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	Defense Prepares to Take Stand in Alleged Kickback Case in Cleveland Diocese By Nancy Erikson Catholic Online September 25, 2007 http://www.catholic.org/diocese/diocese_story.php?id=25484 Cleveland, Ohio (Catholic Universe-Bulletin) - Jurors began hearing testimony from defense witnesses Sept. 20 in the trial of a former diocesan accountant accused of being part of a kickback scheme. Anton Zgoznik, 40, of Kirtland Hills, has been on trial since Aug. 20 in federal district court for allegedly paying money to former diocesan chief financial officer Joseph Smith in return for business from the diocese. Zgoznik is charged with 15 felony counts including conspiracy, fraud and obstructing. Smith is expected be tried at a later date. Federal officials allege that Zgoznik's firms charged the Cleveland diocese more than $17.4 million for computer, accounting and financial work between 1997 and 2003 and then paid nearly $785,000 in kickbacks to businesses operated by Smith in return for continued business from diocesan entities. Zgoznik's attorneys had been expected to begin calling defense witnesses last Monday, Sept. 17, but attorneys for both sides spent the day in Federal District Judge Ann Aldrich's chambers. Jurors were sent home Monday afternoon and told to return Thursday morning. Neither federal prosecutors nor defense attorneys would comment on the delay. Federal prosecutors wrapped up their case last week with testimony from IRS agents, former Zgoznik employees and other diocesan officials. IRS Agent James Fisher, the last witness for the prosecution, explained that he examined records from the Zgoznik and Smith entities from 1997 to 2003 and listened to testimony from former Zgoznik employees to determine if there had been a kickback scheme. Fisher said that when he saw the "large number of hours" that Smith billed to the Zgoznik companies for consulting services and weighed that against the time Smith would need to "spend doing his regular job" he concluded that payments from Zgoznik's firms were kickbacks. Blowing the whistle Peter Carfagna, owner of the Lake County Captains baseball team and a member of the Diocesan Finance Council, testified that he and other Diocesan Finance Council members were beginning to get concerned about the amount of outsourcing by diocesan entities to the Zgoznik companies long before a "whistleblower letter" came to their attention in December 2003. "It began to get out of control and we began to get concerned about it," Carfagna said. Under cross examination, Carfagna reiterated that finance council members became increasingly concerned over time about the cost of outsourcing in the diocesan Finance Office particularly because the diocese had instituted a wage freeze for employees. "We watched every penny, or tried to," he said. "We watched that very carefully. Every penny. "We were driving down, down, down and people were making less, less, less," he said. "That was always the toughest one." Carfagna testified that he learned of the alleged kickback scheme in December 2003 after fellow finance council member William Reidy showed him the whistleblower letter and packet of canceled checks showing payments from Zgoznik's companies to Smith's companies. Reidy testified earlier that he received the packet at home the day after Christmas. "We were apoplectic," he said. "We were speechless." Some of the most uncomfortable testimony came from former Zgoznik employees, many of whom were friends of Zgoznik and his wife, Renee, attending each other's weddings and baptisms. Renee Zgoznik has been in the courtroom everyday of her husband's trial. Former employee Sara Saefkow testified that she became increasingly concerned about the accounting practices and the checks from Zgoznik companies to Smith companies until she resigned at the end of 2003. "I had a lot of questions and never any answers," she said. "I knew I had to resign." Christopher Chesler, who replaced Zgoznik's former business partner Zrino Jukic, as chief financial officer in 2002, claimed Zgoznik's company was an "intimidating environment to work in." "I would say I was left out of the loop of a majority of things," he said. Jurors were expected to begin deliberating next week. Deliberations are expected to be long with jurors faced with examining 11 large binders and several large boxes of documents including tax returns, invoices, canceled checks, general accounting ledgers and IRS activity reports. They also have to weigh the testimony of numerous witnesses including retired Bishop Anthony M. Pilla, who testified early this month.
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