When former Beaufort County Clerk of Court Elizabeth Smith was spared jail time Tuesday after being found guilty in state court of embezzlement and misconduct in office charges, she, along with her friends and family, breathed a sigh of relief.
That relief was short-lived.
On Wednesday, Smith faced a new set of legal challenges in the form of the U.S. Attorney's Office, a federal indictment and the possibility of 10 years in a federal prison.
Smith, 47, was charged by U.S. Attorney Bill Nettles with one count of unlawful conversion of public funds for allegedly using a total of $338,500 in federal child support enforcement funds to pay the salary of her husband, Manning Smith, who once ran the Beaufort County Drug Court, and other drug court costs. The indictment alleges those funds were used from January 2006 until June 2009.
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In addition to possible prison time, a conviction on the charge could bring a $250,000 fine, according to the U.S. Attorney's Office.
According to federal court records, Elizabeth Smith first wrote two checks worth a total of $68,500 in January 2006 from a clerk's office bank account that contained federal child support enforcement funds.
The funds are disbursed to the Clerk's Office through the state Department of Social Services via the U.S. Department of Health and Human Services.
The funds are earmarked to pay for paternity tests and other aspects of child support enforcement, and are not to be used "for compensation of judges, compensation of judicial staff members, and office-related costs," according to federal court records.
Investigators say the money was used to pay Manning Smith, who presided over the drug court and served as president of Beaufort County Problem Solving Courts Inc., the non-profit organization under which the court functioned.
Elizabeth Smith was the charity's registered agent, according to federal tax records.
Elizabeth Smith also is accused of writing three other checks worth $270,000 from the same account to the drug court between January 2007 and June 2009, according to the indictment.
The checks were again used to pay Manning Smith's salary and other "unauthorized, miscellaneous expenses," the indictment said. Those expenses were not specified in the indictment.
Manning Smith has not been charged.
Attempts to reach Manning and Elizabeth Smith for comment were unsuccessful as were attempts to reach the U.S. Attorney's Office.
'KIND OF SHOCKED'
Manning Smith became drug court judge in June 2001, a year after former 14th Circuit Solicitor Randolph Murdaugh III created the program across the five-county circuit in 2000.
Beaufort County's Drug Court is the only one still operating.
In 2002, Manning Smith began appearing before local government bodies, asking them to help fund the program.
Beaufort County and the Town of Hilton Head Island were among the local municipalities that regularly contributed.
Steve Riley, Hilton Head Town Manager, said he was "kind of shocked" by Wednesday's indictment, but added that the town knew little of the program's inner workings.
"We were unaware that (Manning Smith) was drawing a salary," Riley said. "There were things we weren't aware of that we learned about as time went on. The stated purpose of the program was a very good one."
Attempts to reach Beaufort County Council Chairman Weston Newton and County Administrator Gary Kubic for comment Wednesday were unsuccessful.
Authorities say Manning Smith began work with the program as a volunteer judge.
By the time he was removed from his position by S.C. Supreme Court Chief Justice Jean Toal in August 2009, he was drawing a $60,000 annual salary.
Toal has not explained why Manning Smith's judgeship was rescinded.
It is unclear when he was first paid by the drug court.
Lady's Island attorney Carol Ruff was approved by Toal in September 2009 to succeed Manning Smith, and the program is now under the auspices of 14th Circuit Solicitor Duffie Stone.
'KNEW THIS WAS COMING'
Suspicions last year that Elizabeth Smith was diverting federal funds to the drug court prompted Stone to request a S.C. Ethics Commission investigation into the clerk's office's finances.
The investigation resulted in charges of embezzlement and misconduct in office against Elizabeth Smith.
Those charges were filed July 30, 2009, and alleged she wrote checks worth $23,500 to pay insurance premiums for her sister and brother-in-law and to make payments on a $980,000 vacation home on Pawleys Island. Smith resigned her clerk of court position the day the state indictment was announced.
A jury found Smith guilty of those charges Tuesday. She was sentenced to 5 years of probation and 200 hours of community service. She will serve that probation and perform that service in Florence, where she now lives with her husband.
Stone said the timing of the federal charges was no coincidence.
"We have been working very closely with federal investigators since August (2009)," Stone said. "This is their case and they're prosecuting but ... we knew this was coming."