Cleric Arrested in $26 Million Plot, Leaving New Blot on Vatican Bank

By Rachel Donadio
New York Times
June 28, 2013

http://www.nytimes.com/2013/06/29/world/europe/cleric-and-2-others-arrested-in-vatican-bank-investigation.html?_r=1&

Msgr. Nunzio Scarano has twice been accused of financial misdeeds.

Claiming to have foiled a caper worthy of Hollywood, or at least Cinecitta, the Italian police on Friday arrested a prelate and two others on corruption charges, saying that the priest plotted last summer to help wealthy friends sneak the money, the equivalent of about $26 million, into Italy while evading financial controls.

Along with the prelate, a financial broker and a military police agent deployed to the Italian Secret Service were arrested after an investigation that developed out of a broader three-year inquiry into the Vatican Bank. The case is the latest black mark on the bank, which under Pope Francis and Pope Benedict XVI has been trying to shake its image as a secretive tax and money laundering haven and bring itself into compliance with European norms so it can use the euro.

Rome prosecutors say the three men hired a private plane last July with the intention of bringing the cash into Italy from Locarno, Switzerland. The money was to be carried by the Secret Service agent, Giovanni Maria Zito, who would not be required to declare it at the border. But the scheme fell through, the prosecutors said, as the three began bickering and, eventually, lost their nerve. Cellphones used by the three in arranging the money transfer were later burned, prosecutors said.

The European Union and the United States have served notice in recent years that they will no longer tolerate the wall of secrecy in tax havens like Switzerland, Luxembourg and the Cayman Islands. As a result, major account holders have been growing increasingly nervous.

Nello Rossi, the Rome prosecutor who led the investigation, said that discussions picked up on wiretaps seemed to indicate that the 20 million euros in Switzerland was tied to the D’Amico family, Salerno shipping magnates.

Even before his arrest on Friday, the prelate, Msgr. Nunzio Scarano, was known to the authorities. An employee of Deutsche Bank before entering the priesthood, and until recently an accountant in a top Vatican financial office that oversees the Catholic Church’s real estate holdings, Monsignor Scarano was under investigation by magistrates in Salerno on accusations that he illegally moved $730,000 in cash from his account in the Vatican Bank to Italian banks, his lawyer said.

Monsignor Scarano’s lawyer, Silverio Sica, said his client would contest the charges. “I am certain he will want to speak to prosecutors to clarify his position,” Mr. Sica said. He added that Monsignor Scarano had had no previous dealings with the police or with judicial investigations.

In a statement on Friday, the Vatican spokesman, the Rev. Federico Lombardi, said that Monsignor Scarano had been suspended from his position at the Vatican “more than a month ago, ever since his superiors were informed that he was under investigation.”

He added that the Holy See “has not yet received any requests from the competent Italian authorities, but confirms its willingness for full collaboration,” and that the Vatican’s internal financial watchdog was following the matter and would take, “if necessary, the appropriate measures in its competency.”

Only priests, members of religious orders, Catholic institutions, employees of the State of Vatican City and diplomats accredited to the Holy See are allowed to keep accounts at the Vatican Bank, known as the Institute for Works of Religion. But rumors have long swirled that accounts were being used as fronts for other interests, including organized crime and Italian politicians.

In the Salerno case, prosecutors accuse Monsignor Scarano of having illegally moved 560,000 euros, equivalent to $730,000, from his account in the Vatican Bank. Mr. Sica said that the monsignor had told prosecutors that the money came from a “generous donor” and was intended to finance a hospice for terminally ill patients in Salerno.

According to Mr. Sica, the prelate needed the sum to pay off a mortgage on a personal apartment. Because of “controversial reasons of a family nature,” Monsignor Scarano had been advised to ask 56 friends to accept 10,000 euros apiece, in exchange for money transfers in the same amount, Mr. Sica said. All 56 are also being investigated by Salerno prosecutors.

The authorities, who have accused Monsignor Scarano of laundering the money, said he had another reason. “He split the money up so it wouldn’t be as noticeable,” said Franco Roberti, the chief prosecutor of Salerno.

The investigation came about after Monsignor Scarano reported a break-in at his apartment late last year, during which the thieves made off with precious paintings and silver artifacts. That led to questions about where the art had come from, Mr. Sica said, and then to the discovery of the moving of the 560,000 euros.

The arrests Friday were the most dramatic events to emerge from the Rome prosecutors’ investigation into the Vatican Bank since 2010, when prosecutors seized $30 million from two external accounts used by the Vatican Bank and placed its then-president and director general under investigation. The money was later ordered unfrozen after the Vatican created an internal financial watchdog in 2010, but it has not yet been released.

The collaboration between the Vatican and investigators in the case was virtually unprecedented, Giacomo Galeazzi, who follows the Vatican for the Turin newspaper La Stampa, said in a telephone interview. In the past, the Vatican had always resisted when asked to assist in judicial matters, he said, citing a famous kidnapping case that involved the daughter of a Vatican employee, Roberto Calvi, as well as the investigation into the assassination attempt on Pope John Paul II.

“This time the collaboration is real, and the Vatican has announced that it would do its own internal investigation,” Mr. Galeazzi said. “That marks a real change of climate.” That change can be attributed in part to Pope Francis, but also to the influence of the American Catholic Church. The American cardinals “were very upfront about the need to clean up the Vatican Bank,” he said. “This pope could not deny the prosecutors any assistance.”