Investigation into alleged fraud at the BoCo Fairgrounds made public

Release of findings spurs flurry of responses

By Zach Hagadone Reader Staff

The Bonner County Sheriff’s Office publicized an investigative report and news release July 26 focused on alleged misuse of funds by late-Fairgrounds Director Darcey Smith, who took her own life on Oct. 31, 2022, three days after she was questioned by police amid a probe into the fair’s finances.

An initial criminal investigation by the Sandpoint police ended following Smith’s suicide — which Coroner Robert Beers confirmed upon consultation with a forensic pathologist — after which Bonner County Prosecutor Louis Marshall undertook a personnel investigation to assess the scope of the alleged fraudulent activity and associated losses.

The results of that investigation — prepared by Resolve Investigations, a private investigative firm with offices in Coeur d’Alene, Sandpoint and Spokane Valley — identify a number of instances totalling more than $40,000 “where a misappropriation of funds was apparent based on the available evidence and data,” and findings of nearly $207,000, in which “misappropriation of funds was possible, but there was insufficient data to reach a conclusion.”

The report drew on hundreds of receipts found at the fairgrounds office, as well as account records from Columbia and Mountain West banks, PayPal, and records of check and debit card purchases from 2018 to 2022.

“As a result of this investigation, I find there is evidence to support that funds were misappropriated through the misuse of the debit card, unauthorized check purchases [and] unauthorized payments to part-time employees,” investigator Christopher Swan wrote in the report. “Additionally, the expected cash proceed deposits from the Fair and Rodeo are unaccounted for.”

While the results of the report have been made public, its release has resulted in a number of claims and counterclaims, alongside competing statements from various county officials.

Dueling press releases

In a news release accompanying the report — posted on the BCSO Facebook page — Bonner County Sheriff Daryl Wheeler wrote, “The summary narrative reveals weaknesses in Bonner County’s system of financial internal controls, as well as management override of financial controls and state statutes.”

According to the news release, suspicion of fraudulent activity at the fairgrounds dated to the summer of 2022, when Wheeler said the county’s human resources team advised the external auditor of those concerns ahead of an impending audit of the 2022 fairgrounds financial statements.

The BCSO news release went on to claim the county’s internal auditor “should have reviewed the relevant Fairgrounds’ internal controls, including cash controls, prior to issuing 2022 financial statements (based on potentially erroneous bookkeeping data.)”

Bonner County Clerk Michael Rosedale issued a statement in response to Wheeler’s release July 26, stating, “he suggests that my office did not exercise appropriate oversight over the Bonner County Fair Board. This assertion is factually incorrect.”

According to Rosedale’s release — which included that Marshall and Deputy Prosecutor Bill Wilson “assisted in drafting and agreed to” the statement, though Marshall later denied drafting or endorsing it in an email to the Reader — “My office is not, and has never been, responsible for auditing fairgrounds expenses other than salaries and benefits, which are tax funded. All other operational expenses at the fairgrounds are funded by revenues generated at Fair events and are outside the purview of Bonner County’s internal auditors. Likewise, Bonner County’s external auditors have never been tasked with substantive review of fairgrounds operational expenses in their annual audit.”

In a follow-up email Aug. 2, Rosedale told the Reader that county auditing had not been used recently for regular Fair Board operations — “or ever that I am aware of” — “nor has that ever been in the scope of the Bonner County Auditing Department.”

He reiterated that the county auditing staff only reviews the budget for salaries and benefits, which are budgeted.

“All the rest is not known to us,” Rosedale wrote. “It is the responsibility of the Fair Board.”

He added: “Our office was never involved with any conversations with the commissioners, Fair Board or Darcey regarding taking over their finances.”

An external audit of Fair

Board operations would require an additional contract, according to Rosedale.

Other statements in Wheeler’s news release included that Darcey Smith “filed a spurious harassment grievance against the HR Team,” which, “was tailored to hamper the internal investigation [into alleged financial irregularities at the fairgrounds].”

What’s more, the release went on to claim then-Board of Bonner County Commissioners Chair Dan McDonald “supported Smith’s efforts by insisting that the HR Team be taken off the case and by falsely stating that the BOCC would investigate the matter.”

Finally, the news release contended that McDonald “used his authority as Chairman of the BOCC and liaison to the Fair Board to frustrate the Fair Board’s efforts to oversee Fair Board financial activities, including the Fair Board’s efforts in detecting fraud.”

In a phone interview Aug. 2 with the Reader, McDonald called the sheriff’s office news release, “a good exercise in creative writing, for one thing,” and went on to say, “[Wheeler’s] statement about me impeding an investigation is false.”

McDonald said he had no in- fluence over the Fair Board, either as a member of the BOCC or a liaison to the board: “I didn’t have a vote; I didn’t go to the executive sessions. If there’s a claim to the contrary, it’s absolutely false.”

Rather, he said he’d stepped in during the initial phases of looking into fairgrounds operations, and told the Human Resources Department and Deputy Prosecutor Scott Bauer, “You guys need to stop until we get this sorted out” — that is, if criminal allegations emerged, they should be handled by the proper authorities.

“At no time did I ever impede the police investigation,” McDonald said, later adding, “Why the passion to continue this investigation — it just makes me more curious than it does answer any questions, especially with a woman who can’t defend herself. … A lot of this stuff just isn’t making any sense.”

‘Inaccurate information’ and an appeal to the A.G.’s Office

At the regular Tuesday business meeting of the BOCC on Aug. 1, Chair Steve Bradshaw said during his commissioner’s report that “the [statement] that was released is full of inaccurate information and can tend to be misleading.”

In an email to the Reader on Aug. 2, Bradshaw confirmed that the statement to which he referred came from the sheriff’s office. He did not provide examples of “inaccurate information” in the BCSO press release by press time.

Rather, Bradshaw read from a separate release at the Aug. 1 business meeting, a copy of which provided to the Reader indicated it came to commissioners and Wheeler on July 21 as a draft from Marshall, though not previously published.

That statement repeated much of the same general information contained in Wheeler’s release —

< see FAIR, Page 5 > including that “rampant speculation” by the public immediately following Smith’s death had included allegations “made based on false information” — but omitted claims related to the county’s internal and external auditing processes, as well as claims made regarding Smith’s HR grievance complaint and references to McDonald.

Marshall confirmed he had not issued a press release, though did draft one that wasn’t sent to the media, and would not issue one in the near future.

Bradshaw went on to state at the Aug. 1 meeting that the private investigator — Christopher Swan — “is I believe to be a solid, honest man. I believe that if the investigation took it directly to his son, that’s where the ax would fall. … That being said, this man worked for Daryl Wheeler in the jail and was an employee previously of Daryl Wheeler and his son is currently an employee of Daryl Wheeler.”

Following that, Bradshaw said that in order to “protect” the sheriff and the BCSO, as well as the private investigator, Bonner County employees, the BOCC, Fair Board and “everybody concerned,” he and Marshall had sought the counsel of the Idaho Attorney General’s Office “to put another set of eyes on this investigation. To look for discrepancies, anything that could or might be wrong or to say, ‘Yes, this is a clean and solid investigation,’ to protect everybody involved.”

Marshall, in an email to the Reader, confirmed that he had asked the A.G. “to look into the matter but I want to be very clear, I have absolute confidence in the investigation that was done and the integrity of the investigator.”

Commissioner Asia Williams told the Reader in an email Aug. 2 that, “the report that Commissioner Bradshaw made [on Aug. 1] was not written or released by Mr. Marshall as stated. Marshall did however agree to send the report to the attorney general for review, but not for the reasons that Commissioner Bradshaw stated.

“Marshall has given a written comment that he does not find an issue with the investigation report but is aware that some people want to devalue the report for reasons unstated,” she added.

Bradshaw wrote that a timeline for the A.G.’s review of the investigation is unclear — “They are slammed with work also,” he wrote, “but feel that with Louis making the request it will help speed up the process.”

Neither Wheeler nor Swan responded to requests for comment.

A call for further investigation into auditing

Meanwhile, Williams said at the Aug. 1 BOCC meeting that she had submitted a request to Marshall for a “root-cause investigation” of internal and external auditing.

Williams said Aug. 1 that such a move was intended “to make sure we actually provide an issue with a resolution.”

In a follow-up on Aug. 2, Williams wrote, “Some of the goals of said analysis are to identify what went wrong and develop a plan of correction/action to reduce and/or eliminate the risk.”

She added: “My statement was referencing the need for Bonner County to perform risk assessments/analysis on the issues that have negatively impacted Bonner County. External auditors are vital, however there is a business expectation that organizations also perform internal audits.”

According to Williams, such an assessment and analysis would not focus on any one department or individual, but “would and should include the Auditing Department not just to look at their process but to utilize their expertise in performing the review.”

Regarding external auditing, Williams was clear that “an issue arising within the organization does not mean that our external auditor made an error and therefore are the subject of an internal audit. … It is my opinion that it is the obligation of the organization to continually audit and address issues and concerns in real time to ensure the overall health of the organization.”

What’s more, Williams stated that given her experience and education in risk management, she has offered to assist the county’s risk manager “as they see fit.”

“It is critical that we ensure that the foundation of Bonner

County is strong,” she wrote. “County employees are the foundation of the operations [of the county]. I will remain available to assist as needed.”

The sheriff’s press release concluded: “It is evident from the report that the losses due to fraud were substantial. However, the Fair is mostly a cash business, so the entire sum cannot be decisively determined. The Fair Board is committed to righting the ship, and for the past several months, the Office of the Prosecuting Attorney has been providing legal advice to the Fair Board and assisting to determine the proper roles and separation from Bonner County.”

‘She did not have a criminal’s mentality’ Darcey Smith’s husband, Jim Smith, reached out to the Reader following the release of the BCSO statement and investigative report. He categorically denied the findings, stating, “I was married to Darcey Smith for 21 years and she did not have a criminal’s mentality. … To say that she stole $200,000 — where did the money go? Because I worked like a dog to make ends meet. If somebody was stealing that kind of money, would you need to work two jobs?”

Smith pushed back on portions of the report that claimed he was present in his wife’s fairgrounds office during times when she handled money.

“Anybody who says that I was present while Darcey was present with money wouldn’t be willing to swear under oath because they would then be guilty of perjury,” he said. “I was never involved with Darcey’s business.”

Smith said his late-wife “loved that place,” referring to the fairgrounds.

“When she went over there, there was like a dozen different bank accounts. She consolidated them, she went to the Board and she said, ‘I want all of this to go to the auditor’s office every month,’” he said. “Why on Earth would she turn it around and then turn around and steal from it?”

He also pushed back at the report’s inclusion of 13 checks investigators found had been written to the Smiths’ son over a two-year period for part-time work at the fairgrounds, though he hadn’t been hired by the county.

Rather, Smith claimed their son’s work had been known and approved by fair officials.

“How dare they insinuate she was filtering money through my son. That’s scumbag shit,” Smith said.

“They have accused me of a crime,” he later added. “I’m taken aback. I’m in shock.”

Smith said he kept the financial records in his household, and from 2016 paid the bills.

“I’m telling you: Never, ever, ever did I have a question of, ‘Hey, where did this deposit come from?’ Or, ‘Hey, what was this withdrawal about?’” he said. “I never had any suspicions. This is someone I do not know — or this is an elaborate cover-up of corruption and conspiracy to get Darcey out of the fairgrounds.”

In public records obtained by the Reader in November 2022, Darcey Smith, in a grievance complaint filed in August that year against county employees — including Bonner County Deputy Prosecutor Scott Bauer, whose father-in-law is Sheriff Wheeler — alleged that:

“[It] Seems odd that in the middle of what most perceive to be some type of ‘land war’ between the BOCC and the Sheriff that the Sheriff’s son-in-law all of a sudden takes a bizarre interest in the Fair Board and Fairgrounds, attempting to apply Sheriff’s Office policies and place the Fair under Sheriff’s Office technology. All in a very manipulative and intimidating manner.”

Bauer and Marshall both told the Reader in November that in no way were Bauer’s actions related to the Fair Board at the time connected with the series of long-running disputes between Wheeler’s office and the then-BOCC over the use of more than two acres of land at the fairgrounds.

Some have argued those parcels would be best used first as an ice rink and later an RV campground, while the sheriff has argued that the property in question should be devoted to an expansion of the neighboring justice complex.

“I want to make it very clear [that] allegations pertaining to the fair director did not stem from the Bonner County Sheriff’s Office nor from Scott Bauer,” Marshall told the Reader in November. “They came to me from a few separate sources.”

The investigative report as released July 26 contains multiple redactions to protect the identities of various witnesses and those who participated in interviews with the investigators.

“[M]any of these people have already received threats and intimidation throughout the past year, and we will not accept this behavior towards the Fair Board members and Bonner County employees,” according to both the press release from the sheriff’s office and the draft statement from Marshall’s office. “Secondly the release of confidential personnel investigations has a chilling effect on future witnesses coming forward if they know their interviews will be made public. Whistleblowers must be afforded every protection under the law.”

The report concludes on Page 20, omitting sections titled “Policy Concerns,” “Recommendations,” “Interviews” and “Exhibits.”

The final page of the report contains analysis of Darcey and James “Jim” Smith’s P1FCU accounts in 2021 and 2022, showing “high balances,” according to the investigators, but, “Uncorroborated information revealed they possibly refinanced their home in 2022.”

Jim Smith insisted to the Reader multiple times in a phone interview that no one involved in the investigation ever contacted him, and that multiple parts of the investigative report “could be explained if they simply talked to me.”

“They never asked me to see my bank account,” he said. “If they can get a judge to agree that I’ve done something nefarious, I’d be happy to let them look at it — with a warrant.”

Additional reporting by Ben Olson.

If you or a loved one is struggling with suicidal thoughts, please dial 988 in Idaho to receive help.