted on $US4.3 million worth of church bonds. The vicar-general kept a mistress with church money, and took half the salary of friends appointed to monastery jobs.
Half the monks left the order when the Vatican ordered them to turn over their televisions, stereos, cars and credit cars.
To hide the scandal, the Vatican Bank sent more than $US5 million to cover the cost of the monks’ defaults and pay back creditors. The hush money also helped to avoid being sued or facing criminal charges.
4. Smugging gold into Poland to overthrow the communist regime
In an effort to fight communism in the 1980s, the Pope authorised the sending of millions in funds to help the Polish resistance, a ten million member organisation in Poland called Solidarity.
Marcinkus had an Italian intelligence agent convert $US3.5 million in cash into pure gold ingots, then smuggle them into Poland hidden in an SUV. The gold was placed in custom-built double bottoms and on the inside of the SUV doors.
Roberto Calvi, an Italian banker close to the Vatican Bank, said if the church’s role ever came to light, it could lead to another world war and the collapse of the Vatican. “If it comes out that you’re giving money to Solidarity, there won’t be a stone left of St. Peters,” Calvi told Marcinkus.
5. Laundering money for the Mafia and other Italian elite
Because of its sovereignty, the Vatican Bank has the ability to withhold account information from regulators and authorities. This secrecy has provided an excellent cover throughout history, as the Vatican moved money here and there to gain illegal profits and power.
“It was not much of a secret that for decades Italy’s elite had used the IOR to hide their money,” Posner wrote. “One internal review estimated there were approximately 9,300 accounts belonging to ‘privileged citizens of Italy,’ compared to only 2,500 that met the bank’s strict rules. Some accounts were rumoured to be proxies for the Spatola and Inzerillo crime families.”
In the 1970s, the bank bought a stake in the Italian bank Ambrosiano, which was led by the banker Calvi. For two years, the Vatican Bank moved money around Ambrosiano’s accounts, to allow banks and companies to pass financial inspection. Then they’d withdraw the money right after inspection, and keep a cut of the sum.
Ambrosiano later crashed in a massive scandal, and the Vatican paid a $US244 million settlement without admitting to any wrongdoing. Calvi faced criminal charges, then died in a murder made to look like a suicide. Rumours swirled around who was responsible for Calvi’s death — whispered possibilities including the Mafia and the Vatican.
In 2009, an Italian journalist published a book based on hundreds of internal documents smuggled out of the Vatican Bank that proved fake charity accounts were created and instead used for political donations, laundering, and embezzlement. Even donations to real charity accounts fell into the mix and ended up disappearing.
In 2012, four priests came under investigation for operating bank accounts for the Mafia to launder money.
You can find the full story of money, scandal, and power at the Vatican in Posner’s book, God’s Bankers.