Merchants in the Temple (10 page)

Immediately after Francis's election, disturbing rumors were circulating at the Curia and in Casa Santa Marta about a criminal investigation into the Monsignor. The newly elected Pope realized that he had to move with extreme caution. The situation did not materialize until May 29, after the deposition of Father Luigi Noli, an old friend of Scarano. As an employee of a central office of the Holy See, the APSA accountant enjoyed a kind of diplomatic immunity guaranteed by the Lateran Pacts signed in 1929 by the Vatican Secretary of State, Pietro Gasparri, and Italian Prime Minister Benito Mussolini. The investigators had to pursue their leads with the utmost discretion, through the proper diplomatic channels, but they were able to formalize the arrest warrant.

The Pope was at a crossroads reminiscent of the dilemma faced by John Paul II in 1987, when the Italian Supreme Court rejected the arrest warrant that the Milanese prosecutors had issued against the President of the IOR, Paul Casimir Marcinkus, on the charge of fraudulent bankruptcy, and against Luigi Mennini and Pellegrino de Strobel. The Supreme Court's ruling confirmed that the Italian court system had no jurisdiction over the actions of persons who report to the Vatican. The three men were found to be employees of a central office of a foreign state and therefore immune from prosecution without the authorization of senior Vatican officials, which would never be granted. After long discussions and negotiations, Marcinkus, Mennini, and de Strobel did not serve a single day in prison.

In the first weeks of Francis's pontificate, the old nightmares resurfaced, starting with the Banco Ambrosiano scandal and the murder of its president, Roberto Calvi, whose body had been found hanging under the Blackfriars' Bridge of London in 1982.

The Pope had to decide on the freedom of a man, of a priest, so he consulted his colleagues. Opinions were divided within the Secretariat of State and between cardinals strolling in conversation through the splendid gardens of the Vatican. Some felt that the warrant should be rejected, as had always been the case in the past. Allowing the arrest would set a disturbing precedent in the history of relations between Italy and the Vatican City, and future decisions would be held hostage to it. Francis listened in silence. Only later would everyone realize that his mind was already made up. The policy of a soft but decisive revolution prevailed: a tangible sign of his break with the past.

At dawn on June 28, 2013, Monsignor Scarano was placed in handcuffs and is currently facing two trials, one in Rome for corruption, and one in Salerno for money laundering. The Pope was not at the Vatican. He was on his way back from a trip to Brazil. When he was asked for a comment on the plane, his answer was unsparing: “Do you think Scarano ended up in jail because he was similar to the Blessed Imelda?” The Holy Father was citing, ironically, the fourteenth-century child from Bologna who had died in ecstasy after receiving Holy Communion. His reply signaled the growing unbridgeable distance between the allies of Francis and his adversaries in the world of intrigue that characterized the finances of the Curia.

Money Laundering at the IOR

The Scarano investigation and the ensuing scandal ended up in the headlines of newspapers and television news programs throughout the world. Until now we have had no idea about what really happened after the arrest behind closed doors in the Vatican. Tensions ran high between the old and the new guard. On July 3—only five days after Scarano's arrest—at the meeting where Francis announced the establishment of the COSEA commission, Ernst von Freyberg, the new President of the IOR, explained to the cardinals and the Pope the irregularities he had found in certain accounts at the bank, and the risk that there might be more:

What kind of problem do we have? It is mainly a problem of physical persons who use their accounts for illegal transactions, money laundering in every sense. They can be members of the clergy, they can be lay persons, there is no rule as to where the risk is greatest.

This may have been the first time that the President of IOR admitted that money laundering occurred at the bank. Or rather, the first time that we have the means of knowing for certain that inside the Vatican they were perfectly aware of certain illegal activities. It was a clamorous statement that confirmed the many suspicions that had festered since the scandals of the 1980s—suspicions that were always denied in official press releases. For decades the Vatican would not even confirm that the IOR was a bank.

Von Freyberg was convinced that his words would never leave the room, as if the cardinals and senior executives in attendance were under the seal of the confessional. Instead his shocking words were leaked and I am making them public for the first time in this book. Von Freyberg went even further by intimating that it was not easy to hunt down the money launderers, who could be religious or lay account holders. Practically every account was suspicious.

I think there are not so many cases. I myself checked on the computer the ones reported in the press on the first day, and they weren't there … What is true is that Scarano's account was present, an account that, to look at it today, had not been right for ten years, but he's a real professional in money laundering … this was not good … Our problem is this: we are living in a triangle of true facts, like the Ambrosiano, like Scarano; of false rumors, like Osama Bin Laden and all the others; and of total silence on our part.

These were strong and shocking assertions, considering that until a few weeks earlier the Monsignor had played a major role at the Vatican. They raise the question of how Scarano had been able to act with such impunity for so many years, and who his enablers had been. For ten years Scarano had cultivated his personal business interests, apparently without attracting any notice. His individual culpability would be ascertained at the trial, but at the same time someone must have been protecting him.

Mennini Father & Son

At APSA, the freewheeling monsignor's superior was not just any banker. He was Paolo Mennini, the son of Luigi Mennini, the right-hand man of Marcinkus, who had narrowly avoided arrest in 1987. The sins of the father are not necessarily visited on the sons. Mennini was not even questioned during the investigation, but the coincidence that both he and his father should be linked to financial wrongdoing at the Vatican was still quite striking. This became particularly noticeable after Scarano's arrest, and it caught the eye of the new cardinals who had been chosen by Francis, who were still relatively innocent of the dynamics and the most recent financial shenanigans in the holy circles.

Since 2002, Mennini had been the head of the special section of APSA, which manages the cash flow of the Holy See. He was a powerful man. He lived in a 174-square-meter apartment, in a beautiful building on Via di Porta Angelica, a stone's throw from Saint Anne's Gate, one of the main entrances to the Vatican City. He, too, had a very affordable below-market rent, paying only 843 euros a month for his spacious apartment. He played a crucial role at the heart of the Holy See's financial web, coordinating the bank accounts and all the foreign real estate agencies—which manage a total of 591 million euros in assets.

The Commission wanted to get a clear idea of what was going on in Mennini's department, where 102 positions were operative. After an audit by Moneyval—the European Council body that assesses compliance with money-laundering regulations—APSA had closed 31 savings accounts held by persons, entities, or companies that were hard to identify or that were not entitled to bank privileges at the Vatican. This reduced the number of positions to 71, all of whose holders had been identified. Six of them were entities: the Saints Peter and Paul Association, the Circle of St. Peter, the Equestrian Order of the Holy Sepulcher, the Baby Jesus Hospital, the Féderation Internazionale des Associations de Médecins Catholiques, and the International Association of Catholic Hospitals. Two were affiliated companies that deal with buildings in France and Switzerland: the realtor Sopridex SA of Paris and the Profima SA Societé Immobilière et de Participations of Geneva. Finally, there was personal account of Cardinal Giovanni Lajolo, former President of the Governorate, and other accounts that remained secret.

But there were more surprises to come. On November 18, 2013, at the COSEA meeting in Paris, Jean-Baptiste de Franssu described what he had found in his analysis of APSA accounts:

Eighty-nine accounts have been identified, for in addition to the 74 initial accounts another 15 accounts have been identified because APSA was involved in their imminent closing. Of these, 43 are institutional because their consolidated funds are at the Holy See, while 46 are non-institutional (the remaining accounts). There is also an account held by the S.O. [APSA's ordinary section], which has to be analyzed to understand its nature.

Relations were tense between Francis, his collaborators, and Mennini Jr. and matters weren't helped by rumors about the investigation that had been leaked. On July 8, 2013, Monsignor Scarano was questioned by the Italian prosecutors. His explosive revelations on that occasion were reported four months later in an article by Maria Antonietta Calabrò for
Corriere della Sera
:

In the transcript, which was classified in October, Scarano spoke at length about Mennini and the way Finnat Banking Group stocks were always handled, according to him. So much that the prosecutors questioning him asked if he realized that he might be implicating Mennini in the manipulation of stocks of an Italian bank. The son of Paolo Mennini, Luigi (after his grandfather) is the managing director of Finnat. Scarano's statements also concerned Cardinal Attilio Nicora, his successor Domenico Calcagno, and the office chief of APSA.
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Mennini did not seem daunted by the suspicions surrounding him. Late in the evening of October 24, 2013, for example, he expressed his satisfaction with his superior, Cardinal Calcagno, at having found the right channel for purchasing 20–25 million dollars in foreign currency, a circumstance that stand in this never-before-published letter:

Most Reverend Eminence,

I am pleased to confirm that it was possible to arrange with our Swiss correspondent the provision of banknotes in foreign currency, also for significant amounts (20–25 million USD). The first price quoted was 0.05% of the amount requested, all inclusive (transportation, delivery to our offices and insurance coverage). I have succeeded, for the moment, in lowering the rate to 0.04%, and in the negotiations I will try to get it even lower. Considering that the costs of transportation will take a sizeable cut, it would be advisable to execute operations only for very large amounts. I remain at your disposal and send my kind and most devoted regards.

Paolo Mennini would leave his post on November 11, 2013, when his second five-year term expired. But Zahra interpreted his actions during his final days as a declaration of war. It all started with a note that Mennini left on Cardinal Calcagno's desk on November 13, after a telephone conversation with Timothy Fogarty, “senior vice president—CBIAS—of Federal Reserve, New York,” as Mennini indicated in the document. In the one-and-a-half page note, Mennini emphasized that, to supply the cash, Fogarty would prefer to deal directly with APSA and not have to go through the Promontory consultants, who were working with the Vatican central bank in that period:

Mr. Fogarty was happy to be able to speak with me. He confirmed receipt of the Swift message sent to him by APSA on November 5, 2013. With regard to the provision of hard foreign currency, he confirmed that the Federal Reserve usually provides banknotes to central banks, but prefers to guarantee this service only when it is difficult to find availability through commercial banks and financial institutions. He would like to be considered as a last resort. He told me that he would prefer to speak about this subject directly with APSA and, in addition, that he does not understand the exact role and need of Promontory's mediation in this specific instance. This is because he considers APSA a central bank with a clear consolidated relationship with them … Going back to the issue of banknotes, Mr. Fogarty … told me that he will inform Ms. McCaul [Elizabeth McCaul of Promontory] by telephone that he would prefer to deal directly with APSA to arrange this type of service. He also specified that the banknotes would be delivered physically in their vault, so it will be up to APSA to arrange for transportation to the Vatican City. [He is] definitely able to provide APSA with the right contact required for this need. At the end of the conversation Mr. Fogarty mentioned with pleasure his visit to Rome a few years ago and in particular his visit to the Vatican museum and gardens.

Paolo Mennini

From the documentation in my possession, I am able to reconstruct that Zahra interpreted this note as a clear attempt to jeopardize the reform of APSA, and to discredit both the COSEA Commission and the activities of Promontory. He wrote to the coordinator of the Commission, Monsignor Vallejo Balda:

Dear Father Lucio,

Mennini is waging war … let's speak about this later today. But he has to be replaced immediately.

Joe

The same policy was taken by another member of the Commission, Jean-Baptiste de Franssu, who wrote to the analyst Elizabeth McCaul and to Zahra:

This is not a very satisfactory situation and I imagine that we should expect more and more of this type of “Scud missile” from Mennini as long as he is around. The sooner we are dealing with his replacement, the better. What should we do over there, Joe, to speed up the process [of change]? Of the two questions raised, I imagine we should not change in the least the strategy we have developed vis-à-vis the Fed, you, and Promontory.

All the while Mennini continued to report to the office. On November 20 the McKinsey consultants, including Ulrich Schlickewei, remarked on his presence to Zahra:

In the past few days, Mennini has continued to come to the office regularly for the transfer of his duties to Monsignor Mistò. For the moment no official successor has been appointed, but a date should be set for the final exit of Mr. Mennini.