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	Trial to Begin for Former Cleveland Catholic Diocese Financial Officer By Damian G. Guevara Plain Dealer May 11, 2008 http://www.cleveland.com/news/plaindealer/index.ssf?/base/cuyahoga/1210494630140100.xml&coll=2 The buildup to Joseph Smith's trial on charges that the former chief financial officer for the Cleveland Catholic Diocese stole from the church has included accusations of kickbacks, secret bank accounts and double dealing. But if Smith's trial - scheduled to begin with jury selection Monday at the U.S. District Courthouse in Cleveland - is anything like that of his co-defendant Anton Zgoznik, the controversial claims of indiscretions and hidden payments may not help Smith if the jury hears them. Smith, 51, of Avon Lake, was the Cleveland diocese's top financial officer and highest-ranking lay person until 2004, when irregularities in the church's finances came to light. Smith was close to former Bishop Anthony Pilla, who testified in Zgoznik's trial and will probably be called in Smith's as well. Smith and Zgoznik pulled off a seven-year kickback scheme that lined Smith's pockets with at least $784,000, prosecutors said. Smith awarded $17.5 million worth of diocesan business to Zgoznik, an accountant. Zgoznik then made payments to businesses that Smith ran from his home. The payments were designed to look like legitimate business expenses but were really kickbacks for getting the church business in the first place, prosecutors said. Zgoznik and Smith's defense all along has been that Pilla and the Rev. John Wright knew of the payment scheme and approved of it as a way to supplement Smith's salary. Diocesan officials say that explanation is hogwash. "The Diocese of Cleveland is not on trial," diocese officials said in a written statement last week. "Any suggestion that [church officials] knew or approved of [Smith's] activities . . . or engaged in similar conduct, is false." Still, the scandal has led to greater scrutiny of the diocese, and embarrassment. The scheme was initially revealed after a tipster sent anonymous letters to the diocese, attorneys and The Plain Dealer outlining inflated payments by Smith and Zgoznik. Smith was put on paid leave in February 2004, after the allegations surfaced. He then took a job as chief financial officer in the Columbus Catholic Diocese. He eventually resigned from that job, months after he was indicted in federal court in August 2006. Since then, Smith's attorney Philip Kushner has launched an all-out legal attack on the diocese and its credibility. In court papers, Kushner and Smith claim the diocese had hundreds of secret "off the books" accounts used to move money around and take care of people financially as church leaders saw fit. The diocese has denied those claims, and Pilla testified that any financial moves he ever made, personally or on behalf of the diocese, were done based on Smith's advice. Assistant U.S. Attorney John Siegel declined to comment for this article but wrote in court filings that he would challenge any line of questioning that involved Pilla's financial transactions and accounts. Kushner said in court documents that Pilla's records are relevant because they counter the bishop's claim that no one had off-the-books accounts, including himself. Such an admission could destroy the bishop's credibility, Kushner wrote. Kushner declined to comment on the upcoming trial, but recent court filings show that the defense will stick to this argument. What remains to be seen is if any of that is relevant or helpful to Smith's criminal case. It wasn't when Zgoznik, of Kirtland Hills, went on trial last year. Pilla and Wright denied knowledge of payments in question between Smith and Zgoznik. A jury convicted Zgoznik of 15 counts of conspiracy, money laundering, mail fraud and obstruction of justice after the five-week trial. He is to be sentenced June 18. That trial included admissions by Wright that there were some significant financial church transactions that were done without Pilla's knowledge. Wright testified that he approved a $250,000 bonus for Smith that wasn't documented in the diocese's ledger. Wright said he signed off on the payment to keep Smith from fleeing to a higher-paying job in the private sector. Wright also admitted that he approved a double-dipping deal for a retired chief executive officer of the Catholic Cemeteries Association, a deal that Pilla said he knew nothing about. Those revelations have put Wright, who preceded Smith as the diocese's chief accountant, squarely in the crosshairs of Smith's lawyers. Also, government witness Zrino Jukic - a former business partner of Zgoznik's - has said that Wright arranged for other secret payments to a woman whom Jukic called Wright's girlfriend, according to a motion filed by Kushner. If Jukic's claim is true, Kushner wrote, Wright would have broken his priestly vows. "Either way, the jury will be concluding that at least one of Mr. Smith's chief accusers is not credible," Kushner wrote. Wright adamantly denies doing anything improper, said his attorney Kevin Spellacy. "It's a baseless accusation," Spellacy said. "It's a desperate man who makes accusations not based on fact. His strategy is to trash everybody around in hopes that nothing sticks to him. "It didn't work for the other defendant, and it probably won't work for him," Spellacy said. Judge Ann Aldrich, who has presided over the case, said during Zgoznik's trial that she would not tolerate testimony that made the diocese or its members "look bad for the sake of making them look bad." Aldrich has yet to address pending motions regarding what evidence can be presented in Smith's trial. To reach this Plain Dealer reporter: dguevara@plaind.com, 216-999-4128.
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