God's Banker (34 page)

Bazoli agreed to take the job on August 5. The following day, as Andreatta signed the fateful decree in Rome, and a summer thunder­storm fittingly swept over a half-deserted Milan, the new bank was formally registered. Its first board meeting was held the same after­noon, in the offices of the Banca Popolare di Milano.

That weekend, punctuated by a symbolic closedown of a single second, Calvi's Ambrosiano physically became Nuovo Banco Ambrosiano. Officials spent Saturday and Sunday almost without sleep, going over the books of every one of the 107 branches of the old bank. Miraculously the new Ambrosiano opened for "business as usual" at 8.30 a.m. on Monday, August 9. In fact, an uninterrupted transition was essential, for had the bank been shut even for a week, everything might have been lost.

As it was, difficulties abounded. The withdrawal of deposits was only slowly stemmed and the 4,200 staff of the former bank were almost twice as many as its smaller successor warranted. For only those most heavily compromised with Calvi—the previous board, and senior foreign officials like Leoni and Botta—had been dismis­sed. To their surprise, moreover, the new directors found that even in Italy where it had seemed so profitable, Ambrosiano left much to be desired. Its branches were poorly sited, its methods unenterprising, and even the record 1981 profit had only been achieved thanks to the proceeds of share dealings. For Calvi's neglect of the ordinary activities of his bank, Ambrosiano had also paid a price.

The pool had additional teething problems of its own. Strains sometimes would arise between its participants, public and private, Socialist and Christian Democrat, and between banks which were direct competitors in Milan of Ambrosiano and those which were not. Not surprisingly, despite advertisements portraying it as "the bank made of banks", Nuovo Ambrosiano expected to lose 30 billion lire in its first year.

And then, pervading everything, there was the past. Bazoli himself wondered long whether "Ambrosiano" should disappear from the new bank's title. In the event, continuity at home was deemed more important than opprobrium abroad. It fell to Bazoli, too, to step into the shoes, or rather the office, of the dead Calvi. Above him, on the fifth floor, the liquidators of the old bank sifted through the docu­ments of the past. But in those first days, he would occasionally shiver to find himself alone in that huge, half-empty office below, that had once been Calvi's. Early on, Bazoli decided to turn the room over to committee meetings, while he would work in what used to be a waiting room. But little time was to spare for the contemplation of lingering ghosts.

First, the authorities in Luxembourg, piqued at the discredit thrown upon its tax haven status by the Ambrosiano scandal, ordered Italian banks with similar subsidiaries there to provide full guarantees within 48 hours for these latter—or risk losing their local banking licences. The ultimatum was duly met. But the episode betrayed an initial unhappiness felt by more than one foreign central bank at the conduct of the Bank of Italy, and the absence of earlier intimation of its longheld suspicions about Ambrosiano.

But this discontent was modest, compared to the resentment felt at the principal ruling of August 6: that La Centrale, which controlled the choicest Italian interests of the old Ambrosiano, be transferred not to its liquidators, as normal practice would have seemed to dictate, but to its successor. The new bank paid just 350 billion lire for the good will. The liquidators, who would have to pay off the foreign creditors were left with only Banco Ambrosiano Holding in Luxembourg and its mostly worthless appendages. As the impli­cations sunk in many were upset—but not the seven pool banks whose reward would be La Centrale and its banking and insurance sub­sidiaries.

The 39,000 small shareholders of the old Ambrosiano who had lost everything, Leemans at La Centrale, Rossi at the Consob, and above all the creditors of the foreign banks of Calvi, felt cheated or worse.

The decision was justified on the grounds that it would prevent such important assets being put to chancy auction, with the risk that the highest bidder might prove another Calvi or Sindona. The true reason, more probably, was the political requirement to keep Rizzoli and the
Corriere
within their existing orbit, something so carefully ensured by the composition of the original pool, which was now the owner of the new Ambrosiano. In vain did irate small shareholders bring legal actions to try and reverse the decision. The promise of success was small; and to placate them, Nuovo Ambrosiano announced that it would issue warrants, enabling subscription on favourable terms to a capital increase planned for 1985. In the meantime Leemans, who had described the transfer of La Centrale as "the steal of the century", had been forced to resign as its managing director.

Far more revealing, especially of the inbuilt institutional rivalries within Italy, was the departure from the Consob of Guido Rossi. The Ambrosiano collapse was a most embarrassing setback both for the stock market and for the regulatory body trying to change its ways. True, Rossi had by his insistence forced Ambrosiano to issue a prospectus naming Cascadilla, Orfeo and their like in Panama. But it was another Pyrrhic victory in a story full of them. By its omissions, the prospectus was a fraud: and daylight of the main market was far too bright for Ambrosiano to withstand.

In truth, Rossi had been wondering for some while whether to leave. But the Ambrosiano affair was the last straw. Had the Bank of Italy let the Consob know of its suspicions about Ambrosiano, he felt, the quotation might never have happened; as for the decision to liquidate a quoted company, Rossi had learnt of it only after it had been taken. Four days later, he resigned with bitter words for the Bank of Italy and the Treasury Minister for their lack of co-operation.

His going was variously received. Some took it as a ploy to protect himself from the wrath of small shareholders, for many of whom Consob's admission of Banco Ambrosiano to the main market had been a guarantee of soundness. Others simply put the episode down to frayed nerves in the heat of a banking crisis without recent precedent. But not a few were quietly relieved to see the back of Rossi, in the hope of a less prickly, more malleable successor.

But most awkward—and most serious—of all for the Italian au­thorities were the objections of the foreign creditor banks to the liquidation procedure. At that London meeting in July they had been told in effect that only the IOR could ensure repayment of the $450 million lent to Calvi's Luxembourg holding company.

Now they were learning that the most valuable assets of the bankrupt Ambrosiano were not to be sold off, and the proceeds distributed to creditors. To disappointment was added injury, which observations that the banks had been guilty of professional misjudge­ment of a risk did nothing to assuage. Indeed, such suggestions only strengthened their resolve to prove through the courts that the Italian authorities were as bound to underwrite the debts of Ambrosiano in Luxembourg and Lima as they were those of Ambrosiano in Milan— whatever the Basle Concordat might or might not say.

The creditors advanced three main arguments. First, Ambrosiano had always been presented as a group. Second, although the loans were made to different companies, they were all negotiated by the same few people at Ambrosiano, to disappear in an identical con­spiracy down an identical drain. For the liquidators to discriminate against some creditors was therefore unfair and inadmissible. Third­ly, the Bank of Italy's inspection of Ambrosiano showed that it had formed a very shrewd idea of what Calvi was up to as long ago as 1978.

The Italian authorities, the creditors maintained, should have acted much sooner.

Curiously, it was some while before they managed to look closely at Padalino's report, which since late 1981 had been circulating secretly in photocopy form among those in the know in Milan. At one stage a creditor bank in London found itself being offered a copy for £250; happily, one mysteriously arrived for free under anonymous cover, a few days later.

In reply, the Bank of Italy submitted three arguments of its own. Firstly, it had no duty to make good money borrowed by foreign subsidiaries, operating from offshore banking centres impossible to monitor. Secondly, much of the responsibility for the Ambrosiano affair belonged not to Italy, but to the Vatican and the IOR. Thirdly, and more generally, the skill of banking lay in judgement of risk. If all loans were automatically guaranteed by a central bank, it main­tained, one of the main disciplines of banking would be removed, increasing the danger of unwise lending.

Thus the opening positions were staked out for what would be lengthy three-way jousting between the Italian state, the IOR and the foreign creditors. The weapons were study groups, task forces, and mixed commissions.

Above all, however, there were the lawyers and the lawsuits, stretching from Europe to North and South America. Many might face losses at the hands of Calvi, but the lawyers with certainty would profit handsomely. By the end of April 1983, the creditor banks had brought 93 separate lawsuits, claiming over $500 million from the liquidators in Milan and Nuovo Banco Ambrosiano. In reply the Bank of Italy signalled its irritation with those twelve foreign banks which had obliged Calvi with $230 million of risk-free "back to back" loans from late 1981, by suing two of them for the return of $17 million lent them by the old Ambrosiano.

But even richer legal extravagances were conceivable. Theoreti­cally, Banca Nazionale del Lavoro, simultaneously one of the main creditors of Ambrosiano Luxembourg and a leading shareholder in Nuovo Banco Ambrosiano, could end up suing itself.

Most tantalizing of all was the possibility that someone might sue the IOR. The Vatican bank filed claims in December 1982 with the liquidators of Ambrosiano Overseas for the return of $73 million deposited in Nassau. But those same liquidators considered legal proceedings against the IOR—for the return of $90 million Ambro­siano Overseas had in turn deposited with the Vatican bank. Many of the creditor banks, understandably, felt like doing the same.

In fact though, despite their public insistence that nothing less than a 100 per cent settlement would suffice, a compromise did not look impossible. Early in the year, the liquidators of Ambrosiano in Milan, with the blessing of the Bank of Italy, sent a secret emissary to see representatives of the creditors in a Paris hotel. He made a "take-it-or-leave-it" proposal: 30 per cent or nothing.

The banks went away to mull the offer over. Alas, however, news of the meeting was swiftly leaked to the press. Ciampi, the Governor of the Bank of Italy, was initially so angry that he wanted to stop all bargaining there and then. But both sides had an interest to settle. Italy as a borrower needed the good will of potential lenders; the banks for their part knew that it could be years before they won any lawsuit—if they won at all.

More clear-cut, if less eyecatching, were the consequences of the Calvi disaster at home. Directly and indirectly, the Ambrosiano affair would cause great changes in the country's financial landscape.

Under the August agreement Nuovo Ambrosiano agreed to dis­pose of the insurance and publishing interests which Calvi had defied the law to obtain. The first to go was the 56 per cent interest in the Toro insurance company, sold for 270 billion lire in March 1983 to a consortium led by IFI, the holding company of the Agnelli family and the dominant shareholder of Fiat. The fate of Rizzoli, however, was inevitably a rather more complicated matter.

Now that Calvi—both its paymaster and effective owner—had gone, the old Rizzoli seemed as surely doomed as the old Ambro­siano. Even the 176 billion lire provided by La Centrale in 1981 had failed to set it to rights. That year, imaginative accounting had limited Rizzoli's declared loss to 13 billion lire, although Angelo Rizzoli was to admit publicly that the real loss was five times greater.

Most important of all, neither La Centrale, losing 60 billion lire a year itself thanks to its involvement with Rizzoli, nor Ambrosiano under its new management, was prepared to put up with this state of affairs any longer. During August and September, the various banks of the Ambrosiano group refused to extend 120 billion lire of loans to Rizzoli as they fell due for repayment. The consequences were immediate. On October 7, Rizzoli applied to be placed under
amministrazione controllata,
meaning that a moratorium would be placed upon its debts, while expert outsiders went through the books.

At last, the unintelligible balance sheet of years past, and the mysteries of its ownership were made clear. A small discovery was that, partly through the Banco Andino in Lima, Calvi controlled 100 per cent of the
Corriere
itself. A larger one was that between 1980 and 1982, Rizzoli was estimated to have lost 300 billion lire, including 142 billion lire in 1982 alone. It was a monument worthy of the follies of the past. Angelo Rizzoli withdrew from his company's affairs, philo­sophical but morose, to contemplate the virtual loss of both his business and his fortune. Only Tassan Din attempted to resist, twisting and turning to find an escape from the maze he had helped construct. But in mid-February of 1983 he was forced to resign from the post of managing director.

The worst, however, was yet to come. Rizzoli's special administra­tors and the
Guardia di Finanza
had discovered that payments total­ling 28 billion lire had not been recorded at all in the company's previous balance sheets. Not only was the group close to bankruptcy; fraud was suspected as well. Just after dawn on February 18, Angelo Rizzoli, his brother Alberto, and Tassan Din were arrested at their Milan homes, and taken to prison for questioning by magistrates about the missing money. Alberto Rizzoli, less heavily implicated, was released in mid-March. Angelo Rizzoli and Tassan Din were only freed just before Easter.