After being charged in June with embezzling $40 million, William Smith, the former CFO of the nonprofit organization Detroit Riverfront Conservancy, is now working with courts on the potential sale of his popular nightclub Duo Restaurant and Lounge just outside of Detroit.
After being charged with federal bank fraud and wire fraud charges, Courts have authorized U.S. Marshals to assess and photograph the Duo property for sale, according to recent court filings and reporting by Crain’s Detriot Business.
Smith owned the “regularly busy” hangout and its potential sale is part of a mutual agreement between Smith and prosecutors to help contribute to the payback process.
“[Smith and the prosecutors] mutual goal of agreeing to a sale of Duo Restaurant and Lounge under stipulated terms to be approved by the court,” the filing says.
Smith is the center of an FBI investigation into an 8-figure embezzlement over more than a decade from the nonprofit. Many of his assets obtained during that time are now being considered as a part of the repayment process.
The selling of Smith’s assets previously came to light after he was charged in June, when a judge blocked Smith’s attempts to either sell off or change ownership of assets, such as properties in Georgia and Mexico and a yacht named “SS Duo.”
The selloff of assets and the potential loss of his nightclub is in addition to the Conservancy announcing a civil suit last month against Smith’s mother, wife and sister as co-conspirators in his scheme.
Smith also has a collection of other real estate holdings that could be pending sale. His holdings include land, single-family homes and commercial properties. One lender is already considering foreclosure on the site where Smith planned to open a cigar lounge.
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. 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.
You find a series of stories about the Detroit Conservancy and former CFO William Smith’s case here.
