Ex-accountant for diocese guilty in conspiracy

The defendant faces up to 20 years in prison.

CLEVELAND (AP) — A former Cleveland Catholic Diocese accountant who funneled $784,000 in kickbacks to a diocese official was convicted Tuesday of conspiracy and 14 other counts.

Anton Zgoznik arranged the payments to his former boss, Joseph Smith, from 1997 through 2004 in what prosecutors portrayed as unauthorized kickbacks in return for having diocesan accounting work contracted to Zgoznik’s private business.

Zgoznik, 40, frowned and sat calmly with his hands folded on the defense table while the verdict was read.

The U.S. District Court jury started deliberations Friday afternoon. After a weekend break, jurors resumed Monday morning and returned with a verdict Tuesday afternoon.

Zgoznik, of suburban Kirtland Hills, was convicted of conspiracy to commit mail fraud, eight counts of mail fraud, one count of conspiracy to defraud the IRS, one count of corruptly trying to obstruct, one count of aiding preparation of a false document and three counts of aiding preparation of a false tax return.

“What we presented to the jury was a kickback and tax fraud conspiracy. We are gratified the jury paid attention and deliberated correctly on that,” said John Siegel, the assistant U.S. attorney who prosecuted the case.

He was reluctant to discuss specifics because a trial is pending in the matter for Smith, 50, who was chief legal and financial officer for the diocese when the payments were made. He has been charged with 23 counts, including making false personal income tax returns, money laundering, mail fraud and conspiracy.

Possible jail time

Zgoznik faces up to 20 years in prison on the most serious counts, but will likely receive less time under federal sentencing guidelines.

He remained free on bond pending sentencing and left the courthouse without commenting. Judge Ann Aldrich set his sentencing for Feb. 20.

Zgoznik’s attorney Robert Rotatori expressed disappointment in the verdict. He said Zgoznik’s appeal will be based in part on difficulties the defense had in obtaining documents from the diocese. He would not say what they were.

“The diocese maintains a mentality and atmosphere that encouraged this kind of activity,” Rotatori said. “He [Zgoznik] thought that he was doing what he had authority to do.”

Zgoznik’s defense said during the five-week trial that the payments amounted to extra executive compensation authorized by church officials in a pattern of secret financial dealings.

Zgoznik tearfully denied wrongdoing during his testimony at trial and said he was a middleman who handled payments between diocesan leaders and a valued lay employee who could have commanded a higher salary elsewhere.

Zgoznik testified the diocese boosted Smith’s compensation through him but that he did not know it was wrong to do so. He said he was loyal to the diocese when the payments were made.

The diocese, which includes eight-counties and about 780,000 Catholics has claimed it was victimized by the scheme.

The diocese issued a statement Tuesday saying it has implemented polices and procedures in recent years to strengthen its financial controls.

“It is unfortunate that Mr. Zgoznik chose to engage in illegal activity to defraud the diocese,” the statement said.

Bishop as a witness

Retired Bishop Anthony M. Pilla was called as a witness at the trial and testified that he felt betrayed when he learned about the payments.

“There was no way Bishop Pilla would know, the diocese would know” about the payments, Siegel told the jury.

Bills submitted to the diocese by Zgoznik were meant to be obscure, and the alleged conspiracy hurt the church financially and defrauded the Internal Revenue Service of taxes, Siegel said.

Rotatori said during the trial that secrecy was an accepted part of business practices within the diocese. He said Zgoznik went along with payments to Smith at the direction of top diocesan leadership.

Zgoznik had been taught as a young Catholic to “never, ever, ever question the clergy,” Rotatori told the jury. “You never doubt the priest. Whatever the priest tells you to do, you accept.”