How to get rid of bad manager?

The person who works with me and joined some months after I joined the company became my manager. His education and experience is far less than me. He has great skills to make friendship with anyone. He used this skill to make friendship with top management and became manager. Our management is big fool. They don't realize who is doing what in the department. Because I am more skillful than him, he doesn't like me. He does all sort of things against me - stop my promotion, salary increments etc. Most of the time I am thinking about this. 
This person is so confident now that he thinks that no one can do anything against him, he started dealing illegally with vendors. Making commission with every deal. Again our management is so fool they are not realizing his actions. These days making commission is fool proof. The vendors have mutual deal with the person. What can be done with this kind of person. How to realize the management that this person is not what he presents to be.