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	Pilla 'Secret Fund' Really His Savings, Diocese Says By Mike Tobin Plain Dealer [Cleveland OH] March 28, 2007 http://www.cleveland.com/news/plaindealer/index.ssf?/base/cuyahoga/117507126846300.xml&coll=2 The Anthony M. Pilla Charitable account wasn't a secret fund but rather the former bishop's personal savings account, a lawyer for the Cleveland Catholic Diocese said. The information emerged in a motion filed in U.S. District Court as part of the criminal case against Joseph Smith and Anton Zgoznik, two former employees accused of bilking the diocese out of $784,000. Lawyers for the two men filed a motion last month in which they accused the diocese of maintaining hundreds of secret bank accounts used to funnel money to employees, including a $600,000 account controlled by Pilla. "The McDonald & Co. account is Bishop Pilla's personal account in which his savings were deposited," diocesan attorney Stephen Sozio wrote. Smith "tries to impugn Bishop Pilla by arguing that transactions relating to that personal account - transactions on which he actually advised the bishop - were somehow untoward. They were not." But Smith's lawyer said Pilla was untruthful with IRS investigators in November 2005 when interviewed about the account, which used the diocese's tax identification number. Pilla told the IRS that most of the account's money came from an inheritance after his parents died. But attorney Philip Kushner said that while Pilla's mother died in 2003, Pilla had been using the account since 1991. Pilla wrote checks in 1991 for $85,000, which were converted into money orders; a check in 2002 for $180,000 was made out to cash and given to the diocese, Kushner said. Pilla filed amended tax returns for the account after Smith and Zgoznik were indicted, Kushner claims. The trial of Smith and Zgoznik has been delayed to August. The two men face charges including conspiracy, fraud, money laundering and tax evasion. Smith served as the chief financial officer for the diocese until he resigned in 2004. Some diocesan financial work was subcontracted to Zgoznik. Prosecutors contend Smith approved inflated payments to Zgoznik, who in turn paid money to two other companies owned by Smith. Together they illegally received $784,000 in church money, prosecutors said. But lawyers for both men claim Smith's supervisor, Father John Wright, and Pilla approved the transactions as a way to give them additional pay. The men claim the church routinely paid employees through secret accounts, and asked U.S. District Judge Ann Aldrich to force the diocese to turn over records about the accounts. "Smith was comfortable with receiving additional compensation in this fashion in part because Bishop Pilla had a similar investment account at McDonald & Co.," Kushner wrote. The diocese has opposed the request, and in the most recent motion, said the secret accounts do not exist. Sozio called the motion by Smith and Zgoznik "a fishing expedition." "Smith's motion is nothing more than a sad and desperate attempt to disparage those with whom he formally worked with the hope it will somehow excuse his conduct," Sozio wrote. To reach this Plain Dealer reporter: mtobin@plaind.com, 216-999-4128
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