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	Trial Begins in Church Finance Scandal By Bill Frogameni National Catholic Reporter September 19, 2007 http://ncronline.org/NCR_Online/archives2/2007c/092107/092107p.php In the latest chapter of a massive financial scandal plaguing the Cleveland diocese, Anton Zgoznik, a former assistant diocesan treasurer, has gone on trial in federal court, charged with participating in a $17.5 million kickback scheme dating from 1997 to 2004. Also implicated in the scheme is Joseph Smith, the former chief financial officer of the diocese, who left in 2004 after his dealings with Zgoznik were reported in the media. Zgoznik's trial, which began Aug. 20, was expected to last several weeks. Smith faces trial at a later date. While working as an outside accounting contractor for the diocese, Zgoznik (who at one time was employed directly by the diocese) received $17.5 million in diocese money steered to him by Smith. In return, Zgoznik kicked back $784,000 to Smith, according to the federal indictment. In addition, Zgoznik and Smith allegedly failed to report some of their diocesan-derived income to the Internal Revenue Service. Attorneys for Zgoznik and Smith, however, have argued that top diocesan officials authorized the transactions and that it was common diocesan practice for valued employees to receive additional "off the books" compensation. Former Cleveland Bishop Anthony Pilla and Fr. John Wright, former financial and legal secretary, who was Smith's direct superior, have strongly denied the charges. Speaking in an interview shortly after the indictment, Robert Rotatori, Zgoznik's attorney, claimed his client and Smith didn't defraud the diocese because their transactions were approved by top diocesan officials. "One could be a bad steward in his stewardship of diocesan funds and, yet, not be a crook," Rotatori added. In a statement posted on its Web site, the diocese said Smith and Zgoznik have leveled "scurrilous accusations" and "resorted to false statements, half truths, and innuendo against [Pilla and Wright] ... in an apparent attempt by the defendants to explain their conduct." Through an attorney, Wright — who is himself an attorney — has maintained he was "duped" by Smith and Zgoznik's scheme. In an e-mail to NCR, a spokesman for the Cleveland diocese, Robert Tayek, wrote, "Any suggestion that those involved with the administration of the diocese knew or approved of the activities charged against the defendants, or engaged in similar conduct, is false." One of the more bizarre aspects of the imbroglio is how, although forced from his job at the diocese in early 2004 after media reports detailed his dealings with Zgoznik, Smith emerged shortly thereafter as the chief financial officer of the Columbus, Ohio, diocese. Since his indictment in summer 2006, Smith has been on hiatus from Columbus, leaving top officials from Cleveland and Columbus to publicly shift blame to the other diocese for Smith's hire. Former Columbus Bishop James Griffin reportedly claimed that Pilla recommended Smith for the job, but the Cleveland diocese has denied that. "The appointment of Joseph Smith by the diocese of Columbus made a mockery of the term due diligence," said John Moynihan, a spokesman for Voice of the Faithful, a church reform group. "How could they take [Smith] in without checking him out?" Defense attorneys for Zgoznik and Smith claim Pilla used an investment account worth $500,000 for private purposes, even though the account — referred to as "the Anthony M. Pilla charitable account" — was held under the diocese's tax identification number. Steven Sozio, a lawyer for the diocese and Pilla, last spring told the Cleveland Plain Dealer the account was for the former bishop's personal savings, but claimed the defense has tried to "impugn Bishop Pilla by arguing that transactions relating to that personal account ... were somehow untoward." In a phone interview, Sozio verified this statement but declined to speak further on the matter, instead directing NCR to court filings he's made on behalf of the diocese. Defense attorneys contend the diocese has hundreds of such "secret accounts." In Wright's case, the federal indictment says, "In approximately 1996, an arrangement was made between Smith and [Wright] for Smith to be paid a substantial lump sum payment in addition to his regular salary, in order for him to remain at the diocese, rather than seeking a more lucrative position in the private sector. The understanding was that the payment would be in lieu of any additional raises for the next five years, other than cost of living increases." A total of $270,000, was put in an investment account jointly under Smith and Wright's names. The account used the diocese's tax ID number but was never reported to the IRS, according to the indictment. Only Zgoznik and Smith have been criminally charged in connection with the scandal. Pilla and Wright have appeared as government witnesses in Zgoznik's trial. Smith's attorney, Philip Kushner, alleges that "off book" accounts existed to pay Wright, his friends and relatives over $700,000. FBI notes from a 2005 interview conducted with Wright indicate that Wright admitted helping a diocesan secretary obtain employment at Resultant Corp., a company that did business with the diocese. Zgoznik's attorney filed a motion claiming Wright's secretary had a salary that went from $31,500 in 1997 up to $81,000 in 2004
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