New hope is being held out for the elderly survivors of the Croatian Holocaust. In 1999 they launched their claim for compensation against the Franciscans and the Vatican Bank, but ten years later their claims were rejected because the American court said it lacked jurisdiction over the Vatican Bank. However, in 2011 the Vatican was obliged to create a monitoring body to prevent money laundering and this may provide a way to reopen the case.
The “Independent State of Croatia” was actually a puppet state set up in 1941 by Mussolini and Hitler. On its coat-of-arms the “U” stands for the name of the Croatian fascists, Ustasha (ustaše, “revolutionaries”). However, those living under its terror read it as ubica which means “murderers”. Wartime Croatia has been called “one great slaughterhouse”.
The background: Racial mythology invented to sanction religious persecution
To head the new government of their Croatian puppet state the Fascist leaders, Hitler and Mussolini, installed Ante (Anthony) Pavelíc. The two major groups in Pavelíc's new state were the Serbs and the Croats. Both of these are ethnic South Slavs and they even share the Serbo-Croatian language. However, Pavelic was not one to sacrifice his racist ideology to ethnic or linguistic facts. Shortly before he came to power he published
The Croatian Holocaust
This is the “hidden Holocaust” which, though well-known to scholars, is rarely, mentioned elsewhere, presumably because of the active involvement of the Catholic Church, which used the terror to win an estimated 200,000 to 300,000 new converts.  The current lawsuit is on behalf of three groups of victims in the Croatian Holocaust: the Serbs, who were obliged to wear blue armbands marked with a “P” for Orthodox (Pravoslavac), the Jews, who had to wear the Star of David, and the Roma (whose extermination by the Nazis is called the Porajmos). The suit no longer involves the means by which the funds were obtained, only their disposal. However, no serious historian disputes the claimants’ account of the origin of the “victim gold”:
Serbians, Jews, and the Roma were slaughtered in their villages after unspeakable tortures or burned alive in their churches. Those that were not murdered were expelled to Serbia proper after being despoiled of all their property or forcibly converted to the Roman Catholic faith by Franciscan and Roman Catholic clergy. Many were used as slave labourers. The remaining people were taken to concentration camps where the majority perished. 
The Führer (Poglavnik) Pavelic in the military boots beloved of fascist leaders is surrounded by Franciscans. “Upon the establishment of the Ustasha Regime [led by Pavelic] individual Franciscan priests deserted their vocations and incited attacks on Serb and Roma settlements, tortured, killed and expropriated their victims in dozens of villages in Croatia and Bosnia. [...] OFM [the Franciscans] did not actively seek out and punish most priests associated with the Ustasha during the Second World War despite knowledge of their activities.”  And the Vatican did nothing.
Elderly survivors sue the Vatican
This is the claim of William Dorich, an elderly survivor of the little-known “Croatian Holocaust”. Together with other survivors, Dorich launched a suit against the Vatican Bank and the Franciscan order to try to prove this. His claims concern the funding of the “ratlines”, the network of escape routes for Nazis and other fascists fleeing Europe at the end of World War II. Although the Vatican hasn't yet opened up its archives past 1939, documents from the Red Cross show that through the Vatican Refugee Commission, war criminals were knowingly provided with false identities.  His suit claims that the Vatican Bank and the Franciscans helped members of a brutal, pro-Nazi regime in Croatia hide and launder millions of dollars worth of loot, including gold and jewellery taken from concentration camp prisoners and the proceeds of slave labour.
For more on the Vatican ratlines that saved Nazis (and their gold) see the following:
“Lawsuit accuses Vatican Bank of role in World War II crimes” Chicago Tribune, 8 July 2005
“Tied up in the Rat Lines” Haaretz, 15 January 2006
“The Pope, Eichmann and the Nazi ‘Ratlines’” Telegraph, 17 March 2010
“Red Cross and Vatican helped thousands of Nazis to escape” Guardian, 25 May 2011
“Nazis on the Run: How Hitler’s Henchmen Fled Justice” [expert review] New Statesman, 22 June 2011
“Nazis on the Run by Gerald Steinacher – review” Guardian, 24 June 2011
These Holocaust survivors charge that all or a portion of the treasury of Croatia’s government, the Ustasha,
Human rights claims disallowed: “We are not a war crimes tribunal”
The Vatican Bank and the Franciscans have sought to have the suit dismissed on multiple grounds.  This has prolonged it precisely at a time when more and more of the aged claimants are dying off. It was originally brought before a California court in November 1999, but in 2003 lawyers for the Vatican Bank and Franciscan successfully argued that the case was outside the jurisdiction of a US court because it involved issues of foreign policy. However, in 2005 an Appeal Court overturned the earlier judgement and allowed some of the claims, those for restitution, to proceed. The Holocaust survivors could continue to pursue restitution of lost and looted property, what is known as “victim gold”. At the same time, the court also argued that “We are not a war crimes tribunal”.  Hence it disallowed the political, human rights, and war-related claims against the Vatican Bank and the Franciscans. 
Vatican Bank claims disallowed: it has “sovereign immunity”
The Vatican Bank and the Franciscans then challenged this ruling and, at the end of 2009, succeeded in getting the case further whittled down. The appeal court upheld the lower court ruling from 2003 that Vatican bank was immune from such a lawsuit under the 1976 Foreign Sovereign Immunities Act. This generally protects foreign countries and their state-owned bodies from being sued in U.S. courts.  Thus the US court didn't have to rule on the allegations themselves. 
This double exclusion saves the Vatican from the airing in court of some potentially very damaging evidence. Disallowing the human rights part of the original claim removes from consideration what Robert Lee Wolff, professor of History at Harvard calls
a historic fact that certain members of the Croat Catholic hierarchy […] endorsed the butchery, and some members of the Franciscan order took an active part in the forced conversions of the Serbs and also in the massacres. 
Similarly, disallowing the claim of money laundering against the Vatican Bank keeps the spotlight off an institution whose dealings are, as the appeals court delicately put it, “murky”. 
The secretive Vatican Bank operates from this massive round tower adjoining the papal apartments. Built by the Renaissance pope Nicholas V who crushed an attempt to depose him and make Rome a republic, its walls are up to nine metres thick.
Tracking the stolen gold
The Vatican Bank, officially known as the Institute for Religious Works, has an impenetrable organisation, with three separate boards of directors. It also boasts another curious feature: it is said to be “never audited” hence, funds deposited there may simply vanish without a trace.  Furthermore, the Vatican Bank denies that it has any records from the World War period, and even maintains that it adopts the remarkable practice of destroying all of its records every ten years.  Nonetheless, according to the claimants, other records do exist in German and American archives, and these indicate that what is being claimed for Croatia in fact happened in Germany. There the records show Nazi transfers of funds from the Reichsbank to the Vatican Bank and further transfers of funds from the Vatican Bank to Nazi-controlled banks in Switzerland.  The claimants maintain that this shows how the Vatican Bank acted as an intermediary in order to help spirit Nazi gold from Germany to the safe haven of secret Swiss bank accounts, where it would then be available to fund the ratlines, without leaving any trace.
The Holocaust survivors want to prove that the Vatican Bank laundered the proceeds of the Ustasha genocide in Croatia in a similar manner and have based their claim on an extensive report published by the US in 1997.  The Vatican has rejected this report, which implicates the Franciscans, and repeatedly denied the charges arising from it. There is only one known witness to the role of the Order of Friars Minor, as they are officially called: former US Army Counterintelligence Special Agent William Gowen. According to his deposition, Vatican official Fr. Krunoslav Draganovic admitted to Gowen that he received up to ten truckloads of loot in 1946 at the Franciscan controlled Croatian Confraternity of San Girolamo in Rome. Gowen also testified that the leader of the treasure convoy, Ustasha Colonel Ivan Babic, boasted to Gowen of using British uniforms and trucks to move the gold from Northern Italy to Rome. As for the Ustasha Treasury’s ultimate destination, Gowen concurred that it could have gone nowhere but the Vatican Bank. 
The Vatican Bank and the Franciscans have demanded that Gowen's testimony not be published, but a copy was obtained by the Israeli newspaper Haaretz which posted an online article in January 2006. It uses the evidence of this former American counterintelligence agent to accuse Montini, the future Pope Paul VI, of helping to launder money to pay for the ratlines. According to the Gowen, a top Vatican official, Monsignor Draganovic, admitted being the mastermind behind the smuggling and deposit of the Ustasha Treasury at the Vatican bank. Draganovic, who was charged with overseeing Croatian affairs in Rome, reported directly to Montini. 
New attempt to reach the Vatican Bank
In 2009 the Bank of Italy to began to investigate the Vatican Bank for violating banking rules .  This has given the Croatian Holocaust survivors hope that the Vatican Bank is no longer treated as being above the law.  The same year the Vatican, in order to be allowed to retain the euro, was obliged to conclude a new and tougher agreement with the EU which contains specific provisions to prevent money laundering.  This involved setting up a regulatory body for the Vatican Bank, headed by the astute Cardinal Attilio Nicora the author of Italy’s favourable “church tax” regulations.  At the beginning of 2011 the Vatican’s new Financial Information Authority (AIF) was supposed to start exercising oversight. Now, finally the Holocaust victims should have a body to whom they can appeal to address their claims. However, by the end of November that year the AIF had not even replied to their lawyer’s request for an investigation and inquiry. He has now asked the European Commission to intervene.
The best single online source, continually updated, is “Vatican Bank Claims”, the website of the lawyers representing the victims of the Croatian Holocaust. http://www.vaticanbankclaims.com
A recent scholarly book on the Vatican ratlines is Gerald Steinacher's “Nazis on the Run: How Hitler's Henchmen Fled Justice” (2011). See second box for reviews of this.
[“murderers”] Jasenovac, Illustration # 4. http://www.jasenovac-info.com/cd/biblioteka/vecni_pomen/jasenovac_en.html [“one great slaughterhouse”] Misha Glenny, Balkans: Nationalism, War, and the Great Powers, 1804-1999. New York: Penguin, 1999, p. 486. http://dissertations.bc.edu/cgi/viewcontent.cgi?article=1175&context=ashonors
1. Richard West, Tito and the Rise and fall of Yugoslavia, (Sinclair-Stevenson, 1994), p. 78.
2. Gail Harmon, War in the Former Yugoslavia: Ethnic Conflict or Power Politics? Dissertation, Boston College, 2007, p. 100. http://dissertations.bc.edu/cgi/viewcontent.cgi?article=1175&context=ashonors
3. US District Court, Northern District Of California, San Francisco, filed 21 January 2000, Alperin v. Vatican Bank, § 31. http://www.skolnicksreport.com/suit.html
4. XIV. Facts pertaining to the Ustasha regime’s relationship with OFM [Order of Franciscans Minor], p. 44, Plaintiffs’ sixth amended class action complaint, C99-4941 MMC (EDL), filed 14 April 2009. http://vaticanbankclaims.com/six.pdf The complete passage can serve as a summary of well-attested historical evidence:
Upon the establishment of the Ustasha Regime individual Franciscan priests deserted their vocations and incited attacks on Serb and Roma settlements, tortured, killed and expropriated their victims in dozens of villages in Croatia and Bosnia. In one typical example, the Franciscan Priest Shimich exhorted Croats to commit genocide:
5.. Ron Grossman, “Lawsuit accuses Vatican Bank of role in World War II crimes”, Chicago Tribune, 8 July 2005. http://www.vaticanbankclaims.com/tribune.htm
6. Dalya Alberge, Red Cross and Vatican helped thousands of Nazis to escape, Guardian, 25 May 2011. http://www.guardian.co.uk/world/2011/may/25/nazis-escaped-on-red-cross-documents
7. “Court clears way for suit against the Vatican Bank for Nazi gold”, Silicon Valley / San Jose Business Journal, 18 April 2005. http://www.bizjournals.com/sanjose/stories/2005/04/18/daily9.html
8. “Nazi gold-Vatican Bank ruling [US Ninth Circuit Court of Appeals], Jurist [University of Pittburgh School of Law], 18 April 2005. http://jurist.law.pitt.edu/gazette/2005/04/nazi-gold-vatican-bank-ruling-9th.php
9. US Court of Appeals, Ninth Circuit, Opinion No. 03-15208, D.C. No. CV-99-04941-MMC, Alperin v. Vatican Bank. Argued and Submitted October 7, 2004—San Francisco, California. Filed April 18, 2005; p. 46. http://www.ca9.uscourts.gov/ca9/newopinions.nsf/0BFF2CFAE79835FD88256FE7005BEA8C/$file/0315208.pdf?openelement
10. Ibid., p. 8.
11. Michael L. Morkin, Ethan A. Berghoff, and Richard S. Pike, "Doing Business with Foreign Sovereign Entities", Business Law Today,Volume 17, Number 2, November/December 2007. http://www.abanet.org/buslaw/blt/2007-11-12/pike.shtml
In the United States, a "foreign state" for the purposes of the Foreign Sovereign Immunities Act (FSIA) includes all "political subdivisions" as well as "agencies and instrumentalities of the state." The term "political subdivisions" includes all governmental units beneath the central government, including local governments. "Agencies and instrumentalities" of a foreign state, on the other hand, include corporations, associations, or other entities, a majority of whose shares or other ownership interests are owned by the state, even when organized for profit.
12. Nicole Winfield, “US appeals court nixes Vatican Bank Holocaust suit”, Associated Press, 30 December 2009. http://abcnews.go.com/International/wireStory?id=9444865
13. “What was fascism?: Reply by Istvan Deak” [Professor of History, Columbia University], New York Review of Books, Volume 30, Number 9, 2 June 1983. http://www.nybooks.com/articles/6208
14. “Court clears way for suit against the Vatican Bank for Nazi gold”, op.cit. http://www.bizjournals.com/sanjose/stories/2005/04/18/daily9.html
15. John Loftus, former US Department of Justice prosecutor with the Nazi-hunting OSI unit, quoted by Jonathan Levy, “The Vatican Bank”, ed. Russ Kick, Everything You Know Is Wrong: The Disinformation Guide to Secrets and Lies, 2002, p. 19. http://books.google.com/books?id=T75G7hLlk80C&pg=PA19&lpg=PA19&dq=loftus+%22osi+unit%22&source=web&ots=ABfGVLzusl&sig=SeGIC9RubNBDZGHwzRXVsUEh96U#PPA20,M1
16. "Declaration of Avvocato (lawyer) Franzo Grande Stevens in support of defendant IOR's (Institute for Religious Works', i.e., Vatican Bank's) motion to dismiss plaintiff's third amended complaint", 30 October 2000, Turin, Case No. C-99-4941 MMC, United States District Court, Northern District of California, § 21, "It is the custom and practice of the IOR not to retain records after ten years". http://www.vaticanbankclaims.com/vatpr.html
17. Levy, op. cit.
18. U.S. and Allied Efforts To Recover and Restore Gold and Other Assets Stolen or Hidden by Germany During World War II, May 1997. http://www.ess.uwe.ac.uk/documents/asetindx.htm
19. Vatican Bank Lawsuit Plaintiffs, “Current Update:Vatican Bank Lawsuit Progressing”, Press release, 23 February 2006. http://www.vaticanbankclaims.com/update.htm
20. Yossi Melman, “Tied up in the Rat Lines”, Haaretz, 17 January 2006. http://www.haaretz.com/hasen/spages/670245.html
21. “Vatican Bank probed for money laundering”, ANSA, 25 November 2009. http://www.ansa.it/web/notizie/rubriche/english/2009/11/25/visualizza_new.html_1621155260.html
22. Levy, “$30 Million Vatican Bank Scandal Helps Holocaust Survivors”, All Voices, 23 September 2010. http://www.allvoices.com/contributed-news/6823238-30-million-vatican-bank-scandal-helps-holocaust-survivors
By contrast, its predecessor seems toothless, reading like a gentleman's agreement: "Monetary agreement between the Italian Republic, on behalf of the European Community, and the Vatican City State and, on its behalf, the Holy See", (2001/C 299/01), 29 December 2000, pp. 245-48. http://www.edis.sk/ekes/KC6505868ENC_002.pdf
24. The Vatican was obliged to place itself, theoretically, at least, under the jurisdiction of the European Court of Justice:...
Election of jurisdiction: The present Monetary Agreements have not given the Community any leverage in the event that the countries having signed the Monetary Agreements do not fulfil their obligations (e.g. do not transpose the relevant Community legislation in due time), apart from the ultimate – and therefore unlikely - possibility to withdraw unilaterally from the Agreement. The Commission therefore proposes to elect the European Court of Justice as the jurisdiction responsible for settling disputes which may arise from the application of the Monetary Agreements.
Last updated 29 October 2011
Letter to European Commission asking for action
The new Vatican body, the AIF (Autorità di Informazione Finanziaria), meant to provide financial oversight and transparency, was set up at the beginning of 2011. However, it appears to have taken over the delay tactics of the Vatican Bank, with whom it shares a number of officials. Letters and a fax to the AIF from the lawyer representing victims of the Croatian Holocaust have not been answered. Every year more and more of the aged survivors die off and the Vatican Bank