Former Top Cleveland Church Accountant Convicted

Associated Press, carried in Akron Beacon Journal
July 03, 2008

A federal jury on Thursday convicted the former top accountant at the Cleveland Catholic Diocese of tax charges in a case that involved alleged kickbacks and secret church accounts.

The jury in the trial of Joseph H. Smith, 51, of Avon Lake, returned the verdict after beginning deliberations nearly two weeks ago in U.S District Court.

The prosecution portrayed Smith as a manipulator who arranged $785,000 in kickbacks and secret payments because he felt he was underpaid. A judge earlier dismissed money laundering charges, and Smith was acquitted Thursday of more serious charges of mail fraud related to the alleged kickbacks.

He was convicted of six tax-related charges, including conspiracy to defraud the IRS, making a false tax return and obstructing an IRS investigation. He faces a maximum sentence of 20 years in prison.

The church said it was a victim in the case and was unaware of financial wrongdoing.

The government said Smith orchestrated $250,000 in secret pay raises over five years and took kickbacks from his co-defendant, Anton Zgoznik, through church accounting and consulting contracts with Zgoznik businesses.

According to the government, the alleged scheme put the diocese at risk of overpaying for accounting services.

The defense said the $250,000 in payments were an attempt by Smith's boss, a priest who directed church financial and legal matters, to keep Smith from quitting for a better-paying job.

Zgoznik and Smith maintained that Bishop Anthony M. Pilla, now retired, knew of the payments. Pilla testified at both trials and said he was unaware of the payments and was shocked to learn about them from an anonymous whistleblower's letter.

Zgoznik, a former church accountant and later an outside church contractor, was convicted in October of conspiracy and 14 other charges. He faces sentencing Sept. 26 and could face up to 20 years in prison.

Judge Ann Aldrich postponed Smith's trial until after the completion of Pope Benedict XVI's recent visit to the United States. The defense had asked for such a delay, fearing favorable coverage of the papal trip could hurt Smith's chances for a fair trial, but the judge said she took the action on her own initiative in the interest of justice.

Smith was the Cleveland diocese's highest-ranking lay person until 2004, when irregularities in church finances were disclosed in an anonymous letter to a member of a lay board that advised the bishop on financial matters.

After leaving the Cleveland diocese, Smith took a job as chief financial officer in the Columbus Catholic Diocese but resigned after he was indicted in August 2006.

The eight-county Cleveland diocese is the nation's 17th largest with 766,000 Catholics.


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