Render Unto Rome_ The Secret Life of Money in the Catholic Church - Jason Berry [132]
The anonymous letter dated December 24, 2003, was addressed to Jay Milano, an attorney who had seven abuse lawsuits against the diocese. The letter criticized a pattern of “consulting payments” by an “extremely large vendor of the Diocese of Cleveland … Mr. Anton Zgoznik.” The letter listed seven corporate names Zgoznik used and also took aim at Joe Smith.
The person in charge who chooses to give the work to Mr. Zgoznik is Mr. Joseph Smith, who receives such payments under JHS Enterprises ($451,596) and under Tee Sports ($226,635) as indicated in the attached material …
[Zgoznik’s] firms have been paid a few million dollars each year for the last few years to perform services for the Diocese that some feel are either not needed in the fashion as prepared by the consulting firm[s], totally unnecessary at all, or somewhere in the middle … [T]he Diocese has been paying the millions per year in bookkeeping/accounting/computer/consulting fees when the Diocese could easily hire employees for a small fraction of that cost. In addition, this would probably explain why there were no raises for the dedicated employees of the Diocese this year, thus further explaining why this particular consultant is so disliked by those here at the Diocese office. I understand the Diocese has been advised to make payments to Mr. Zgoznik’s companies in small enough amounts as not to raise any red flags with the auditors.61
Jay Milano knew the legal equivalent of lava when he saw it. So did Jim McCarty of the Plain Dealer and Bill Sheil at Fox 8: both found the same hot package on their desks after Christmas. Obligated to disclose a potential crime, Milano sent copies of everything to the U.S. Attorney and the diocese, whose documents had landed unsolicited on his desk. On January 6, 2004, the Feast of the Epiphany, Joe Smith was summoned to Pilla’s office. Sitting with the bishop were two attorneys. Steve Sozio, of Jones Day, was a former federal prosecutor who had worked closely with Smith in steering the diocese through the abuse crisis. Peter Carfagna, a Harvard Law graduate, chaired the diocesan financial council. Carfagna, formerly with Jones Day, was a corporate counsel in professional sports. His face telegraphed huge dismay. “Joe,” said Bishop Pilla, “I have something terrible to tell you.” Pilla got flustered and left the room. Steve Sozio showed Smith the documents sent by Milano and said, “I think you better get a lawyer, Joe.” Sozio hoped an internal investigation would find a reasonable resolution. Smith was suspended with pay for a month; he never returned.
The Plain Dealer soon reported that Joe Smith had raked in $750,000 from Zgoznik’s firms in outsourced church accounts. Smith’s Tee Sports Inc. received more than $225,000 as “a marketing firm that runs golf tournaments,” wrote McCarty and Joel Rutchick. On TV Sheil magnified the image of a diocese reeling from a sex scandal that toppled into a financial debacle.
“Smith made false representations to a member of the Diocesan Financial Advisors and a Diocese attorney,” a Jones Day attorney wrote to a claims analyst with AIG Technical Services in New York, as the diocese sought a settlement from its crime insurance policy for “Employee Dishonesty—Joseph H. Smith.” The letter, which surfaced much later as a public document, telegraphs the strategy that emerged in the early months of 2004:
In records created for [the Cleveland diocese], Mr. Zgoznik euphemistically characterized his hundreds of thousands of dollars of payments to Mr. Smith as part of some so-called “executive compensation package” … Smith apparently will claim that at least some of the so-called “executive compensation package” was authorized by Father John Wright, who until late 1999 preceded Smith in the position of Financial and Legal Secretary of the Diocese. Father Wright categorically denies ever doing so, however.62