Catholic World News News Feature

Cleveland diocese under scrutiny in former official's trial August 21, 2007

Jury selection began on August 20 in a criminal trial in which a former financial officer of the Cleveland, Ohio diocese is charged with defrauding the Church.

Anton Zgoznik, who was once the assistant treasurer of the Cleveland diocese, faces multiple criminal charges for allegedly conspiring with the former chief financial officer, Joseph Smith, in an elaborate scheme that involved multiple invoices and bank accounts. The scheme reportedly netted over $17 million in consulting fees for Zgnoznik-- who, according to an Ohio prosecutor, kicked back over $750,000 to Smith.

Defense lawyers representing Zgoznik and Smith have charged that diocesan officials, including former Bishop Anthony Pilla, were aware of the irregular financial transactions, and were themselves embezzling funds from diocesan accounts. Spokesmen for the Cleveland diocese have rejected these charges as "scurrilous."

At Zgoznik's trial, which is expected to last 2-3 weeks, the defense will use financial records from the Cleveland diocese in an effort to persuade jurors that Bishop Pilla was involved in the creation of multiple bank accounts that were kept off the official financial records.

The former bishop himself controlled one such secret account. Bishop Pilla has argued that the funds in that account were his own, although the account used the diocesan tax-identification number. After disclosure of the account, the bishop amended his personal income-tax return to reflect his personal use of the funds. In 2005 a group of lay Catholics headed by Santiago Feliciano, a former lawyer for the diocese, sued Bishop Pilla for mismanagement of diocesan funds. That suit was dismissed by an Ohio judge. Feliciano and a group of parishioners also brought suit against Smith for improper expenditures.

Bishop Pilla resigned in April 2006, shortly before an Ohio judge granted a request by the defendants in the fraud case to compel the release of diocesan financial records. Simultaneously with the announcement of Pilla's retirment, the Vatican announced the appointment of Bishop Richard Lennon to head the Cleveland diocese.

In a letter sent to the priests of Cleveland before the opening of Zgnoznik's trial, Bishop Lennon warned that "the defendants may try to portray the diocese and those associated with it in a light favorable to the defense." He reminded the priests: "The Diocese of Cleveland is not on trial; it is the victim of crimes alleged against the defendants."