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	Diocesan Officials Testify in Trial over Alleged Kickbacks By Nancy Erikson Catholic Online September 10, 2007 http://www.catholic.org/national/national_story.php?id=25303 Cleveland, Ohio — Even though a former assistant treasurer for the Cleveland Diocese is the one on trial in U.S. District Court for an alleged kickback scheme involving church money, observers are getting a look at the financial operations of the diocese. Anton Zgoznik, 40, a certified public accountant, has been on trial since Aug. 20 for allegedly paying money to former diocesan chief financial officer Joseph Smith in return for business from the diocese for consulting work. Zgoznik is charged with 15 felony counts including conspiracy, mail fraud and obstructing tax laws. Smith also is facing 23 similar charges and his trial is expected to begin after Zgoznik's concludes. Federal officials allege that the diocese paid $17.5 million to Zgoznik's firms for computer, accounting and financial work between 1996 and 2003. The government charges that Zgoznik's companies then paid $784,000 in kickbacks to Smith's companies. But defense attorneys for Zgoznik say the lifelong Catholic, who was raised in the St. Vitus Church community and a traditional Slovenian family, was merely following directions from his clergy superiors and that the diocese often paid consultants for work in special compensation accounts. They also contend that all work that Zgoznik's firms received was approved by the diocesan Finance Council. "It wasn't Mr. Smith steering business to anybody," said Zgoznik's attorney, Robert Rotatori, in his opening remarks. "This was the decision of the finance committee." Much of the testimony at Zgoznik's trial has focused on Smith and his work for the diocese. Bishop Anthony M. Pilla, retired head of the Cleveland Diocese, testified in late August about his disappointment in the charges brought against the diocese's former financial and legal secretary. Bishop Pilla said he relied on Smith, as he did with all of his staff, to advise him on business matters so that he could focus his energies on the pastoral and spiritual ministries of the people of the diocese and wider community, particularly the poor and marginalized. "Joseph Smith was a highly valued co-worker of mine in whom I placed great trust," Bishop Pilla said. "I considered it a very close relationship." Also testifying in late August was Father John Wright, pastor of St. Timothy Church in Garfield Heights, who had been the head of the diocesan finance office until 2000. He testified that in early 1996 he felt pressured by Zgoznik to pay Smith a lump sum of $250,000 in extra compensation but said that he told Smith to be responsible for the taxes. Father Wright testified that he told Smith that if Smith was given the $250,000 he could ask for no raise in pay during the next five years. "Joe made it pretty clear that if he didn't get his lump sum, he was going to leave," Father Wright said. "I felt Joe was a hard worker and he did a good job." Rotatori said in his opening arguments that the defendant was told by Father Wright to keep the special compensation "hush, hush." Zgoznik worked under Smith in the diocesan finance office from 1996 to 1999 before forming his own consulting business, ZJ & Associates. Although Father Wright admitted to approving the executive compensation for Smith, he testified that he did not know about a separate account – called the Fidelity Account – into which Smith allegedly placed the money. The federal indictment alleges that Smith used funds from the account to purchase stocks and securities as well as for personal expenses without declaring the money on his tax returns. Father Wright also said he could not recall signing a payment voucher for $185,000 or documents opening the account even though they contain his signature. He also testified he did not know about payments from Zgoznik's company to Smith. Zgoznik's trial was expected to continue until at least mid-September.
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