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	Former Cleveland Diocesan Official Acquitted of Taking Kickbacks By Dennis Sadowski Catholic Explorer July 7, 2008 http://www.catholicexplorer.com/explore4325/nationworld/former-cleveland-diocesan-official-acquitted-of-ta.shtml WASHINGTON (CNS) -- The former chief financial officer of the Cleveland Diocese has been acquitted of most charges stemming from an alleged financial kickback scheme involving nearly $785,000 in church funds. A federal jury in Cleveland, however, found Joseph Smith, 52, guilty July 3 of six tax-related charges in connection to money prosecutors said he received from a former diocesan accountant to whom $17.5 million in diocesan business was steered during a seven-year period. Smith had been indicted in August 2006 on 23 counts of fraud, money laundering, conspiracy and filing false tax returns. At one time he was the highest ranking layperson in the diocese's history, serving as legal and financial secretary. U.S. District Judge Ann Aldrich dismissed eight money laundering charges at the end of the trial, leaving the jury to decide Smith's fate on 15 counts. Jurors deliberated for nearly two weeks before returning a verdict. Prosecutors spent five weeks building their case during the trial. Smith's attorney, Philip Kushner, said his client was relieved to be acquitted of the most serious charges. "He's gratified that the jury acquitted him of taking kickbacks, of committing fraud or in any way breaching his duty to the Catholic diocese," Kushner said. "He's disappointed the jury convicted him of some of the tax charges, and he and his lawyers will be meeting to determine what his options are." Smith faces a maximum of 20 years in prison on the six charges, but he is expected to receive a much lighter sentence. His sentencing is set for Oct. 3. The Cleveland Diocese, through a statement from spokesman Robert Tayek, maintained that although Smith was acquitted no one at the diocese knew of or approved payments to Smith through a company run by former diocesan accountant Anton Zgoznik. "It is regrettable that Joseph Smith chose to engage in conduct which led to the jury verdict finding him guilty of criminal violations of federal law," the statement said. The statement outlined steps the diocese has implemented in recent years to strengthen its financial controls, including reorganization of the legal and financial offices under separate leadership, improved internal controls, and the use of well-known professional firms when needed. "Through similarly focused efforts, the diocese has been able to secure reimbursement for a large portion of the inappropriate payments made to Smith," the statement said. The trial was the second in connection with the alleged scheme. Zgoznik was convicted of 15 charges, including conspiracy, tax charges, mail fraud and obstruction in October. His sentencing is scheduled for September. He faces up to 20 years in prison. Smith, who worked for the diocese for more than 20 years, resigned his position in January 2004 after being confronted by diocesan officials who received an anonymous letter outlining the payments to Smith. He then worked for a short time as the financial officer of the Diocese of Columbus, Ohio, but resigned the position after he was indicted. Financial records showed that Smith sent $17.5 million in diocesan business to Zgoznik between 1996 and 2003. Prosecutors charged that some of the payments were inflated and that Zgoznik's firm paid kickbacks totaling $784,627 to Smith through businesses he owned. Government attorneys said the men disguised the kickbacks between June 1997 and February 2004 in part by having Zgoznik's companies write checks payable to two businesses that Smith ran and portraying the payments as compensation for "legal, consulting and other services not actually rendered by Smith." Prosecutors showed that Smith failed to report $427,000 of income to the IRS and then lied to an agent during an audit. The jury found him guilty of not paying taxes on about $150,000 in income. Kushner maintained his client's innocence throughout the trial, saying all the payments were approved by diocesan officials, who reportedly agreed to off-the-book compensation to prevent Smith from pursuing higher paying employment. Father John Wright, who once was Smith's supervisor, testified during the trial that he approved only a one-time secret payment of $250,000 in 1996 to prevent him from leaving the diocese to seek other employment. He denied approving any other payments. Retired Bishop Anthony M. Pilla of Cleveland also appeared on the witness stand. He testified that he was stunned to learn of the scheme after an anonymous letter and copied documents were turned over to a member of the diocesan Finance Council early in 2004. The bishop said he considered Smith a friend and trusted his advice during the time he had been employed by the diocese.
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