Feds: Former CFO of Detroit Riverfront group embezzled $40 million

The ex-chief financial officer for the Detroit Riverfront Conservancy was charged with bank and wire fraud in a criminal complaint unsealed Wednesday amid allegations he embezzled nearly $40 million over a dozen years.

U.S. Attorney Dawn N. Ison announced the charges, which arose out of what is alleged to be a yearslong scheme by William A. Smith to embezzle conservancy funds for his own use.

The complaint accuses Smith, 51, of orchestrating the plan as early as November 2012 to embezzle millions from the nonprofit conservancy focused on promoting and revitalizing the international riverfront. 

“This defendant is alleged to have abused the trust the conservancy placed in him and to have carried out a fraud that is simply astonishing in scale,” Ison said in a news release. “Today’s allegations are extremely serious ones, and my office is committed to pursuing anyone, regardless of their title, who fleeces taxpayers and charitable donors for their own private gain.”

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Gina Balaya, a spokesperson for Ison’s office, said Smith turned himself in. He appeared in federal court Wednesday with his attorney and was released on a $10,000 unsecured bond. He is barred from applying for any loans or new lines of credit, must surrender his passport and cannot travel outside the Eastern District of Michigan. A preliminary examination is set for June 26. Smith’s attorney could not be immediately reached for comment. 

The criminal complaint comes days after the conservancy announced Smith’s firing and the resignation of longtime Chief Executive Officer Mark Wallace, who will aid the conservancy as a consultant. Conservancy Board Chair Matt Cullen also ordered two investigations led by former U.S. Attorney Matthew Schneider – one by the auditing firm PwC and another by the Honigman Law Firm.

In a Wednesday statement, Cullen commended the FBI and U.S. Attorney’s Office for the “quick and thorough” start to its investigation, which led to Smith’s arrest. 

“We will continue to cooperate with law enforcement to ensure justice is brought against this nefarious scheme to subvert layers of financial controls and embezzle resources from one of the greatest waterfront projects in the United States,” Cullen said. 

The criminal complaint alleges that Smith carried out his embezzlement scheme in two distinct ways: First, he is alleged to have used conservancy funds to pay for charges that he and his family accrued on an American Express account. Second, federal authorities allege he diverted conservancy funds to a company he controlled called “The Joseph Group.” The company was not an approved vendor of the conservancy board, nor did it provide any conservancy services.

According to the complaint, in January 2013 Smith used a credit card to purchase airline tickets for himself and others, pay insurance premiums and made significant clothing and jewelry purchases, including $4,850 worth of men’s wear from Revive in Birmingham and $5,618 in jewelry from Diamonds Direct in Southfield. Other charges in March 2013 ranged from more than $12,000 at a Chevrolet dealer and over $17,000 from Louis Vuitton.

Bank statements showed that on March 14, 2013, Smith made a $96,000 payment from the conservancy’s Comerica bank account to his American Express account. 

That June, he allegedly used more than $22,000 of conservancy funding for his personal residence, including lawn care services and items from The Home Depot, Art Van Furniture, Wayfair and Scott Shuptrine, the complaint adds. 

To cover up his alleged acts, according to the complaint, Smith doctored bank statements that he is then accused of providing to the conservancy’s accountant for entry into the nonprofit’s accounting software. 

These false bank statements led to erroneous financial information being entered into the DRFC’s books, thereby concealing the fraud,” the Wednesday news release notes. 

In 2023, Smith is alleged to have obtained a $5 million line of credit with Citizens Bank on the conservancy’s behalf – a line of credit he was not authorized to take out. 

The bank asked Smith for documentation confirming that Smith, as CFO, had the sole authority to obtain such a line of credit on behalf of the conservancy. Smith is alleged to have provided the bank with a document purporting to establish that he was empowered by the conservancy’s Board of Directors to obtain such credit lines. 

That document, according to the complaint, was false, and bore the forged signature of the conservancy’s corporation secretary. 

Smith was CFO of the conservancy from 2011 until he was fired in late May. The nonprofit is funded by a combination of public and private dollars. 

Wayne County Prosecutor Kym L. Worthy noted in the Wednesday release that the case was initially brought to her office on May 14. The prosecutor said the office was “quickly able to deduce that an enormous amount of money was allegedly embezzled and that there would be mountains of documents to examine.”

Worthy’s office then looped in Ison, who immediately agreed to take the case. 

The federal complaint notes Smith was initially placed on a paid leave from the conservancy on May 10, and, by May 17, he stopped receiving conservancy compensation. He was terminated on May 31.

A criminal complaint is a formal charging document and not evidence of guilt.