William Smith, the former CFO of the Detroit Riverfront Conservancy who was set to plead guilty yesterday to embezzlement charges, had his hearing delayed when Gerald Evelyn, one of Smith’s attorneys, requested a recess mid-hearing and a private meeting was held about the agreement.
As reported by the Detroit Free Press, just before the court session paused, Assistant U.S. Attorney John Neal estimated a sentencing range of 15 and a half to 19 and a half years in prison, with potential restitution starting at $44.3 million or possibly higher. He also mentioned the ongoing efforts to identify assets and pursue property forfeiture. Following these statements, a recess was requested by Evelyn.
Judge Susan DeClercq said after the recess that an issue had developed between prosecutors and the defense regarding the plea. The judge said she would set a new court date at a later time.
Neither prosecutors nor the defense spoke publicly after the hearing’s adjournment. However, the CEO of Smith’s former employer released a statement regarding the hearing’s outcome. “We are disappointed that today did not meet our expectations of a guilty plea, and we look forward to this being resolved in the near future,” conservancy CEO Ryan Sullivan said, adding that the conservancy is thankful to the U.S. attorney’s office for its efforts.
Financial controls failure
Elements of the financial failure that have been revealed in the court proceedings, as reported by the Detroit Free Press, include:
- Smith 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.
- Advisory firm George Johnson and Co. was 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.
