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The Vatican's Rat Line

The Rat Line was an underground railroad that helped Nazis and their allies escape to Latin America, often with gold and jewelry taken from concentration camp prisoners. Did the Franciscan order and the Vatican assist war criminals? Lawsuit accuses Vatican Bank of role in World War II crimes

Like any new pope, Benedict XVI inherits some problems from his predecessor, among them sexual abuse scandals and a Catholic Church deeply divided between progressives and traditionalists.

Then there are William Dorich's accusations.

Dorich, a Los Angeles book publisher, is the force behind a class-action lawsuit against the Vatican Bank and the Franciscan Order.

Filed in a federal court in California, the suit alleges that immediately after World War II, the bank - the financial arm of the Roman Catholic Church - helped fleeing members of a brutal, pro-Nazi regime in Croatia hide and launder millions of dollars worth of loot, including gold and jewelry taken from concentration camp prisoners.

According to Dorich and his lawyers, those riches were used to help the pro-Nazi henchmen slip out of Europe and escape to South America in 1945 and after.

Dorich, the son of a Serbian immigrant, recalled that dozens of his relatives were massacred by the Ustashe, a Croatian puppet government installed by the Nazis when they conquered the Balkans in the 1940s.

U.S. government documents of the period show that some Ustashe leaders and many of their financial resources made it to Rome during the chaos of the war's final months.

But Dorich and other plaintiffs take the chain one crucial step further: Their suit alleges that the missing link between the money's arrival in Rome and its apparent transfer to South America was the Vatican itself.

"From money stolen from the gold teeth of my relatives, the Vatican enabled Nazis to escape to Argentina," Dorich said.

In 2003, a federal judge dismissed the case, saying U.S. courts lacked jurisdiction. But this spring, that decision was reversed by the 9th U.S. Circuit Court of Appeals.

"Deciding this sort of controversy is exactly what courts do," a panel of the appellate court ruled in a 2-1 decision.

The judges noted that the issues "ultimately boil down to whether the Vatican Bank is wrongfully holding assets."

It could be years before the case goes to trial or is settled. The defendants are considering appealing to the U.S. Supreme Court. And even if the plaintiffs are able to prove the Vatican Bank played a role, that would not - of itself - settle the issue of who at the Vatican was involved or knew what was taking place.

Still, as the Vatican continues to struggle with the role the church and its leading clergy played during the dark days of World War II, the case sheds renewed light on the tangled ethnic and religious landscape of Eastern Europe - and the way in which ancient feuds and hatreds played out during the horrors of a modern war.

The events recalled in the case took place against the background of religious antagonisms that were still sparking violence and bloodshed in recent years, especially when Yugoslavia broke apart in the 1990s.

Serbs are predominantly Orthodox Christians and Croats are predominantly Catholics. Despite their longstanding antipathies, Serbs and Croats were linked together in the creation of Yugoslavia after World War I.

Yugoslavia was dominated by Serbs, so when Yugoslavia was defeated early in World War II, Croatian nationalists saw the Germans not as conquerors but liberators. Ustashe military detachments fought alongside Nazi armies while settling old scores.

During the Ustashe regime, Orthodox Christians were subject to forced conversions to Catholicism. Serbian churches were looted and burned, sometimes with their congregations locked inside. In one such massacre, at a church in the village of Vojnic, 99 people were burned alive on April 17, 1942.

"Seventeen of the victims were my relatives," said Dorich, who visited the site.

According to Jonathan Levy, one of the plaintiffs' attorneys, the Franciscans were named as defendants because the political extremism of the period was fueled by religious hatred.

"Not everybody who collaborated with the Germans committed atrocities," Levy said. "But in the Ustashe movement, religiosity was wrapped up with fascism."

The lawsuit alleges that members of the Franciscan Order were allied with the Ustashe and participated in attacks on Serbs.

"Our official position is that there is nothing to the allegations," said Ronald Mallen, attorney for the Franciscan Order. "The other side ignores the fact that `Brother Devil' was excommunicated."

That was the nickname given to Brother Miroslav Filipovic-Majstorovic by inmates of the notorious Jasenovac concentration camp, where tens of thousands of Serbs, Jews and Gypsies perished. A Franciscan brother before becoming the camp's commandant, Filipovic-Majstorovic was tried and hanged as a war criminal after World War II.

Other Ustashe leaders got away. When Germany's defeat became imminent in late 1944 and 1945, high-ranking members of the Croatian government fled, some passing through Rome en route to escaping from Europe.

The military and political situation in Italy was chaotic. From day to day, it would be hard to say who was in charge. German troops were fleeing northward. Italian partisans led popular uprisings. Arriving Allied forces struggled to establish some sort of order.

Ante Pavelic, the head of the Ustashe government, and 1,500 of his followers made their way through Austria to Italy. They carried with them gold - estimates of its value vary widely from a few hundred thousand dollars to many millions, according to U.S. military reports at the time.

The route of the Ustashe leaders and treasure can roughly be traced through memos written by U.S. Army intelligence officers.

One 1946 memo on the Ustashe treasury said that "approximately 200 million Swiss Francs (about $47 million) were originally held in the Vatican for safe-keeping" before being moved to Spain and Argentina. Like other documents of the time, that one is tantalizingly silent about whether "Vatican" meant the Vatican Bank or the papal city-state, a political enclave within Rome.

A 1947 intelligence report noted: "Many of the more prominent Ustashe war criminals and Quislings are living in Rome illegally, many under false names. ... All this activity seems to stem from the Vatican."

Long classified and buried in military archives, those memos first came to light through the detective work of author John Loftus.

Once a Justice Department lawyer assigned to track wanted war criminals, Loftus had come upon documents suggesting that Catholic clergy had a role in the so-called Rat Line, an underground railroad that helped Nazis and their allies escape to Latin America.

Pavelic went to Argentina, he found. There the ex-strongman was supported by proceeds from the Ustashe treasury, which traveled the same route, according to a 1998 State Department investigation of assets stolen by Germans and their collaborators during World War II.

"From the character of the Ustashe regime and the nature of its wartime activities," that report said, "this sum almost certainly included some quantity of victim gold."

The State Department's investigation was belatedly instigated under congressional pressure, after parallel cases of looting of Holocaust victims' assets became a hot issue in the 1990s.

"The State Department knew about those documents for 50 years and did nothing," said Loftus, who later wrote of his discoveries in the 1992 book "Unholy Trinity."

He attributes the government's long reluctance to investigate the affair to the fact that American hands weren't clean, either. As World War II segued into the Cold War, U.S. and British officials were eager to recruit former Axis agents and willing to overlook their wartime records.

William Gowen, an Army intelligence officer stationed in Rome at the war's end, was the author of some of the newly surfaced memos. He was then barely out of his teens, but because he was fluent in Italian he found himself in the thick of an investigation of the Rat Line. He discovered that a Croatian Catholic monastery in Rome was sheltering a flock of armed men, presumably former Ustashe operatives.

"We found out about the Ustashe treasury and knew it had been brought to Rome," Gowen said in an interview. "But where in Rome?"

Gowen said Ustashe funds eventually were transferred to Swiss banks, and then presumably to Latin America.

"The Swiss banks are famous for their secrecy. Once you have an account there you can send money anywhere, no questions asked," Gowen said. "But you couldn't just drive truckloads of gold, jewelry and other valuables across the Swiss border."

Accordingly, Ustashe loot had to be converted into currency that could not be traced, then transferred to Switzerland. The lawsuit alleges that the Vatican Bank was the perfect agent to perform that money laundering. Should the suit go forward, plaintiffs' attorneys will press the Vatican to open its archives in hopes of finding documents to cement their thesis.

Jeffrey Lena, an attorney for the Vatican Bank, declined to comment.

The Serbs' lawyers hope to mobilize public opinion, noting there has been a pattern to similar suits on behalf of Holocaust victims and World War II slave laborers: After first denying the allegations and resisting the lawsuits, Swiss banks and German industries felt enough pressure to make an out-of-court settlement.

Attorneys for the defendants petitioned the full appellate court to overturn the finding of the three-judge panel, but their request was turned down in June. The Franciscans' attorney said that decision, in turn, will be appealed to the Supreme Court; the Vatican Bank's attorney said a Supreme Court appeal is under consideration.

Both defendants still contend that the dispute doesn't belong in court but should be resolved by diplomacy, since the Vatican is not just a religious body but a sovereign state.

Mallen, the Franciscans' attorney, noted that under the law, his client can argue that the affair belongs to the world of diplomacy without conceding there is anything for diplomats to negotiate - without, that is, admitting any wrongdoing.

Others, though, wonder if that argument might be too subtle for the court of public opinion.

"It's not exactly a plea of innocence, is it?" Loftus said.