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In surprise plea deal, Chicago businessman admits grant fraud

George E. Smith. | Sun-Times files

A Chicago businessman accused four years ago of “large-scale fraud” by the state executive inspector general’s office unexpectedly pleaded guilty in federal court Tuesday, admitting he cajoled two state agencies into giving him separate, six-figure government grants to perform nearly identical services.

Social service provider George E. Smith “converted the duplicate funding to his personal and business use,” according to a news release from the U.S. attorney’s office in Springfield, where Smith was charged, appeared in court and pleaded guilty within a matter of hours.

Additionally, Smith admitted to submitting “false and fraudulent documentation” to the state’s human services department that caused him to be paid nearly $140,000 that he shouldn’t have gotten. That paperwork overstated the services that his not-for-profit, Diversified Behavioral Comprehensive Care, provided under a grant for drug- and alcohol-treatment services.

Smith’s fraud cost taxpayers between $400,000 and $550,000, according to his plea deal. U.S. Magistrate Judge Tom Schanzle-Haskins allowed him to remain free on bail pending sentencing, which is set for July 25.

Smith, 66, faces up to 20 years in prison. But prosecutors agreed to recommend far less time — no more than 30 months — in exchange for Smith’s plea to money-laundering and two counts of mail fraud.

Between 2005 and 2011, Smith received grants from state agencies including the Illinois Department of Children and Family Services and the Illinois tate Board of Education. In 2008, he “induced DCFS and ISBE to issue two separate, but nearly identical grants” to help at-risk children and families in which the “sources of referral, services to be provided and the goals for each grant were essentially identical,” according to prosecutors.

In 2011, Ricardo Meza, at the time the state’s executive inspector general, put out a 201-page report questioning millions in state deals that Smith had gotten.

Attorney General Lisa Madigan sued Smith in 2013 to recover $8 million she says he misspent on sports tickets, trips, concerts and payments to himself and to a consultant. That case is still pending, court records show.