Posted on 08/30/2007 6:39:21 AM PDT by Alex Murphy
CLEVELAND The retired bishop of the Cleveland Catholic Diocese testified Wednesday in federal court that he felt betrayed by a trusted top aide when he heard about alleged kickbacks in the church.
Former Bishop Anthony Pilla, 74, testified in the trial of Anton Zgoznik, a former church accountant charged with paying kickbacks to his old boss, the top-ranking lay executive of the diocese.
Pilla testified that he was unaware of any extra money paid to the diocese’s former chief financial officer, Joseph Smith, who faces trial later.
The prosecution has alleged that Zgoznik funneled $785,000 in kickbacks to Smith, through $17 million in outside auditing and consulting contracts with the church.
The defense claims that the funds reflected extra executive compensation arranged by the defendant in a pattern of secret financial dealings by the church.
Zgoznik, 40, of suburban Kirtland Hills, faces 15 counts, including mail fraud and conspiracy to commit mail fraud.
Pilla, who retired last year after 25 years leading the eight-county diocese of 800,000 Catholics, said he learned of the alleged kickbacks from William Reidy, a financial adviser who received a whistle blower’s anonymous letter detailing the alleged payments in late 2003.
“Shock,” Pilla responded quietly when asked his reaction to learning about the alleged payments.
Smith “was a valued co-worker in whom I had great trust,” Pilla said. “I had complete trust.”
Pilla, after meeting with an attorney and advisers, placed Smith on leave one day later. Smith quit within the month as the FBI mounted an investigation into financial irregularities.
Pilla said he was unaware of any off-the-books payments to Smith. Asked if he would have approved the $250,000, five-year lump-sum incentive payment authorized by Smith’s predecessor for Smith, Pilla said he would do so only if recommended by his outside financial advisers.
Smith had complained that he was underpaid working for a nonprofit institution. Pilla testified Smith was paid $120,000 to $150,000. Pilla said he followed the salary recommendations of his financial advisers.
When jurors submitted questions read by the judge, one asked whether Pilla had ever visited a Florida condo where the prosecution has contended Smith got $15,000 in rental payments that amounted to kickbacks.
“No,” Pilla responded.
Asked by a juror about perks for his job, Pilla said his compensation included a car and transportation expenses.
Under cross-examination by the defense, attorney Robert Rotatori tried to show that Smith had growing access to Pilla and was given additional responsibilities, including work addressing the clergy sex-abuse scandal.
“That role also increased his status in the diocese?” Rotatori asked.
“It did,” Pilla responded.
Pilla said Smith had sought the job security of an employment contract when Pilla first began discussing retiring several years ago as the sex-abuse scandal spread.
Pilla said the interest in an employment contract was understandable giving his retirement discussions and the job uncertainty Smith might face with a new bishop.
Reidy, a retired accountant and financial adviser to the church, testified Wednesday that Pilla expressed shock when he heard the whistle blowers’ report on the church’s financial irregularities.
Yesterday's thread covered the Rev. John Wright's testimony.
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