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	Former Bishop Pilla Testifies in Kickback Trial Questions Restricted for Former Bishop By James F. McCarty Plain Dealer August 30, 2007 http://www.cleveland.com/religion/plaindealer/index.ssf?/base/living-0/1188462715165640.xml&coll=2 Defense lawyers expected embarrassing bombshells to drop when retired Bishop Anthony Pilla took the stand Wednesday in the kickback trial of a former diocese accountant. For months the lawyers had maintained in court filings that the Catholic Dio cese of Cleveland had made secret payments to the accountant, with the approval of Pilla. They even said the retired bishop benefited from the payments. Finally Wednesday, the lawyers had Pilla on the stand and were ready to pin him down. But the bombshells did not drop. A judge refused to let the lawyers ask their questions. Federal prosecutors called Pilla to testify in the kickback trial of Anton Zgoznik, the former accountant. The questioning of Pilla was tempered and unemotional, lasting less than two hours. It barely touched on Zgoznik, but was dominated instead by the bishop's dealings with the former head lawyer and chief financial officer of the diocese, Joseph Smith. Smith, who will stand trial later, and Zgoznik each are charged with multiple counts of conspiracy, money laundering, mail fraud and obstruction of justice. Smith hired Zgoznik's companies to modernize the diocese's antiquated accounting systems, for which he received $17.5 million over a seven-year period. Court documents show Zgoznik paid $784,000 of the money back to companies controlled by Smith. Prosecutors contend those payments were kickbacks to Smith for approving inflated payments to Zgoznik's companies. In pretrial motions, lawyers for Smith and Zgoznik argued the payments were not kickbacks but under-the-table compensation for Smith, paid with the approval of diocesan officials, including Pilla. The defense lawyers maintained that such secret compensation agreements were standard practice in the diocese. In fact, they claimed in a pretrial motion, Pilla was a beneficiary of his own sweetheart deals, citing a charitable account in the bishop's name at McDonald & Co. containing more than $500,000. Some of that money was used to pay for furniture, a large-screen television and improvements at a home on 30 acres in Munson Township where Pilla sometimes spent his off days. He eventually moved to his retirement residence in Cleveland Heights. But none of those subjects were broached in U.S. District Court in Cleveland on Wednesday. Following a succession of prosecutor's objections to questions by defense lawyer Robert Rotatori, and numerous sidebar conferences with Judge Ann Aldrich, Rotatori was precluded from interviewing Pilla about any subject not related directly to Smith or Zgoznik. Pilla denied any prior knowledge of an executive compensation agreement between Smith and Zgoznik, or a deal where Zgoznik paid the retired head of diocesan cemeteries, Tom Kelley, off-the-books after he retired. Pilla said he was extremely disappointed after Smith's predecessor, the Rev. John Wright, confessed that he had agreed to give Smith $250,000 in a secret lump-sum payment. In January 2004, diocesan lawyers and members of the church's Finance Council came to him with a letter from a whistleblower and documents laying out Smith and Zgoznik's apparent kickback scheme. Assistant U.S. Attorney John Siegel asked the bishop about his reaction. "Shocked," Pilla said. "Shocked. I had complete trust in Mr. Smith. He was a valued co-worker in whom I had great trust." Pilla placed Smith on a leave of absence and called the FBI. Smith resigned on Feb. 13. Pilla's only moment of emotion on the witness stand came when he described his friendship with Smith. "I considered ours a very close relationship," Pilla said. He recalled Smith's success at organizing the bishop's annual fund-raising golf tournaments benefiting a home for troubled and neglected children and inner-city schools. "I'm not a business person," Pilla said. "Joe was of great assistance to me there." Several weeks after Smith's resignation, Pilla said he received a surprising phone call from Bishop James Griffin, head of the Columbus Catholic Diocese, who said he planned to hire Smith as his chief financial officer. Griffin said he acted on the recommendations of Pilla and Auxiliary Bishop James Quinn, who "strongly and positively recommended" Smith for the Columbus job. Pilla denied endorsing Smith for the job in a letter to Griffin. "At no time did you ask for, nor did I give a recommendation to you" to hire Smith, Pilla read from his letter to Griffin in court. Griffin retired shortly after hiring Smith. Smith resigned from the Columbus diocese after he was indicted last August. Contact: jmccarty@plaind.com, 216-999-4153.
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