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	Cleveland Diocesan Official LED Kickback Scheme, Accountant Testifies By James F. McCarty The Plain Dealer August 23, 2007 http://www.cleveland.com/news/plaindealer/index.ssf?/base/cuyahoga/1187859987160480.xml&coll=2 Cleveland (OH) — Ten years ago, the chief financial officer of the Cleveland Catholic Diocese made a proposition to the co-owners of an accounting firm working for the diocese. CFO Joseph Smith asked for a 10 percent cut of all the money the diocese paid the accountants, Zrino Jukic testified Wednesday in U.S. District Court in Cleveland. In exchange, Smith assured Jukic and his business partner, Anton Zgoznik, that he would give them more diocesan accounting work. Jukic said he knew Smith's proposal was illegal, but Zgoznik relented. "Anton said we would do this," said Jukic, a former friend and the best man at Zgoznik's wedding. "I accepted it because he wanted to do it. I didn't have much of a say in the matter." Jukic was the first witness for the prosecution on the opening day of Zgoznik's kickback trial in federal court. Smith, seated in the back of the courtroom, will stand trial later this year. Smith was good to his word, Jukic testified. The firm's diocesan workload increased. And as the accountants got richer, so did their kickback payments to Smith. Over a seven-year period, Zgoznik's and Jukic's company, ZJ and Associates of Mentor, collected $17.5 million from the diocese. They wrote checks totaling more than $784,000 to Smith. In addition, Smith received $30,000 from the head of the Catholic Cemeteries Association and from an insurance broker who did business with the diocese, Assistant U.S. Attorney John Siegel told the jury in his opening statements. At the same time, Smith's predecessor, the Rev. John Wright, rewarded Smith with a secret bank account containing $270,000 that he could use at his discretion over a five-year period. The money was meant to keep Smith from jumping to the private sector, and was kept secret from Bishop Anthony Pilla, Siegel said. In all, Smith received more than $1 million in "executive compensation" in addition to his $120,000 annual salary. He failed to report most of that money on his tax returns, Siegel said. Smith and the accountants' scheme unraveled in 2003 when a whistleblower tipped off the diocese. Zgoznik's attorney told the jury the money his client paid to Smith was not for kickbacks, but rather evidence of a long-standing practice by diocesan leaders to compensate employees off the books. "The evidence will show that millions of dollars of receipts were not recorded by the bishops because that is the way they did business," said defense attorney Robert Rotatori. Zgoznik comes from a strict Slovenian Catholic family where the children were taught not to disobey priests. Wright ordered Zgoznik to pay Smith, Rotatori said. "Anton accepted that," Rotatori said. "He knew never to question a priest." To reach this Plain Dealer reporter: jmccarty@plaind.com, 216-999-4153
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