CHAPTER 9
IL CRACK SINDONA
Considering the importance and all-consuming nature of the work I was doing at the
Agency; considering the missionary zeal, sense of elitism and marvelous camaraderie
among my colleagues there…one can see how easy it would have been for me to drop
out of the world and immerse myself exclusively in the cloak and dagger life. And
some of my colleagues at the Agency did just that. Socially as well as professionally
they cliqued together, forming a sealed fraternity. They ate at their own favorite
restaurants; they partied almost only among themselves; their families drifted to each
other, so their defenses did not always have to be up. In this way they increasingly
separated themselves from the ordinary world and developed a rather skewed view of
that world. Their own dedicated double life became the proper norm, and they looked
down on the life of the rest of the citizenry. And out of this an inbred, distorted, elitist
view of intelligence that held it to be above the normal processes of society, with its
own rationale and justification, beyond the restraints of the Constitution, which
applied to everything and everyone else.
Former CIA Director William Colby, 1978
Who in the US chain of command was responsible for implementing and directing Gladio, Condor,
and the strategy of tension? It's hard to believe that these massive operations were orchestrated by a
cadre of CIA agents, elite White House personnel, and select Congressional officials within a
planning room in Langley, Virginia. The undertakings spanned decades and required an ongoing
funding of fresh billions from the drug trade and other illicit sources. Moreover, mounting evidence
shows that the Agency often acted without any input from the executive or legislative branches of the
government.
After 1948, Congress and the White House remained in the dark about most developments within
the Agency, including Gladio operations. During the 1950's, the Eisenhower administration directed
the CIA to undertake covert activities in Iran (1953), Guatemala (1954), and Indonesia (1957). But
even these missions were conducted without consultation with any Congressional subcommittee on
intelligence.1
Congress was briefed in advance of the 1961 Bay of Pigs invasion and several
clandestine missions in Southeast Asia during the Vietnam War. But no evidence has surfaced that
either Congress or the White House sanctioned the establishment of Castle Bank and Trust, the Bank
of Credit and Commercial International (BCCI), or the Nugan Hand Bank—all of which were solely
owned and controlled by the CIA for money laundering purposes.2
In the wake of Watergate and revelations about the CIA's involvement in the toppling of the
government of Salvador Allende in Chile, Congress passed the Foreign Assistance (Hughes–Ryan)
Act in 1974, which stipulated that the president must be personally informed of all covert operations
and must endorse a “finding” that such operations are necessary for “national security.”3
THE CHURCH COMMITTEE
Despite this legislation, the CIA continued to engage in subversive undertakings, including the
shipment of arms to the rebels in Angola and to the Kurds in northern Iraq. When news of such
undertakings began to surface, the Senate established the Church Committee in 1974 to probe into the
activities of the CIA. In its final report, the committee upheld the following:
The overwhelming number of excesses continuing over a prolonged period of time were due in large measure to the fact that the
system of checks and balances—created in our Constitution to limit abuse of Governmental power—was seldom applied to the
intelligence community. Guidance and regulation from outside the intelligence agencies—where it has been imposed at all—has
been vague. Presidents and other senior Executive officials, particularly the Attorneys General, have virtually abdicated their
Constitutional responsibility to oversee and set standards for intelligence activity. Senior government officials generally gave the
agencies broad, general mandates or pressed for immediate results on pressing problems. In neither case did they provide
guidance to prevent excesses and their broad mandates and pressures themselves often resulted in excessive or improper
intelligence activity.
Congress has often declined to exercise meaningful oversight, and on occasion has passed laws or made statements which
were taken by intelligence agencies as supporting overly-broad investigations.
On the other hand, the record reveals instances when intelligence agencies have concealed improper activities from their
superiors in the Executive branch and from the Congress, or have elected to disclose only the less questionable aspects of their
activities.
There has been, in short, a clear and sustained failure by those responsible to control the intelligence community and to ensure
its accountability. There has been an equally clear and sustained failure by intelligence agencies to fully inform the proper
authorities of their activities and to comply with directives from those authorities.4
BEYOND THE LAW
Ignoring the recommendations of the Church Committee and the stipulations of the Foreign Assistance
Act, President Jimmy Carter, during the Iranian hostage crisis, encouraged the CIA not to inform
Congress of its undertakings in Tehran.5
The Agency needed no encouragement. From the time of its
creation, it had opted not to inform any elected official of the full scale of its undertakings, including
Gladio, let alone the source of its funding.
Michele Sindona
Who, then, was directing the killings, the terror attacks, and the coup d’états? Who was sanctioning
the transactions with the mafias and the drug cartels? Who was creating the secret armies, the
neofascist societies, and the bogus banks? The answer, in part, resides in the strange story of Michele
Sindona's purchase of the Franklin National Bank in 1972.
Laurence Tisch
Sindona purchased the controlling interest in the bank from Laurence Tisch. One of the world's
richest men, Tisch was the acting chairman and chief executive officer of CBS. He also owned a
chain of movie theaters, a cigarette manufacturing plant, a conglomerate of hotels, and a fleet of oil
tankers.6
During World War II, Tisch served under William “Wild Bill” Donovan at the Office of
Strategic Services (O.S.S) and never severed his ties to the intelligence community. He was a
distinguished member of the Council on Foreign Relations (C.F.R), a Washington “think tank.”7
THE THINK TANK
In 1961, the Christian Science Monitor described the C.F.R as “probably one of the most influential,
semi-public organizations in the field of foreign policy.” It noted that the organization is “composed of
1,400 of the most elite names in the world of government, labor, business, finance, communication,
the foundations, and the academies,” and “has staffed almost every key position of every
administration since that of FDR.”8
Fourteen years later, Rear Admiral Chester Ward, a member of
the CFR for sixteen years, reported that a powerful clique within the organization sought “the
surrender of the sovereignty of the national independence of the United States” to create a one world
government.9
Few critics of the C.F.R were more vocal than Senator Barry M. Goldwater, who wrote in his
memoirs: “Their goal is to impose a benign stability on the quarreling family of nations through
merger and consolidation. They see the elimination of national boundaries, the suppression of racial
and ethnic loyalties as the most expeditious avenue to world peace. Their rationale rests exclusively
on materialism.”10 After noting that C.F.R members control both political parties, Goldwater
continued:
When we change presidents, it is understood to mean that the voters are ordering a change in national policy. Since 1945 three
different Republicans have occupied the White House for a period of sixteen years. Four Democrats have held this most powerful
post for seventeen years. With the exception of the first seven years of the Eisenhower administration, there has been no
appreciable change in foreign or domestic policy direction…. When a new President comes on board, there is a great turnover in
personnel but no change in policy. Example: During the Nixon years Henry Kissinger, C.F.R member and Nelson Rockefeller's protege, was in charge of foreign policy. When Jimmy Carter was elected, Kissinger was replaced by Zbigniew Brzezinski, C.F.R
member and David Rockefeller's protege 11
SPOOK HAVEN
In 1972, when Sindona purchased controlling interest in Franklin National, the C.F.R was a haven for
spooks, spies, diplomats, military officials, and White House dignitaries. Among its members were
Allen Dulles, CIA director from 1953 to 1961; William F. Buckley, CIA agent and publisher of
National Review; master CIA operatives Robert R. Bowie, Donald Gregg, and Deane R. Hinton;
Katharine Graham, CIA adviser and the publisher of The Washington Post; Edward Martin, former
O.S.S deputy chief of staff and US ambassador to Argentina from 1964 to 1968; Henry Sturgis Morgan,
O.S.S officer and co-founder of Morgan Stanley; Jacob D. Beam, CIA agent and US ambassador to the
U.S.S.R from 1969 to 1973; General Lyman Lemnitzer, Supreme Allied Commander of NATO from
1963 to 1969; Dean Acheson, US secretary of state from 1949 to 1953; Henry Kissinger, US national
security adviser from 1969 to 1973; and David M. Kennedy, Sindona's business partner, who served
as the US secretary of the Treasury from 1969 to 1971. Other members of the prestigious “club,” at
that time, were Kingman Brewster Jr., president of Yale from 1963 to 1977; Arthur F. Burns,
chairman of the Federal Reserve from 1970 to 1978; Navy Admiral William J. Crowe; Thomas S.
Gates, US secretary of Defense from 1969 to 1961; J. Peter Grace, CEO of W. R. Grace and chairman
of Radio Free Europe; Henry A. Grunwald, managing editor of Time magazine; Irving Kristol,
founder of Encounter, a magazine funded by the CIA; William S. Paley, chairman of CBS from 1946
to 1983; Robert McNamara, US secretary of Defense from 1961 to 1968 and president of the World
Bank from 1968 to 1981; Nelson Rockefeller, governor of New York from 1956 to 1973; and David
Rockefeller, CEO of Chase Manhattan Bank and founder of the Trilateral Commission. The list even
included the names of Lyndon Baines Johnson, the thirty-sixth president of the United States, and
Hubert H. Humphrey, his vice president from 1965 to 1969.12
THE PROBLEM BANK
Laurence Tisch had been widely hailed as one of most astute businessmen in American history.
Throughout his long career, he rarely made a financial blunder. But in 1972, he acquired, through his
Loews Corporation, 21.6 percent of Franklin National, which was based in Franklin Square on Long
Island, New York. The acquisition was quaggy from the get-go. On March 6, 1972, federal bank
examiners found the bank at the brink of insolvency, with its classified and criticized loans at $211.1
million. This figure represented 11.6 percent of Franklin's total loans and 91.2 percent of its capital.
Moreover, the purchase of the stock placed Tisch in a compromising position. Being the major
shareholder and a member of the board of directors of both the holding company and the bank, he had
improper control of Franklin's assets and activities. This “rebuttable presumption” triggered a
Federal Reserve investigation that might have resulted in criminal charges and a stiff prison
sentence.13
As soon as the investigation got underway, Sindona appeared at Franklin on July 20, 1972, with hat
in hand, offering Tisch forty dollars a share, eight dollars above the market value. Sindona was not a
second-class mobster but a world-renowned financier who would not buy a pig in a poke. Yet at the
time of the purchase Franklin was posting a loss of $7.2 million and had been classified as a
“problem bank” by the Office of the Currency.14 Why did Sindona suddenly show up with the offer?
Why would Sindona take such a massive financial risk for an institution on the verge of collapse?
And why was he willing to pay so much more than the bank shares were worth?
CONSPIRACY THEORY
Some writers have speculated that the deal may have been triggered by the animosity between Arthur
Roth, who served as the CEO of Franklin National from 1946 to 1968, and David Rockefeller, the
CEO of Chase Manhattan Bank, and New York governor Nelson Rockefeller. Roth testified that he
ran into trouble with the Rockefeller brothers when he sought to establish a branch office of Franklin
National in New York City. He said:
Starting in 1958, I came into direct personal conflict not only with David but with his brother Nelson; and this went on over several
years. It first came into the open during hearings on the new omnibus banking bill in Albany in February 1958. A good part of the
legislature was present, because we'd sent telegrams to each assemblyman and senator the night before, saying that if he wanted
to learn the answer to the bank controversy, to come to the legislative chamber the following day.15
Arthur T. Roth compiled a huge dossier on the shady dealings of the Rockefeller's and presented it to
reporters when Governor Nelson Rockefeller arrived in California to campaign for the Presidency.
The wrath of the Rockefeller's, according to this scenario, knew no bounds and they set out to concoct
a plan—involving Tisch and Sindona—that would result in the destruction of Franklin National.16
THE SHADOW GAME
Roberto Calvi
Sindona purchased the Long Island bank through Fasco AG, his holding company. He was represented
by the New York law firm of Mudge Rose Guthrie & Alexander, in which President Richard Nixon
and Attorney General John Mitchell had been partners. Sindona informed the Securities and Exchange
Commission that he had raised the $40 million for the deal by selling his shares in La Centrale,
Credito Varesino, Pacchetti, and Zitropo—major industrial and financial concerns—to Roberto
Calvi, chairman of Banco Ambrosiano. Tisch got his money; the Securities and Exchange Commission
seemed satisfied; and the Comptroller of the Currency asked no questions. But nowhere can it be
verified that Sindona received the $40 million from Calvi and Banco Ambrosiano and nowhere can
investigators find proof that Fasco transferred the money from any of its accounts.17
David M. Kennedy
As soon as the purchase was made, David M. Kennedy, Sindona's old partner, took a place on the
board of Fasco AG, and assumed responsibility for voting the shares at the annual board meeting of
Franklin National.18 Kennedy, at that time, had left his position as President Nixon's secretary of the
Treasury to become the US ambassador to NATO. One of the highest ranking federal officials was a
principal player in the new shadow game.
BAGGING THE BROADCASTER
When the deal was announced, Jack Begon, a journalist for ABC in Italy, aired a report stating that
concrete evidence had been established to show that Michele Sindona was involved in the heroin
trade with American and Sicilian Mafia families.19 This report should have raised enough suspicions
for the US regulatory agencies to disallow the transaction. But the purchase was approved without
questions from any regulator.
Several months after the broadcast, Begon was contacted by Angelo Sorino, a Palermo police
detective, who told him that he possessed documents concerning Sindona's ties not only to the Mafia
but also the CIA. Begon arranged to meet Sorino on July 22, 1973. On the day of the meeting, Begon
was kidnapped from his office by two thugs. He appeared two months later in a clinic in Rome.
Exhausted and frightened, Begon told the police that he had been forced to fly to the United States and
had been transported to several cities, including St. Louis, New Orleans, and Las Vegas, where he
was grilled about the source of his story. Begon said that he had pledged never to seek further
information about Sindona or to “follow up the story in any way.” This was a pledge, the journalist
said, that he intended to keep.20
Thinking that Begon's story was fishy, an Italian magistrate charged him for simulating a crime and
ordered a full-scale investigation. The authorities ultimately gathered enough evidence to support
Begon's story. Unfortunately, they were unable to question Angelo Sorino. The detective had been
shot to death, Mafia style, on a street in Palermo in January 1974.21
UNLETTER UNANSWERED
The only questions came from Arthur Roth. In an open letter, dated July 18, 1972, which he sent to the
regulatory agencies and national newspapers, including the New York Times, Roth, who remained a
minority Franklin shareholder, wrote the following to Laurence Tisch:
The newspapers of July 13, 1972, reported Loews Corp. (of which you are its Chief Executive Officer), sale of 1 million shares of
stock of Franklin New York Corporation for $40,000,000.00. The sale was to a company controlled by Michele Sindona of Milan,
Italy.
Your sale of this stock…raises some serious questions for the stockholders and depositors of the Franklin National Bank.
1. Do you know enough about Michele Sindona to unconditionally recommend him as a person who will be good for the
bank?
2. Will there be a full disclosure of his finances, his backers, and detailed biographies?
3. Why would he pay $40.00 a share for stock that is currently selling for $32.00, having run up from $28.00 per share
apparently as a result of rumors of this sale?
4. What are his intentions regarding additional purchases and what role will he play in the operation of the bank?22
Tisch never responded to the letter. Neither did the regulatory agencies. Arthur F. Burns, chairman
of the Federal Reserve, opted to turn a blind eye to the transaction, as did Peter G. Peterson, the
secretary of Commerce, and CIA directors Richard Helms and James Schlesinger. All four men, along
with Tisch and David Kennedy, were prominent members of the Council on Foreign Relations.23
THE TRILATERAL COMMISSION
Augusto Pinochet
If the situation was being manipulated by the C.F.R, the puppeteers most probably were the elite group
within the organization who formed the Trilateral Commission in 1973. David Rockefeller became
the chairman of the new commission, which openly sought to create a new world order controlled by
multinational corporations and banks. During Operation Condor, Rockefeller traveled throughout
South America, telling the newly installed dictators how to run their governments.24 The effects of his
visits south of the border were crystallized in Chile, where in 1976 the military regime under General
Augusto Pinochet ignored international condemnation and the congressional cut-off of American aid
(due to its terrorist activities), thanks to $927 million in loans from Chase Manhattan, Citibank,
Morgan Guaranty Trust, and other US banks. The Trilateral Commission, in effect, had made
American bankers a higher authority than the elected representatives of the American people.25
THE FINANCIAL NIGHTMARE
In keeping with Gladio's game plan, Sindona's purchase of Franklin National created a financial
nightmare. By April 1974, less than two years after the acquisition, the bank was in a tailspin,
announcing a net operating income of two cents a share for the first quarter, compared to the previous
year's sixty-eight cents a share. But even this report had been falsified. The reality was that Franklin
had suffered a $40 million loss and the bleeding still needed to be clamped.26 By August, the Federal
Reserve, knowing that Franklin was on the brink of collapse, granted the ailing institution unlimited
access to federal funds.
One of the most bewildering questions in the sordid saga of Franklin National remains the rationale
behind the Federal Reserve's decision to shell out hundreds of millions to the Sindona bank. Surely,
the Fed officials knew that the bank could not survive. Warning notices about Franklin's terminal
condition had been issued by Morgan Guaranty Trust and a host of other international financial
institutions. But the money kept pouring into Franklin until the Long Island bank finally collapsed on
October 8, 1974. By that time, the Fed had shelled out $2 billion to Franklin without any hope of
recovery. It was the largest bank failure in American history at that time and the first since the Great
Depression.27
THE FALL GUYS
In 1975, Peter Shaddick, the former executive vice-chairman of the bank's international division, pled
guilty to fraud. He was sentenced to three years’ imprisonment and fined twenty thousand dollars.28
Following their 1979 trial in the Federal District Court of New York, Paul Luftig, the bank's former
president and chief administrative officer, and J. Michael Carter, a former senior vice president, were
convicted of falsifying financial records. They ended up serving a year at the Allenwood Federal
Prison Camp in Pennsylvania.29
But no charges were raised against David M. Kennedy, who remained the pivotal player in the
plot. Kennedy's complicity in the crime was not only evidenced by his position as a director of Fasco
AG, but also his voting control over the controlling shares owned by Sindona. The scam probably
could not have been undertaken without his cooperation. Kennedy was well-connected to Arthur F.
Burns, the chairman of the Federal Reserve. Both Kennedy and Burns were key appointees of the
Nixon administration and both were prominent members of the C.F.R and the Trilateral Commission.
Kennedy was also closely tied to James E. Smith, the Comptroller of the Currency, who neglected to
conduct the legally mandated inspections of Franklin after Sindona acquired it and approved
Franklin's overseas expansion even when the bank was in dire straits.30 For many years, Smith had
served as Kennedy's undersecretary of the Treasury.
BANCA PRIVATA COLLAPSE
Throughout 1974, the crack within the Sindona overseas operations continued to widen into a cleft.
Having raided the assets of Banca Privata Finanziaria and Banca Unione, Italy's national union bank,
which he purchased with the Vatican in 1970, Sindona merged the two firms into a new financial
institution called Banca Privata. The two large holes now became a massive crater that even the most
myopic bank examiner in Milan could not ignore. By July 1974, Sindona's new institution displayed a
loss of 200 billion lire.31 Somehow, Sindona managed to convince the directors of Banca di Roma to
sink $200 million into Banca Privata.
The Sicilian obviously possessed a silver tongue because even a second-rate accountant would
have been aware that Sindona's financial empire was about to tumble. The ill-advised loan, no doubt,
was due to his position in the Vatican and his powerful American associates. By September 1974,
less than three months after its creation, Banca Privata went into compulsory liquidation with losses
over $300 million, causing Banca di Roma to teeter on the brink of bankruptcy.32 The loss to Holy
Mother Church, according to Swiss estimates, was in the range of $1 billion.33 But such estimates
failed to take into account the massive amounts of drug money flowing into the Vatican's coffers from
the drug trade. Nor did they realize that the massive disappearance of funds was necessary to further
the strategy of tension and the cause of Gladio.
After the collapse of Banca Privata and Franklin National, the sound of Sindona's falling financial
institutions reverberated throughout Europe. In a matter of weeks, Bankhaus Wolff of Hamburg,
Bankhaus Herstatt of Cologne, and Amincor Bank of Zurich lay in financial ruins.34 Untold billions
fell through a massive crater that became known in the Italian press as IL Crack Sindona.
THE MIDNIGHT CALL
Shortly after the stroke of midnight on October 4, 1974, Licio Gelli made a call to Sindona, who was
staying at a chalet in Switzerland, to inform him that the Italian government was preparing two
warrants for his arrest: one for a false 1971 balance sheet and the other for filing a fraudulent
statement of bankruptcy. “Leave Switzerland before they notify Interpol,” Gelli said. “Get out of there
so that they can't extradite you. If you don't, our enemies will torture you. They may even kill you…. It
is very dangerous, Michele. Things have changed.”35
Things, indeed, had changed. Throughout Europe, prominent bankers had lost a fortune, thanks to
Sindona's financial shenanigans, and were now demanding the arrest of “the pope's banker.” Sindona
heeded Gelli's advice. He packed his bags and headed back to New York, where he could remain
under the protection of the Mafia and the CIA within his luxurious suite in the discreetly elegant Hotel
Pierre on Fifth Avenue.36
THE GOOD LIFE
Life was good in the Big Apple. Sindona's daughter, son-in-law, and two granddaughters moved in
with him. Every night they dined at the Café Pierre on the ground floor of the Hotel Pierre, where
chefs prepared special dishes for the honored guest. Sindona became the financial consultant for
Johnny Gambino's G & G (Gambino and Genovese) Concrete Company.37 He also became a lecturer
in economics at many leading American universities.
At the University of Pennsylvania, Sindona waved the American flag and spoke as a democratic
idealist. He began his address by saying, “The aim, perhaps, an ambitious one, of this brief talk is to
contribute to restoring the faith of the United States in its economic, financial, and monetary sectors,
and to remind it that the free world needs America.”38
At Columbia University, several days after he was sentenced in absentia by a Milan court to three
and a half years in prison for embezzlement, Sindona upheld the importance of high morals and fiscal
accountability by saying, “When payments are made with the intent of evading the law in order to
obtain unfair benefits, a public reaction is clearly called for. Both the corrupted and the corrupter
should be punished.”39
ST. PETER'S DENIAL
Sindona may have been an honored guest at Ivy League institutions and private social clubs in Little
Italy, but the bronze doors to the Holy See were closed to him. As Italian investigators uncovered the
Vatican's ties to Banca Privata, Pope Paul VI became an object of scorn and derision. Stories
appeared in the press claiming the Holy Father had lost up to $1 billion because of his clandestine
deals with Sindona. On the left of the theological spectrum, the Jesuits attacked the pope for his
interference in Italian politics and “the placement of the Church's future in the hands of the devil.”40
On the right, Tridentine conservatives, including French archbishop Marcel Lefebvre, demanded Paul
VI's abdication. The Traditionalist, a Catholic weekly newspaper, after publishing a detailed account
of the Sindona affair in February 1975, called the pope “a traitor to the Church.”41
Archbishop Marcinkus was forced to submit to the indignity of intensive questioning by Italian
officials about his transactions with Sindona on a personal basis and as a representative of the
Vatican. The archbishop performed as expected. In April 1973 he had told US investigators:
“Michele and I are very good friends. We've known each other for many years.”42 Two years later,
when questioned by the Italian magazine L'Espresso, Marcinkus said: “The truth is that I don't know
Sindona. How can I have lost money because of him.”
Sindona was shut off not only from Marcinkus and the Holy Father but also from Roberto Calvi, the
new direttore generale of Banco Ambrosiano in Milan, who refused to receive his telephone calls.43
What's more, Calvi and Marcinkus advanced Sindona's scheme of raiding the assets of the Milan bank
by setting up a string of shell companies as unofficial subsidiaries of the Roman Catholic Church in
Panama and the Bahamas. These companies began to receive massive loans from Banco Ambrosiano
in Milan and Banco Ambrosiano Holding in Luxembourg. Such investments seemed secure since the
Church was the Rock against which “the gates of hell could not prevail.” As an added insult to their
former mentor, Calvi and Marcinkus removed Sindona's name as a director of Cisalpine, the Nassau
financial front, which now became known as Banco Ambrosiano Overseas.44
THE PURPLE FUNK
Pope Paul VI fell into a purple funk. His behavior became erratic. He spoke with his confidants about
the possibility of resigning. Before he would agree to set aside his tiara, the pope said that he would
have to make amends for the financial loss he had caused Holy Mother Church. He wished to retain
the right to name his successor, and he requested the abolition of the four-hundred-year old decree
that prohibited popes from selling their sanctified positions as Vicars of Christ to the highest bidders
among the College of Cardinals.45 This return to the time-honored practice of simony would permit
Paul VI to raise a fortune for the Church—the fortune he had lost thanks to his dealings with Sindona
and the Mafia.
The Holy Father complained of lack of sleep. He wandered through the corridors of the papal
apartments in the Apostolic Palace in the wee small hours of the morning, often complaining to guards
and attendants of an ominous presence within the Holy See. “The smoke of Satan has entered the
Church,” he said. “It is all around the altar.”46
EXTRADITION HEARING
On September 7, 1976, the United States, acting on behalf of the Republic of Italy, initiated an
extradition proceeding against Sindona in the District Court for the Southern District of New York.
Distinguished individuals appeared in court to plead on Sindona's behalf. Carmelo Spagnuolo,
president of the Supreme Court in Rome, swore that the charges against Sindona were part of a
Communist plot to undermine leading industrialists of Italy. He claimed that left-wing extremists
within Italy's judiciary had concocted a plot and that Sindona—“a great protector of the working
class”—would be killed as soon as he arrived on Italian soil.47 Few in the court room were aware
that Spagnuolo was a leading member of P2. It was small wonder, therefore, that the testimony of the
Italian judge was supported by Licio Gelli, who in a signed affidavit to the court, said: “The
Communists’ hatred of Michele Sindona is due to the fact that he is an anti-Communist and that he has
always been favorable to the free enterprise system in a democratic Italy.”48
Although Judge Thomas P. Griesa held Sindona extraditable, the Sicilian don prevailed with an
appeal that claimed his case fell within the ambit of Article VI(1) of the Treaty on Extradition
between the United States of America and Italy, 26 UST 493, TIAS 8052, which bars extradition
“when the person whose surrender is sought is being proceeded against or had been tried and
discharged or punished in the territory of the requested party for the offense for which his extradition
is requested.”49 By the time the appeal was granted, Sindona was facing similar charges of fraudulent
bankruptcy in the United States creating a situation in which extradition, according to his lawyers,
would place him in “double jeopardy.”
THERE WILL BE BLOOD
While Sindona remained free due to this bizarre interpretation of habeas corpus, the Italian
government continued to press for his arrest. This pressure prompted the pope's banker to initiate
action against his adversaries, including Giorgio Ambrosoli, the Italian lawyer who served as the
liquidator of Banca Privata Italiana. In 1979, Ambrosoli began to provide damning evidence about
Sindona's role in the collapse of Franklin Nation to John Kenney, a prosecutor with the US
Department of Justice. The evidence included transcripts that proved Sindona had pilfered funds from
his Italian banks to purchase the shares from Tisch. In addition, Ambrosoli obtained checks and
documents from Giorgio Giuliano, deputy superintendent of the Palermo police department, which
showed that Sindona was laundering heroin profits through the IOR and Amincor, his Swiss bank, for
the Gambino-Inzerillo-Spatola crime syndicate.50 He also had secured information from Lt. Col.
Antonio Varisco, who was investigating P2, concerning Sindona's close relationship with Licio Gelli.
On July 11, 1979, only hours after conferring with Kenney, Ambrosoli was shot and killed in Rome
after parking his car in front of his apartment.51 Two days later, Varisco and his chauffeur were killed
by a hit man wielding a sawed-off shot gun.52 On July 21, Giorgio Giuliano was shot dead while
having a drink at the Lux Bar in Palermo.53 His replacement at the Palermo police department was
Giuseppe Impallomeni, a member of P2.
THE SICILIAN COUP
While Mafia assassins eliminated the problem of his Italian adversaries, Sindona continued to plan a
coup that would mark the culmination of the years of lead: the annexation of Sicily from mainland
Italy. This plan, initially approved by the Nixon administration in 1972, called for an armed invasion
of the island by Gladio units and the installation of a right-wing government. It was drafted in
response to the anti-American policies of Ugo La Malfa, minister of the Italian Treasury, and the
steady rise of support for the Italian Communist Party in the general elections. John McCaffery, the
Hambros representative in Italy and the chief of the European Resistance Movement for Europe
during World War II, teamed up with Sindona and Graham Martin, the US ambassador to Italy, to
become one of the principal planners of the coup.54 The coup failed to take place during the Nixon
years, according to McCaffrey, because of “the lack of security” for the Gladio units and “the
emergence of the Watergate upheaval.”55
Count Edgardo Sogno
But plans for the coup were revived after Aldo Moro, Italy's Prime Minister, announced his intent
to create a new Italian coalition government of Communists, Socialists, and Christian Democrats. The
notion of such a coalition prompted Sindona to meet with Dr. Joseph Miceli Crimi, the chief surgeon
for the Palermo Police Department, a prominent P2 member, and a CIA operative, and Rear Admiral
Max K. Morris, a prominent Naval intelligence official. Admiral Morris advanced the notion of the
coup with Admiral Stansfield Turner, the CIA director, and preliminary plans got underway. An
American aircraft carrier was deployed off the coast of Sicily with a ship full of soldiers ready to
provide military assistance. The ship allegedly was placed under the command of Count Edgardo
Sogno, a World War II resistance hero with a long record of involvement in American-backed coup
attempts.56
THE ADMIRAL'S LETTER
Sometime in June 1979, Michele Sindona, Johnny Gambino, and Rosario Spatola met in a room at the
Conca d'Oro Motel in Staten Island. Sindona disclosed his plan to liberate Sicily from the mainland.
He informed them that Dr. Miceli Crimi had generals in the Italian army drawing up maps of the
military bases that must be taken over. “The US military has authorized me to do this,” he told them.
“They will not participate in the coup, but there will be a fleet off the coast of Sicily. After we have
taken over, they will enter the island to help restore order and protect us from Italy.”57
For proof of US involvement, Sindona produced a letter from Admiral Morris. “See? It is true,” he
told the American mobsters. “We can do this. But I need two hundred more men. More guns. If you
help, I will grant all Mafiosi amnesty for crimes committed before the coup.”58 Rosario Spatola
kissed Sindona's hand, a Sicilian gesture of respect. The plan was ingenious. The Gambino capos
would cooperate. What greater catastrophe could the combined forces of Gladio, the Mafia, and the
Vatican inflict upon Italy for its concessions to communism than the breakaway of one of its most
important provinces as a separate state?
CLOSING TIME
But it was too late for Sindona to realize his dream of an independent Sicily. In August 1976, Carlo
Bordoni, his right-hand man, was arrested in Caracas at the request of the US Justice Department for
his role in the collapse of Franklin National. From his cell, Bordoni granted interviews to Italian
journalists in which he spoke of the machinations of the Sindona syndicate, including the ties to the
Vatican and the CIA.59 In January 1977, Mario Barone, whom Sindona appointed to head Banca
Privata, spoke of the “list of 500” that Sindona kept in a safety deposit box. This list, according to
Barone, contained the names of five hundred politicians, industrialists, and Mafiosi involved in
Operation Gladio and the smuggling of “hot money” out of Italy.
The walls were closing in on Sindona. The federal officials left Bordoni in the filthy cell in
Venezuela three years before extraditing him to the United States in June 1979. By this time, Bordoni
was willing to spill his guts in court. The trial date for Sindona was set for September 10. But St.
Peter's banker was not terribly worried. He believed he would be protected by the US intelligence
officials he had served so long and so well. After all, his only crime was to make the world safe for
democracy by “opening the floodgates of black funds.”60 Few men could have done more. On the
morning of August 2, Sindona walked out of his luxurious suite in the Hotel Pierre and disappeared.
CHAPTER 10
HIGH TIMES,NEW CRIMES
Most well-developed heroin networks very quickly move towards a complementation
of interests between the narcotics traffickers and corrupt elements of the enforcement
agencies responsible for the suppression of the illicit drug trade.
Alfred McCoy, The Politics of Heroin, 2003
Sindona's dream of an independent Sicily was shared by the CIA not only because of its strategic
location for US military bases but also because of the island's pivotal importance to the narcotics
industry. By 1970, the Mafia had established hundreds of laboratories within Sicily for the refinement
of heroin. One was an orange-roofed stucco villa on the Via Messina Marina; another was a decrepit
storefront near Brancaccio.1
The capos no longer needed the services of the Corsicans. They had
established their own connections to the drug lords of Southeast Asia and had obtained the services of
talented French scientists.2
To maintain their monopoly on the trade, the Sicilian mob worked with the
Nixon administration in launching the so-called war on drugs. The war resulted in raids by Interpol
on Corsican laboratories throughout the French Riviera, eradicating the only source of competition.
Business was booming. By 1971, there were more than 500,000 heroin addicts in the United States,
producing a cash flow of $12 billion. On a government survey, 3,054,000 Americans admitted to
using heroin at least once. Down at the morgue, where people don't lie, the numbers told a different
story: 41 percent of the drug-related deaths were now linked to heroin.3
Southeast Asia remained the main source of opium. From Laos alone, over a ton of opium arrived
every month in Saigon on C-47 military transport planes that had been provided by the CIA to Lt.
General Vang Pao of the Royal Lao Army.4
So much opium was flowing into Saigon that 30 percent of
the American servicemen in Vietnam became heroin addicts.5
Some of this same heroin was smuggled
into the United States in body bags containing dead soldiers. When DEA agent Michael Levine
attempted to bust this operation, he was warned off by his superiors, since such action could result in
the exposure of the supply line from Long Tieng.6
Cash from the network continued to be deposited by the mob in parochial banks throughout Italy.
From these financial firms, including Banco Ambrosiano, the money flowed into the IOR (which
continued to collect its 15 percent processing fee) before the funds were transferred to privately held
mob accounts in Switzerland, Liechtenstein, Luxembourg, and the Bahamas. But this system was not
equipped to handle the billions generated from the heroin trade throughout the world. And so a host of
new laundries were established by the CIA.
CASTLE BANK & TRUST
Paul E. Helliwell
One of the first of these operations was Castle Bank & Trust, which was established in the Cayman
Islands by the ubiquitous Paul E. Helliwell in 1962. This bank, according to Penny Lernoux, author of
In Banks We Trust, “formed a bridge between the poppy fields of Thailand and organized crime in the
United States,” while Helliwell retained his dual role as “CIA paymaster [from off-the-record
accounts] and mobster's counselor”7
Helliwell organized an entire Caribbean banking circuit and
numerous Panamanian shell companies. He continued to operate Sea Supply and became Thai consul
in Miami, operating out of the American Bankers Insurance building. Ever industrious, Helliwell also
served as legal counsel to Meyer Lansky's protege Santo Trafficante and as an adviser to Lyndon
Johnson.
The Cayman Islands represented the ideal place for Helliwell's offshore banking company. A
nation of 13,500 residents and 14,000 telex numbers for banks, sometimes no more than tiny offices,
the Cayman's offered banks a degree of secrecy that matched that of Switzerland, Luxembourg, and
Liechtenstein. Within a decade, Castle Bank was joined in the Cayman's by a branch of Nugan Hand
Bank and the World Finance Corporation. All three dealt with the CIA, the Vatican, and mob boss
Santo Trafficante.
THE CIA CASINO
Initially, the funding for the Castle Bank came from the International Diversified Corporation, a CIA controlled
Panamanian holding company that had been set up by CIA operative Wallace Groves. A
convicted felon who had served two years in prison for selling worthless stock, the Agency had
assigned Groves such tasks as organizing coups, funding political parties, and cleaning dirty money.8
Money flowed into the Castle Bank not only from International Diversified but also from a host of
underworld figures, including Moe Dalitz, the racketeer who became known as “Mr. Las Vegas,” and
Morris Kleinman, and Samuel A. Tucker, who operated the gambling syndicate in Ohio and the Desert
Inn in Las Vegas.9
A SINISTER SISTER
Castle Bank & Trust was joined at the hip to Mercantile Bank and Trust, another CIA operation that
was set up in the Bahamas by Helliwell. Castle owned a large block of stock in Mercantile, and vice
versa, and both became principal depositors in each other's operation. In addition, the banks shared
most of the same directors.10 Money flowed back and forth in a bewildering array of transactions that
included International Diversified. Mercantile and Castle interlocked with Underwriters Bank, Ltd.,
another firm that Helliwell created in the Bahamas. The majority shareholder of this firm was the
American insurance conglomerate American International Underwriters Corp. (AIUC), which was
established as part of the insurance empire headed by former OSS agent C. V. Starr, and evolved into
the giant multinational AIG (American International Group). AIUC, according to Peter Dale Scott,
author of The American War Machine, “was an insurance conglomerate with suspected ties to the
CIA in Southeast Asia.”11
In 1976, Mercantile was closed by the Bahamian Government after investors discovered that the
bank's holdings were worthless. This came as a surprise to the shareholders since Price Waterhouse,
the prestigious accounting firm, had certified a few months before the collapse that Mercantile
possessed $25.1 billion in assets. Unfortunately, these assets were alleged “loans” given to
unidentified individuals. The money vanished into the agency's black hole.12
THE BLACK HOLE
In 1977, the IRS launched an investigation into the affairs of the Castle Bank that became known as
Project Haven. Investigators obtained evidence that the source of much of the money deposited in the
bank by underworld figures was the heroin trade in Southeast Asia. Such evidence led to a grand jury
investigation. But after the jury was assembled, the investigation was called off. The CIA had issued
a warning to the US Justice Department that the pursuit of criminal proceedings against the Castle
Bank would endanger “national security.”13 The Washington Post later uncovered an IRS memo
stating that the case against Castle involved “hundreds of millions of dollars.”14 The final figure might
never be known, because of the strict disclosure laws concerning Bahamian bank records.
A DEAD BANKER
On January 27, 1980, two Australian policemen, driving along the Great Western Highway near the
port of Sydney, came upon a 1977 Mercedes Benz parked along the side of the road. Inside the car,
slumped across the front seat, was the body of a burly, middle-aged man. Searching his pockets, the
policemen found the business card of William Colby, former director of the CIA. On the back of the
card was Colby's itinerary for his trip to Hong Kong and Singapore. The dead man's hand was
wrapped around the barrel of a new .30-caliber rifle. Next to the body was a Bible with a meat-pie
wrapper as a book mark. On the wrapper were scrawled the names of Colby and California
Congressman Bob Wilson, then the ranking Republican on the House Armed Services Committee.15
The dead man was identified as Frank Nugan, co-owner of the Nugan Hand Bank and one of the
most prominent lawyers in Australia. His death was ruled a suicide despite the fact that Nugan's
fingerprints were not on the rifle, and only a contortionist could have shot himself in the head from the
position in which he was found in the vehicle.16
When Nugan's partner, Michael Hand, a former Green Beret who had served in Vietnam, learned of
the death, he rushed back to Sydney from a business trip in London and began shredding enough of the
bank's documents to fill a small cottage. The next day, Hand held a meeting of Nugan Hand Bank
directors in which he warned them that they must follow his instructions in destroying all records of
transactions, otherwise they would “finish up with concrete shoes” or find their wives being
delivered to them “in pieces.”17 By June 1980, Nugan Hand Ltd was in liquidation. It owed about $50
million to creditors. Hand fled to the United States, never to be seen or heard from again.18
THE BLACK BANK
The Nugan Hand Bank had been established in 1973 by Nugan and Hand. Shortly after setting up
headquarters in Sydney, the bank blossomed into twenty-two branches. One branch was set up in
Chiang Mai, the heart of Thailand's opium industry, in the same suite as the United States Drug
Enforcement Administration (DEA). The DEA receptionist answered the bank's phone and took
messages when the representatives were out.19 Neil Evans, the former head of the Chiang Mai branch,
told investigators that he had seen millions pass through his office, claiming that the bank operated
solely “for the disbursement of funds, anywhere in the world, on behalf of the CIA, and also for the
taking of money on behalf of the CIA.”20
The money taken from the bank by the CIA was used to purchase weapons from international arms
dealer Edwin Wilson for guerrilla forces in Indonesia, Thailand, Malaysia, Brazil, and the white
Rhodesian government of Ian Smith.21 Wilson was a former CIA operative who was later convicted
of selling arms and explosives to the Libyan government of Muammar Gaddafi.22 Funds were also
shelled out to undermine the liberal government of Prime Minister Gough Whitlam, who had pulled
Australian troops out of Vietnam and condemned the bombing of Hanoi. These actions were
orchestrated by Theodore Shackley, the CIA's deputy director of operations. After Whitlam was
removed from office by John Kerr, Australia's governor-general, in 1975, the black ops money
flowed to Italy and the I.O.R, for support of the Christian Democrats.23
The bank also imported heroin into Australia from the Golden Triangle. This dirty work was done
by Australian police officers in service to the CIA, according to the Commonwealth-New South
Wales Joint Task Force on Drug Trafficking. In 1976, one such officer, Murray Riley, organized five
shipments of heroin into Australia, mostly in false-bottom suitcases. For each shipment the branches
of the Nugan Hand were used to transfer the purchase money from Sydney to Hong Kong. Over one
hundred pounds of heroin was involved in each importation, and much of this was eventually shipped
from Hong Kong to the United States. Riley was also involved in two heroin importations in July and
September 1977.24
THE SPOOK STAFF
Earl Preston Yates
The president of the Nugan Hand Bank was Admiral Earl Preston Yates, who served as the deputy
chief of staff at US Pacific Command during the final stages of the American withdrawal from
Vietnam. General Edwin Fahey Black, the bank's representative in Hawaii, commanded American
troops in Thailand during the Vietnam War, having previously served with the National Security
Council (NSC) and the Office of Strategic Services (OSS). Lieutenant-General Leroy Joseph Manor,
who worked for the bank in the Philippines, had been appointed chief of staff of the Pacific
Command, while General Erle Cocke, a World War II veteran and former brigadier-general of the
Georgia National Guard, worked as a consultant for the branch in Washington.25
The board of directors and administrative staff members of Nugan Hand represented a who's who
of prominent CIA officials. A partial list is as follows:
Dr. Guy Parker—an expert from the RAND Corporation, a CIA think tank, who served as a financial consultant;
Major General Richard Secord—director of the Defense Security Assistance Agency, who worked closely with Ted Shackley in
smuggling heroin money out of Vietnam in large suitcases. The money was stored in a bank account that was accessible only
to Secord, Shackley, and CIA agent Thomas G. Clines;
Walter McDonald—retired CIA deputy director and head of the Annapolis branch;
Dale Holmgreen—former chairman of the CIA's Civil Air Transport and manager of the Taiwan branch;
Theodore Shackley—former CIA deputy director for clandestine operations;
Richard L. Armitage—special consultant to the Pentagon in Thailand who oversaw the transfer of heroin profits from Indonesia to
Shackley's account in Tehran, Iran;
Patry Loomis—former CIA adviser to the Provincial Reconnaissance Unit in Vietnam;
Robert “Red” Jansen—former CIA station chief in Bangkok, who represented Nugan Hand in Thailand.26
THE MAN NOBODY KNEW
William Colby served as legal consul. After organizing the Gladio unit in Scandinavia,27 he was
dispatched by the Agency to Rome, where he worked with the Vatican in thwarting the growth of the
Italian Communist Party.28 His budget for black ops in Italy was $25 million a year. Colby was the
ultimate Vatican insider. He became keenly aware of the not-so-holy ghosts within the Holy See. He
once famously remarked that the global intelligence services maintained by the Vatican left the CIA in
the shade.29
As the commander of the CIA station in Saigon, Colby ran intelligence operations during the
Vietnam War, including Operation Phoenix, a Stalin-like program that resulted in the assassination of
an estimated forty thousand South Vietnamese civilians who were suspected of collaborating with the
Viet Cong. From September 1973 to January 1976, he served as the director of the CIA. He was
removed from this position by President Ford after revelations of domestic spying by the Agency
captured national headlines. Four years later, his business card was found in Frank Nugan's pocket.30
No doubt Colby, who was deeply involved with Gladio, realized the need to establish a new
laundry for drug money in Australia. The worldwide demand for heroin had surpassed the wildest
dreams of Lucky Luciano. New heroin laboratories had sprung up in Burma, Thailand, and Laos to
produce the paste that was shipped on to Hong Kong and Palermo for further refinement. The annual
income from the 40 percent tax, which Shan United Army commander Khun Sa imposed on the ten to
twenty laboratories along the Thai-Burma border in northern Burma, amounted to $200 million a
year.31
A SPOOK'S SPOOK
Throughout his career, Colby remained loyal to the Vatican. Like so many of his fellow spooks, he
was a member of the Sovereign Military Order of Malta (SMOM) and held clandestine meetings with
fellow knight Gelli.32 Colby also had strong ties to the Mafia. After the shutdown of Nugan Hand, he
worked with members of the Giannini crime family to set up Household International in Chicago,
another CIA financial front.33 Household conducted ongoing business with the gangster-infiltrated
First National Bank of Cicero and the Vatican-controlled Continental Bank—both of which are now
defunct.34
A spook's spook, Colby met with a mysterious end. Late one stormy night in May 1996, he stepped
away from a half-eaten supper of clams and white wine at his riverside home in Rock Point,
Maryland, apparently gripped by a sudden desire to go fishing minus his usual life jacket. Despite
continuous sweeps, it took a week for divers to find his body, which remained a few feet from the
empty skiff.35
THE DRUG BUST
By 1978, the Nugan Hand Bank was doing billions in business, but all good things must come to an
end. Within a year, the operation came to a screeching halt, due, in part, to the delayed repercussion
from the fall of Saigon on April 30, 1975. Once the major gateway to the world market for Laotian
heroin laboratories, Saigon now became a dead end for Southeast Asia's drug traffic, thanks to the
anti drug policies of the Viet Cong. Crude opium still crossed the border from Laos to service the
city's declining addict population, but choice No. 4 heroin was no longer available. The syndicates
that had produced the high-grade product moved to markets in Europe and the United States.36
Other factors contributed to the bank's cash-flow problems as well. Between 1978 and 1980 the
Golden Triangle was hit with two severe droughts. The droughts were followed by two seasons of
intense monsoon rains, which reduced the region's opium production to a record low. The usual 600-
ton opium harvests were cut to 160 tons in 1978 and 240 tons in 1979.37 The natural catastrophes
were accompanied by concerted efforts by the Burmese and Thai governments to eradicate poppy
production, necessitated by the fact that opium remained the main source of revenue for the Shan
guerrilla armies. From 1976 to 1979, the Burmese army destroyed four major heroin laboratories
near the Thai border, netting impressive quantities of precursor chemicals.38
A TURNING POINT
A turning point had been reached. Southeast Asia could no longer remain the main source of heroin
revenue for Gladio. New poppy fields had to be planted in countries that possessed the proper
climate and terrain—cool plateaus above five hundred feet. There, the plants would grow rapidly and
propagate easily, and the real work came with the harvesting. The poppy heads had to be scraped as
soon as the petals fell off, causing the plants to ooze sticky sap that was squeezed into banana
leaves.39 Such intensive work required not only a slave labor force but a strong-arm government that
could benefit from the production of narcotics. Before the outbreak of the Vietnam War, Turkey was
an important source of opium in Europe and the United States. But in 1967 the Turkish government
announced its plans to abolish opium production. Within a matter of months, the number of Turkish
provinces producing poppies declined from twenty-one to four. The total ban was imposed in 1972.40
The elite CIA and US State Department officials in charge of Operation Gladio were at their wits’
end. The threat of communism had not been eradicated. The world was still not safe for democracy.
The need for black operations was intensifying not only in Italy and South America but also in the
Middle East. With the setbacks in Southeast Asia, the source of funding for the creation of the New
World Order was in jeopardy.
In August 1978, when it seemed that matters couldn't get any worse, Pope Paul VI suffered a
massive heart attack and died at Castel Gandolfo, and his successor—Albino Luciani, who called
himself John Paul I, issued a call for reform.
Next
A Papal Problem
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