CLEVELAND -- There is a new development in an alleged kickback scheme within the Catholic Diocese of Cleveland.

New allegations implicate that former Bishop Anthony Pilla gave the green light for a secret church bank account, 5 On Your Side investigator Ron Regan reported.

Former diocese CFO Joseph Smith and another former employee, Anton Zgoznik both pleaded not guilty in federal court on Wednesday to charges that include conspiracy, mail fraud and money laundering.

The case involves millions of dollars in church-related business and whether the former employees illegally profited from it.

Unitl now, the role that Pilla played in the alleged scheme remained a mystery.

Smith is accused of being paid $270,000 in a secret church account. Lawyers for Zgoznik said that their client was not only authorized to make those payments but that top church officials knew about them, including the recently retired bishop.

"The chief financial officer was aware of it, the committee that reviewed the finances made up of lay people and priests were aware of it, the CPA firm that audited the books every year was aware of it, the bishop was aware of it, and now because of the multi problems, I think, in this diocese, people are just saying, 'Oh no, we didn't know and we didn't authorize,' so it's a tragedy," said defense attorney Robert Rotatori.

Smith allegedly received another $784,000 in kickbacks in return for steering more than $17 million in church business to outside companies owned by Zgoznik.

Smith's attorney said the payments are not what they appear to be.

"We think that there are some misunderstandings which we hope to clear up and we look forward to doing so at trial, in the courtroom with the jury," said attorney Philip Kushner.

Both Smith and Zgoznik are free on $50,000 bond, although Smith was ordered to wear an electronic monitoring device and remain at home between the hours of 10 p.m. and 6 a.m.

A trial date has been set for Nov. 6.