Financial Fraud: George E. Smith Sentenced For a Fraud Scheme

Financial Fraud
George E. Smith Sentenced For a Fraud Scheme

Chicago Businessman Sentenced to Two Years in Prison for Grant Fraud Scheme

Springfield, Ill. – A Chicago businessman has been ordered to serve 24 months in prison for a fraud scheme that resulted in two state agencies awarding separate, but nearly identical, grants to his not-for-profit entity in September 2008. U.S. District Court Judge Sue E. Myerscough sentenced George E. Smith, 66, and ordered that Smith pay restitution of nearly $500,000 to the state. Judge Myerscough allowed Smith to self-report as directed by the federal Bureau of Prisons to begin serving his prison sentence. Smith waived indictment and pled guilty in March 2016, to two counts of mail fraud and one count of money laundering.

In rendering today’s sentence, Judge Myerscough noted that Smith exploited his personal relationship with a former director of the Illinois Department of Children and Family Services related to a grant in the amount of $450,000 awarded by the agency on Sept. 2, 2008, under the Students at Risk Program. On Sept. 8, 2008, the Illinois Board of Education awarded Smith’s not-for-profit a similar grant in the amount of $342,000. According to the terms of the grants, both provided for similar services to be provided to the same at-risk population in the Chicago area during fiscal year 2009. The populations served, sources of referral, services to be provided, and the goals for each grant were essentially identical. Neither DCFS nor ISBE were aware of the issuance of an identical grant by the other state agency. Smith then converted the duplicate funding to his personal and business use.

Both grants were awarded to Diversified Behavioral Comprehensive Care, a not-for-profit entity owned and operated by Smith. In addition, Smith owned and operated three for-profit entities: Diversified Behavioral Services, Inc., Management Planning Institute, Inc., and the Institute for Positive Child and Family Development.  From 2005 through 2011, Smith, through both his not-for-profit and for-profit entities, received millions of dollars in funding from agencies of the state of Illinois, including DCFS, ISBE, and the Illinois Department of Human Services.

Smith further admitted that in February 2009, he caused Illinois DHS to award a third grant of $200,000 to DBCC to provide community services relating to the prevention, intervention, treatment and rehabilitation of alcohol and other drug abuse and dependency. In fact, Smith admitted that he submitted and caused to be submitted false and fraudulent documentation to DHS falsely representing the amount of community services DBCC actually provided under the DHS grant and fraudulently caused DHS to pay DBCC a total of $138,901.

Smith was ordered to pay restitution in the amount of $342,000 to the Illinois State Board of Education and $138,901 to the Illinois Department of Human Services – Division of Alcoholism and Substance Abuse.

Assistant U.S. Attorney Timothy A. Bass prosecuted the case on behalf of the U.S. Attorney’s Office for the Central District of Illinois. The investigation was conducted by the Federal Deposit Insurance Corporation, Office of Inspector General (FDIC-OIG) with the assistance and cooperation of the Office of Inspector General, Illinois Department of Children and Family Services; the Illinois Attorney General; the Illinois Board of Education, and the Illinois Department of Human Services.

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