|No Checks and Balances at Diocese
By James F. McCarty
The Plain Dealer
August 28, 2007
Cleveland (OH) — The defense attorney for a former church accountant on trial in federal court presented evidence Tuesday that the normal financial system of checks-and-balances didn't exist at the Catholic Diocese of Cleveland.
During his second day on the witness stand, the Rev. John Wright, former lead lawyer and chief financial officer at the diocese, said he deferred most of the church's money decisions to his right-hand man, Joseph Smith.
"We were friends," Wright testified. "I relied on him totally for his financial expertise."
Smith, 50, jotted notes in the back of the courtroom while Wright testified at the trial of a former diocesan accountant, Anton Zgoznik. Smith and Zgoznik are both charged with multiple counts of conspiracy, money laundering, mail fraud and obstruction of justice. Smith will stand trial at a later date.
During cross-examination by defense lawyer Robert Rotatori, he introduced evidence designed to show that it was not unusual for Zgoznik to have paid $784,000 to Smith over a seven-year period -- money that prosecutors considered illegal kickbacks.
Such sweetheart deals and secret executive compensation agreements were the routine in the loosely-run diocese, Rotatori said.
Evidence was presented Tuesday that:
* Casmir Rutt, a former diocesan chief financial officer, continued to be paid his full salary for three years after his retirement.
* Bishop Anthony Pilla, now retired, approved a $60,000 loan to Wright's secretary, Maria "Mitzy" Milos, in the late 1990s. The loan was not documented on the church's ledgers, Rotatori said. When she failed to repay the loan, Wright paid off the $50,000 balance with a check from the church's Cemeteries Association.
* The diocese paid a one-time computer consultant, Don Felkin, head of Resultant Corp., with money funneled through Zgoznik's company.
"I was not aware of that," Wright said. "I never inquired" to how Felkin was paid, "although I assumed the diocese was paying him directly."
Wright also said his secretary is repaying her loan, plus 8 percent interest, through payroll deductions.
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