by Jason Berry
“We were friends,” Wright said of Joe Smith. “I relied on him totally for his financial experience. I felt Joe was a hard worker and he did a good job.”
When Rotatori questioned him about payments to a computer consultant with money routed through Zgoznik’s company, Wright said, “I was not aware of that.” Did he know how the subcontractor was paid? “I never really inquired … I assumed the diocese was paying him directly.”21
Wright admitted to arranging a $60,000 loan for one of his secretaries, Maria “Mitzy” Milos in the late 1990s. He cleared it with Pilla: “We didn’t work out the specifics, but he told us to work it out.” Mitzy Milos’s loan was not on church ledgers; when she fell behind on payments, Wright paid the $50,000 balance from Cemeteries. Mitzy Milos repaid it through paycheck deductions.
Against the image of a benevolent boss, Wright was a cipher on questions of deep money. He had no recollection of Zgoznik’s contractual ties to the diocese; he did not remember signing the first $185,000 bonus check for Smith in 1996, when his salary was $70,000. When Smith assumed his job as Wright moved on to Cemeteries, in 2000, he knew Smith was earning $135,000. “He said that he was going to negotiate his salary with the canonical advisors,” said Wright. That much, he remembered.
On the fulcrum issue of why and how in 1996 Wright approved a total bonus of $270,000 for Smith not to seek private sector work, he was hazy.
ROTATORI: Did you not ask Anton Zgoznik to check with universities and hospitals and see what they were paying their chief executive officers?
WRIGHT: No. I don’t recall doing that. I just recall Anton saying Joe would be making twice as much out in the public.
Wright did allude to a twist of regret. He had met with another priest, his spiritual director, to discuss whether to tell Pilla about a $270,000 off-the-books bonus. That dialogue of entombed secrecy (his spiritual adviser had passed on) confirmed for the Georgetown law graduate that he could, in conscience, keep mum on how Joe Smith got his money. Despite that nebulous notion of guilt, Wright’s memory hole deposited the ethical burden onto Anton Zgoznik.
Bishop Pilla took the stand. The smooth, dulcet tones of a homilist yielded to terse answers as a witness. “I considered it a very close relationship,” he said of Smith. “He was of great assistance to me because I’m not a business person. I have no training in that.”
Bishop Pilla’s use of money, secret accounts, the foiled grab for the Dolan house, were off-limits for questioning. His motives and behavior were not on trial. In the prosecution script, Tony Pilla was a victim. What, asked Assistant U.S. Attorney Siegel, did the bishop think of that anonymous letter that spilled out the news of payments between Smith and Zgoznik?
“Shocked,” testified Pilla. “I had complete trust in Mr. Smith. He was a valued co-worker in whom I had great confidence and trust.”
Shocked, registered Charlie Feliciano of testimony that recalled for him the scene in Casablanca when the police chief in Humphrey Bogart’s nightclub orders a probe of backroom gambling, saying Round up the usual suspects! just as someone hands the chief his winnings. But Charlie Feliciano was not on the jury.
Pilla said he knew nothing of the Wright-Smith agreement for the off-the-books bonus of $270,000. Nor, testified the bishop, had he known that Wright allowed a longtime executive at Cemeteries, Tom Kelly now, to retire, draw a pension, and continue to work, billing the diocese as a subcontractor off payroll. Father Wright felt for Tom Kelly: his wife had Alzheimer’s; her care costs were skyrocketing. Still, when Rotatori asked Pilla if he had discussed Tom Kelly’s deal with Wright, the bishop had no memory.
The silence between Father Wright and Bishop Pilla on diocesan finances hovered like a monolith, damp in folds of fog.
Only after the scandal broke had Pilla discussed Smith’s bonus with Wright, “expressing my serious concern, that I was not informed or consulted, in a reprimanding way, and my disappointment,” asserted the bishop.
“It would have been nice to hear more from the bishop,” one juror remarked after the trial. “He played deaf, dumb and blind up there.”22
One hurdle to Pilla’s victim-credibility was the job Smith got in Columbus. Pilla testified that Bishop Griffin had called him several weeks after Smith resigned—a surprising phone call, said Pilla, who then read from a letter he had sent Griffin: “At no time did you ask for, nor did I give a recommendation.” Griffin did not testify: Smith’s job was irrelevant to Zgoznik’s charges. And so Pilla read the letter—his self-defense—on how another bishop had hired Joe Smith.
As prosecution and church lawyers sparred over what various witnesses should or could not say, more hushed huddles ensued at the bench.
“I’m beginning to feel like the judge in the O.J. Simpson case with all of these sidebars,” Her Honor said at one point. “I don’t normally work like this.”23
When Zrino Jukic’s secretly taped conversation was presented, Anton Zgoznik’s scramble to keep himself from being the fall guy was on full display. “We’ll say they wanted us to keep a confidential payroll going on,” Anton tells Zrino, “because they wanted to compensate the key executives of the diocese. It’s gonna be our word against theirs.”
Later, he says, “Zrino, we did not kick back any money.”
“I know, I know,” replies Zrino. “We got sucked in. We didn’t do anything”—though Zrino was sucking in Anton via the digital device in his sock.24
When Anton Zgoznik took the stand his biggest challenge was to rebut the black image of himself from the tape and Zrino Jukic’s knifing testimony.
“I was the only one of my family born here,” he began. “My father died when I was in college. And, you know, we had no aunts or uncles, so in essence, I had to finance a lot of my education … with the support of my mother.” Recounting his employment history, the founding of his firm as chief diocesan vendor of financial services, he began rushing, giving longer, nervous answers, apologizing to judge and jury. But Anton Zgoznik was emphatic on having met with Wright to review Smith’s job and the contested payments of $185,000 and $85,000. In those discussions, he learned the diocese had assets of $3 billion. Details like that do not come from thin air. How had he gotten the money to pay Smith?
Basically, what I did is find unrestricted money that was sitting in the Finance Office, and basically, you know, I found that pocket of money and moved that money into their checking account.
Now, that money was held as like a liability on their books, but it was really unrestricted. Once the money was moved from that investment account, for that liability into their checking account, the Diocese would have enough to make a payment to cover funds for Mr. Smith.
Under Siegel’s questioning, Zgoznik grew flustered, volunteering, “I was not happy about taking money off the books, and I told Smith and Father Wright, you guys have to go another way. Taking money off the books is not right for me or the Catholic Church, Mr. Siegel. I was concerned about the appearance of doing something like that behind closed doors.”
Emotions welling, Zgoznik went far beyond the question about how the second check was written: “I am on trial because they don’t want to take responsibility for their decision making. And you know what? They are human beings, but they are blaming the wrong person!”
Huge and shaking, he spun into a choking carousel of self-defense: “Yes, I had good understanding of the Diocese, but I earned my work unequivocally, categorically. Anton Zgoznik would never buy the work! I would never buy the work. I would rather take a gun to my head than steal from my own religion! This is my church we are talking about, my church to House of God that I love. I would rather take a gun to my head, and if I get convicted, Mr. Siegel, kill me, please. Because anybody that takes money from his own religion should die! I deserve to die. Anton Zgoznik doesn’t deserve to live—”
“Sir!” interjected Judge Aldrich.
“—if he pays the kickbacks,” groaned Zgoznik, in near hysteria.
“Would you please cal
m down?” said the judge.
Anton Zgoznik composed himself.
In closing arguments his attorney Rotatori had to maneuver around the devastating taped conversation in which Zgoznik tried to confect a defense for himself and Zrino Jukic. Rotatori outlined Zrino Jukic’s many problems saying, “That’s why he made up these lies.” But after his client’s overflow of self-pity on the stand, Rotatori stopped short of a full attack on the diocese’s cozy world of financial insiders. “Never, ever, ever question the clergy” is how he explained his client’s flaw. So had Anton been taught as a boy, so had Zgoznik worked as a man. “Never doubt the priest. Whatever the priest tells you to do, you accept.”
In contrast, federal attorney John Siegel told the jurors in his summation: “There was no way Bishop Pilla would know, the diocese would know.”
When the jury returned, Anton Zgoznik was convicted on fifteen counts of fraud, kickbacks, and tax charges. His wife was weeping.
Judge Aldrich let him stay free on bond till sentencing. Rotatori promised to appeal in remarks to the press more barbed than his closing argument: “The diocese permitted this type of program to go on. They permitted the improper transfer of charitable funds for noncharitable purposes.”
He hit that one dead on the money.
EVIDENCE OF THINGS UNSPOKEN
When Joseph Smith stood trial ten months later, Zgoznik was still free on bond. Judge Aldrich wanted the second case done before meting out prison time for the two defendants.
Too smart to testify in his own defense, Joe Smith had a paramount advantage over Zgoznik: the Smith jury would not be exposed to Zrino Jukic’s taped conversation with Anton. Judge Aldrich ruled it inadmissible as hearsay evidence: Smith was not present as the two men schemed on how to defend themselves in entanglements with him. Nor would Smith’s trial be subjected to messy fireworks by Anton Zgoznik giving testimony: the prosecution could not gamble with so volatile a witness.
Without a secret tape to convey his would-be probity against Anton’s desperation, Zrino Jukic made a weak witness. Kushner chopped like a butcher on Jukic’s failure to file income taxes, the bypassed CPA-ethics test, his role as a cooperative witness hoping to not get nailed. When Kushner maneuvered Jukic into a statement on Wright’s girlfriend, Aldrich told the jury to disregard gossip. Kushner then asked Jukic, “And did you have personal knowledge that that was true?”
“No.”
“What was the source of that information?”
“I had a conversation with Anton—”
Besmirching a priest on hearsay!
In cross-examining Wright, Kushner had a witness whose vanilla personality nevertheless gave answers as a sinner might reveal in confession.
KUSHNER: You didn’t need to report to anyone the decisions you’d made regarding Mr. Smith’s salary, correct?
WRIGHT: Correct.
And you were concerned that if you didn’t give him a raise he would leave, correct?
Correct.
And you did not want him to leave?
I did not want him to leave …
And, in fact, it is fair to say that you regarded him as your right-hand man?
I would say that’s true.
… but you didn’t want anyone to know, because you were concerned that they would want a raise, too, if they knew. Is that right?
That’s correct.
And so you concealed the fact that you had agreed to give Mr. Smith a raise from others, true?
Correct.
And you concealed it from the Payroll Office?
Correct.
And the Benefits Office?
Correct.
And from your secretary?
I did not tell my secretary.
And you concealed it from the Finance Council?
I did not tell the Finance Council.
You concealed it from the diocese attorneys and outside lawyers?
Correct …
Nevertheless, Wright insisted that Smith and Zgoznik had presented him with the payment plan: “They said no one will ever find out.”
Cemeteries was making good money but falling short of funding the perpetual care of certain plots when Wright assumed the reins in 1996. “And you offered [Smith] a thousand dollars a month if he would help you with turning things around … true?” asked Kushner. “That is correct,” said Father Wright.
By 1997 Joe Smith as CFO had a base pay of $70,000, plus $12,000 from Cemeteries, plus the $250,000 bonus to cover five years of raises. Moreover, testimony from a witness given immunity confirmed that Smith pulled in $1,200 a month in a sweetheart deal from a church insurance vendor on his Florida condo. If we factor the bonus at a per annum $50,000, Smith was earning $146,400 before the profits from Tee Sports, which ran the Bishop Pilla Golf Classic and such functions. In 2000 his base pay rose to $135,000. In sum, the church was paying Smith as well as the private sector that Father Wright wanted to prevent him from joining.
The trial elicited similar testimony from Pilla as before. The jury had to decide between the prosecution’s version of a financial cover-up and kickbacks by Smith and Zgoznik—or the defense’s version of a secret deal between Father Wright and Joe Smith, with Zgoznik as the outsourced vendor routing the money, all done according to the diocese’s secret methods. The jury acquitted Smith on the fraud and kickback charges; he went down on six charges of filing false income tax returns, including failure to report $150,000 in earnings.
“At the end of the trial I thanked the judge,” says Joe Smith. “She told me, ‘I know you’re not guilty of the diocesan stuff—in fact you’re the victim.”
The self-serving words of a convicted felon? That is one interpretation. Judge Aldrich, who ordered Smith (and Zgoznik) to make financial restitutions, died before I was able to contact her about Smith’s comment. Well before that, the prosecution presented Aldrich with federal sentencing guidelines for the scope of charges on which Anton Zgoznik was convicted: ten years in prison. Aldrich gave Zgoznik the identical one-year-and-one-day sentence as Smith. A year and a day means eight months if an inmate shows good behavior. Smith and Zgoznik each served the short sentence, returned to their families, and began picking up their lives.
What does the legal resolution tell us? Pilla and Wright were never punished for running a religious charity like a set of fiefdoms, making their own rules for spending Catholic donations. Under oath, Wright admitted keeping Smith’s bonus a secret from Pilla and the supplemental pay of $784,624 over seven years. Why was Wright afraid to tell Pilla what he confided to another priest, his spiritual director? The most plausible answer is that he feared Pilla would not approve—Wright didn’t want a bishop’s scrutiny on how his barony facilitated funds to his girlfriend or Cemeteries’ Tom Kelly, just as Pilla did not want others snooping into his $500,000 savings account or the deed he coveted for the house donated by the Dolans. Secrecy ruled the financial baronies.
In the end, Judge Aldrich saw Zgoznik as a fall guy for church officials’ dishonesty. The winner was the Jones Day law firm. All those billable hours! Steve Sozio did what high-dollar defense attorneys do for dirty clients: he turned them into witnesses against smaller fish. The U.S. Attorney did what prosecutors do: move the case with the strongest evidence. The big piece was Zrino Jukic’s secret tape recording; the weak link, Wright and Pilla as victims. Had Rotatori done a better job cross-examining Jukic and Wright, and had Zgoznik never testified, his trial may well have ended differently. The Smith jury rejected the charge that his nearly $785,000 off-the-books were kickbacks. Smith told me his attorney’s fees exceeded $1 million. The Cleveland diocese surely spent several times that to protect Pilla, Wright, and what credibility they had.
ASSETS TO THE SUBURBS
As the financial scandal receded, Bishop Lennon got down to business. In March 2009 the diocese announced it would close twenty-nine Cleveland parishes outright and an additional forty-one would merge with others. Across the eight counties, fifty-two churches in all woul
d close. The inner-city and inner-ring suburbs accounted for thirty-eight closures, the poorest neighborhoods bearing the brunt. Akron, Elyria, and Lorain—which was poorer than Cleveland, since a Ford plant downsizing—lost twelve parishes among them.
“Some were big surprises—St. Ignatius of Antioch, St. James in Lakewood and St. Colman in Cleveland,” wrote Michael O’Malley in the Plain Dealer:
Shutting down Colman and Ignatius means the darkening of two brilliantly lighted West Side steeples, both of which are prominent landmarks reaching into the city’s skyline …
“The suburbs are isolated from the poor,” said Colman parishioner Carol Romansky of Berea, noting how inner-city neighborhoods took the biggest hits in the downsizing. “Would Jesus have stayed in the suburbs?”25
“We’re just too big for the number of people that we have,” Lennon told Mike O’Malley, as emotions roiled in many of the targeted parishes.
Cleveland did not have the black hole of deficit financing Law had left Boston. Indeed, for all of his petty greed and secrecy, Tony Pilla, like a wily ward boss, had paid attention to the real estate; he kept old churches open, even as maintenance costs and unpaid assessments rose. Catholic Charities would counter the worst ravages of urban decay. Although his diocese did face tough realities that a prudent plan of limited closures could have mitigated, Lennon’s rationale stemmed from Boston, liquidating assets to cover the operational shortfalls. For Cleveland, Lennon took preventative steps. But Cleveland in 2006—four years after Pilla’s frantic midnight calls to Joe Smith—had gained $1 million in parish Offertory donations, taking in $106.1 million, while Boston since 2002 had steadily registered losses and deficits. Cleveland had seen a drop of $2 million from 2002 in reaction to the pedophilia cover-up. But in 2004, the Sunday plates began a steady climb and in 2005 registered $104.5 million. In 2006—the year the secret files on Zgoznik and Smith made headlines—the collections rose again, by $1.6 million.26 Quite the opposite happened in Boston, which one could take as a popular repudiation of Lennon’s Reconfiguration plan. Cleveland’s numbers track the national data cited in the prologue of Catholics who kept giving to their parishes despite the spectacle of their bishops slogging in scandal muck.