BishopAccountability.org
	Jury to Decide Fate of Former Cleveland Diocese Employee Joseph Smith, Charged with Fraud By Damian G. Guevara Plain Dealer June 21, 2008 http://www.cleveland.com/news/plaindealer/index.ssf?/base/cuyahoga/1214037008320080.xml&coll=2 Joseph Smith violated the trust of Cleveland's top Catholic clergy, including former Bishop Anthony Pilla, when he devised a kickback scheme to steal $784,000 from the church's coffers, prosecutors said Friday. "He breached that trust . . . all in the name of wanting more," federal prosecutor Jerrod Patterson said during closing arguments at the U.S. District Courthouse in downtown Cleveland. A jury is now deciding the fate of Smith, 51, of Avon Lake, following a five-week trial. He is charged with fraud, conspiracy and tax evasion. Smith's lawyer argued that his client did nothing wrong. The money funneled to Smith was not a kickback but rather payments approved by the church's leaders as a way to supplement Smith's salary, attorney Philip Kushner said. "The payments were a secret raise . . . to Mr. Smith to keep him at the diocese," Kushner said. At issue are payments between Smith, who worked for the diocese for more than 20 years, and Anton Zgoznik, who did accounting work for the diocese. Smith steered $17.5 million in diocesan business to Zgoznik between 1996 and 2003. Some of those bills were wildly inflated, prosecutors said, although they would not detail by how much. Zgoznik, in turn, then made payments to two companies owned by Smith. A jury convicted Zgoznik of conspiracy, money laundering, mail fraud and obstruction of justice after a trial last year. Zgoznik is to be sentenced in September. The Rev. John Wright, who preceded Smith as chief financial officer, admitted authorizing a one-time secret payment to Smith in 1996 of $250,000. The money, Wright testified, was supposed to keep Smith from taking a higher-paying job in the private sector. Wright said he handed Zgoznik a blank check for Smith. The payment ballooned to $280,000 and was set up in an investment account using the diocese's tax ID number, making it tax-exempt, even though Smith used the account for his personal gain, prosecutors said. Smith is also accused of failing to report $427,000 of income to the IRS and of lying to an agent who performed an audit. Wright denied approving or having knowledge of the other payments between Smith and Zgoznik. Diocesan officials have adamantly denied church officials approved of or knew about the payments. 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. When confronted by a diocese lawyer about the tip, Smith declared that his career was over, Patterson told the jurors. "If this was legitimate, why would his career be over?" Patterson said. Kushner repeatedly told the jury that the money between Smith and Zgoznik were legitimate payments, not kickbacks. He attacked the credibility of Zrino Jukic, a former business partner of Zgoznik's. Jukic was the only witness who called the payments kickbacks. "We know he's a liar, and I don't use that term lightly," Kushner said. During testimony, Jukic admitted that for a time he passed himself off as a CPA, signing a false tax return and of deceiving Zgoznik, Kushner said. "The government knows Mr. Jukic is a liar, but they looked the other way," Kushner said. Smith kept the movement of money hidden because he was going out of his way to keep his promise of secrecy to Wright, Kushner said. To reach this Plain Dealer reporter: dguevara@plaind.com, 216-999-4128.
Any original material on these pages is copyright © BishopAccountability.org 2004. Reproduce freely with attribution.