Former Bishop Pilla Implicated In Alleged Kickback Scheme

CLEVELAND -- There is a new development in an alleged kickback scheme within the Catholic Diocese of Cleveland.

New allegations implicate that former Bishop Anthony Pilla gave the green light for a secret church bank account, 5 On Your Side investigator Ron Regan reported.

Former diocese CFO Joseph Smith and another former employee, Anton Zgoznik both pleaded not guilty in federal court on Wednesday to charges that include conspiracy, mail fraud and money laundering.

The case involves millions of dollars in church-related business and whether the former employees illegally profited from it.

Unitl now, the role that Pilla played in the alleged scheme remained a mystery.

Smith is accused of being paid $270,000 in a secret church account. Lawyers for Zgoznik said that their client was not only authorized to make those payments but that top church officials knew about them, including the recently retired bishop.

"The chief financial officer was aware of it, the committee that reviewed the finances made up of lay people and priests were aware of it, the CPA firm that audited the books every year was aware of it, the bishop was aware of it, and now because of the multi problems, I think, in this diocese, people are just saying, 'Oh no, we didn't know and we didn't authorize,' so it's a tragedy," said defense attorney Robert Rotatori.

Smith allegedly received another $784,000 in kickbacks in return for steering more than $17 million in church business to outside companies owned by Zgoznik.

Smith's attorney said the payments are not what they appear to be.

"We think that there are some misunderstandings which we hope to clear up and we look forward to doing so at trial, in the courtroom with the jury," said attorney Philip Kushner.

Both Smith and Zgoznik are free on $50,000 bond, although Smith was ordered to wear an electronic monitoring device and remain at home between the hours of 10 p.m. and 6 a.m.

A trial date has been set for Nov. 6.

Previous Stories:

August 23, 2006: Man Enters Not Guilty Plea To Defrauding Catholic Diocese
August 17, 2006: Indictment: Former Diocese CFO Received Kickbacks

http://www.cwnews.com/offtherecord/offtherecord.cfm?task=singledisplay&recnum=3764

when the other shoe drops

Posted by: Diogenes - Aug. 25, 2006 10:15 AM ET USA

There's a funny sequence of events this year in the Cleveland diocese:

In January, Bishop Anthony Pilla announced that he had asked the Vatican to accept his resignation. That seemed odd, since at the time he a couple of years short of canonical retirement age. Bishop Pilla ducked questions about his reason(s) for wanting early exit. Odd.
In April the Vatican accepted the Pilla resignation, and immediately announced that his successor would be Bishop Richard Lennon. Again, odd. Usually a bishop's resignation is followed by a lengthy search for an appropriate successor. And the choice of Bishop Lennon-- who had made his bones in Boston by serving as apostolic administrator after Cardinal Law was run out of town-- indicated that Rome wanted a battle-tested soldier on the ground, fast.
To be sure, the Cleveland diocese had its problems. Bishop Pilla had faced nasty accusations that he had lied under oath in testimony involving sexual abuse by Cleveland clergy. But that had been several months earlier, and the perjury charges were no longer in the headlines at the time of the bishop's rather sudden resignation.
Then another nasty story arose in Cleveland: about the diocesan finance officer being investigated on charges of fraud involving over $700,000 in diocesan funds. The criminal investigation that produced this week's indictments would have been gaining steam at just about the time Bishop Pilla stepped down. An odd coincidence?

Now, from Cleveland's Channel 5 news, we hear the allegation that "Bishop Anthony Pilla gave the green light for a secret church bank account" involved in the fraud charges. The defense attorney for the indicted former diocesan official claims that Church officials knew what his client was doing with the money, and specifically that "the bishop was aware of it."

That's a defense lawyer talking, of course; we shouldn't take his perspective as Gospel truth. But then frankly, Bishop Pilla's reputation as a straight shooter has been pretty thoroughly tarnished (see item #3 above). And if the former bishop was implicated in the financial misconduct, that would explain the timing of his departure.

Not for the first time, we're left to observe that when a bishop mishandles the financial affairs of his diocese, the Vatican takes action promptly. If only Rome would act as quickly when a bishop's misdeeds involve spiritual affairs!

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Did Bishop's Spokesman Lie to Poor Rocco Palmo about Pilla Resignation?
April 5, 2006 | Diago

Posted on 04/05/2006 12:07:40 AM EDT by Diago

Three months ago when Bishop Pilla's offer to resign was made public, there was much speculation that Pilla was being forced to resign and that the Pope would quickly accept his resignation.

Pilla and Pope Benedict had been odds dating back to Pilla's tenure as President of the United States Conference of Catholic Bishops. Moreover, Pilla was being investigated by the FBI, was being sued for perjury, had overseen the Diocese during the widespread homosexual priest abuse scandal, and had continued to allow Futurechurch to reside on diocesan property after telling the Vatican differently.

Pilla was being forced out and everyone in the know knew it.

Even the Plain Dealer reported at the time:

http://www.freerepublic.com/focus/f-religion/1555796/posts

"Bishop Anthony M. Pilla won't say why he has offered to resign from his position as leader of more than 800,000 Roman Catholics in the nation's 15th-largest diocese."

"nagging questions about the financial stewardship of diocesan officials - show no sign of abating soon"

"unusual and intriguingly timed request"

"particularly his handling of the sexual-abuse and financial scandals"

_________________________________________________________

And then one man stepped forward to tell us we were all wrong.

That man was Rocco Palmo and his source was Cleveland diocesan spokesman Bob Tayek.

On January 5, 2006, Palmo stepped forward and assured us through the diocesan spokesman that Pilla "was not going anywhere" and that he just "wanted to get his request in the pipeline." He want on to tell us that Pilla would be around until a "series of events which could likely take a year or more to conclude."

His report follows:

http://whispersintheloggia.blogspot.com/2006/01/pilla-still-bishop-of-cleveland.html

Pilla: Still Bishop of Cleveland

Some reports this morning seemed to indicate that Bishop Anthony Pilla's resignation as head of the diocese of Cleveland and its more than 800,000 Catholics is relatively imminent.

Rumors circulating in recent weeks of Pilla's desire to leave office early were confirmed when the bishop yesterday told the Cleveland Plain-Dealer that he had asked to be relieved of the governance of the diocese in advance of his 75th birthday in November 2007.

Despite the unusual request, a word of caution is still advisable.

Bishop Pilla's letter to the Holy See seeking retirement under the provisions of Canon 401, paragraph 2 merely sets into motion the process for the selection of his successor, which normally begins once a bishop has surpassed the canonical retirement age of 75. In recent years, however, particularly in the wake of the sex abuse scandals since 2002, the replacement of retiring diocesan bishops has been subject to increased scrutiny placed upon potential nominees by both the Congregation for Bishops in Rome and the apostolic nunciature to the United States in Washington. Delays have often extended to beyond a superannuated prelate's 76th or even 77th birthday.

In an interview with Whispers, Cleveland diocesan spokesman Bob Tayek indicated that Pilla intends to remain in his post until the acceptance of his retirement and designation of his successor, a series of events which could likely take a year or more to conclude and are expected to occur in tandem.

"He's not going anywhere," Tayek said of Pilla, whose patience will spare the diocese of having to install an administrator to govern it for the interim. Alluding to the bishop's awareness of the the state of the process, the spokesman said the bishop "just wanted to get [his request] into the pipeline."

***

Complicating the timetable which will select the tenth bishop of Cleveland are several shifts at work, both in Rome and the United States.

The Cleveland appointment will be the first major American appointment to bear the stamp of Pope Benedict XVI's hand-picked representative to the United States, Archbishop Pietro Sambi, who was appointed as nuncio to Washington last month to replace the retiring Archbishop Gabriel Montalvo.

Sambi, who is not expected to arrive in Washington until late January at the earliest, must establish his own criteria for the research and consultation processes from which the terna of recommended nominees is produced before the appointment dossier can proceed to the Congregation for Bishops at the Vatican, which votes to forward one name to the Pope.

The Congregation is currently at its highest-ever American compliment of five prelates, among whom can be expected a significant exchange of views given Cleveland's size and prominence on the national stage. Notable among the Americans is Archbishop William Levada, prefect of the Congregation for the Doctrine of the Faith, whose counsel has already begun to be felt in Benedict's first US appointments, coming barely five months after his arrival in Rome.

Pilla, who served as president of the United States Conference of Catholic Bishops from 1995-98, is said to be "well aware" of the factors which will likely delay Rome's acceptance of his retirement. To mark his Silver Jubilee as diocesan bishop, Cardinal Theodore McCarrick of Washington will celebrate an invitation-only liturgy tomorrow at Cleveland's Cathedral of St. John the Evangelist at which a standing-room only crowd of 1,200 is expected.

________________________________________________________

Three months later and Pilla is gone. Rocco became the final victim of the Pilla adminstration's pattern of deception.

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