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Detroit Nonprofit CFO Accused of Stealing $40 Million

U.S.Detroit Nonprofit CFO Accused of Stealing $40 Million

The Detroit Riverfront Conservancy, a nonprofit intended to beautify the city’s once-industrial waterfront, had more than $100 million in assets, and tens of millions more flowing in annually from government and private donors.

One man had near total control of the group’s money, according to federal charging documents released Tuesday: its chief financial officer, William A. Smith.

Mr. Smith’s grip on the nonprofit’s finances was so tight that even the nonprofit’s accountant, charged with tracking spending, could not log into one of the group’s bank accounts. Only Mr. Smith had the password. He gave her the bank statements on paper and met her only four times a year, in the parking lot of a Honey Baked Ham store 40 miles from the office.

On Wednesday, federal prosecutors said Mr. Smith abused his power to pull off an astonishing fraud: He stole nearly $40 million between 2012 and this March, they said, equal to 39 percent of all the money that the group had reported spending in that time, burning through the group’s cash reserves.

Mr. Smith, 51, was charged with bank fraud and wire fraud, both felonies that can come with as much as 30 years of prison time.

The case highlights an enduring problem among nonprofits. A lax or informal approach to financial management can leave groups that handle millions of dollars in public and private funds vulnerable to waste, runaway costs or, in the worst cases, insider theft. When this happens, it’s often hard to catch. While the Internal Revenue Service has oversight over nonprofits, the average annual audit rate by the agency is less than 1 percent.

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