Code Words and Safe Phones: Anatomy of a Money Smuggling Plot

By Philip Pullella
Reuters
July 1, 2013

http://in.reuters.com/article/2013/07/01/vatican-bank-document-idINDEE9600EQ20130701

To most people, a book is a book. But to Monsignor Nunizio Scarano, a Vatican official arrested on charges of money smuggling, a "book" was a code word for one million euros in cash, a report by the judge on the case said.

"Encyclopaedia," and "bookmarks" were among other code words that Scarano, who had close connections to the Vatican bank, used in phone conversations with secret service agent Giovanni Zito and broker Giovanni Carenzio, it said.

The three were arrested on Friday for allegedly attempting to smuggle 20 million euros in cash from Switzerland a year ago for Scarano's rich shipping industry friends in their home town of Salerno in southern Italy.

The contours of the plot are detailed in a 48-page judicial document that includes transcripts or summaries of wiretaps, emails, letters and cheques passed on to investigators by police. The document, in which Judge Barbara Callari approves magistrates' requests for the arrests, was obtained by Reuters.

"I think the more books you can bring the better it is," Scarano tells secret agent Zito, who was to have collected the cash from Carenzio in Switzerland and whisk it past customs controls when a private plane returned to Italy.

Scarano: "Can you bring 20-25 books?"

Zito: "Those for sure."

Scarano: "That is already a good goal, you understand, because it will allow us to do many things for ourselves."

All the conversations in the report came from official police transcripts of wiretaps. Scarano was interrogated by magistrates in Rome on Monday and one of his lawyers, Francesco Grimaldi, said he was cooperating with investigators, but declined to give any details of what he said.

The other two defendants had not yet been questioned by magistrates, Grimaldi said, and one of them, secret agent Zito, was in a military prison south of Rome. Neither of their lawyers could be reached.

VATICAN BANK CONNECTION

The document says Scarano controlled vast amounts of money and felt he could act with impunity because of his connections to the Vatican bank.

Scarano found an equally confident partner in Zito, a Carabiniere policeman seconded to the domestic secret services.

He assures Scarano: "The customs people will clear us on the plane for me. They won't do anything to me. They'll see my (official) passport and they'll say 'good day, sir, goodbye, everything is in order'".

The money never left Switzerland because Carenzio, the broker, did not carry out his part of the deal - to withdraw the money from a bank - even though Zito had gone to Locarno in July, 2012 to pick it up.

Scarano, who worked until recently as a senior accountant in the Vatican's financial administration, and who magistrates say owned various properties and had accounts in the Vatican bank, was the pivotal part of the plot and commanded respect.

In one of the conversations heard by police, Zito tells the monsignor, with whom he is on first-name terms: "Nunzio, I am your humble servant ... maybe you have not understood. I don't know what else to do for you. I am your humble servant".

In a conversation between Zito and Carenzio the secret services agent tells the broker to remember to "turn off (your cell phone) and remove the battery before you cross the border (into Switzerland)" when he drives to the country to arrange to withdraw the money.

The cell phones were bought with false identity documents, code named "bookmarks," and the phones were burned afterwards.

The judge's report includes an e-mail Carenzio received from a Swiss bank asking him for "a sworn statement" to "release the bank from anti-money laundering norms".

ORIGINAL AMOUNT WAS DOUBLE

That e-mail, which Carenzio forwarded to Scarano, referred to 41 million euros, the amount magistrates said the three defendants originally planned to move into Italy before settling on 20 million euros.

Even though the money never left Switzerland, Zito demanded his cut and Scarano begrudgingly complied.

The prelate gave Zito two cheques, one for 400,000 euros and another for 200,000 euros from his account in an Italian bank near the Vatican. Zito cashed the first cheque but Scarano blocked the second before Zito could cash it by filing a false report that it had been lost.

In her report, Callari wrote that Scarano felt safe "thanks to his relations with the Vatican bank". She said the monsignor saw the IOR as "the only safe and rapid instrument for financial and banking operations that could evade - if not outright violate - laws against money laundering and tax evasion".

Magistrates have said there was no indication so far that the bank was directly involved in Scarano's attempt to smuggle the money into Italy for his rich friends.

The judge wrote that the investigations showed that Scarano had "very vast economic resources" and that "the prelate did not hesitate to use complicated stratagems and to involve many third parties to carry out financial operations without respecting norms against money laundering".

In an earlier investigation in his home town of Salerno, Scarano was accused of attempting to launder money by taking 560,000 euros in cash out of his Vatican account and giving various amounts to friends in exchange for cheques.

He then deposited the cheques into an Italian bank account to pay off a mortgage on a property, his lawyer, Silverio Sica, told Reuters. Sica said well-off friends had donated money to Scarano in order for him to build a home for the terminally ill.

Scarano wanted to use that money to pay off his mortgage so he could sell a property in Salerno and use the proceeds to build the care home, Sica said, adding that Scarano would "clear everything up". (Reporting By Philip Pullella; editing by Philippa Fletcher)