God's Banker (19 page)

A small irony was that Leoni had a morbid fear of flying. If he went to Luxembourg he would insist on going by train; and it is said that on the one occasion he went to the United States, he took a boat from Gibraltar. But despite his Latin American duties, Leoni never had to travel very far. For if Banco Andino's nameplate was in Paseo de la Republica, Lima, its heart and mind remained firmly in Milan, or at best in nearby Switzerland or Luxembourg where board meetings were mostly held. There was no need to go to Lima, since nothing much ever happened there. Decisions were taken in Milan, and conveyed through Banca del Gottardo, or Cisalpine in Nassau.

From late 1979 on most of the loans extended to Panama and Liechtenstein were transferred to Lima. With this ready-made busi­ness, and some dealings with local banks (notably Banco de la Nation which held two per cent of Andino's capital) Calvi's new creature could boast "assets" of $890 million by the end of 1980, after barely a year of activity. From nothing, it had become twice the size of Cisalpine.

To the extent that it was known about, such breathtaking growth should have aroused suspicion. Even so, it was odd that Ambrosiano was so interested in Latin America, whose economy even then was wobbling. But to anyone who asked why the bank was not more concerned with major international centres like London or Paris, Calvi would either murmur something about excess taxes, or pro­claim that South America was world banking's next Eldorado. The correctness of that claim would of course be demonstrated by the debt crises which swept across Mexico, Argentina, Brazil and Venez­uela—and through the international banking system—not long after­wards. Less surprising was that despite the strictures of its report in 1978, the Bank of Italy permitted it, or at least allowed Botta and Leoni to hold senior posts at Andino. The attack on Baffi and Sarcinelli had had its effect.

But the insertion of first Managua and then Lima into the mechan­ism of fraud was not the only new screen Calvi introduced between the inquisitive and the truth. Where his own safety, financial or physical, was concerned, he was not one for half measures.

Between 1977 and 1980 a new litter of tiny companies, usually with a nominal capital of $10,000, was born in Panama and Liechtenstein. They were registered through resident agents there, but owned by Manic S.A. of Luxembourg and thus indirectly by the IOR. By the end they numbered seventeen; but the Panamanian offspring which most need to be remembered were called Belrosa, Bellatrix, Erin, Laramie and World Wide Trading. An obscure Liechtenstein
anstalt,
called Nordeurop Trading Company Establishment, was another newcomer. In time it would be replaced by Astolfine, to emerge as the most voracious Panamanian company of all. Alongside operated the opaque United Trading Corporation, set up in 1974 on the Vatican Bank's behalf by the Banca del Gottardo, and Zitropo, that veteran from the days of Sindona. All of them would achieve debts, and notoriety after Ambrosiano folded, quite out of proportion to their unnoticed and motley origins.

Their purposes were no less motley. The main one, of course, was to finance those other Panamanian and Liechtenstein companies owned by Manic with the strange sounding names, and which owned so much of Banco Ambrosiano itself: Cascadilla, Lantana, Orfeo, La Fidele, Finprogram and so on. Those financings, and the debts they implied, soon began to grow, as interest fell due and fresh money had to be found, to subscribe to the capital increases which Ambro­siano was forced to carry out, first in 1979 and above all in 1981. Physically, as might be guessed, the shares never strayed from Milan, safely on deposit with Ambrosiano. When his bank's annual share­holders' meeting came round each April, Calvi would strangely but conveniently emerge as proxy-holder on their behalf.

But the little companies of the second generation also served as repositories for others of Calvi's secrets. Among these the more innocent were concealed holdings of shares in companies and banks already controlled by Ambrosiano. There was, for example, six per cent of Banca del Gottardo, meaning that Ambrosiano owned not 45 per cent of the Swiss bank, as it always declared, but an outright majority of 51 per cent. Another of their "assets" was that block of Pacchetti shares, for which Calvi had paid so much in 1972. At the end ten years later, their book value in Zitropo's portfolio was $82 million; their real worth, when they were sold in autumn 1982, was just $4 million. Then there were funds which Calvi seems by then to have been channelling to Gelli and Ortolani. The tiny Erin was, for example, the recipient from Banco Andino of a $37 million loan destined for Bafisud Corporation of Panama, an emanation of Orto- lani's Banco Financeiro in Uruguay. There were transactions involv­ing Rizzoli, and others where the IOR was a direct destination of funds. These, it was later claimed by the lOR, were passed straight on to the United Trading Corporation, which it technically owned, but which it never administered.

As the months and years went by, the dealings between these tiny companies and Ambrosiano's various banks became steadily more entangled. But the process of deception was established—basically that of Sindona before Calvi. As their indebtedness increased, so the value of their own assets, pledged to Managua and then Andino as collateral for the credits advanced, was increased. As the difference between Pacchetti's theoretical and real valuations above shows, the process was to culminate in absurdity, when the moment of reckoning came in 1982. But that was still some way off. Calvi had just one more immediate problem to tackle.

The Bank of Italy inspectors who prepared the excellent report of 1978 had identified the weakest spot in his defences, which even the transfer from Nassau to Managua and Lima had not removed. It was, in effect, the first link in the chain—that $200 million lent initially from the Milan parent, with the help of which Cisalpine had extended the unspecified "financings", at whose nature the report had guessed so accurately. These were now being extended by the banks in Nicar­agua and Peru. Therefore, to ensure complete concealment, Calvi had to find the funds abroad, so that no trace of the foreign
imbroglio
would feature on the books of Banco Ambrosiano itself. The task, given the rumour which surrounded Calvi in Italy, might not have been easy. But at this juncture a crucial benefactor emerged from an unlikely quarter: the huge state-owned oil concern ENI.

From 1978, the year of the inspection, until the end ENI was to be another bridge linking Ambrosiano with the politicians. Since its inception just after the Second World War, it had been far too important to be ignored by the parties. Under its legendary first chairman, Enrico Mattei, the inroads had been kept to a minimum. By force of his extraordinary personality, and the skill with which he exploited the growing appetite of the party organizations for money, it was Mattei who dominated the politicians—to the extent that he was considered the most powerful single figure in all Italy. But after his death in a mysterious air crash in 1962 near Milan, the roles gradually reversed.

Mattei's successors were weaker, and the group's own financing needs grew. These could be met from two obvious sources: the banking system, or its only shareholder, the State. Both, however, were increasingly in the grip of the parties, whose own rivalries were increasing. Gone was the cosy command of the Christian Democrats, who had run the country unchallenged since 1945, as Italian politics adjusted to the postwar social transformation. The changes led to the birth of the formula of the "centre-left", drawing the Socialists first from Opposition in the late 1950s, and then from 1963 directly into Government. Some of the consequences were beneficial—on paper at least—like the long-overdue nationalization of the electricity supply industry, and a re-organization of the chemical sector.

But the trend had a less wholesome effect, of intensifying the battle for control of the appendages of the State, citadels of patronage and finance. The main struggle was between the Christian Democrats and the Socialists and their factions, with smaller bones being tossed to the smaller parties of Government, the Social Democrats, Liberals and Republicans. No citadel was more highly prized than ENI.

Mattei's bold and controversial forays into the international oil business had endowed it with a huge foreign substructure, while the rise in oil prices, especially after 1973, meant that ever larger sums of money flowed through its accounts. Today ENI ranks as the fourth largest industrial corporation in the world outside the US. Unfortu­nately, so furious did the contest become for its control between

Christian Democrats and Socialists that between 1978 and 1983 its chief executive changed no less than six times. Sometimes he would be called chairman, on other occasions "commissioner", when a truce could be delayed no longer. It has been a typically Italian miracle that despite this self-inflicted injury, ENI has succeeded in functioning at all, thanks to a dedicated middle management. But there are two fairly constant threads through these embattled years, Leonardo Di Donna and Florio Fiorini, who between them ran ENI's important financial department.

At the risk of crude oversimplification, Di Donna was the repre­sentative within the group's top management of Bettino Craxi, the Socialist leader, and Craxi's dominant faction within his party. Di Donna's presence was a rock on which at least four of ENI's chairmen and commissioners foundered. However fierce the public criticism of him, the Socialists insisted that Di Donna should stay, even after revelation in 1981 of his name among the members of Gelli's P-2.

And Craxi, perhaps, owed him not a little. For, the story ran, Di Donna alerted Craxi to the ENI-Petromin affair. That most extravagant example of the seemingly unbreakable bond between the Italian oil industry and scandal, concerned the payment of a seven per cent commission on a direct oil supply deal between the Italian group and Petromin, the State-owned Saudi Arabian oil company. Just where this huge sum (no less than $115 million had the contract been completed) was destined—-to Italian politicians, Saudi princes or both—it is still impossible to say. Saudi Arabia, in any case, broke off the arrangement when the affair became public in late 1979. Most important, however, the revelations discredited Giorgio Mazzanti, ENI's then chairman and identified with the Socialist faction hostile to Craxi. Mazzanti was forced to resign, while Craxi was empowered to beat off a real threat to his position from his party opponents. Gelli's own genius at playing on both sides at once is shown by the fact that not only Di Donna but also Mazzanti were listed as members of the lodge, although the former denied involvement.

Well before that, however, Di Donna was doing business with Gelli's financial arm, the Banco Ambrosiano of Roberto Calvi. How their association began has never been made clear. The common link of the P-2 is a possibility, but political connections in any case existed already. Since 1975 Calvi's bank had been helping to finance the

Socialist party, and in the normal run of things would have had dealings with ENI in Italy. But from 1978 on, that relationship blossomed far beyond Italy's borders, and at an ideal moment for Calvi.

The Bank of Italy inspectors completed their fieldwork at Ambro­siano in Milan on July 19, 1978. Hardly had they done so than 5,000 miles away, in Nassau, the ENI connection was operational. Cisal­pine Overseas was then headquartered in the IBM building, a stylish modern office block on East Bay Street owned by the American computer company. But it had close, indeed personal, links with another tenant of the same building—Tradinvest Bank and Trust of Nassau, ENI's financial affiliate specially tailored for the Bahamas offshore centre. On its board sat Pierre Siegenthaler, President of Calvi's Nassau bank, as well as two more junior managers of Cisal­pine, Calvin Knowles and Sue-Anne Dunkley.

On July 21, Tradinvest agreed to lend Ambrosiano Holding of Luxembourg $45 million for five years. Inside a fortnight another $15 million followed, then another $20 million, this time from another ENI financial company in the Caribbean, Hydrocarbons Interna­tional of Curasao. Before the end of the year yet more money had flowed into Ambrosiano Holding, this time 100 million Swiss francs. The lender was ENI's embodiment in the Grand Cayman Islands, one of Nassau's most pressing rivals in the Caribbean offshore business.

Thus, within the space of four months, Italy's biggest oil group had come to Calvi's aid with no less than $130 million. And where ENI trod, others followed. In 1979, Banca del Gottardo, Ambrosiano's Swiss arm, had arranged two syndicated credits for over $60 million, in which some of the world's biggest banks took part. In 1980, Midland Bank of France was arranging a loan of $40 million, and in 1981 International Westminster led a group of banks who provided $75 million for Ambrosiano's Luxembourg Holding company. ENI's accommodating finance department had started a process which would lead to one of the angriest postscripts of the Ambrosiano collapse—the legal conflict over who should make good some $450 million of loans contracted by the Luxembourg affiliate between 1978 and 1981.

But the generosity of Di Donna and Fiorini did not stop at $130 million. No matter that ENI's experts made the alarming discovery that
it
was alone providing 60 per cent of the medium term funds secured by Ambrosiano Luxembourg, a dangerously high exposure by a single lender, and that the balance sheet valuation of the latter's
assets
looked unrealistically high. By mid-1979, Di Donna was writing to Calvi to assure him that if Ambrosiano would lend more to the oil group in Italy, then ENI would be quite happy to provide more help to his bank's foreign subsidiaries. He was as good as his word. Tradinvest provided $31 million to its next door neighbour Cisalpine in Nassau, and in 1980 capped all with a peculiar financing agreement with Banco Andino in Lima. Tradinvest would lend $50 million to Andino, in return for a credit of 100 million Swiss francs from Ambrosiano. This latter sum materialized only in part, and then after some delay. But why did Ambrosiano have to be involved at all? Could not ENI simply have used some of its own dollar balances to buy Swiss francs on the foreign exchange market?