Authors: Rupert Cornwell
Those months of unglamorous drudgery in Milan were some of the most newsworthy in recent Italian history. Aldo Moro, a former Prime Minister and President of the Christian Democrats, was kidnapped and murdered that May by left-wing Red Brigades terrorists. The following month President Leone (who had made Calvi a
Cavaliere del Lavoro
back in 1974) was driven from office by scandal. In the space of three months, there were three different Popes. Paul VI died on August 6, to be succeeded by Albino Luciani, Cardinal Patriarch of Venice, who took the name of John Paul I. "The Smiling Pope" reigned for just 33 days, until his death on September 29. Then, on October 17, at their second conclave in less than eight weeks, the Cardinals of the Catholic Church chose Carol Wojtyla, Archbishop of Cracow, to be the first non-Italian Pope in 450 years.
All were exceptional events. But hardly less exceptional, in its own abstruse way, was the Bank of Italy's report on Banco Ambrosiano. Its language was dull and bureaucratic, and its length, including 26 appendices, ran to over 500 pages. What was exceptional was the quality of its financial detective work—and the conclusions it reached.
The report identified every basic ingredient of the future disaster, as well as providing the groundwork for the charges on which Calvi was to be convicted in July of 1981. Given Ambrosiano's refusal to come clean about its foreign subsidiaries, the inspector's findings could only be couched as heavily underlined suspicions. Suspicions, though, which proved uncannily exact. For that reason the document should be studied in detail.
The overall verdict on Ambrosiano was "Not at all satisfactory". The report then explained why. Ambrosiano had expanded with extraordinary speed in the last few years. True, results were there to show for it, but they had been achieved thanks to frequent infringement of the supervisory department's regulations. The bank had constructed a foreign network which allowed it to move large sums around, free of scrutiny by the Italian currency authorities. Any technical judgement on the soundness of Ambrosiano was impossible without greater detail of the operations in Luxembourg and Nassau, the nature of whose assets remained a mystery. These assets in turn were so substantial that any discrepancy might make a large difference.
Given a central bank's taste for caution and understatement, it was a harsh assessment. Even more damning was the recommendation of the inspectors: "There is a clear need to cut back the network of subsidiaries which Ambrosiano has created abroad. They must also be forced to provide more information and figures about their real assets,
to avoid the risk that a possible liquidity crisis on their part might also affect the Italian banks, with all the unfavourable consequences that might entail."
The circumstances of the collapse four years later could hardly have been set out more clearly.
The report then went on to point a heavy finger at the mechanism of the fraud Calvi was elaborating. It identified the crucial chain of command, from Milan, through the Banca del Gottardo in Lugano, to the key—Cisalpine Overseas in Nassau. Now Cisalpine had borrowed more than $200 million from Banco Ambrosiano in Milan. On the other side of its balance sheet were $183 million of assets, described only as unspecified "financings". But where had they gone? The inspectors recorded other clues. On the board of the Nassau bank sat not only Calvi, but Archbishop Paul Marcinkus, chairman of the IOR, which Carlo Olgiati, Ambrosiano's general manager, had told them was the owner of Suprafin. Now Suprafin had been the mysterious buyer of fifteen per cent of Banco Ambrosiano's shares between 1974 and 1977. These shares had in turn been despatched, on buying orders placed by Cisalpine through Banca del Gottardo, to that clutch of Liechtenstein and Panamanian companies, with names like Cascadilla and Orfeo.
What the inspectors could not
prove
was that these fanciful creatures were the property of either Ambrosiano, or of the IOR. But they certainly had their suspicions. The growth of the mysterious assets in Nassau "might not be unconnected with the massive purchases of Ambrosiano shares"—in other words, that Banco Ambrosiano had lent the money to Cisalpine to buy, in effect, control of itself. At another point, the report remarks that "it cannot be excluded" that the Liechtenstein and Panamanian companies were part of the Ambrosiano group. As for the IOR, the Vatican bank said it had only 1.37 per cent of Banco Ambrosiano. But again, it "could not be excluded" that it owned more, in the person of the Panaman- nian companies which had bought such large blocks of Banco Ambrosiano, with the express blessing of Cisalpine. And on Cisalpine's board, of course, sat Archbishop Marcinkus of the IOR.
Nor, the report illustrates, was Ambrosiano a bank whose shares were innocently spread among tens of thousands of small shareholders. In fact 32 per cent of its capital was in the hands of 22 large shareholders—all of them in one way or another "friendly" to Ambrosiano.* If Calvi and the IOR were behind the offshore companies, then he had succeeded in making Ambrosiano takeover-proof.
But there was more. The inspectors judged Ambrosiano to be undercapitalized. They found breaches of the banking law, and severe organizational shortcoming—principally that Calvi was running Ambrosiano as he pleased. Board meetings did take place once a month, as prescribed by Ambrosiano's statute; but mainly to endorse decisions which Calvi had taken, and often implemented beforehand.
They must have been remarkable occasions, rather like a priest celebrating mass. Calvi would deliver a brief sermon, to which the other directors would reply with a respectful Amen. A twenty-minute monologue by the chairman would typically be followed by a rapid run-through of the major credits extended by the bank in the previous month. Calvi routinely would enquire if there were any questions. Invariably there were none, and proceedings were over. The report condemned the board for its "supine acquiescence", while Ambrosiano's official auditors were described as "superficial and unquestioning".
As both chairman and managing director, Calvi enjoyed unfettered control. On his own he could authorize major loans, allowing the relationship with important borrowers like Rizzoli to be conducted as he wanted. The system was also ideal for Licio Gelli, in that financial operations within the orbit of the P-2 could be carried out without query. Already one of Ambrosiano's biggest borrowers, the inspectors had found out, was the Genghini construction group in Rome, later to collapse in a 450 billion lire scandal. Its founder, Mario Genghini, had made a spectacular career as a property magnate, with links to the politicians. He was also a member of the P-2.
*See Appendix A.
The central bank's conclusion was that Ambrosiano's internal organization was in some respects "patently inadequate" for a bank of its size and ambition. The inspectors suggested that "a first step" might be to withdraw authorizations so far granted, and thus force a restructuring of Calvi's bank, "so that the real destination of every single financial transaction abroad can be followed". The restructuring, of course, never took place.
In October 1978 Padalino discussed the report's findings with Calvi. And although he did not show it, the banker was more than a little alarmed. Yet again he pleaded his good faith in his foreign operations. The trouble was, he maintained, that the accounts of both the Luxembourg and Bahamas affiliates had been drawn up in accordance with local rules, which prevented him from providing more details to the Italian authorities. But the crocodile tears were still wet as Calvi was strengthening his defences.
There were a number of reasons why he decided to reduce the role of Cisalpine Overseas in Nassau. Siegenthaler was probably getting pangs of unease, especially after the creation of four Panamanian shell companies (with himself as chairman of one of them) to hold Ambrosiano shares. Coopers and Lybrand, the Nassau bank's accountants, were worried about the size of its lending to the IOR, and probably to those mysterious little companies sheltering behind the legal ownership of the Vatican bank, including Manic S.A. in Luxembourg, and the United Trading Corporation, set up on its behalf in Panama four years earlier. Graham Garner, of Cooper and Lybrand's office in Nassau, asked Siegenthaler to ensure that the lending did not grow further. He also intimated that changes in accounting standards might force his firm to disclose the relationship between Cisalpine and the IOR.
Above all, however, Calvi realized that Padalino and his inspectors had grasped the function of Cisalpine in his elaborate device for despatching control of his bank abroad. But contingency plans were ready. For on September 29,1977 Ambrosiano Luxembourg had set up in the even remoter haven of Managua, the capital of Nicaragua, a new bank called Ambrosiano Group Banco Comercial. It was capitalized at $20 million, and had the bland-sounding purpose of "conducting international commercial transactions".
During 1978 and 1979, a good part of the unspecified "financings" by Cisalpine was transferred to the books of the new bank in Managua. The arrangement seemed if anything better. Ambrosiano was exempt from tax, apart from a nominal contribution to the Nicaraguan treasury. The new bank was in effect run from Nassau by Cisalpine. Calvi (probably with Gelli's intercession) was on good terms not only with the then dictator Anastasio Somoza, but also with the ever more menacing Sandinista opposition. To the end of his life he retained a Nicaraguan diplomatic passport, and in 1979 Calvi attempted to lobby the Rome Government for an increase in coffee imports from Nicaragua. To the Sandinistas, he would later confide, he had given large sums to buy seed grain on international markets.
Curiously, of the foreign banks in Managua at the time of the left-wing takeover in early 1979, Ambrosiano's subsidiary was the only one not to be nationalized by the new revolutionary regime. By the end of that year, Calvi was to transfer his most delicate business again, from Managua to Lima, Peru. But in those anxious months, while the Bank of Italy's inspectors were swarming over his bank in Milan, Nicaragua looked an ideally safe hideaway. However, even these considerations were quickly to become secondary. The Bank of Italy report expressed the reservations we have seen. But it also identified what appeared to be two clear breaches of currency regulations. Since 1976, these had been criminal offences.
Sarcinelli and Padalino must have suspected they would make some interesting discoveries at Ambrosiano. But the cupboard was even fuller of skeletons than they could have expected. For failure to report those secret share dealings involving La Centrale, Credito Varesino and Toro between 1973 and 1976 looked to be a
prima facie
violation of currency regulations by Calvi, in his capacity as chairman of La Centrale.
The special internal procedures of the Bank of Italy then took over. Although the supervisory department was in the business of banking, not of police work, it was bound from time to time to come across breaches of the law, particularly after the 1976 currency legislation, and its retroactive penal provisions. But the central bank had equally to avoid provoking public panic among savers and depositors. For that reason, cases which looked as if they might lead to criminal charges were first examined by an internal committee of experts and lawyers, whose conclusions would be automatically endorsed by the Governor.
This committee met in late 1978. It decided that there was indeed a
prima facie
case against Calvi. It was also agreed that, given the location of Ambrosiano's headquarters, the case should be entrusted to Milan, rather than Rome, where the risk of political interference was in any case greater. The task of submitting the report to the Milan judiciary fell to Padalino, as the senior inspector directly involved.
By coincidence, the day Padalino did so, Calvi came down from Milan to talk over the report with Sarcinelli. The Ambrosiano chairman was as evasive as ever—as with so many others at different times who dealt with Calvi, Sarcinelli could not understand what he was getting at. But Sarcinelli made
himself
perfectly clear: Ambrosiano should provide the missing information on its foreign subsidiaries, and the Bank of Italy would press him until he did. Calvi astonishingly protested that he already
was
supplying the facts, adding rather mysteriously that he travelled a great deal, but was always reachable through his secretary in Milan.
The two were not to meet again. Sarcinelli showed Calvi out of his office with the hardening suspicion that something was very badly wrong at'Ambrosiano; and Calvi must have been more alarmed than ever at the central bank's determination to establish the truth. A day or so later, those apprehensions grew greater. Sarcinelli had not mentioned that the Milan magistrates were now about to look into those murky share dealings. But the following issue of
L'Espresso
weekly magazine reported that the matter had indeed been passed over to the judiciary. Although the leak almost certainly originated in Milan, Calvi sent a telex to Baffi to protest bitterly at this apparent breach of confidence.
In fact Calvi need not have worried unduly. For within a few months Sarcinelli, not he, would be in prison, while the magistrate to whom the case first fell, would be dead.