Soured restaurant deals, an indicted business partner and losses in the hundreds of thousands of dollars are some of the red flags in court files regarding the personal dealings of the Detroit Riverfront Conservancy's ex-chief financial officer, now accused of embezzling $40 million from the nonprofit.
Federal prosecutors charged William Smith, the ousted CFO of the Conservancy, on Wednesday with bank and wire fraud, alleging the 51-year-old's scheme there went unchecked for more than 11 years while he falsified bank statements, made unauthorized wire transfers to his company and paid his credit card bills with Conservancy money.
While that scheme allegedly played out, court records show Smith was losing hundreds of thousands of dollars in private investments with a business partner who would later be indicted by the U.S. Attorney in Detroit, in deals involving franchise restaurants in the area, including Which Wich sandwich shops and a pizzeria chain called Pie Five.
The court records, reported first by the Detroit Free Press, add to questions about oversight of the Conservancy during Smith's long tenure there. A 44-member board of directors governs the Conservancy and is filled with high-ranking members of the public and private sector in Detroit and Michigan.
In 2019, a grand jury indicted Smith's partner, John Draper II, on two counts of wire fraud, with federal prosecutors accusing him of defrauding investors, including parents of his children’s classmates at Detroit Country Day School in suburban Detroit.
In a deposition last year in an Oakland County lawsuit, Smith indicated his investments in the deals with Draper exceeded $700,000, saying he poured more money in at one point to avoid possible bad publicity from two restaurant owners who weren't paid.
“I’m a high profile person in the city of Detroit and I can’t have — and I’m a CFO, right, and so with that I could not have … this type of negative stuff associated with me, as who I am here in the city,” Smith said in the May 2023 deposition.
During the investigation of Draper, an FBI agent asked Smith questions about their restaurant deals and told Smith to be aware of the “company” he was keeping, according to Smith's deposition. It's not clear when exactly that specific conversation happened but Smith said later in his deposition he spoke with the FBI in May 2020.
Draper pleaded guilty in December 2020 to one count and was sentenced to 25 months in federal prison and to pay nearly $2 million in restitution to victims. He was released in early 2023.
There is no indication in the records that the federal government considered Smith one of Draper's victims. Smith said in his deposition that he did not tell the FBI how much Draper owed him and didn't seek restitution through the court.
Calls by the Free Press to Smith this week were not returned and his attorney, Gerald Evelyn, declined comment at Smith's appearance in federal court Wednesday. Calls to Draper and his attorney at the time, Jeffrey Collins, were not returned.
A Riverfront Conservancy spokesman declined comment late Wednesday on behalf of Board Chair Matt Cullen, who did not return a call, text or email.
"Out of respect to the investigations instigated by the board, which seek to uncover the full extent of Smith’s complex and nefarious scheme, we cannot comment," said Marc Pasco, the nonprofit's communications director.
The Conservancy's recent request that the FBI investigate Smith came after an outside audit identified the $40 million in missing funds. The nonprofit's board fired Smith last week. CEO Mark Wallace resigned as well.
Former U.S. Attorney Matthew Schneider, now a private practice attorney who assisted in the Conservancy's own investigation and sent a termination letter to Smith's attorney last week, was the top federal prosecutor for the Eastern District of Michigan when Draper was indicted in 2019.
'He can easily hide or dispose of property'
Smith said in his deposition that he had worked 18 years at that point for the Conservancy, which meant he started in 2005. The nonprofit is responsible for redeveloping more than 5 miles of land along the Detroit River with hundreds of millions of dollars it collected from public, private and philanthropic organizations.
In federal court in Detroit during Smith's arraignment Wednesday, officials said he was born in Detroit, has been a lifelong metro Detroit resident and has no criminal history.
Smith’s private business dealings, according to his deposition, include sole ownership of the Southfield establishment, Duo Restaurant & Lounge, which closed recently. The Michigan Liquor Control Commission listed Duo as one of the state’s top liquor-purchasing bars in each of the past two years. It spent $868,000 on liquor in 2023, making it the third-highest purchaser behind Little Caesars Arena and a now-closed business.
Smith also said in the deposition he owns 15 real estate properties, including single family homes and a vacant warehouse on McNichols Road in Detroit. The federal charging document listed two of Smith's companies involved in disbursem*nts from the nonprofit, Joseph Group & Associates LLC and William Smith & Associates LLC.
Smith’s wife, Kimberly Smith, filed for divorce in 2021. Although the case was eventually dismissed, at one point she filed a motion for a restraining order and another order to maintain financial status quo, which touched on her husband’s business dealings.
“The marital estate is expansive, and Plaintiff has been kept in the dark about the family’s assets for the duration of the marriage,” her filing said. “Defendant owns several companies, where he can easily hide or dispose of property, the extent of which is unknown to Plaintiff.”
Smith was the sole wage earner, the motions said, and paid Kimberly a “small salary from one of his businesses.”
Some of Smith’s payments to the business owners in the Draper case came from his “real estate portfolio account,” Smith said in his deposition, which was part of a 2021 lawsuit filed against him from those business men in Oakland County Circuit Court.
Pizza, wings and broken promises
The restaurant deals started after Smith and Draper met, introduced by officials with the Wingstop chain, according to Smith’s deposition.
Although he didn’t say when he first met Draper, Smith said at some point he invested $500,000 with him in a deal involving the chicken wing chain and Pie Five franchises.
Draper and his father, J.D. Draper, were Wingstop franchisees, according to a Free Press story in 2015. Draper’s father spent 40 years in the restaurant business with national companies including Burger King, Auntie Anne's pretzels and Pizza Hut.
Federal prosecutors maintain that John Draper II's Pie Five “franchise scheme” started in the fall 2014, saying he lied to two unnamed victims in order to solicit $1 million, including falsely saying he had “secured rights” to open 100 franchises in Michigan and nearby states and that their money would be used for capital and operating expenses.
Instead, Draper spent some of the funds on personal expenses and business licenses he claimed he had already obtained, according to his indictment.
While promising those investors an eventual payback, Draper moved onto a second “scheme” a year and a half later, the U.S. Attorney’s Office said. That’s where he lied to new investors, including the Detroit Country Day parents and the parents of his kids’ soccer teammates he convinced to invest $375,000 in a water bottle distribution business.
Instead of spending the money on that business, he paid his kid’s private school tuition and bought clothes, federal prosecutors said.
Hopes that a new deal will recover past losses
That water bottle business doesn’t appear to involve Smith’s money. But the third Draper business deal that federal prosecutors investigated did.
It involved three Which Wich sandwich shops, located in Grosse Pointe, Southfield and in Detroit at downtown’s Penobscot Building. Draper offered the owners of the three eateries, Nabil Shurafa and Michael Berschback, $900,000 in 2017 to purchase them, according to court records.
The transaction was delayed, along with Draper’s funds, but the sellers handed over the stores in early 2018, under promises Draper would pay. The purchase price rose to nearly $960,000 in an amended agreement.
Smith said in the deposition he was a member of the three companies purchasing the three shops, but Shurafa and Berschback said they weren’t aware of his role until later in the deal.
Smith said he became involved when he helped Draper work out a lease with a reluctant landlord at the Southfield store. Smith said in his deposition that he didn’t have an ownership interest. He was just trying to get paid for the previous failed pizza chain deal.
“What I was trying to do was secure the funds that I lost from (Draper) in a previous deal,” Smith said about his involvement in the sandwich deal. “That’s what I was trying to do, right? Which is what (Draper) said to me is that once the stores were cash flowing that he would begin to pay me back on the investment that I lost in the Pie Five restaurant.”
But by the summer of 2018, Shurafa and Berschback still hadn’t been paid the sale price.
In early 2019, Smith met with the two sandwich shop sellers and pledged to cover their monthly loan payments while they waited for Draper’s promised funds, the sellers said. That promise by Smith was not in writing, though.
Smith said he feared if he didn’t continue the payments, the pair would sue him, saying he felt he was being extorted.
“And they kept threatening and threatening to sue me and so that’s how we worked out the arrangement that we worked out because they threatened to sue me … so that’s how I ended up in the middle,” Smith said in his deposition.
David Shea, an attorney for Shurafa and Berschback, told the Free Press this week that it’s “absurd” of Smith to say he was being extorted by his clients. Smith admitted that he did not complain to his lawyer or to the FBI that he was being extorted, Shea said.
“My clients lost their three stores and were never paid anything for them,” said Shea, speaking about when his clients’ first threatened to sue Smith and Draper. “And the ownership of the stores went into the names of entities that were owned by Will Smith and John Draper.”
Smith also paid a food distribution company owed money by one of the sandwich shops.
He said in his deposition that he was frustrated with Draper.
“I cussed John out on several occasions because of this situation,” Smith said in the deposition. “Because he was misrepresenting things to me, he was misrepresenting things to (Shurafa and Berschback) and then would ghost and not answer the phone.”
Draper apologized to his victims at his 2021 sentencing and said he did not intend to mislead them.
“I know my words don't mean much to the victims but my intent has always been to make good on the mistakes that I have made,” Draper said, according to the court transcript.
Smith ended up paying the shop owners a total of $214,000 before he stopped making his payments in 2020.
Shurafa and Berschback sued Draper and Smith separately in Oakland County.
In 2019, a default judgment for more than $859,000 was issued against Draper and the three companies used to buy the shops.
The case against Smith was filed in 2021, alleging breach of contract.
Shurafa and Berschback agreed to binding arbitration with Smith. A judge last year upheld an arbitrator’s decision not to require Smith to pay the remaining $745,262 purchase price, in part because Smith's commitment wasn't in writing. Shurafa and Berschback argued that Smith made the payment agreement via email.
Shurafa and Berschback refinanced their home mortgages to take out cash to pay the rest of their business loans on the sandwich shops and have gotten “minimal” restitution so far from Draper, Shea said.
Smith said in last year’s deposition that he did not seek restitution for himself from Draper through the court. But it appears they had a discussion before Draper went to prison.
“What I will say is my restitution is different than the court restitution,” Smith said. “That means I contacted John, you know, before he went in ... I am going to collect my money.”
Contact Christine MacDonald: cmacdonald@freepress.com or 313-418-2149. Follow her on X: @cmacfreep.
