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Bishop Pilla had hidden account, ex-CFO says
Cleveland Plain Dealer ^ | Sunday, February 18, 2007 | Mike Tobin

Posted on 02/18/2007 5:01:13 PM PST by Diago

Pilla had hidden account, ex-CFO says

Diocese denies charges by indicted financial officer
Sunday, February 18, 2007
Mike Tobin
Plain Dealer Reporter

Former Cleveland Catholic Bishop Anthony Pilla received $177,000 in money and furniture over a decade from an off-the-books church account set up to hide the transactions, a former diocesan official said.

The accusation came in a 40-page motion filed Friday in U.S. District Court by lawyers representing Joseph Smith, the former diocesan chief financial officer. Lawyers for Anton Zgoznik, a former diocesan employee, later joined the motion.

Smith and Zgoznik are accused of defrauding the Cleveland Catholic Diocese out of at least $784,000 over seven years in an elaborate kickback scheme. The two men maintain they simply followed orders from diocesan supervisors, including Pilla, and are taking the fall for the church's poorly managed finances.

A diocesan spokesman denied Smith's accusations.

"We are sorry that Mr. Smith has resorted to making false accusations against those associated with the diocese," spokesman Bob Tayek said in a written statement released Saturday.

"Any suggestion that those involved with the administration of the diocese knew or approved of the activities charged against Mr. Smith, or engaged in similar acts, is false," Tayek said. "We continue to pray for Mr. Smith and his family."

Smith, 50, and Zgoznik, 40, were indicted in U.S District Court last year on charges including conspiracy, money laundering, fraud and tax evasion. Both have pleaded not guilty.

Their trial is scheduled to begin in April.

Smith, of Avon Lake, and Zgoznik, of Kirtland Hills, are accused of running a kickback scheme using church money. As part of his job, Smith approved $17.5 million in payments for accounting and financial work to companies owned by Zgoznik between 1996 and 2003. Some of the work was legitimate, but some of the work was not, prosecutors said.

In return, Zgoznik then paid $784,000 in consulting fees to companies owned by Smith, prosecutors said.

Smith then used the money to pay for a Florida condo, his children's tuition, landscaping and resort membership, prosecutors said.

Prosecutors have not specified how much money Zgoznik got that he was not entitled to receive.

Smith and Zgoznik contend that diocesan supervisors, including Pilla and the Rev. John Wright, knew of and approved the payments as a way to supplement Smith's salary. Wright was Smith's supervisor for several years, until Smith succeeded him as financial secretary.

The motion filed Friday asks U.S. District Judge Ann Aldrich to force federal prosecutors or the Catholic diocese to produce financial documents that Smith's and Zgoznik's lawyers say would help exonerate the men.

Robert Rotatori, Zgoznik's lawyer, said the diocese had hundreds of bank accounts that were not listed on the financial books and records of the diocese. Those accounts were routinely used to give additional compensation to diocesan employees, including Pilla, Rotatori said.

"We want to demonstrate the diocese was working with off-book accounts and disbursing money," he said. "This is not something they're unfamiliar with."

In the motion, the lawyers outline transactions in several accounts they say existed but were not part of the diocese's official books and records. The documents list check numbers, dates, amounts and payees.

Philip Kushner, Smith's attorney, said Smith provided the information.

"Joe Smith worked at the highest levels of the diocese for over 20 years," Kushner said. "He's intimately familiar with diocesan operations and specific transactions."

Smith started working for the diocese in the 1980s. In 1994, he was named chief financial officer, becoming the highest-ranking lay person in the business office. In 2000, he was named legal and financial secretary, a job he held until 2004, when he was suspended.

One account detailed is the "Anthony M. Pilla Charitable Account" opened at McDonald & Co. The account had assets of more than $500,000, Kushner said in the motion.

"Bishop Pilla withdrew money from the account for his own use in a manner designed to conceal the transactions and his use of the fund," Kushner wrote. "After the indictment in this case, Bishop Pilla resigned and filed amended tax returns which account for some of the activity in this account."

Pilla, who retired last year citing health concerns, declined through a spokesman Saturday to comment.

In September 1991, Pilla had two checks written on the Anthony M. Pilla Charitable Account totaling $85,825. The money was deposited with the diocese, which then bought a money order payable to Pilla for the same amount, Kushner said.

In 1997, three checks were written on the Pilla account to Ivanhoe Furniture totaling $78,759, Kushner said.

There were also 28 checks written between 1997 and 2001 made out to cash. Those checks totaled $12,558, Kushner wrote.

In 2002, Pilla wrote a check payable to cash from the account for $180,000, which was deposited with the diocese. It's unclear what became of that money, Kushner said.

Kushner declined to say whether the money in the Pilla account came from the diocese or from private donors. The account alternated between using the diocesan and Pilla's tax identification number but never appeared on the diocese's books or records, Kushner claims.

Smith also claims Wright, the former financial secretary for the diocese who now leads the Catholic Cemeteries Association, approved more than $700,000 in payments to himself, his secretary and companies owned by friends and relatives.

Kevin Spellacy, a lawyer representing Wright, did not return calls seeking comment. Spellacy acknowledged last year that Wright approved paying Smith an additional $270,000 that was placed in an account outside the diocese.

Spellacy said at the time that Wright was duped and did not know about the additional $784,000 in payments made through Zgoznik.

Smith's lawyers say that Wright not only knew about the payments but also orchestrated them.

"He is a financially sophisticated attorney," Kushner wrote. "He arranged for other diocesan employees to receive compensation through Zgoznik enterprises, so it would not be disclosed on [diocesan] books and records."

Starting in 1998, Wright approved payments of more than $500,000 to a die and mold company, which Kushner says is owned by a friend of Wright's. The money was paid through Basilica Corp., a subsidiary of the Catholic Cemeteries Association that manufactured burial monuments.

The motion also says Wright approved $95,000 worth of payments to consulting and landscaping companies where relatives of Pilla and Wright worked.

Smith resigned from his job at the Cleveland diocese but then took a similar position with the Columbus diocese in 2004. He resigned from that job last year, after he was indicted.

To reach this Plain Dealer reporter:

mtobin@plaind.com, 216-999-4128


© 2007 The Plain Dealer

© 2007 cleveland.com All Rights Reserved.


TOPICS: Catholic; Current Events
KEYWORDS: pilla
Believing Pilla didn't know about a kickback scheme takes a giant leap of faith

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1 posted on 02/18/2007 5:01:16 PM PST by Diago
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To: Coleus; NYer; narses

bump


2 posted on 02/18/2007 5:02:49 PM PST by Diago ("Upon hearing about such things, I confess that I'm tempted to look for my shotgun and baseball bat")
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To: Diago

Oh dear, another scandal that the media is going to beat up Catholics on.


3 posted on 02/18/2007 5:05:24 PM PST by mware (By all that you hold dear.. on this good earth... I bid you stand! Men of the West!)
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To: Diago
Despite Bishop Pilla's seeming to be perhpas not the world's most forthcoming and reliable bishop, there is a problem here. In the PepsiCola Church we used to have "discretionary funds". I forget the whole canonical justification but it was along the lines of the Rector got the total haul of one Sunday a month - for chariotable purposes, or something like that. But what happened was that the preist would accept an "allowance" in lieu of the one colelciton a month. Better all around for finances.

Now I considered that money confidential, because I used it for confidential things, like buying a hooker some nights in a motel to get away from her pimp, or helping to hide an abuse victim. That kind of stuff.

The whole thing ws based on trust: trust that I would not cheat.

BUT, it being the PesiCola Church there were never any guidelines that anyhbody cared about. Some priests would say they could use their discretionary find to buy books of a profesisonal nature. And little by little, what sure looked like abuses crept in, and the fund began to look to the IRS like income.

From MY POV this was a great loss. What had enabled me to be an emergency provider of last resort in tricky situations was, at the time I renounced my orders, likely to become open to lay auditors from the Diocese, the IRS, or wherever.

When people abuse charitable gifts in a church environment, it's a real disaster. Society needs a few people with money and confidentiality. When we lose that, it's pretty sad.

4 posted on 02/18/2007 5:19:47 PM PST by Mad Dawg ("global warming -- it's just the tip of the iceberg!")
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To: mware

If the church doesn't admit wrongdoing when and wherever it occurrs and take care of it...then its not " the media is beating up on us"!

"Blind faith" doesn't mean stupid.
Nobody audits these churches???


5 posted on 02/18/2007 5:39:44 PM PST by Recovering Ex-hippie (We need a troop surge in New Orleans and Philly!)
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To: Diago

Strange... never saw it as CFO.


6 posted on 02/18/2007 5:55:18 PM PST by AliVeritas (Stop Global Dhimming. Demand testicular fortitude from the hill. Call the crusade.)
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To: 2ndMostConservativeBrdMember; afraidfortherepublic; Alas; al_c; american colleen; annalex; ...

poor stewardship


7 posted on 02/18/2007 5:59:36 PM PST by Coleus (Roe v. Wade and Endangered Species Act both passed in 1973, Murder Babies/save trees, birds, insects)
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To: Mad Dawg

As an accountant, it makes my hair stand on end. I want to see receipts for everying.

As a ... person ... I want to think the money is going for something that is forwarding the Kingdom of God.


8 posted on 02/18/2007 6:24:48 PM PST by Tax-chick (Every "choice" has a direct object.)
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To: Tax-chick
Yeah, I get the hair on end side of it. What I lament is that the probably predictable abuses to confidential discretionery accounts finally happened.

From MY POV it's like this: I have a guy. He's an SOB, alcoholic, abuser of family. WE lock him up. well, that's one answer, but it doesn't solve stuff, not really. But if I can get him into a situation where he is going to have to deal with his addiction and where his family will not have to deal with him for 6 whole weeks, while they figure out their options ... then we have some hope. Not much, but some.

But if we just throw him in jail, which IS an option, I don't see any real improvements for him or anybody else, and the family, which has just begun to deal with this at all, will suddenly be overwhelmed with lawyers, police, and publicity and ....

SO here's a case where my being able to throw some money at a problem under strict confidence is good. (And this case is, in fact, a composite of a few I dealt with so it's not real, but close enough to a few realities.) And the freedom and fluidity of NOT having to go through a committee is priceless. From my learning what was up to my getting a hosptial bed AND the cooperation of the bad guy was about 3 days of doing nothing but. It was great. I confront the guy, and drive him to the hospital. NO delay, no muss, no fuss. And Nobody the wiser.

That's a nice capability. It's a shame we don't have it anymore, because some dopes thought that wearing a collar gave them some kind of entitlement.

9 posted on 02/18/2007 6:37:29 PM PST by Mad Dawg ("global warming -- it's just the tip of the iceberg!")
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To: Mad Dawg

I agree. Financial discretion is great when the people given discretion can be trusted to be stewards. Maybe not perfect stewards, but stewards who are genuinely working for the Kingdom.

Unfortunately, too many aren't, so you get into the "count every penny - if it's not in the budget forget it!" mentality. That doesn't work for Christ.

We shouldn't have to be always in "damage control" mode, but it seems like that's where most Christian bodies in the U.S. are, these days. "Just don't do anything disastrous, please!"


10 posted on 02/18/2007 6:41:16 PM PST by Tax-chick (Every "choice" has a direct object.)
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