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Chicago businessman gets two-year prison sentence in fraud scheme

George E. Smith. | Sun-Times files

A Chicago businessmen who admitted to a fraud scheme involving two state agencies was sentenced Friday to 24 months in prison.

At his sentencing in U.S. District Court in Springfield, George E. Smith, 66, also was ordered by Judge Sue E. Myerscough to pay nearly $500,000 in restitution to the state: $342,000 to the Illinois State Board of Education and $138,901 to the Illinois Department of Human Services.

Smith had unexpectedly pleaded guilty in March during a federal court hearing, about four years after he had been accused of the “large-scale fraud” by the state executive inspector general’s office.

Smith admitted he cajoled two state agencies into giving him separate, six-figure government grants to perform nearly identical services. He “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.

In passing sentence, Myerscough said Smith had exploited a personal relationship with a former director of the Illinois Department of Children and Family Services.

Smith’s fraud cost taxpayers between $400,000 and $550,000, according to his plea deal. He had faced 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 Department of Children and Family Services and the 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.

Contributing: Chris Fusco