Detroit Riverfront Conservancy embezzlement probe that might top $40 Million

[Henry Whalley]

...If found guilty this guy is toast.

Don't you think he'll get a light sentence as a first-time offender in a white-collar crime? Probably has his money hidden offshore where he will savor a life of luxury after 2-3 years max in a club fed prison.

[stasu1213]

Don't you think he'll get a light sentence as a first-time offender in a white-collar crime? Probably has his money hidden offshore where he will savor a life of luxury after 2-3 years max in a club fed prison.

Unless he is pardon by a President such as Kilpatrick was. Federal penitentiary may not be a brutal as State. If that's true then maybe it was better for him to be charged with federal crime. It's still unfortunate.

[Henry Whalley]

...It's still unfortunate.

I read that CFO Smith planned to put cigar lounge in the old carriage house on Woodbridge Street just around the corner from the beloved Woodbridge Tavern. Mayor Archer destroyed that organically thriving neighborhood to make way for carpetbaggers, casino mafiosi, and urban planners, which is to say he misused eminent domain for zero good reasons.

[Gistok]

Here is the DYES thread on the riverfront casinos fiasco...

https://www.detroityes.com/mb/showth...oit-Riverfront

[Lowell]

[Richard]

he Ralph C. Wilson, Jr. Foundation is making a grant of $10 million to the fund. Additionally, the Wilson Foundation has authorized the Community Foundation to utilize assets of their endowed funds at the Community Foundation to establish a $25 million line of credit for future payments to construction contractors. As fundraising continues or recoveries from the embezzlement are received, that line of credit will be reduced.

In essence providing a bridge loan in order to keep things moving forward uninterrupted due to other current events.

The Community Foundation For Southeast Michigan is an interesting study,giving out $43 million in just one 1/4.

They seem to be a local non profit that is a clearing house of sorts for 501c donations and philanthropists while adding a teaspoon of being an advocacy group and funding “just causes” alongside of supporting local businesses etc with grants.

They must have some heavy hitters behind them in the shadows.

People like to talk about the evil big businesses but even going back to the titans of industry,their philanthropic investments back into the community is in the billions.

[JBMcB]

The Ralph C. Wilson, Jr. Foundation is making a grant of $10 million to the fund. Additionally, the Wilson Foundation has authorized the Community Foundation to utilize assets of their endowed funds at the Community Foundation to establish a $25 million line of credit for future payments to construction contractors. As fundraising continues or recoveries from the embezzlement are received, that line of credit will be reduced.

So I assume they are paying the contractors directly. Because, clearly, the Riverfront Conservancy has some major accounting and auditing issues that need to be resolved.

[Richard]

I would think the Conservatory would establish a separate account for the initial $10 million and assign somebody to oversee that,then the other $25 million is a line of credit,so the contractor would submit the billing,then the Conservatory would submit it to the foundation who would then write a check directly to the contractor?

The $10 million is probably for Conservatory operating costs as the “other set of books “ would be locked until the investigation is over.

So the conservatory would be operating as a shell within a shell to keep new business separate from the old to keep from mixing funds. Kinda like a married couple with separate bank accounts.

They still have to continue fundraising,cover whatever overhead etc so the $10 million grant is to cover operating costs.

When they called for the investigation it kinda froze everything in time,so they would not have been able to even buy an ice cream,not able to excess anything under the old accounts.

So they were technically penniless and without the lifeline may have had to declare bankruptcy until it was settled.

[Henry Whalley]

Enquiring minds want to know if CFO Smith docked his felonious yacht at Milliken harbor?

[stasu1213]

I would think the Conservatory would establish a separate account for the initial $10 million and assign somebody to oversee that,then the other $25 million is a line of credit,so the contractor would submit the billing,then the Conservatory would submit it to the foundation who would then write a check directly to the contractor?

The $10 million is probably for Conservatory operating costs as the “other set of books “ would be locked until the investigation is over.

So the conservatory would be operating as a shell within a shell to keep new business separate from the old to keep from mixing funds. Kinda like a married couple with separate bank accounts.

They still have to continue fundraising,cover whatever overhead etc so the $10 million grant is to cover operating costs.

When they called for the investigation it kinda froze everything in time,so they would not have been able to even buy an ice cream,not able to excess anything under the old accounts.

So they were technically penniless and without the lifeline may have had to declare bankruptcy until it was settled.

The overseer of the first 10 million should not be someone who currently sits on the board or any committee of the Conservancy nor any elected official especially anyone who currently sits on city council. I would say that some type of financial review board should oversee the money and given the line of credit.

[Richard]

I agree but they are caught between a rock and a hard place,or between the road and river.

The reason the line of credit was established and specifically mentioned,is because those contractors are under contract and if the conservatory defaults,then the lawsuits and asset seizures come into play and it gets even nastier then it already is,it could spell the end of the conservatory.

They did not have a lot of options damage control would be A: get money in the bank for daily operations B: make sure there was funds available to fulfill existing contracts.

That had to require some serious thought when they made the decision to turn it over to the authorities,knowing by doing so it could end everything as soon as that call was made,but they had no choice given the amount of funds.

That may be what brought it to light,time to pay a contractor and opps no funds available.

But this is all just speculation on my part and they did hire a 3rd party accounting firm ,so they probably are handling the day to day financials outside of the conservatory hands.

Otherwise once the books were frozen,they would have collapsed because it’s going to be a year or more before it all gets figured out.

To many people with to much money,to not have it under their microscope.

They only thing I found mentioned City wise was a $3 million taxpayer grant for something,but outside of that it is a 501C and not a quasi government/private enterprise.

The mayor made it clear day one it’s not the city’s pervue or involvement.

So there would not be or should not be nobody within the city payroll involved in it to begin with.

I do not think any member of the city counsel is on the conservatory board,if so it may be considered a conflict of interest.

The conservatory lists the board members as public information,I believe it is accessible on their web site.

Given the current situation I would not be nervous about donating because they will figure it out and like I mentioned it’s tax deductible so as a donor you are not losing anything financially,but they have some serious damage control as far as trust.

But even at that it does not matter because they have been showing results that you can see and touch and it has been a benefit to the city and its residents.

Do not take it the wrong way but in the grand scheme of things,$40 million is alot but it is not really.

That is until you no longer have it and the power company wants to get paid,but this happened over a course of years,it may represent a fraction of what they raise because apparently nobody noticed it missing in the first place.

So they must be turning some serious numbers,$40 million goes missing and nobody felt it.

But that would also be public information and I have not gone that deep into it.

[stasu1213]

I agree but they are caught between a rock and a hard place,or between the road and river.

The reason the line of credit was established and specifically mentioned,is because those contractors are under contract and if the conservatory defaults,then the lawsuits and asset seizures come into play and it gets even nastier then it already is,it could spell the end of the conservatory.

They did not have a lot of options damage control would be A: get money in the bank for daily operations B: make sure there was funds available to fulfill existing contracts.

That had to require some serious thought when they made the decision to turn it over to the authorities,knowing by doing so it could end everything as soon as that call was made,but they had no choice given the amount of funds.

That may be what brought it to light,time to pay a contractor and opps no funds available.

But this is all just speculation on my part and they did hire a 3rd party accounting firm ,so they probably are handling the day to day financials outside of the conservatory hands.

Otherwise once the books were frozen,they would have collapsed because it’s going to be a year or more before it all gets figured out.

To many people with to much money,to not have it under their microscope.

They only thing I found mentioned City wise was a $3 million taxpayer grant for something,but outside of that it is a 501C and not a quasi government/private enterprise.

The mayor made it clear day one it’s not the city’s pervue or involvement.

So there would not be or should not be nobody within the city payroll involved in it to begin with.

I do not think any member of the city counsel is on the conservatory board,if so it may be considered a conflict of interest.

The conservatory lists the board members as public information,I believe it is accessible on their web site.

Given the current situation I would not be nervous about donating because they will figure it out and like I mentioned it’s tax deductible so as a donor you are not losing anything financially,but they have some serious damage control as far as trust.

But even at that it does not matter because they have been showing results that you can see and touch and it has been a benefit to the city and its residents.

Do not take it the wrong way but in the grand scheme of things,$40 million is alot but it is not really.

That is until you no longer have it and the power company wants to get paid,but this happened over a course of years,it may represent a fraction of what they raise because apparently nobody noticed it missing in the first place.

So they must be turning some serious numbers,$40 million goes missing and nobody felt it.

But that would also be public information and I have not gone that deep into it.

It's been reported that there were one or two council members either sitting on the Riverfront Conservancy board or one of their committee or groups. Anyway it goes that's still a conflict of interest.
On the other hand, maybe this is what had taken the development of the Riverfront and the Dequindre Cut so many years to develop. Contractors probably were getting paid in phases while money were being used for something else. The development of the Riverwalk and the Dequindre Cut were moving fast until 2014 then things started stalling for months even years before work had restarted. Even the weather was used as an excuse.

[JBMcB]

But this is all just speculation on my part and they did hire a 3rd party accounting firm ,so they probably are handling the day to day financials outside of the conservatory hands.

I don't think hiring an accounting firm is going to be enough, and I don't think the conservancy is taking this seriously, or at all. There is no mention of the scandal on their web site, nor what they are going to do about it. I don't know who they think is going to donate money directly to them going forward. A big chunk of their budget evaporated and they don't seem to care at all.

[southen]

I don't think hiring an accounting firm is going to be enough, and I don't think the conservancy is taking this seriously, or at all. There is no mention of the scandal on their web site, nor what they are going to do about it. I don't know who they think is going to donate money directly to them going forward. A big chunk of their budget evaporated and they don't seem to care at all.

You don't stop performing triage on a patient that is bleeding out to inform the family of progress. I think they are still trying to figure out the extent of the damage and I think the other part is they are desperately trying to make sure that construction continues on their other projects, thus the line of credit from the non-profit sector. I don't think much progress has been made on Ralph C. Wilson since this started, so getting that back on track should be priority one while the rest is still being figured out.

They will have to say something at some point though, because as someone who has donated hundreds to the riverfront over the years, I would like some answers and those answers better be good before I consider giving another dime to the organization. They really killed the trust they had with the community and that has to be earned back.

[Lowell]

An article in the Free Press, yesterday or the day before, shed some light on his MO. Smith had created several shell LLC's, would write checks to them, jigger the banks statements to cover sale purpose, then transfer the funds to another shell, that would buy things [largely real estate and even a 36-foot yacht] then disappear those through quit claims with, my guess, receiving undocumented cash payments.

Smith was made aware that the investigation was underway a month or two ago and in the time between then and the issuance of the criminal complaint he made such moves, as the Free press documented, likely seeing that the posse was closing in.

This along with the long period of piecemeal thefts tells me that efforts to claw back the assets, sadly, are likely to yield little. The money has likely vanished.

[401don]

Smith was made aware that the investigation was underway a month or two ago and in the time between then and the issuance of the criminal complaint he made such moves, as the Free press documented, likely seeing that the posse was closing in.

This along with the long period of piecemeal thefts tells me that efforts to claw back the assets, sadly, are likely to yield little. The money has likely vanished.

Is this further incompetence? Can you not get an injunction to freeze someone's assets, financial transactions, etc. and suspend them pending the investigation to prevent this?

[Richard]

They did get an injunction to prevent him from selling assets like the boat and houses.

$15 million was on credit card for personal stuff,restaurants,flights,lawn care so that is gone.

In regards to conflict of interest and City Counsel members,well ….

Smith’s Biltmore Development Group won the property and approval to develop from the Economic Development Corporation of Detroit — a public body governed by mayoral appointees — after offering $500,000 for it in a bidding process in 2019.

City council — where Riverfront Conservancy board member Mary Sheffield serves as president — unanimously approved a $12 million tax incentive for the project in September 2022.

Invest Detroit, whose CEO is also Riverfront Conservancy board member

Dave Blaszkiewicz, approved $3 million in loans for Biltmore in April 2023, property records show. It's not clear from records how much of that Smith's company ultimately received.

So that’s confirmation and what happened to the $12 million that was given in tax incentives ?

I am thinking the surface has only been scratched on this one

https://www.yahoo.com/news/experts-r...113347688.html

[Lowell]

Is this further incompetence? Can you not get an injunction to freeze someone's assets, financial transactions, etc. and suspend them pending the investigation to prevent this?

From the article, Smith may have been aware of a brewing investigation as early as April. It seems the Feds did not enter the investigation until late May or even early June giving Smith plenty of time to make some moves.

The article contains a laughable quote from Board Chair Matt Cullen, who has to be busy wiping the egg off his face.

"We are thankful for the swift action taken by the government and law enforcement to retrieve the money stolen from the Conservancy,” said Matt Cullen, board chair of the Detroit Riverfront Conservancy.

https://www.freep.com/story/news/loc...s/74197682007/

[Henry Whalley]

...no mention of the scandal on their web site...

People use these board positions for political skinning and grinning. The most interesting discussions aren't in the meeting minutes, but rather are whispered in private when there are no witnesses. How to score a yacht slip in Milliken harbor? It's who knows you and whom you know, in saecula saeculorum.

[Gistok]

^ Unfortunately this type of behavior is not unique to this scenario. All sorts of social groups, be it Masons, DYC, DAC, ethnic social groups, etc., have similar social "who knows you and whom you know"...

[Richard]

From the article, Smith may have been aware of a brewing investigation as early as April. It seems the Feds did not enter the investigation until late May or even early June giving Smith plenty of time to make some moves.

The article contains a laughable quote from Board Chair Matt Cullen, who has to be busy wiping the egg off his face.

"We are thankful for the swift action taken by the government and law enforcement to retrieve the money stolen from the Conservancy,” said Matt Cullen, board chair of the Detroit Riverfront Conservancy.

https://www.freep.com/story/news/loc...s/74197682007/

it’s still under investigation and they have not arrested Smith.

It happened over 12 years .

The “experts” are saying that having over 40 board members “volunteers” and the inherent nature of those types of organizations tend to be based on trust when they really need a healthy dose of skepticism.

Not sure how 40 different board members can always be on the same page.

Smith was in a paid position making $250k a year as CFO but they were running through almost $200 million a year but the red flag should have been when he forged the $5 million loan papers and signatures at the bank when they knew and had suspicions .

It all does not sound to professional when they are doing financial business in the parking lot of Boston Harbor.

A lot of times people sit on the boards of these 501c or communities programs for the credibility or they have them sit there for the organizations credibility and they actually do little or have little involvement.

I know cancer research specialists that are paid hundreds of thousands to be under contract for cancer research facilities,just for their name to lend credibility for getting grants and donations,and they never do one day of work for it.

It’s plausible that 39 of those 40 board members did not have a clue what was going on with anything, because they were there in name only, and not actually involved.

Thats their way of giving back to the community,by lending their good name to an organization so that organization can gain the credibility it needs to acquire donations,all well and good but if it goes sideways,they also lose their credibility.

The amount of organizations Mr. Cullen has lent his name to in the city,there are not enough hours in the day for him to be actually involved in any of them,as would most likely be the case of a majority of those board members.

They put one of the X high up from GM in charge as damage control ,she may not have a clue either, but the reason they put her in charge because her name carries a lot of credibility because of her past position with GM.

Remember - Mr Cullen up until recently ran operations for Bedrock and is invested and involved in running multiple casinos that is valued in the billions,so attaching his name alone has value.

These boards are not like corporation boards where they have meetings everyday,they are just a bunch of names of highly respected people that are lending their name for the credibility and may at best meet once every 6 months if that.

[Henry Whalley]

QUOTE=Richard;643683]...These boards are not like corporation boards where they have meetings everyday...[QUOTE]

Corporation boards meet every day???

[Richard]

[QUOTE=Henry Whalley;643686]QUOTE=Richard;643683]...These boards are not like corporation boards where they have meetings everyday...

Corporation boards meet every day???

I believe it is safe to say you have been provided an example of what happens when they do not.

Enron is another classic example,the directors never showed up or held meetings and put their sole trust in one guy - so how did that work out?

[Gistok]

Um... I have to agree... that Board members do NOT meet every day. In fact most board members of major corporations aren't even in the state that the company HQ is located, and many board member sit on different corporate boards, so daily meetings is not possible.

From what I searched...

"The frequency of board of directors meetings depends on the organization and its size and complexity. Some boards meet monthly, while others meet quarterly or less often. However, most bylaws require that boards meet at least once a year."

[Richard]

As long as you two are playing semantics,it is required by law that board meetings are held,at least once a year in order to retain their corporate status and in order to retain the 501c status.

You guys are just looking for a reason to argue.

Now argue the point how well it worked out when 40 board members did not meet regularly ?

If they had they would not be in the mess they are in.

So to clarify things for some - It is RECOMMENDED that board metings are held daily or regularly so the board members know exactly what is going on.

Just because one corporation does not meet daily it is not indicative of every corporation.

Use the semantics and get the $40 million back,we will be waiting.

It’s a 501c they are not shareholders and fall under the once a year mandatory meeting.

It’s 40 people sitting on a board where over $200 million flows through,you do not think it is prudent for everybody to know exactly what is happening and what is being spent weekly if not daily?

Or you just hand Mr Smith $200 million and say have at it . Talk to you in a couple of years and see how it is going.

They replaced diligence with trust ,and it cost $40 million.

Its a $200 million a year operation and while the board members are really only required to meet once a year and not even required to even be there,they would have put a management term in place from every division that held daily meetings.

They are not sitting there calling people on Craigslists for estimates,they have some kind of structure but clearly no oversight.

They used to call that - putting the chickens in charge of the hen house and now the chickens stole the eggs.

It’s a 501C ,trying to compare for Profit corporations to a 501C is akin to comparing a Cadillac to a Pinto and saying they are the same.

Like I explained,the board members are meaningless,it’s the structure that’s in place that provides the over site,they did not just stick a bunch of people in a room and say here’s $200 million go develop the riverfront.

Take the board out of the equation,then you need a management team that meets everyday with progress reports on every aspect of the fund who then updates the board members.

Talk to the other local charities and fundraisers,they do not just throw $200 million a year into a pile and tell somebody have at it,I would be willing to bet they know exactly where every penny is and where every penny went and they have daily meetings for progress reports.