Pilla kept many of the household items - including a large-screen television - after the diocese sold the Munson Township house and 30-acre lot in 2003. Movers took the furnishings to a home Pilla owns in Cleveland Heights.

The allegations about the money come from two former church employees who are accused of defrauding the diocese and are facing federal charges. The two men say that the diocese had hundreds of secret accounts - including one in Pilla's name - to hide and distribute money.

The diocese issued a statement Saturday denying what it called "scurrilous accusations." Pilla said that the diocese cooperated fully with federal investigators and that the only wrongdoing that was uncovered involved the two former employees.

Diocesan spokesman Bob Tayek said private donations paid for improvements at the Munson property. After the sale, items in the home were split among diocesan headquarters, St. John Cathedral and the Cleveland Heights residence that Pilla inherited after his mother died.

"The diocese is responsible for a retirement residence for him," Tayek said.

The Munson home was donated to the diocese in 1995 by Larry Dolan, now the owner of the Cleveland Indians, who suggested that it be used as a retreat house for the Cleveland bishop. The house was intended for whoever was serving as bishop of the Cleveland diocese, not just Pilla, Tayek said.

Ivanhoe Furniture was contacted in 1996 about updating the 5,000-square-foot house on Bean Road, said Tom Dottore, whose family owned the now-defunct furniture company.

"It was for furniture, remodeling, painting, appliances, right down to glasses and plants and towels," Dottore said.

Ivanhoe Furniture was paid $78,759 for its work, according to a motion filed this month by lawyers defending former diocesan Chief Financial Officer Joseph Smith and Anton Zgoznik, a former diocesan employee.

Smith and Zgoznik are scheduled to go to trial in U.S. District Court in April on charges including conspiracy, money laundering, fraud and tax evasion. The two are accused of defrauding the diocese of at least $784,000 in a kickback scheme in which they enriched themselves using church money.

But lawyers for Smith and Zgoznik say church supervisors knew and approved of the transactions. The diocese had hundreds of accounts not listed on its official books or in records that were used to give additional compensation to employees, including Pilla and the Rev. John Wright, the former financial secretary for the diocese, the lawyers said.

The motion asks U.S. District Judge Ann Aldrich to force federal prosecutors or the diocese to provide documents about the alleged accounts.

In Saturday's statement, Pilla said, "The diocesan records and all employees were open and available to federal investigators." Pilla said that he followed Smith's guidance while making financial decisions as bishop.

"My judgments in these matters were based on Mr. Smith's advice and counsel," Pilla said.

One account that Smith's lawyers say existed is the Anthony M. Pilla Charitable Account opened at McDonald & Co.

The account had assets of more than $500,000, Smith's lawyer, Philip Kushner, said in the motion. Three checks from the Pilla account were used to pay Ivanhoe Furniture in 1997.

Dottore said he does not recall who paid Ivanhoe Furniture and does not have records of the transactions. The company sold furniture to the diocese for at least 30 years, Dottore said.

Dottore said Pilla was a friend of his family's going back decades. The home on Bean Road, near Notre Dame-Cathedral Latin School, needed a lot of work, he said.

"The Dolans raised a lot of kids in that house," Dottore said. "It wasn't in mint condition."

The six-bedroom house included tennis courts and a large wooden deck overlooking a pond.

Ivanhoe was paid for a wide range of services, not just furniture. The company was paid for installing ceramic tile, cleaning the house, repairing the furnace and even buying bottled water and life jackets, according to billing receipts.

"They asked us to do the job, and we did the job," Dottore said.

Tayek said the home "wasn't used much by Bishop Pilla." In 2003, the diocese sold the house for $696,000 to Famiglia LLC, a Shaker Heights company managed by Rita Murphy Carfagna. She is a former member of the board of the Catholic Diocese of Cleveland Foundation and co-owner, along with her husband, Peter, of the Lake County Captains baseball team.

The diocese hired a company in May 2003 to move several of the furnishings from the Bean Road house to Pilla's house on Quilliams Road in Cleveland Heights. A memo attached to the moving invoice outlines what was to be taken, including a large-screen television, a couch, a washer and dryer, several tables, patio furniture, a grill and 20 boxes.

County records show the diocese invested $382,000 in the property. At the time of the sale, Tayek said the money was paid through private donations and that no diocesan money was spent.

Kushner says in his motion that the Pilla account alternated between using Pilla's personal tax identification number and the diocesan tax number. He also says Pilla gave the diocese $85,825 from the account, which in turn bought money orders payable to Pilla for the same amount.

There were also 28 checks made out to "Cash" written out of the account between 1997 and 2001, totaling $12,558.

Attorney Kevin Spellacy, who represents Wright, said the accusations in the motion were an attempt to smear Pilla and Wright and take the focus off of Smith and Zgoznik's criminal activities.

To reach this Plain Dealer reporter:

mtobin@plaind.com, 216-999-4128