The CEO of the Detroit Riverfront Conservancy resigned Friday and its CFO was terminated amid an FBI probe into more than $40 million in missing funds, the nonprofit confirmed.
Mark Wallace, who has led the nonprofit focused on revitalizing the land around the riverfront since August 2014, stepped down but will remain with the organization as a transitional advisor, according to a press release.
The conservancy board also voted to fire CFO William A. Smith and “explore all legal avenues to protect the interests of the riverfront, including a potential civil lawsuit against Smith,” the statement adds.
After noticing discrepancies in financial statements last month, Conservancy Board Chair Matt Cullen ordered two investigations led by former U.S. Attorney Matthew Schneider – one by the auditing firm PwC and another by the Honigman Law Firm. At Cullen’s request, Schneider brought the alleged evidence against Smith to the Michigan State Police to pursue a criminal investigation. MSP determined the complexity of the case made it a better fit for the FBI, which is now investigating Smith with the conservancy’s cooperation.
Cullen declined to comment beyond the press release. Smith and Wallace could not be reached for comment.
Schneider, at the board’s direction, sent a letter to Smith’s attorney terminating the CFO’s
employment immediately, noting that the investigation “revealed that Mr. Smith has embezzled significant sums of money” from the conservancy, which were converted to his own personal use.
“Mr. Smith’s unlawful conduct spans several years,” Schneider’s letter reads. “We are therefore
terminating Mr. Smith’s DRFC employment, effective immediately, for cause.”
The conservancy was formed 20 years ago and is responsible for redeveloping more than five miles of prime riverfront property with parks and public spaces, including the Dequindre Cut and the Southwest Greenway. Over the years, it has received hundreds of millions of dollars from foundations, private donors and public funding.
The conservancy hosts more than 3 million annual visitors with hundreds of community events. In each of the past three years, USA Today named the Conservancy project the best riverfront in America.
“This is obviously terrible news for all of the supporters of the Detroit Riverfront Conservancy
and our mission,” the board statement said. “As board members, we each feel a sense of
responsibility to overcome this horrific act.”
The board, in a resolution, said as volunteers members believed that the right team and processes were in place to protect the financial integrity of the organizations.
“That belief was disabused by the recent discovery of this significant financial crime,” it reads.
The board’s Friday statement also notes that Ryan Sullivan was brought in as interim Chief Executive Officer to replace Wallace. Sullivan will head a board-ordered review of the conservancy’s financial, governance and operations policies. At the same time, the board announced Karen Slaughter-DuPerry, a long-term conservancy executive, will manage all construction activities.
In her role, Slaughter-DuPerry, a retired General Motors Co. executive, will oversee the ongoing construction of the new 22-acre Ralph C. Wilson Centennial Park in Southwest Detroit. It is set to open in 2025.
The nonprofit arm of Quattro Financial Services was brought on to oversee the conservancy’s finance and accounting activities. Cullen has also recruited board members and business leaders from outside the conservancy to analyze the organization’s accounting/finance, governance and operations and make recommendations about how to improve them.
“If we can, we want to help other Michigan nonprofits avoid problems from within,” Cullen said in the release.
The conservancy’s governance structure includes a 44-person board consisting of prominent metro Detroit community, civic, philanthropic, and business leaders, with issue experts serving on the finance, audit, governance, compensation, and executive committees.
The conservancy said in the statement it has consistently received the highest level of assurance on its annual audits, an unmodified opinion
In a related development, two of the conservancy’s largest donors – the Ralph C. Wilson Jr. Foundation and The Kresge Foundation – announced their support of the board’s actions and pledged renewed funding to sustain its projects.
“I have talked to a number of philanthropic leaders about the current situation. To a person, there continues to be overwhelming support for the Riverfront Conservancy as they work through this difficult time,” said David Egner, President and CEO of the Ralph C. Wilson Jr. Foundation. “I have no doubt that philanthropy will collectively work toward a solution.”
Kresge’s President and CEO, Rip Rapson, said, “This redoubles our commitment to the project.” Exact details on the funding will be announced at a later time.
Detroit Mayor Mike Duggan, in an interview with Stephen Henderson on Mackinac Island for WDET-FM’s “Created Equal,” questioned how that amount of money could go missing without being detected in an annual audit.
The park, the mayor said, “has become the unifying center of the city” and Cullen “is on top of it now.”
“He made a $1 million donation himself to help keep things going,” he said. “It was a message to everybody that we may have made some mistakes but we’re all going to pull together to fix it.”
They literally ruin, e v e r y t h i n g
Members of the board apparently neglected their legal and fiduciary duties for years. They may want to contact defense attorneys. Additionally, donors can be expected to take legal actions to recover their misused donations. This travesty will get nasty fast.