Kickback Scheme Leads to 27 Count Indictment That Includes 8 Money Laundering Charges
Gregory A. White, United States Attorney for the Northern District of Ohio, announced recently that a federal grand jury returned a 27-count indictment against Joseph H. Smith and Anton Zgoznik, charging them with conspiring to defraud the Catholic Diocese of Cleveland, conspiring to defraud the Internal Revenue Service, and other related charges. Counts 10-17 against Smith were money laundering charges.
According to the indictment, Smith held several senior financial positions with the Cleveland Catholic Diocese for several years. The indictment further alleges that from approximately June 1997 through February 2004, Smith and Zgoznik conspired to defraud and obtain money from the Diocese through a scheme by which Smith, in violation of his duties as a Diocese official, steered substantial outsourced business from the Diocese to companies controlled by Zgoznik in exchange for substantial undisclosed kickback payments. The amounts were quite staggering: the indictment alleges that the Diocese paid approximately $17,533,330 to Zgoznik’s companies from 1996 through 2003 and that Zgoznik’s companies paid kickbacks totaling approximately $784,627 to Smith during 1997 through 2003.
To conceal his kickback income, Smith deposited the kickback checks payable to Tee Sports into an account in his name, doing business as Tee Sports, which he opened using the Tee Sports corporate tax identification number but which he used as a personal account. The money laundering charges stem from Smith's alleged use of the Tee Sports account to issue checks for personal expenses in an effort to conceal and disguise, the nature, location, source, ownership, and control of the ill-gotten proceeds.
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