San Diego Businessman Is in Hot Water

SAN DIEGO (CN) - A San Diego businessman was charged Wednesday with defrauding the federal government and an Indian tribe of $1.25 million.

Michael A. Smith persuaded the Mesa Grande Band of Mission Indians to invest HUD money in his company, the Paradigm Group, claiming the money would buy panel housing manufacturing equipment, the U.S. Attorney's Office said.

The Department of Housing and Urban Development released the money to the tribe based on a phony addendum and invoice Smith prepared, prosecutors said in the statement.

"The indictment alleges, however, that neither Smith nor the Paradigm Group used the funds to purchase the equipment on the phony invoice. Instead, Smith used a substantial portion of the grant money improperly by repaying personal debts and funding his own lavish lifestyle, including a timeshare private jet, personal limousine service, and exotic wood furniture for the Paradigm Group's offices," according to the U.S. attorney.

Smith pleaded not guilty. His bail was set at $50,000. His next court appearance is set for Sept. 30.

If convicted, he faces up to 20 years in federal prison for wire fraud, and 10 years for money laundering, plus fines.

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