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Vatican Bank Probe Leads to Three Arrests
Prelate, Broker and Member of Italian Secret Service Arrested


Italian financial police arrested three people in "an offshoot" of the investigation into the Institute of Religious Works, the Vatican's bank.

By Gilles Castonguay

MILAN—Italian financial police Friday arrested a senior prelate, a financial broker and a member of Italy’s secret service in an investigation into a failed attempt to bring about €20 million ($26.1 million) in cash into Italy from Switzerland by plane, a spokesman for the financial police said.

According to the spokesman, the investigation was opened by the public prosecutor’s office in Rome while it was pursuing a separate probe into the Vatican’s bank, the Institute of Religious Works, which is under pressure from international regulators to improve its transparency.

The investigation didn’t concern the bank, known by its Italian abbreviation, IOR, the spokesman said.

“It is an offshoot,” he said.

The suspects, including Msgr. Nunzio Scarano, are being investigated for crimes such as fraud and corruption, he added.

Msgr. Scarano’s lawyer, Silverio Sica, confirmed the arrest.

Msgr. Scarano had already suspended himself from his duties with the church after coming under investigation in a separate money-laundering case, Mr. Sica added.

Vatican officials couldn’t immediately be reached for comment.

Pope Benedict XVI named a new president of the bank in February to restore public trust in the way the Vatican handles its finances. Earlier this week, Pope Francis established a high-powered special committee aimed at reforming the bank, marking a new turn in the Vatican’s efforts to come to grips with a secretive institution that has embarrassed the Catholic Church for years.

Prosecutors have been investigating whether the bank violated Italy’s money-laundering laws—an allegation the Vatican denies.

Vatican official arrested in alleged $26M corruption plot

Updated 5:20 a.m. ET

VATICAN CITY A Vatican official already under investigation in a purported money-laundering plot involving the Vatican bank was arrested Friday in a separate operation: Prosecutors allege he tried to bring 20 million euros ($26 million) in cash into Italy from Switzerland aboard an Italian government plane, his lawyer said.

Monsignor Nunzio Scarano, a recently suspended accountant in one of the Vatican's main financial departments, is accused of fraud, corruption and slander stemming from the plot, which never got off the ground, attorney Silverio Sica told The Associated Press.

He said Scarano was a middleman in the operation: Friends had asked him to intervene with a broker, Giovanni Carenzio, to return 20 million euros they had given him to invest. Sica said Scarano persuaded Carenzio to return the money, and an Italian secret service agent, Giovanni Maria Zito, went to Switzerland to bring the cash back aboard an Italian government aircraft. Such a move would presumably prevent any reporting of the money coming into Italy.

The operation failed because Carenzio reneged on the deal, Sica said.

Zito, nevertheless, demanded his 400,000 euro commission. Scarano paid him an initial 200,000 euros by check, which Zito deposited, Sica said. But in a bid to not have the second check deposited at the bank, Scarano filed a report for a missing 200,000 check, even though he knew Zito had it, Sica said.

Carenzio and Zito also were arrested Wednesday along with Scarano, Sica said.

It's not the only troubles facing Scarano.

Prosecutors in the southern city of Salerno have placed him under investigation for alleged money-laundering stemming from his account at the Vatican's bank, the Institute for Religious Works. Just this week, Pope Francis named a commission of inquiry into the bank to get to the bottom of the problems that have plagued it for decades and contributed to damaging the Vatican's reputation in global financial circles.

That investigation concerns transactions Scarano made in 2009 in which he took 560,000 euros ($729,000) in cash out of his personal IOR bank account and carried it out of the Vatican and into Italy to help pay off a mortgage on his Salerno home.

Vatican spokesman Father Federico Lombardi tells CBS News that Scarano was an accountant in the APSA, the Vatican department that manages the Holy See's real estate.

To deposit the money into an Italian bank account -- and to prevent family members from finding out he had such a large chunk of cash -- he asked 56 close friends to accept 10,000 euros apiece in cash in exchange for a check or money transfer in the same amount, Sica said earlier this week. Scarano was then able to deposit the amounts in his Italian account.

The original money came into Scarano's IOR account from donors who gave it to the prelate thinking they were funding a home for the terminally ill in Salerno, Sica said. He said the donors had "enormous" wealth and could offer such donations for his charitable efforts.

He said Scarano had given the names of the donors to prosecutors and insisted the origin of the money was clean, that the transactions didn't constitute money-laundering, and that he only took the money "temporarily" for his personal use.

The home for terminally ill hasn't been built, though the property has been identified, Sica said.

"He declares himself absolutely innocent," Sica said of the Salerno investigation.

The Vatican spokesman, the Rev. Federico Lombardi, told the AP earlier this week that the Vatican is taking the appropriate measures to deal with Scarano's case.

Vatican official arrested on suspicion of corruption, Rome prosecutor says
By Hada Messia and Laura Smith-Spark, CNN
June 28, 2013 -- Updated 1245 GMT (2045 HKT)

Rome (CNN) -- A Vatican official, a financial broker and a former secret service police officer have been arrested on suspicion of corruption, Rome Prosecutor Nello Rossi said Friday.
Monsignor Nunzio Scarano works as a financial analyst in the Vatican office that administers Vatican-owned property.
The archdiocese of Salerno, in southern Italy, issued a statement saying media reports identifying him as a bishop there were incorrect.
Rossi told reporters the three suspects could face corruption charges, with Scarano also facing a possible count of defamation.
He stressed that the investigation is ongoing and that money laundering is not among the possible charges based on what investigators have uncovered so far.
The suspects were identified as a result of a larger investigation into the Vatican bank, also known as the Institute for the Works of Religion, he said, but Friday's arrests are not directly linked to the bank.
The suspects are accused of "attempting to illegally import from Switzerland large amounts of money in cash, to be considered the result of tax evasion" he said.
The alleged attempt took place in July 2012 but it was never carried out in full, he said, as the money never left Switzerland and never got to Rome.
Scarano and the two other suspects were trying at first to bring in €40 million in cash using a private plane, then the reduced sum of €20 million, he said.
Vatican spokesman the Rev. Federico Lombardi said Scarano had been suspended from his work at the Vatican a month ago as soon as his superiors had been informed that he was under investigation.
The Vatican is ready and willing to cooperate with Italian authorities on the investigation, he said.
Papal commission
The arrests come in the same week that Pope Francis established a papal commission tasked with investigating the activities of the Vatican bank.
The commission, made up of four clerics and a Harvard law professor, will report to the pope with its findings "in view of possible reform," Lombardi said, according to Vatican Radio.
Pope Francis urges rich to help the poor
The Vatican has been plagued by internal power struggles over its murky finances for decades.
On Wednesday, a financial watchdog agency established in 2010 issued its first report on money laundering, in a move to improve financial transparency in the city-state.
The document from the Financial Intelligence Authority shows six reports of "suspicious activity" in the past year, up from just one in 2011. It says the Vatican's prosecutors are investigating two of those reports for possible criminal activity. It wouldn't elaborate further.
The Vatican bank is also working to improve transparency, announcing earlier this month that it will launch a website to publish an annual report of its activities.
The bank serves thousands of Catholic charities, religious orders and dioceses around the world, in addition to roughly 500 people living in the tiny city-state. It has some 33,400 accounts and about $8 billion in assets