A federal judge barred former Detroit Riverfront Conservancy CFO William Smith and others from selling or transferring assets after prosecutors Monday alleged he tried to unload a condo in Mexico, a home in Georgia and a 36-foot yacht, the "SS Duo," since being arrested by the FBI and accused of stealing $40 million.
The allegations emerged in unsealed federal court filings that provided new details about how Smith is accused of spending money that prosecutors believe was stolen from the riverfront group. Details in the unsealed filings confirmed reports in the last two weeks in The Detroit News that Smith had transferred homes to a company headed by his wife and a friend as investigators uncovered one of the largest alleged fraud schemes in Detroit history.
U.S. District Judge Linda Parker issued a temporary restraining order preventing the property from being sold and required Smith to answer why the order should not be extended for the duration of the case and while he negotiates a possible guilty plea with federal prosecutors.
Meanwhile, the judge's restraining order covers assets up to $39.3 million — approximately the amount Smith is accused of stealing since late 2012. Smith became CFO of the conservancy in 2011 and had some level of control over its finances since 2006, according to prosecutors.
An "FBI investigation reveals that Smith is engaging in an ongoing effort to transfer assets that would otherwise be available to repay his victims," Assistant U.S. Attorneys K. Craig Welkener and Jessica Nathan wrote in requesting the restraining order.
"Smith used the embezzled funds for his own personal gain and enrichment, spending the funds on airline tickets, hotels, limousines, household goods, lawn care, clothing, and jewelry," they added.
There was no immediate comment from Smith's lawyer, Gerald Evelyn.
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Monday's court filing provides the most complete look at the real-estate empire Smith amassed while being paid less than $250,000 annually during his Riverfront Conservancy tenure. Prosecutors say he used millions of dollars stolen from the nonprofit, along with some of his own money, to buy properties in two countries, including a nearly $1.3 million home in Novi, the Southfield nightclub Duo Restaurant & Lounge, a party store in Michigan's "Black Eden" and other property in Texas, Georgia and Mexico.
“We are thankful for the swift action taken by the government and law enforcement to retrieve the money stolen from the conservancy,” conservancy Chairman Matt Cullen said Monday in a statement. “This is a crucial step in ensuring that no one will get away with stealing from the conservancy and the people of Detroit."
The effort by federal prosecutors to freeze Smith's assets across two countries and three states came on the same day the Ralph C. Wilson Jr. Foundation announced a new $10 million gift to help finish the west riverfront park the conservancy is constructing amid a cash crunch from the alleged embezzlement scandal. The Community Foundation of Southeast Michigan also has created a $35 million fund to help the cash-strappedconservancy finish the newRalph C. Wilson Centennial Park and final portions of the Uniroyal Promenade and Robert Valade Park on the east riverfront.
New real estate revealed
The new real estate revealed late Monday includes a home in southwest Atlanta that is listed for $799,900. Smith bought the three-bed, five-bath home for $665,000 four years ago and transferred the property to his YBE Investments LLC, prosecutors said.
Prosecutors said the Atlanta home has been for sale since May 28, three days before the conservancy fired Smith and eight days before the FBI arrested him.
Federal prosecutors also believe Smith controls a $385,000, two-bed, two-bath condo in Los Cabos, Baja California Sur, Mexico. Details were unavailable, but it appears the condo was built in 2021 or later, prosecutors said.
Investigators learned about that property after raiding his conservancy office and finding paperwork about the condo and a company named "Alter Ego Properties LLC," prosecutors revealed.
State records also show Smith has recently tried to sell the "SS Duo," a 36-foot Cruisers 35 Express yacht he purchased in May 2021.
"The yacht is believed to be dry docked at a Detroit area marina," prosecutors wrote.
The yacht appears to be named after his shuttered Southfield nightclub, Duo Restaurant & Lounge. A sign on the door last week indicated the lounge was closed "indefinitely."
The nightclub is in a plaza along Northwestern Highway, near Inkster Road, tucked between a comedy club and Woof Woof, a doggie boutique.
Yet state records show Duo Restaurant & Lounge, despite its small footprint, sold more liquor ($868,051) than almost every other bar, restaurant or concert venue in Michigan last year, except Little Caesars Arena ($1,186,551) and the Detroit sports bar Brass Rail ($880,894), according to Michigan Liquor Control Commission sales data. Duo's sales surpassed much larger venues, such as Ford Field, Comerica Park and the Topgolf driving range along Interstate 75 in Auburn Hills.
State liquor sales data show Duo Restaurant & Lounge rocketed from 221st in total purchases of booze ($117,519) from the liquor control commission in 2016 — when state records show Smith became the owner — to the state's No. 5 in total annual purchases in 2019 ($498,525).
"Given that Smith obtained $39.3 million in fraud proceeds over 12 years, while making less than $3 million total in that time frame from his conservancy salary, and his pattern of transferring criminal proceeds to LLCs in his control or spending them on his own pursuits, the United States alleges that Smith obtained or improved the great majority of his numerous assets with fraud proceeds," prosecutors wrote.
Smith also identified a home near Houston, Texas, that Smith either has an interest in or has tried to transfer, an investigator wrote in the unsealed civil case.
The three-bed, 2.5-bath, 2,288-square foot home in Cypress was built in 2021 and is worth an estimated $493,988, according to real estate records.
More:Feds target ex-Detroit Riverfront CFO's real estate empire to recoup missing millions
Smith risks being charged with another crime if he is able to sell the properties or yacht, prosecutors said.
Flurry of asset transfers
As first reported in The News, Smith last month transferred one of his family's homes, a $224,000 ranch-style home in Redford Township, to a new LLC organized by his wife for $10. The transfer occurred on May 21, five days after state police investigators searched Smith's office at the conservancy and seized unspecified documents, according to Wayne County property records.
Smith also transferred two homes on Biltmore Street in northwest Detroit, including a rental home to a friend who talked to The News about the deal last week.
Investigators have identified other property in which Smith has an interest or has tried to transfer recently. That includes two 2021 Can-Am motorcycles. The News reported about the motorcycles last week, including that he and friend Darrell Greer, purchased matching $21,000 motorcycles and registered them with the state on the same day. Greer also bought one of Smith's homes on Biltmore Street on Detroit's west side in late April for $35,000 while forensic auditors were uncovering fraud at the conservancy, records show.
That price was far below the home's true value of $79,939, according to the court filing.
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The criminal case alleges Smith used an American Express platinum credit card to make $14.9 million in illegitimate purchases, including airline tickets, clothing, jewelry, furniture and $17,453 at Louis Vuitton.
Smith also is accused of wiring $24.4 million from a conservancy account to one of his companies, the Joseph Group & Associates.
Smith is charged with bank and wire fraud, charges that could send him to federal prison for 30 years.
The News, however, has obtained liens filed by prosecutors on at least 14 properties linked to Smith, which shows FBI agents are also investigating theft or bribery involving federal funds and money laundering.
In a related affidavit Monday, the lead FBI special agent on the case said there was a “high likelihood of multiple money laundering violations.”
“Each of these transactions commingled the proceeds of his offenses with other property that he purchased before and during the criminal activity, transforming victim funds into individual assets, and concealing the nature, location, source, ownership, and control of his fraud proceeds,” the agent wrote.
Shoring up the riverfront projects
The flurry of legal action against Smith comes as Metro Detroit's philanthropic foundations are scrambling to keep construction continuing on schedule on the West Riverfront, where the 22-acre Ralph C. Wilson Centennial Park remains under construction.
The Ralph C. Wilson Jr. Foundation is contributing a $10 million grant to the $35 million fund, officials said.
The Wilson Foundation has authorized the Community Foundation to use assets of endowed funds at the Community Foundation to create a $25 million line of credit for future construction contractor payments. A line of credit will be reduced depending on fundraising and recoveries from the alleged embezzlement are received, officials said.
Officials said if the endowed funds need to be used, the Wilson Foundation will provide additional grants to ensure the Community Foundation can continue making community grants from those funds while fundraising efforts continue. Other funders have expressed support for the effort, officials said. Discussions with those groups will resume now that the fund has been created, officials said.
Construction of Wilson Park is expected to be completed by fall 2025.
"We are grateful to our philanthropic partners who continue to support our vision, and will continue to collaborate with law enforcement to ensure justice, recover the money stolen from the conservancy, and finish our mission of completing and sustaining the No. 1 riverfront in the U.S.," Cullen said Monday in a statement.
Other philanthropic organizations that have played a role in the development of the RiverWalk and adjoining walkways through the city praised the Community Foundation of Southeast Michigan and Ralph C. Wilson Foundation for forming the new fund.
"The Hudson-Webber Foundation is very pleased that there has been a solution provided to ensure that work will continue on the Riverfront project. We have future funding commitments in place that have already been approved by the board," said Donald Rencher, president and CEO of the Hudson-Webber Foundation.
The Hudson-Webber Foundation's board is chaired by Jennifer Hudson Parke, who is the board secretary of the Detroit Riverfront Conservancy. Federal prosecutorsallege Smith forged Hudson Parke's signatureto secure a $5 million line of credit last fall — unbeknownst to anyone else at the conservancy — as part of his embezzlement scheme.
rsnell@detroitnews.com
@robertsnellnews
