William Smith, the former CFO of the Detroit Riverfront Conservancy, has pleaded guilty to one count of wire fraud and one count of money laundering in the theft of over $40 million from his former employer. He agreed to pay no less than $44.3 million in restitution and faces a statutory maximum prison term of twenty years. The plea statement states that the financial losses from Smith’s scheme are “difficult to quantify with precision,” and comes just days after the conservancy announced a delay in construction on a new project due to a lack of funds stemming from Smith’s theft.
Smith’s guilty plea was expected to be heard last month, but his attorneys delayed accepting the plea deal due to discrepancies regarding restitution payments, according to reports. Federal authorities have already seized assets linked to the theft, including homes, businesses and a yacht named “SS Duo.”
The conservancy is also pursuing a civil suit against Smith, his wife, mother and sister, accusing them of participating in and benefiting from the scheme. Last month, the organization hired Plante Moran to conduct an independent audit of its finances, likely to gain a deeper understanding of Smith’s theft beyond what has been provided to attorneys and the court.
The nonprofit has not yet hired a CFO to replace Smith. Currently, the highest-ranking finance role is held by Dianne Hinton, coordinator of finance and development. The conservancy does have a notable CFO as a board member, Amy B. Robinson, who also serves as finance chief of The Kresge Foundation, a Detroit-based public works fund with an endowment of $4.3 billion.
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.
