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 Pilla stunned by news of crimeFormer bishop says he trusted close friend
Friday, May 30, 2008
John Caniglia Plain Dealer ReporterRetired Bishop Anthony Pilla testified Thursday that he was stunned when an anonymous letter accused Joseph Smith, one of his closest friends and advisers, of fleecing the Cleveland Catholic Diocese out of $784,000 through an elaborate kickback scheme. "My reaction was disbelief and secondly shock," Pilla said. "That was not the person I knew. Why was I shocked? We had a close relationship. I trusted him, for good reason." Pilla, looking pale and tired, testified in U.S. District Court for three hours in the second week of Smith's trial on charges of conspiracy, mail fraud, money laundering and filing false tax returns. Defense attor neys denied the allegations. They said a church official set up the pay ments as a way to help pay Smith and keep him from leaving for a better-paying job. Prosecutors called Pilla to bolster their case, though he repeatedly called Smith a loyal, hardworking employee vital to the diocese. Assistant U.S. Attorney John Siegel contends that Smith, the former financial chief of the diocese, and accountant Anton Zgoznik steered $784,000 to Smith. Smith gave $17.5 million of diocesan business to Zgoznik, who then shipped money back to businesses that Smith ran from his home, disguised as legitimate business expenses, prosecutors said. A jury convicted Zgoznik in October of conspiracy, tax charges, mail fraud and obstruction. He will be sentenced June 18. Defense attorney Philip Kushner said the Rev. John Wright, the diocese's financial officer who preceded Smith, knew of the payment scheme and approved of it as a way to supplement Smith's salary. In Zgoznik's trial, Wright admitted that there were some significant financial church transactions that were done without Pilla's knowledge. Wright testified that he approved a $250,000 bonus for Smith that wasn't documented in the diocese's ledger. Wright said he signed off on the payment to keep Smith from fleeing to a higher-paying job in the private sector. Pilla, who retired in 2006, testified Thursday that he didn't recall any accounts set up to pay Smith. He also had no idea of any lump-sum payments made to Smith by Wright, he said. He said the financial chiefs of the diocese reported to him once a week. But Pilla said he didn't worry about the day-to-day handling of the business side. "I'm not an accountant," he said. "I'm not a business person. I'm a pastor." Pilla said Smith implemented new accounting procedures and worked closely with parishes. He handled the bishop's taxes and helped organize a golf tournament Pilla established to raise money for inner-city Catholic schools. Pilla said he was pleased with Smith's work until a tipster sent an anonymous letter in January 2004 to the diocese and The Plain Dealer, outlining financial irregularities. "It just didn't fit the person I knew," Pilla said. Pilla called Smith to his office, where he met with a diocesan attorney and a member of the financial council. Pilla said he quickly left the meeting without much discussion. Smith went on paid leave. He later resigned. Pilla said Wright met with the bishop and apologized about the payments to Smith. "I said, 'John, why didn't you tell me?' " Pilla said. Pilla appeared saddened as he answered one of his last questions: What's your relationship with Joseph Smith. Pilla stopped. "My current relationship with Mr. Smith is that I've had no contact with him," he said. "But I still value the relationship that we had." To reach this Plain Dealer reporter: jcaniglia@plaind.com, 216-999-4097
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