* Magistrates' says prelate used web of contacts illegally
* Scarano lawyer says document has no proof, only suspicions
* Scarano is target of two Italian investigations
* IOR in spotlight over global rules against tax evasion
* Pope has made cleaning up the Vatican a goal of his papacy
By Philip Pullella and Massimiliano Di Giorgio
ROME, July 21 A senior Catholic prelate arrested
last month used his influence at the Vatican to provide private,
illegal financial services for rich friends, Italian
investigators say in a judicial document.
They say Monsignor Nunzio Scarano, who is the target of two
Italian investigations and had accounts at the Vatican bank,
engaged in "totally private, illegal activity which was also
aimed at serving outsiders".
Scarano was arrested in Rome on June 28 along with a
self-styled financier and a member of Italy's secret services
and formally accused of taking part in a plot to smuggle 20
million euros ($26.28 million) into Italy from Switzerland.
Reuters has obtained the 28-page document in which
magistrates in Rome had asked a judge to order his arrest.
Scarano's lawyer, Silverio Sica, denied the accusations it
contains. "They don't have any evidence to prove all of this,"
he said on Sunday. "These are just suspicions".
Pope Francis, who has made cleaning up the Vatican a goal of
his papacy, has set up a commission of inquiry to reform its
bank. On Friday he announced he was forming another commission
of lay experts to help him overhaul the Holy See's economic and
Account holders at the Vatican bank, officially known as the
Institute for Works of Religion (IOR) and which has been plagued
by scandal for decades, are obliged not to let them be used,
even indirectly, by third parties.
The IOR has long been in the spotlight for failing to meet
international standards intended to combat tax evasion and the
disguising of illegal sources of income.
Its stated purpose is to provide financial services for
religious orders of priests and nuns, Holy See officials and
Scarano, a former banker who became a priest at the
relatively late age of 35, worked as a senior accountant in the
Vatican's central financial administration office, the
Administration of the Patrimony of the Holy See, or APSA.
In the document, the magistrates say Scarano, who worked at
APSA for 22 years, offered his friends "a series of services ...
in the area of financial transactions, in particular when there
was a need or a request for them to remain secret".
They say the prelate carried out "a series of illegal
activities by unscrupulously using his network of contacts in
different areas, including businessmen, clergy who looked the
other way, secret service agents and Vatican bank
The IOR's director and deputy director, who are under
investigation by Italian magistrates, resigned on July 1, three
days after Scarano's arrest. On July 12, the Vatican froze
Scarano's accounts in the IOR and said its own investigation
could extend to other persons.
In an interrogation after his arrest, a transcript of which
was obtained from legal sources and whose contents were
confirmed by Sica, Scarano says he was to have received 1.5
million euros as a loan to pay off a business debt connected to
one of the real estate companies he had a stake in.
Scarano has had two requests to move from jail into house
arrest turned down. He is also under a separate money laundering
investigation by magistrates in his hometown of Salerno, where
he is accused of withdrawing 560,000 euros in cash from his
account at IOR and giving small amounts to friends in exchange
for 61 cheques drawn on Italian banks, according to court
He later cashed the cheques, which ranged from 2,000 euros
to 20,000 euros, in what magistrates say was an attempt to mask
the origin of the money. His lawyers say that money came from
donations to build a home for the elderly.
Magistrates say Scarano used that money to pay off a
mortgage on his luxury apartment, filled with expensive works of
art. Scarano's lawyers say he intended to sell the apartment at
a profit in order to help build a home for the terminally ill.
In the document, magistrates say Scarano received 20,000
euros each month from Cesare D'Amico, a member of a wealthy
shipping family in Salerno. The payments, which came from
foreign bank accounts, were marked "for works of charity" but
the magistrates say Scarano used them "for totally personal
It says that in a tapped telephone conversation Scarano says
that he and D'Amico had a joint account at the IOR. But in the
interrogation after his arrest, Scarano said he had lied during
that telephone conversation and that there was no joint account.
D'Amico's lawyer, Vincenzo Crupi, also denied that his
client had a joint account with Scarano at the IOR.
Crupi told Reuters the D'Amico family was "very religious"
and had made many donations to Scarano over the years,
particularly to a fund to help the elderly in Salerno. He denied
that the 20 million euros that Scarano is accused of plotting to
smuggle into Italy belonged to the D'Amico family.
($1 = 0.7611 euros)
(editing by David Stamp)