The girlfriend was not identified but it has been widely reported that Hathaway, who starred in such films as "The Devil Wears Prada" and "The Princess Diaries," had until recently dated Follieri.
Bail was set at $21 million at a court appearance in which an angry Follieri repeatedly interrupted his lawyer to tell her what to say, shook his head and, as a prosecutor accused him of owing various debts, called out: "We paid that."
Assistant U.S. Attorney Reed Michael Brodsky said Follieri 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 said. "The evidence in this case is overwhelming because he left a trail of evidence."
Brodsky had asked for detention without bail, saying Follieri had the money, the connections and the incentive to flee because overwhelming evidence was likely to lead to a conviction and a sentence of as much as nine years in prison. He said Follieri, 29, lost between $2.5 million and $6 million of investor money.
He said the investigation until Tuesday had been covert, with only investors the government knew would not tip off Follieri contacted. Brodsky said Follieri had $15,000 in cash on him when he was arrested and claimed an annual salary of $500,000.
Magistrate Judge Henry B. 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 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.
Burkle is a close friend of former President Clinton and is known for holding lavish fundraisers at his Beverly Hills estate.
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 currently being treated at a hospital in Manhattan.
Prosecutors allege that Follieri embellished his slim connections to the Vatican to make it seem he was so powerful that the Catholic church would sell him property at a deep discount.
He is accused of keeping various ceremonial robes, including the robes of senior clergymen, in his Manhattan office and 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.
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. His actual connections to the Vatican were minimal, including his hiring of a relative of a former Vatican official, his meetings with clergymen and his travels with the monsignors and a reporter for a news publication in Italy, according to the complaint.
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, prosecutors said.
The complaint alleges that Follieri spent hundreds of thousands of dollars from May 2005 through February 2007 for personal trips and vacations with his then-girlfriend, family, friends and associates; an apartment that overlooked Rockefeller Center and Central Park; and medical expenses for himself, his parents and his girlfriend.
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.
