Jury to Announce Verdict in Diocese Kickback Case

By John Caniglia
Plain Dealer
July 3, 2008

A jury will announce its verdict this morning in the fraud case of Joseph Smith, the former chief financial officer for the Cleveland Catholic Diocese accused of stealing $784,000 from the church.

The trial lasted five weeks. The jury has deliberated on charges of fraud, conspiracy and tax evasion for nearly two weeks.

Smith, 51, of Avon Lake, is accused of running an elaborate kickback scheme with accountant Anton Zgoznik.

Smith steered $17.5 million in diocesan business to Zgoznik between 1996 and 2003. Some of those bills were wildly inflated, prosecutors said, although they would not detail by how much.

Court officials said the verdict will be announced about 11:30 a.m.

Zgoznik, in turn, then made payments to two companies owned by Smith, prosecutors said.

A jury convicted Zgoznik of conspiracy, money laundering, mail fraud and obstruction of justice after a trial last year. Zgoznik is to be sentenced in September.

Smith's lawyer argued that his client did nothing wrong. The money funneled to Smith was not a kickback but rather payments approved by the church's leaders as a way to supplement Smith's salary, attorney Philip Kushner said.

"The payments were a secret raise . . . to Mr. Smith to keep him at the diocese," Kushner said.

The Rev. John Wright, who preceded Smith as chief financial officer, admitted authorizing a one-time secret payment to Smith in 1996 of $250,000. The money, Wright testified, was supposed to keep Smith from taking a higher-paying job in the private sector.

Wright denied approving or having knowledge of the other payments between Smith and Zgoznik.

Diocesan officials have adamantly denied church officials approved of or knew about the payments.


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