Detroit Riverfront Conservancy embezzlement probe that might top $40 Million

[canuck]

She won't be able to divert the social media consequences of not being employable. Or find one of those organizations where you fall-up?

Yeah, crazy to think someone who attained such a high profile job for one of the world’s top companies would squander this for a lifetime. I would not trust her with a nickel going forward.

[13606Cedargrove]

I am a CPA and CFA [[Certified Fraud Examiner). One of the reasons these embezzlers move on to their next victim is because the first [[and subsequent victims sometimes) refuse to prosecute and are timid about revealing the activity in a reference check by the next employer. Bad publicity is usually cited, but the prosecution - a public activity - reveals poor governance and lack of internal controls. When that toothpaste is out of the tube, the SEC, their outside auditors and investors [[or donors) get involved. Truly a mess to avoided. I believe the coverup by the organization in itself makes the organization an accessory. [[I am not a lawyer. The last sentence is my personal opinion.)

[1953]

Knowing more facts after the indictment, it sounds like it was possible because the CFO was creating fake receipts and there weren't enough checks and balances in place for anyone to catch him - it really showcases the trouble with flying too thin at your organization in terms of staffing capacity. This is the ideal organization for this kind of fraud - they had a lot of money passing through and relatively little need for people to administer it.

1953

[mwilbert]

Knowing more facts after the indictment, it sounds like it was possible because the CFO was creating fake receipts and there weren't enough checks and balances in place for anyone to catch him - it really showcases the trouble with flying too thin at your organization in terms of staffing capacity. This is the ideal organization for this kind of fraud - they had a lot of money passing through and relatively little need for people to administer it.

1953

The receipts I can kind of understand; it takes some amount of work to verify the paperwork. What I find amazing is that he was apparently providing fake bank statements that no one else could tell were fake because he was literally the only one with the password to the accounts.

It sounds as if there wasn't any internal or external audit check of the actual balances for over a decade. Which is kind of remarkable, given that we are talking about something that you could do in a few minutes. I'm assuming we will learn more about poor governance processes as this case unfolds.

[Henry Whalley]

...showcases the trouble with flying too thin at your organization in terms of staffing capacity. This is the ideal organization for this kind of fraud - they had a lot of money passing through and relatively little need for people to administer it.

Agreed, but are there enough competent honest people to monitor our world's bumper crop of crooks? IMHO, we need more deterrence in the form of just sentences for white-collar crime. Also, no presidential pardons except for the Thanksgiving Day Turkey.

https://yalebooks.yale.edu/book/9780...painted-women/

Presidential pardons have always been controversial. However, at present white-collar crime is so rampant and egregious that most people would IME support a constitutional amendment to eliminate pardons for white-collar felons.

"...pardon power was controversial from the outset; many Anti-Federalists remembered examples of royal abuses of the pardon power in Europe, and warned that the same would happen in the new republic. Critics such as the Anti-Federalists have argued that pardons have been used more often for the sake of political expediency than to correct judicial error.

In the 18th century, George Washington granted the first high-profile federal pardon to leaders of the Whiskey Rebellion on his final day in office.

In the 19th century, Andrew Johnson controversially issued sweeping pardons of thousands of former Confederate officials and military personnel after the American Civil War.

In the 20th century, Gerald Ford pardoned former president Richard Nixon on September 8, 1974, for official misconduct which gave rise to the Watergate scandal. Polls showed a majority of Americans disapproved of the pardon, and Ford's public-approval ratings tumbled afterward. Other publicly controversial uses of the pardon power include Jimmy Carter's grant of amnesty to Vietnam-era draft dodgers on his second day in office, January 21, 1977; George H. W. Bush's pardons of 75 people, including six Reagan administration officials accused or convicted in connection with the Iran–Contra affair; and Bill Clinton's commutation of sentences for 16 members of FALN in 1999.

In the 21st century, Clinton's pardons of 140 people on his last day in office, January 20, 2001, including billionaire fugitive Marc Rich and his own half-brother, Roger Clinton, were heavily criticized.

President Donald Trump issued his first pardon to former Arizona sheriff Joe Arpaio on August 25, 2017; Arpaio had been convicted of criminal contempt in federal court. The pardon of Arpaio was relatively unusual in being issued early in Trump's presidency. It was met with widespread criticism from political opponents. On November 25, 2020, Trump announced, via Twitter, that he had pardoned former General and Trump National Security Advisor Michael Flynn. Flynn had pleaded guilty to one count of making false statements to the FBI, an offense which prompted Trump to fire Flynn as his national security advisor 23 days after taking office. On December 23, 2020, Trump pardoned 26 friends and allies, including his longtime ally Roger Stone, former campaign chairman Paul Manafort, and Charles Kushner, his son-in-law's father."

[Jimaz]

...In the 20th century, Gerald Ford pardoned former president Richard Nixon on September 8, 1974, for official misconduct which gave rise to the Watergate scandal. Polls showed a majority of Americans disapproved of the pardon, and Ford's public-approval ratings tumbled afterward....

And Gerald Ford was himself appointed by Nixon after Spiro Agnew resigned.

quid pro quo?

[13606Cedargrove]

And Gerald Ford was himself appointed by Nixon after Spiro Agnew resigned.

quid pro quo?

I don't think so. As I recall at the time, Ford's ambition was to be Speaker of the House. As a member of the House, he was highly regarded on both sides of the aisle as good negotiator willing to compromise. Like many politicians of that time, country was before party. The VP role was thrust upon him due to circumstances as one of the most senior elected Republicans.

I hated the Nixon pardon at time. Ford lost my vote because of it. I have changed my mind about this. I now believe it was the right move to help the country get back to normal. The combination of Nixon on trial and the impending collapse in Vietnam would have been a disaster. Carter's pardon of the "draft dodgers" was also correct for the same reason.

[Henry Whalley]

[QUOTE=13606Cedargrove;643194]I hated the Nixon pardon...[QUOTE]

Same here but haven't changed my mind. What's your opinion of pardons in general for political and white-collar criminals?

[13606Cedargrove]

[QUOTE=Henry Whalley;643195][QUOTE=13606Cedargrove;643194]I hated the Nixon pardon...

Same here but haven't changed my mind. What's your opinion of pardons in general for political and white-collar criminals?

Pardons need to be carefully considered weighing a variety of factors. But political or economic payback by the pardoner or the pardoner's party should not be among them.

[Lowell]

I'm still trying to track down the actual criminal complaint [anybody here know how to do that?] but the Eastern DOJ Eastern District of Michigan's press release gives some hints of what to expect in the indictment. He had two schemes.

First, Smith is alleged to have used Conservancy funds to pay for charges that he and his family accrued on an American Express account.

Those were early on and relatively small in terms of the alleged $40 million stolen. [Edit: Not so small. I now read he, "ran up $14.9 million on an American Express Business Platinum account also accessed by his wife and other random family members."]

The second, which seems far larger, was creating a shell company and diverting money to it. [Edit: This accounts for the remainder of the $40M, "The nonprofit's auditing firm found $24.4 million in wire transfers from the nonprofit's Comerica account to the Joseph Group between February 2013 and February 2024...he concealed some of those payments to his company by altering bank statements to appear that money was going to the State of Michigan"]

Second, Smith is alleged to have diverted Conservancy funds to a company he controlled called “The Joseph Group.” Neither of these sets of expenditures were authorized or approved by the Board of the DRFC; “The Joseph Group,” was not an approved vendor and provided no services to the DRFC, and Smith had no authority to use Conservancy funds to pay his own personal credit card bills.

For coverup he forged signatures as in this example.

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 in any way 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 Smith was indeed empowered by the DRFC 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 is alleged to have used funds he obtained from this line of credit to further his embezzlement scheme.

I look forward to reading the actual indictment which I suspect will likely be very lengthy with numerous counts.

[Wesley Mouch]

Knowing more facts after the indictment, it sounds like it was possible because the CFO was creating fake receipts and there weren't enough checks and balances in place for anyone to catch him - it really showcases the trouble with flying too thin at your organization in terms of staffing capacity. This is the ideal organization for this kind of fraud - they had a lot of money passing through and relatively little need for people to administer it.

1953

I find the argument that they just needed more staff unsatisfying. The CFO was a crook, and should be punished. The real problem is that this organization wasn't governed well. It's more than one bad apple. There had to be several people who weren't good at their jobs. The board needs to be replaced as well. And frankly probably best to toss the entire staff out the door. But we won't do that. They are such good people who are doing such important work. They just needed more money for staff. Then everything will work out next time.

[CassTechGrad]

[Gistok]

I find the argument that they just needed more staff unsatisfying. The CFO was a crook, and should be punished. The real problem is that this organization wasn't governed well. It's more than one bad apple. There had to be several people who weren't good at their jobs. The board needs to be replaced as well. And frankly probably best to toss the entire staff out the door. But we won't do that. They are such good people who are doing such important work. They just needed more money for staff. Then everything will work out next time.

They certainly dried up a lot of donation sources... although it looks like the big foundation donors are giving them Hail Mary...

[Henry Whalley]

They certainly dried up a lot of donation sources... although it looks like the big foundation donors are giving them Hail Mary...

Light penalties for white collar crime make it an attractive occupation. Also, it keeps people from donating to charities.

[ABetterDetroit]

As long as there is a political movement that a cornerstone pillar of it’s ideology is that the well off are not to be taxed the same way that people who have jobs are these crimes are way to easy to commit.

Someone with a job that pays 125k a year has income tax directly removed from their check. Someone else who has holding companies, shell companies, LLCs etc, has countless write offs that removes their income and spending from any scrutiny making these crimes and money laundering easier to hide. It is no coincidence that the party with this cornerstone wants less IRS agents, less FBI and thinks that the Kwame’s and Blagojevich’s of this country are innocent victims. Heck, they believe that payments to porn stars are a legitimate legal expense and therefore fully tax deductible for the well off.

If the people who vote want financial white collar crimes up the wazoo that’s what they will have. It is as simple as that.

[Henry Whalley]

...If the people who vote want financial white collar crimes up the wazoo that’s what they will have. It is as simple as that.

Up the wazoo until people wake up. Agreed 100%. Lock them up and throw the key away.

[Henry Whalley]

https://www.yahoo.com/news/feds-form...201812241.html

[stasu1213]

I find the argument that they just needed more staff unsatisfying. The CFO was a crook, and should be punished. The real problem is that this organization wasn't governed well. It's more than one bad apple. There had to be several people who weren't good at their jobs. The board needs to be replaced as well. And frankly probably best to toss the entire staff out the door. But we won't do that. They are such good people who are doing such important work. They just needed more money for staff. Then everything will work out next time.

Where were the checks and balances to this organization? The CEO or CFO should not have control over the withdrawing or control of fundinds nor the bank account the fundings, donations, and contributions are in. What board agreed to give this person that much control without giving an answer or given voted approval to go into the account? I wonder if there are others involved who are shaking in their boots figuring out ways not to be exposed

[mwilbert]

Where were the checks and balances to this organization? The CEO or CFO should not have control over the withdrawing or control of fundinds nor the bank account the fundings, donations, and contributions are in. What board agreed to give this person that much control without giving an answer or given voted approval to go into the account? I wonder if there are others involved who are shaking in their boots figuring out ways not to be exposed

It's perfectly normal for the CFO to have control over the financial accounts. What's weird about this case is the lack of oversight or effective auditing over such a long period of time. Whether other people were actively complicit or just negligent is something that I expect will become clear as the case is investigated.

[Henry Whalley]

...Whether other people were actively complicit or just negligent is something that I expect will become clear as the case is investigated.

Another possibility is that people who are both competent and honest may be few and far between. Respected scholars have argued that the zone is flooded with con artists.

https://www.amazon.com/Confidence-Me.../dp/0300037880

[Zacha341]

A great deal of pandemic [PPP loans] inspired finessin' and flossin' [flashy careless fraud] is yet being revealed.

Former Atlanta city attorney sentenced to prison for PPP fraud

[Lowell]

As far as I can calculate this heist puts the Kwame and Bobby gang to shame. It will be interesting to see how much can be recovered.

What I can never understand is why such crooks who are so smart at pulling off these heists can't seem to know when to quit, just stop, say ten years ago after say, ten million.

[Richard]

10 million you can live like a king for the rest of your life in a non extradition country.

No different then the drug trade,lots made 50- 60 million real quick and stayed in the game for the thrill of it and are now either dead or life in prison,enough will never be enough for some.

There is a guy they busted by me for swindling $100 million from a special needs children’s trust fund so some know no limits.

Greed funds Ponzi schemes also.

[Richard]

I'm still trying to track down the actual criminal complaint [anybody here know how to do that?] but the Eastern DOJ Eastern District of Michigan's press release gives some hints of what to expect in the indictment. He had two schemes.



Those were early on and relatively small in terms of the alleged $40 million stolen. [Edit: Not so small. I now read he, "ran up $14.9 million on an American Express Business Platinum account also accessed by his wife and other random family members."]

The second, which seems far larger, was creating a shell company and diverting money to it. [Edit: This accounts for the remainder of the $40M, "The nonprofit's auditing firm found $24.4 million in wire transfers from the nonprofit's Comerica account to the Joseph Group between February 2013 and February 2024...he concealed some of those payments to his company by altering bank statements to appear that money was going to the State of Michigan"]



For coverup he forged signatures as in this example.



I look forward to reading the actual indictment which I suspect will likely be very lengthy with numerous counts.

They started on May 14th - did not waste no time

https://www.justice.gov/usao-edmi/pr...llions-dollars

They have not posted the actual indictment yet,which is kinda strange,they are still in the alleged stage.

As soon as it is typed it will be posted.

Matt Cullen,chairman of the board,used to be Bedrocks CEO,not charged or accused of any crimes but it’s not like there were numb skulls on the board there.

To me it looks like there was an internal audit that discovered it and that file was passed on to the FBI ,no way they could have started on May 14 ,performed the forensic audit and filed the charges in a matter of a couple of working weeks,the FBI does not move that fast.

Looks like they wanted the feds to get It verses the state,no chance of walking.

[Zacha341]

What I can never understand is why such crooks who are so smart at pulling off these heists can't seem to know when to quit, just stop, say ten years ago after say, ten million.

I think they get caught-up in their theft and fraud.

It becomes a 'system' as such. Especially if the theft is easy: progressing from a certain amount justified to the final bag discovered.

What's crazy are the fraud cases were the crooks are conspicuous in their theft [trash-bling, exotic and tricked-out cars]!

They ultimately have no shame. Some proud of their graft!