William Smith, the former CFO of the Detroit Riverfront Conservancy, is set to plead guilty on Oct. 21 after reportedly working out a plea deal that was revealed through a criminal information charge filed last week and reported by the Detroit Free Press.
Assistant U.S. Attorney Robert Moran told U.S. Magistrate Judge Elizabeth Stafford the conservancy’s losses “will exceed $40 million.” Stafford entered a not-guilty plea on Smith’s behalf.
If found guilty of the federal wire fraud and money laundering charges against him, for nearly $40 million, the former CFO and moonlighting nightclub owner could go to prison for more than 20 years.
Smith’s arraignment came just one day after federal prosecutors filed new wire fraud and money laundering charges against him.
The Detroit Riverfront Conservancy also filed a civil lawsuit against Smith, his relatives and associated companies. The suit accuses them of participating in the alleged theft. The suit claims Smith manipulated financial records, made unauthorized wire transfers and used the embezzled funds for personal expenses.
Smith is also accused of using public money to support his own business endeavors such as a nightclub, real estate properties and lavish lifestyle. His assets, whose sale or transfering to others was blocked by a judge in June, included multiple vacation homes and a yacht named SS Duo.
Financial controls failure
Elements revealed in the court proceedings suggest Smith leveraged his position:
- He was the only one with access to the nonprofit’s checking account. This control enabled him to alter bank statements to hide the conservancy’s financial position.
- He allegedly secured a $5 million line of credit from Citizens Bank under the guise of acting with the conservancy board’s approval, though in reality he had no authorization to do so. He is accused of using these funds to replenish the conservancy’s bank accounts, attempting to cover up his crimes.
- Advisory firm George Johnson and Co. had been the conservancy’s independent auditor for more than a decade. The industry standard is to switch auditing firms every three to five years, according to Joan Harrington, assistant director of social sector ethics at the Markkula Center for Applied Ethics at Santa Clara University.
- A potential conflict of interest was introduced when a nonprofit investment firm Invest Detroit, which was governed by Matt Cullen, who is also the conservancy chairman, permitted a loan for Smith’s personal business venture near the RiverWalk. Invest Detroit’s CEO Dave Blaszkiewicz is also a board member of the conservancy.
