God's Banker (11 page)

Banca
Cattolica del
Veneto had
been
in
the hands of the
IOR
since
the
War. It was
deeply
entrenched
in
the Veneto,
that region of
Northern Italy
inland
from Venice, where respect for the Church is
greatest and the Christian Democrat vote remains largest. Then, as
now, the bank was a marvellous investment. Its property assets,
notably the beautiful old buildings which would house its branches,
were enormous. It was moreover flush with the savings of the faithful,
and spread over one of the parts of Italy where the famous
economia
sommersa,
or submerged economy, was most dynamic. Indeed, in
1981 the Banca Cattolica del Veneto announced the highest net
profits of any bank in the country.

The same could not be said of Pacchetti, but Sindona had his own
plans. Out of this nondescript concern, he intended to conjure a
financial creature then unknown in Italy, but all the rage in the United
States: the conglomerate. Sindona's model was Gulf and Western.
Pacchetti saw its shares pumped higher and higher, and found itself
the owner of an odd lot of companies in anything from steel to
household cleansers. But after Bastogi, Sindona was interested in it
no longer. It was time to find a buyer for Pacchetti, and a bait that
would tempt him.

At this point, the three-way deal between himself, Calvi and the
IOR was concocted. In return for buying Pacchetti, Calvi would gain
the option to acquire from the Vatican a controlling interest in Banca
Cattolica del Veneto. Everyone was content, Sindona was to make a
great deal of money, Calvi would gain a bank, and the IOR could
contemplate the genesis of a huge Catholic grouping around Ambrosiano, which would be a natural ally. In March 1972, La Centrale duly
announced that it had paid the equivalent of $45 million for 37 per
cent of the Veneto bank. On the face of it, an excellent arrangement
for La Centrale, whose lustre had been tarnished by the departure of
such as Evelyn de Rothschild from its board after the Hambro's
disengagement.

Rather less appealing, had shareholders known about it, was the
underside of the deal. Pacchetti had been sold by a Luxembourg shell
company of Sindona's called Steelinvest, to a concern with the weird
name of Zitropo Holding, also of Luxembourg.
As
would also later
emerge, fat commissions seem to have been paid as well. Calvi was to
hint that, yes, Zitropo might have something to do with Ambrosiano.
But
he was acting on behalf of an "important client", and more he
could not say. In the light of what happened later, that client might
even have been the
IOR.
As for Pacchetti, it was a child's doll
to
be
cast aside. In a few months Sindona had inflated its price from 200
to
1,200 lire per share.
Now
it would be used as a staging post
for shares
traded between Calvi and the Bonomis, before being left
to decay. By

June 1982, as the deluge overtook Calvi, its shares were worth just 75
lire apiece.

Apparently, though, someone did object to the sale of Banca Cattolica del Veneto by the Vatican. He was Albino Luciani, Cardinal
Patriarch of Venice, in whose archdiocese the bank mainly operated.
The story goes that he protested to Marcinkus at the IOR about the
transaction, but received little sympathy. Later Cardinal Luciani was
to become Pope John Paul I. But he reigned for only a month, in
1978, far too short a time to bring the IOR to heel.

But Pacchetti was not just a prime example of how the Milan
market could be abused by the unscrupulous. Its sale to Zitropo was
the first of the financial skeletons which Calvi was to hide away
abroad. In return for Pacchetti, Zitropo/Ambrosiano paid Sindona
$40 million. The money in fact came from Cimafin, a Liechtenstein
front company, which in turn was lent the money by Compendium
(later Banco Ambrosiano Holding) in Luxembourg. In the end,
Pacchetti would cost Calvi, if subsequent capital increases and com­missions were included, over $80 million at the then exchange rate.
Thus Ambrosiano's foreign liabilities began, and thus Calvi began his
habit of accumulating treasures in Italy at the price of troubles
abroad. Zitropo was to be a millstone to the end.

But in late 1972, Calvi was blandly asking Ambrosiano's sharehol­ders to agree to a capital increase, to enable the bank's foreign
business to be "expanded further". As usual he was finding it hard to
tell the whole truth, or even a significant part of it; and on that
occasion the deception did not stop there.

Ever since the previous February, Calvi had been travelling
through a separate financial labyrinth, which would lead to control of
another rich bank. This time his object was Credito Varesino, based
at Varese, to the north-west of Milan. As so often the IOR was a
staging post. Put simply, Calvi bought Credito Varesino from the
Bonomis; but his means were typically contorted. By the end of 1972,
Calvi controlled 35 per cent of the new bank, a decisive interest—but
for six months the shares involved were oddly left with the IOR. Calvi
had sold them in April to Giammei, notoriously the Vatican bank's
stockbrokers in Rome, for 11 billion lire. In October La Centrale, in
other words Ambrosiano, bought them back, but for 31 billion lire.
This remarkable difference of 20 billion lire was not, however, a
profit for the IOR. It had merely acted as a screen, behind which
Calvi could shift such a sum around his group.

With Credito Varesino safely netted, Calvi turned his attention to
Toro, and the interests in other smaller banks in its portfolio. This
time, he found the Bonomis in opposition, after Toro for reasons
similar to his own. By early 1974, after a covert stock market battle,
Calvi was the contender to triumph. The Bonomis had to give best,
but remained allies of Calvi in some other of his obscure dealings until
withdrawal in 1975. But by then, his basic design had been realized.
Not only was Banco Ambrosiano an orthodox commercial bank, with
1,800 billion lire of deposits, but in practice a merchant bank as
well—whatever the Italian banking laws might say.

Not until 1978 was the Bank of Italy to expose, in an outstandingly
perceptive report, the most questionable side to some of those
dealings in Toro and Credito Varesino. But Calvi's methods were
already attracting criticism. Cesare Merzagora, head of Assicurazioni Generali, Italy's biggest insurance company, and something of
a patriarch himself of Italian finance, wrote to the Bank of Italy
complaining of Calvi and the unsatisfactory nature of the Pacchetti
affair. Ambrosiano, he pointedly observed, had the reputation
until
recently
of being well-run. Guido Carli, the Governor of the central
bank, also publicly criticized the inadequacies of the Milan Market.
But Sindona's generosities to the politicians had helped ensure that
they were in no hurry to strengthen its rules.

In fact, the Bank of Italy did carry out two earlier inspections of
Ambrosiano, in 1971 and 1973, proof that it already had its misgivings
about Calvi. But the smokescreen proved too thick to penetrate, and
nothing came of them. Meanwhile events at home and abroad were
making Calvi's dubious activities a less pressing concern. For a series
of upheavals in the international monetary system coincided with the
beginning of the end for Michele Sindona.

The Sicilian had wasted no time in using the $40 million received from
Calvi for Pacchetti. That same 1972, he bought control of Franklin
National, the twentieth largest American bank. Franklin was to be
used as the platform for a speculative extravaganza, made all the
easier by the then liquid state of international capital markets. The

Vietnam war was at its height, and thousands of millions of dollars
were leaving America, as the Nixon administration, under its much-
criticized policy of "benign neglect", countenanced a succession of
payments deficits.

Sindona, and his top foreign exchange specialist Carlo Bordoni,
thus could borrow money to speculate on everything: from lire,
dollars and Deutschmarks to gold, silver and commodities of many
kinds. As far as the lira was concerned, Sindona speculated on its
decline. Alas, however, it was the dollar which weakened, devalued
by ten per cent in February 1973, and undermined further by Middle
East war and the sharp rise in the price of oil which followed. The
mark, which Sindona was expecting to fall, instead rose almost
without interruption. As his losses accumulated, he was forced to
resort to ever riskier expedients to recover them. Payments to the
politicians in Italy multiplied; the Christian Democrats admitted
receiving $3 million from him, but the true figure probably was
considerably higher. During this period too the shadow of the Mafia
lengthened over his affairs.

But both Sindona and Calvi suffered another misfortune at about
that time: the appointment as Treasury Minister of the redoubtable
and uncompromising Ugo La Malfa.

La Malfa was one of the founders of the postwar Italian republic; by
background and instinct he was a part of that "lay" establishment
whose financial embodiments were the Banca Commerciale and
bankers such as Enrico Cuccia, Sindona's great foe. Like both of
them, La Malfa was Sicilian by birth; but despite, or perhaps because
of that, his lifelong ambition was to haul Italy northwards to the
modern mainstream of Western Europe, to let daylight into the
confessional booth.

The story of Roberto Calvi would demonstrate how hard that task
would be. But until his death in 1979, the name of La Malfa was
synonymous with an intellectual honesty and determination unusual
in Italy. In that summer of 1973 he lost no time in proving where his
sympathies lay. Calvi, Sindona and the Bonomis he branded as
golpisti della Borsa,
or "coup-makers of the stock market". More
important, he raised interest rates, and thus put an end to the policy
of easy money, under which such coup-making flourished.