* Scarano had vast amounts of money at disposal -judicial document
* Prelate had close connections to Vatican bank
* Poses first big headache for Pope Francis
* Francis has promised transparency, set up bank inquiry
By Philip Pullella
VATICAN CITY, June 30 A senior Catholic cleric arrested in a plot to smuggle tens of millions of dollars into Italy controlled vast amounts of money and felt he could act with impunity because of his connections to the Vatican bank, according to a judge's investigative document.
In the latest blow to the Vatican's image, Monsignor Nunzio Scarano, 61, was arrested on Friday along with an Italian secret service agent and a financial broker.
The three had plotted to smuggle 20 million euros ($26 million) into Italy from Switzerland for a members of a family of ship-owners in southern Italy, an investigating magistrate told reporters on Friday.
The magistrate said the pivotal protagonist was Scarano, who worked until recently as a senior accountant in the Vatican's financial administration, and that he owned numerous pieces of property and had accounts in the Vatican bank.
A 48-page document in which Judge Barbara Callari approves magistrates' requests for the arrests, and which was obtained by Reuters, contains transcripts or summaries of wiretaps, emails, letters, cheques and other results of police investigations.
It describes the development of a plot that reads like a spy novel, involving a private plane that was to collect the cash in Switzerland, burned cell phones, a shady financier and an allegedly corrupt secret service agent who promised to slip the money past customs.
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".
EMBARRASSMENT FOR POPE
The case came as an embarrassment to Pope Francis who, only two days earlier, set up a commission of inquiry into the scandal-plagued Vatican bank, formally known as the Institute for Works of Religion (IOR).
Scarano was for years a senior accountant APSA, the Administration of the Patrimony of the Apostolic See. Through APSA, he had ready access to the IOR and magistrates believe he had at least two personal accounts there.
The Vatican, which has pledged to cooperate with the magistrates, said Scarano was suspended several weeks ago when magistrates in Salerno put him under a separate investigation.
The arrests of Scarano, secret service agent Giovanni Zito and broker Giovanni Carenzio stemmed from a previous money laundering investigation by Rome magistrates into the IOR.
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.
But Italian newspapers speculated that Scarano may have been planning to use the bank to launder at least some of the Swiss money for his friends later.
The judge's report said the cash was in Swiss bank UBS. But it said it never left because Carenzio, the broker, did not carry out his part of the deal even though Zito, the secret service agent, had gone to Locarno in July, 2012 to pick it up.
In her report, Callari 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 the Salerno investigation, Scarano has been accused of attempting to launder money by taking 560,000 euros ($727,900) 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". ($1 = 0.7693 euros) (Editing by Mark Heinrich)