Cleveland diocese financial officer convicted

The church said it was never aware of any financial wrongdoing in the diocese.

CLEVELAND (AP) — A federal jury on Thursday convicted the former chief financial officer at the Cleveland Catholic Diocese of tax charges and acquitted him of more serious charges related to alleged kickbacks.

Joseph H. Smith, 51, sat calmly at the defense table with his hands folded and showed no emotion as the verdicts were read. The jury had been deliberating for nearly two weeks, taking two days off this week due to one juror’s illness.

The prosecution portrayed Smith as a manipulator who arranged $785,000 in kickbacks and secret payments because he felt he was underpaid.

He was acquitted of more serious charges of mail fraud related to the alleged kickbacks, but convicted of six tax-related charges, including conspiracy to defraud the IRS. A judge had earlier dismissed money laundering charges.

Sentencing was set for Oct. 3. He faces a maximum of 20 years in prison.

Smith smiled as he quickly left court and deferred comment to his attorney, Philip Kushner.

“Mr. Smith was happy and gratified to be found not guilty of the most serious charges,” Kushner said. On the tax convictions, he said the defense team will study its options, including filing an appeal.

The church said it was a victim in the case and was unaware of financial wrongdoing.

Smith’s co-defendant, Anton Zgoznik, a former church accountant and later an outside church contractor, was convicted in October of conspiracy and 14 other charges. He faces sentencing Sept. 26 and also could face up to 20 years in prison.

Assistant U.S. attorney John Siegel, the lead prosecutor in the case, said he felt there was enough evidence in Smith’s trial to support the mail fraud charges.

“The jury felt otherwise,” he said.

The government said Smith orchestrated $250,000 in secret pay raises over five years by funneling money to business related to Zgoznik, who then gave him kickbacks.

But the defense said the payments were an attempt by Smith’s boss, a priest who directed church financial and legal matters, to keep Smith from quitting for a better-paying job.

Zgoznik and Smith maintained that Bishop Anthony M. Pilla, now retired, knew of the payments. Pilla denied that, testifying at both trials that he was shocked to learn about them from an anonymous whistleblower’s letter.

The diocese issued a statement Thursday accepting the verdict and reiterating its position that no one knew of or approved irregular payments to Smith.

Judge Ann Aldrich postponed Smith’s trial until after Pope Benedict XVI wound up his recent visit to the United States.

Smith was the Cleveland diocese’s highest-ranking lay person until 2004, when irregularities in church finances were disclosed in an anonymous letter to a member of a lay board that advised the bishop on financial matters.

After leaving the Cleveland diocese, Smith took a job as chief financial officer in the Columbus Catholic Diocese but resigned after he was indicted in August 2006.

The eight-county Cleveland diocese is the largest in Ohio and the nation’s 17th largest with 766,000 Catholics.