The Detroit Riverfront Conservancy (DRFC), mired in a financial investigation that has been referred to the Federal Bureau of Investigation, has fired its CFO William Smith in response to the FBI’s findings. Additionally, CEO Mark Wallace resigned in the aftermath. Ryan Sullivan, CEO of Watershed Horizons, will assume the interim CEO role.
Smith, who had previously been placed on leave amid the criminal investigation, was fired following a vote by the Conservancy’s board. Reports indicate that the criminal investigation has revealed more than $40 million has gone missing from the organization, the Detroit Free Press reported.
Conservancy chairman Matt Cullen, who has overseen operations amid the investigation, previously said he “became concerned about the accuracy of management reports and financial statements that had been provided to the Board of the Detroit Riverfront Conservancy.” Due to the nature and complexity of the situation, the case passed hands from a forensic audit by PwC to the Michigan State Police to the FBI.
“Our investigation has revealed that Mr. Smith has embezzled significant sums of money from the DRFC and has converted DRFC funds to his own personal use ... Mr. Smith’s unlawful conduct spans several years," according to Smith’s termination letter, sent by former U.S. Attorney Matthew Schneider, who investigated with an outside law firm hired by the conservancy.
The DRFC is responsible for redeveloping more than five miles of riverfront and has received millions of dollars in donations to fund the effort. As CFO noted previously, The conservancy’s most recent filing in 2022 indicates revenue — comprised of contributions and grants — of $25 million, an increase from $18.3 million in 2021. The largest increase in YoY revenue occurred between 2017 and 2018 when contributions grew from $5.2 million to $19.6 million, a 277% increase.
Schneider noted Smith’s “unlawful conduct spans several years.” The Detroit Free Press, in an editorial board opinion, stated that it was the conservancy’s discovery about an apparent cash shortfall, amid its biggest annual revenue recorded of $25 million in 2022, that triggered the investigation. The editorial asserts that Smith’s financial mismanagement lasted for more than a decade, where his annual salary remained largely unchanged, but as noted above, the nonprofit’s revenues jumped, starting in 2018.
Financial controls failure
The embezzlement occurred, according to the Detroit Free Press, “without anyone raising the alarm, despite a management structure and board stocked with some of our region's most trusted and respected professionals.” Smith served as CFO since 2013, according to past tax filings, and before that was finance director for the nonprofit. Records indicate he has been in charge of the filings since 2005.
While the details of Smith’s actions remain unknown, internal financial controls aim to ensure checks and balances are in place to guard the integrity of financial information and prevent fraud. The board requested a review of DRFC’s financial, governance and operations policies, which failed to detect Smith’s actions over an extended period.