Cleveland diocese involved in embezzlement trials

Cleveland, Ohio, Aug 21, 2007 / 08:58 am

The trial began yesterday for a former assistant treasurer of the Diocese of Cleveland, Anton Zgoznik, accused of taking part in widespread financial mismanagement and the embezzlement of church funds.

Zgoznik and the former chief financial officer of the diocese, Joseph Smith, face a total of 27 criminal charges, including money laundering and tax evasion, reported the New York Times.

Lawyers for the defendants, however, are pointing fingers at top Church officials. In documents filed in federal court, the lawyers say the diocese’s former bishop and a priest used secret accounts to embezzle millions of dollars from the diocese.

In a written statement, the diocese said such accusations are “scurrilous.”

According to the Times report, federal prosecutors say Smith hired Zgoznik as a consultant to perform accounting services for the diocese and to computerize records. In return for contracts worth $17.5 million over eight years, Zgoznik used secret accounts to pay Smith kickbacks totaling $785,000. Smith has yet to be brought to trial, but will be arraigned after Zgoznik.

The indictment also says Smith embezzled from the Catholic Cemeteries Association and took kickbacks from the diocese’s insurance broker. He used off-book accounts to hide these and other earnings from the IRS, the prosecutors say.
 
The defendants counter that Fr. John Wright, the diocese’s former financial and legal secretary and Smith’s boss, created the system of secret compensation for favored employees. They say Fr. Wright directed almost $1 million in disguised compensation to himself, his relatives and friends, and is using Smith as a scapegoat. Fr. Wright has denied the accusations through his lawyer.

In court filings, the defense lawyers also say Bishop Anthony Pilla, who led the diocese for 25 years before retiring in 2006, had an off-book account worth more than $500,000.