Detroit Riverfront Conservancy Files Lawsuit to Recover $40M in Stolen Funds

The Detroit Riverfront Conservancy today announced it is seeking to reclaim every possible portion of the $40 million stolen in an “elaborate scheme and cover-up,” naming former CFO William Smith in a multimillion-dollar civil lawsuit filed in state court as a result of a board-initiated internal investigation.

The suit names Smith’s mother, wife, and sister as co-conspirators who benefitted from Smith’s alleged theft, and claims Smith’s close friend, local businessperson Darrell Greer, attempted to help hide assets from authorities once the conspiracy was uncovered.

In a separate but related criminal inquiry sought by the Conservancy board, the U.S. Attorney’s Office has charged Smith with bank and wire fraud, and placed liens on real estate owned by Smith and his holding companies.

Today’s suit, filed in the Third Circuit Court in Detroit, is part of a four-pronged response to Smith’s circumvention of Conservancy protocols: investigate the theft and hold any wrongdoers fully accountable; restructure the Conservancy’s executive staff leadership; bolster its financial protocols; and complete and sustain the five-plus miles of riverfront access from the Ambassador Bridge to the MacArthur Bridge at Belle Isle.

“We are seeking and seizing every stolen dollar possible from Smith and his co-conspirators,” says Matt Cullen, chair of the Conservancy. “From the moment this scheme was discovered, we promised to investigate what happened, fix it, and make sure it can never happen again.

“The sweeping federal criminal investigation initiated by the Conservancy, together with the civil lawsuit filed today, represents another important step towards realizing those goals. Our investigation continues.”

The lawsuit filed by former U.S. Attorney Matthew Schneider, leader of investigations at Honigman in Detroit, “paints a vivid picture of deception, deceit, and destruction at the hands of Smith, a once-trusted member of the Conservancy team and a prominent member of Detroit’s business community.”

“By falsifying bank records, fraudulently misrepresenting his authority, transferring DRFC finances into his own personal bank account, diverting additional funds to pay his own personal credit card and that of some of the other named defendants, and enlisting the other named defendants to help Smith advance or cover up his scheme,” the suit says, “Smith stole approximately $40 million from the DRFC.”

The suit claims Smith confided his misdeeds to a long-time friend and confidant, Darrell Greer, before the theft was made public, and asked Greer to accept the transfer of a Detroit home. Greer agreed.

Charlotte Smith, Kimberly Smith, and Jennifer Smith — William Smith’s mother, wife, and sister, respectively — are accused of spending lavishly using Conservancy money on high-end interior design goods, beauty supplies, shoes, restaurant meals, and assorted other luxuries, the suit says.

Also named are two companies owned by Smith, William Smith & Associates and the Joseph Group, as well as one owned by Greer, You Services.  The latter business provided construction management services to the Conservancy.

The lawsuit outlines the “enormous financial devastation” to the Conservancy, and “emotional damage” on the people of Michigan who’ve come to love the revitalized riverfront, oft-cited as the greatest Riverwalk in the United States. “Smith and his co-defendant’s actions cannot be tolerated in a civilized society,” the suit says.

Under state law, the DRFC can recover from Smith three times the total of actual damages.

The suit described how Smith used his CFO position as a “shield and a sword.” His authority shielded others from interfering with his scheme, and he used his access to Conservancy bank accounts to make cash withdrawals as a sword, “cutting away at the DRFC’s donations.”

The suit identifies six interconnected steps to his scheme:

1. Smith wire transferred funds from the Conservancy’s primary operating account at Citizens Bank into the Conservancy’s much lesser-used account at Comerica Bank.
2. Smith withdrew funds from the Comerica Bank account by directly paying his personal American Express card and by wiring payments to his private business, the Joseph Group. The suit provides details and receipts of these transactions.
3. Smith took steps to prevent others at the Conservancy from accessing the Citizens Bank and Comerica Bank account records. He created forged Comerica Bank account statements to make it appear his American Express payments and his Joseph Group wire transfers did not exist. He created false line items in the Comerica Bank statement to explain his transfers.
4. Covering his tracks, Smith presented false financial statements to the Conservancy Board and painstakingly created hundreds of pages of fraudulent financial reports and budgets — carefully reconciling them to create two sets of books — never allowing the board to have an accurate view of the Conservancy’s true financial circumstances.
5. Smith obtained a $5 million line of credit from Citizens Bank to replenish some of the money he had stolen from the Citizens account. Smith gave Citizens Bank a forged statement purporting to show he had authority to open such a line of credit on behalf of the Conservancy. He had no such authority.
6. Smith and his family members used the money he stole from the DRFC to live a lavish lifestyle. Smith himself spent the money on NFL tickets, limousines, hotel, airfare, jewelry, clothing, and high-end goods from the likes of Gucci, Louis Vuitton, and Diamonds Direct.

The conservancy also moved to intervene in the federal government’s civil lawsuit against Smith.

In United States of America v. William Anthony Smith, the U.S. Attorney’s Office sought and obtained a restraining order preventing Smith from disposing up to $39.3 million of his assets, which is the same amount the Conservancy alleges Smith stole from its bank accounts.

In her ruling issuing the restraining order and freezing Smith’s accounts, Judge Linda V. Parker named the conservancy, its donors, and its financial partners as Smith’s victims. The conservancy is moving to intervene in the case to exercise its victims’ rights.

Working with the Conservancy Board, the Community Foundation for Southeast Michigan, and Ralph C Wilson, Jr. Foundation have created a multimillion-dollar funding structure to help complete and sustain the full five-plus miles of the riverfront vision, which includes the Ralph Wilson Park and final elements of the East Riverfront Promenade and the Robert Valade Park.

Monies seized from Smith and others in the criminal or civil proceedings will be a critical component of the overall strategy.

“This suit is just one piece of our framework for accountability,” says Ryan Sullivan, the Conservancy’s new CEO after his predecessor, Mark Wallace, resigned the leadership position in the wake of the scandal. “We will be relentless in pursuing our claims and seizing the money stolen by Smith and his co-conspirators.”

The post Detroit Riverfront Conservancy Files Lawsuit to Recover $40M in Stolen Funds appeared first on DBusiness Magazine .