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Image: Follieri, Hathaway
Lucas Jackson  /  Reuters file
Italian businessman Raffaello Follieri sits with actress Anne Hathaway at a New York fashion show last February.
updated 9/10/2008 8:06:08 PM ET 2008-09-11T00:06:08

A smooth-talking Italian businessman who once dated actress Anne Hathaway and claimed to have friends in high places at the Vatican is headed to prison after pleading guilty Wednesday in a Manhattan real estate fraud case.

Raffaello Follieri agreed not to appeal any sentence of up to five years and three months in prison for his plea to wire fraud, money laundering and conspiracy. Sentencing was set for Oct. 3.

Prosecutors have said the 30-year-old Follieri posed as the Vatican's representative to the U.S., telling investors that the Roman Catholic church would sell him property at a steep discount.

As part of his plea, he admitted misappropriating at least $2.4 million of investor money, sending it to foreign personal bank accounts that were disguised as business accounts.

"I knew what I was doing was wrong," he told U.S. District Judge John G. Koeltl in Manhattan.

Assistant U.S. Attorney Reed Brodsky told the judge that Follieri misled investors to think he was spending their money to buy Catholic properties below market value "when he in fact used it to live a lavish lifestyle."

Brodsky said investigators at the time of Follieri's arrest found a March 2006 letter in his apartment safe from a Vatican cardinal warning him not to continue presenting himself as having ties to the Vatican. Brodsky said Follieri continued to do so.

Jet-setted with Hathaway
Prosecutors said Follieri was a sophisticated con man who went to elaborate lengths to carry out his scam and then spent his ill-gotten gains to fly across the world in a private jet with his celebrity girlfriend and to live a life of luxury at his Manhattan penthouse.

Video: Tipped off? A forfeiture order as part of Follieri's plea requires him to give back $2.4 million in cash as well as jewelry and watches. The judge said he will also order restitution.

The FBI arrived at Follieri's doorstep weeks after his split with Hathaway, the "Get Smart" and "The Devil Wears Prada" star.

According to the FBI, Follieri claimed the Vatican had formally appointed him to manage its financial affairs and that he had even met the pope in person in Rome. His actual connections to the Vatican were slim, including his hiring of a relative of a former Vatican official.

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Prosecutors allege that Follieri was so intent on carrying out the Vatican ruse that he kept ceremonial robes, including the robes of senior clergymen, in his Manhattan office.

One of Follieri's investors was supermarket billionaire Ron Burkle, a close friend of former President Clinton. A division of Burkle's Yucaipa Cos. has settled lawsuits accusing Follieri of misappropriating more than $1 million.

The Vatican has declined to comment on Follieri's case, citing the ongoing U.S. probe.

Hathaway was once on the board of the Follieri Foundation, but her publicist has said she no longer serves in that capacity and is not part of any probes.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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