Anne Hathaway's ex accused of cashing in on fake Vatican ties (AP)

NEW YORK - An Italian businessman who once dated actress Anne Hathaway was arrested Tuesday on charges he posed as a representative of the Vatican to fleece wealthy investors in a real estate company that sought to buy and redevelop Roman Catholic Church property.

Bail was set at $21 million for Raffaello Follieri. Federal prosecutors said they have "overwhelming" evidence that he improperly spent up to $6 million from investors, much of it on a lavish lifestyle, including privately chartered jet travel with his girlfriend and others, expensive meals and clothing and a posh Manhattan apartment.

The girlfriend was not identified but it has been widely reported that Hathaway, the star of films including "Get Smart," "The Devil Wears Prada" and "The Princess Diaries," had until recently dated Follieri, 29.

An angry Follieri repeatedly interrupted his lawyer at a court appearance to tell her what to say. He shook his head at times and, as a prosecutor accused him of owing various debts, called out: "We paid that."

Prosecutor Reed Michael Brodsky said Follieri, of Foggia, Italy, boasted of tight Vatican connections to entice investors to give millions of dollars so he could "live the lifestyle of a multimillionaire." He said Follieri had duped one investor as recently as last month.

"In short, your honor, he is a con man, and he was able to defraud a lot of people out of a lot of money over a long period of time," Brodsky told Magistrate Judge Henry B. Pitman. "The evidence in this case is overwhelming because he left a trail of evidence."

Brodsky had asked Pitman to deny bail, saying Follieri had the money, the connections and the incentive to flee charges that could send him to prison for up to nine years if he is convicted. He said Follieri lost between $2.5 million and $6 million of investor money.

Pitman said Follieri must secure bail with $16 million in cash or property and must endure home detention, except for legal meetings, medical treatment or religious services.

The complaint filed in U.S. District Court in Manhattan alleges that Follieri duped a partner into investing millions of dollars in a real estate scheme to buy properties at bargain prices from the Catholic church in the United States and redevelop them.

The partner, a private equity firm in California, was not identified in court papers. However, a division of supermarket billionaire Ron Burkle's Yucaipa Cos. has settled lawsuits accusing Follieri of misappropriating more than $1 million to support a fancy lifestyle.

Follieri was charged with a dozen counts of wire fraud conspiracy, wire fraud and money laundering.

His lawyer, Flora Edwards, told The Associated Press, "We're going to move forward and hope for a speedy resolution to this matter."

Outside court, she called the bail package one of the stiffest she had seen.

Edwards told the judge her client was no threat to flee just because he had access to millions of dollars and his family is in Italy. She noted that his mother was being treated at a hospital in Manhattan.

According to the FBI, Follieri claimed the Vatican had formally appointed him to manage its financial affairs and that he had met with the pope in person in Rome.

He is accused of keeping various ceremonial robes, including the robes of senior clergymen, in his Manhattan office, and of hiring two monsignors to accompany him during his business dealings.

Once, according to the complaint, he even asked a monsignor to change out of his robes and put on the robe of a more senior clergyman to create the false impression that Follieri had close ties to the Vatican.

The monsignors are not accused of any crimes. Messages for comment left for Archbishop Pietro Sambi, the Vatican's U.S. ambassador, and the U.S. Conference of Catholic Bishops, were not immediately returned Tuesday.

Prosecutors allege that Follieri's scheme unraveled when the principal investor sought an audit of the partnership and demanded an explanation for expenditures unrelated to administrative overhead or business expenses.

Earlier this month, the New York attorney general's office said it was investigating a foundation operated by Follieri that vaccinates children in Third World countries.

The Follieri Foundation has not filed U.S. tax disclosure forms required from charities, according to a review of records by the AP.

Hathaway's publicist, Stephen Huvane, has previously stressed that she is not part of any probes and is no longer a board member of the Follieri Foundation.