Fraud investigation after fairgrounds director’s suicide reveals deeper divisions within Bonner County government

SANDPOINT – Late last October, the director of the Bonner County Fairgrounds was interviewed by police about allegations that she had misappropriated fair funds. Four days later, she drove behind the fairgrounds and took her life.

A recently released private investigation report concluded that Darcey Smith misappropriated at least $40,000. Her husband said she has been unfairly maligned.

As the fair returns this week, questions remain.

The investigation into Smith highlights deep divisions among the Republican leadership of Bonner County, especially between the longtime sheriff and some members of the County Commission who have publicly fought over the future of a piece of land on the county fairgrounds.

Sheriff Daryl Wheeler released a portion of the report three weeks ago, along with a triumphant two-page news release that blamed a former commissioner for interfering with the investigation.

Other county officials called Wheeler’s statement misleading and inaccurate. County Commissioner Chairman Steve Bradshaw and County Prosecutor Louis Marshall said they would ask the Idaho Attorney General’s Office to take a second look at the case.

Smith denied any wrongdoing in her interview with the police detectives.

A few months before her death, Smith filed a harassment grievance against a deputy prosecutor and several members of Bonner County’s human resources department. Her grievance was never investigated.

The grievance suggested that deputy prosecutor Scott Bauer was attempting to separate the powers of the fair board from the county commissioners as part of a yearslong dispute between Wheeler and the commissioners over a parcel of land adjacent to the fairgrounds where Wheeler is determined to build a justice center.

In his news release July 26, Wheeler called Smith’s grievance “spurious” and “tailored to hamper the internal investigation.”

Wheeler said the losses from fraud were substantial, but the entire sum cannot be decisively determined because the fair is mostly a cash business. He said the report provides “conclusive proof” that rumors and allegations against fair board members, employees and elected officials that had circulated in the community since November were based on false information.

The private investigation

After Smith’s suicide, the criminal investigation closed and Marshall hired Sandpoint-based Resolve Investigations to identify the losses.

The investigation was led by Christopher Swan, a former Bonner County Sheriff’s deputy.

His report identified $40,000 that had evidently been misappropriated, as well as another $207,000 that was possibly misappropriated but had insufficient data for him to conclude.

Of the $40,000, the report determined that about half came from checks written to part-time helpers who were not officially hired by Bonner County. This included $8,000 paid to Smith’s teenage son over a two-year period.

Employees should be paid through county payroll, not from fairgrounds accounts, the report said. It found no documentation showing these payees as sub-contractors.

The report further identified $9,000 of unauthorized purchases from a fairgrounds debit card, a deposit missing an expected $5,000 from pre-sale rodeo tickets and a missing $5,000 donation that was not redeposited when funds were transferred from one account to another.

The report also said a fair board member would typically sign 30 blank checks at a time so Smith could pay the bills. The name of the board member was redacted, along with other witnesses and whistleblowers.

Wheeler only released the first 20 pages of the more than 90-page report. The full report contained sections for policy concerns, recommendations, interviews and exhibits, according to the table of contents. The county declined to provide the other pages of the report in response to a pubic records request, claiming the rest of the documents are personnel records exempt from requirements to release them.

Smith’s husband, James Smith, said his wife was falsely accused. He added that he and their son also committed no wrongdoing.

“That report provides not even close to circumstantial evidence that Darcey did anything,” James Smith said. He said he was not interviewed for the report or given a chance to respond to its claims.

According to the report, fair personnel claimed that James Smith on several occasions assisted in counting cash generated by fair and rodeo. James Smith said he never handled any fair money.

The harassment grievance

After receiving several tips in June 2022 that Darcey Smith was possibly misappropriating fair funds, the Bonner County Human Resources Department “assembled a team to formulate a response and present it to the Fair Board,” according to Wheeler’s statement.

Smith filed her general harassment grievance on Aug. 11, 2022, for communications leading up to and including a July 27 executive session with the fair board. The grievance was against the fair board’s legal counsel Scott Bauer, Human Resources Director Cindy Binkerd, Risk Manager Christian Jostlein and HR generalist Alissa Clark.

Smith showed email exchanges with Bauer in which he insisted she schedule an executive session without telling then-chairman of the county commissioners Dan McDonald, who was a liaison to the fair board.

Bauer said the meeting was to update her job description and to present a legal memo regarding internal controls.

Smith said it made her uncomfortable the commissioners would not know about the meeting.

At the executive session, Smith said she and the fair board were “bombarded with legal explanations from Scott Bauer and Christian Jostlein pertaining to the inaccuracies of the Fair Board creation and jurisdiction, that the BOCC was not in control over the Fair Board or its policies, that the BOCC were not my superiors that the Fair Board was …”

Smith said she felt that Bauer and the HR department, which works under the county prosecutor, were actively working against her, the fair board and the commissioners “to implement some scheme for Sheriff’s Office benefit.”

Scott Bauer is Wheeler’s son-in-law.

“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 Fairboard and the Fairgrounds,” she wrote.

Even though it was an executive session, Bauer said they were free to speak about the meeting, Smith said.

She said intimidation by all four employees was a form of general harassment.

“As a Bonner County Employee of more than 10 years, I have never felt more disrespected by another employee,” Smith wrote.

Wheeler’s news release said the human resources team advised the fair board that the fair manager position needed to be immediately reclassified as reporting only to the fair board “to ensure the investigation was managed according to state statute.”

After Smith sent her grievance, Binkerd retained a private attorney, who sent a letter to Marshall complaining that he had removed her from investigating Smith as retaliation for her grievance, allegedly at the request of McDonald and Bradshaw.

The attorney noted protections in the law for employees who participate in investigations.

Marshall replied after Smith’s death, informing the attorney that Binkerd was taken off the investigation when it was turned over to the police department. He also said Smith’s grievance was not investigated.

“I personally reviewed the grievance and on its face it does not allege any policy violations,” Marshall wrote. “There is no basis for an investigation and I am not sanctioning one.”

A public records request for an investigation of Smith’s grievance confirmed no such records exist.

The police investigation

Marshall referred the case to the Sandpoint Police Department in October because of a conflict of interest with the sheriff’s office.

As part of an initial inquiry, police Chief Corey Coon reviewed a spreadsheet of expenditures and checks from the fairgrounds bank account. When he looked at the checks, the numbers did not add up to what was listed on the spreadsheet, he wrote in the police report. It was unknown if the errors were typos or intentional, but it was clear something was wrong with the accounting.

On Oct. 27, 2022, Smith was interviewed by two Sandpoint police detectives.

Their inquiry centered around an apparently fraudulent invoice for a custom belt buckle award from a business named “Hartmeyer and Buckin Silversmith,” according to the police report.

One of the detectives contacted the company and learned that they do not make belt buckles and that “Silversmith” is not part of their name.

A fairgrounds staff member suspected Smith fabricated the invoice to buy a pair of boots for herself instead.

Smith told the detectives she ordered the buckle from a new company she learned of at a fair conference in Colorado. She had no contact information for the company, and the buckle was never delivered.

Smith told the detectives she had nothing to hide, that she did not misuse or steal fairgrounds funds and that she would provide any documentation they asked for.

After the interview, she texted McDonald.

“I was read my rights!!” she wrote. “I am shocked. Just shocked. I am embarrassed to have been called in to meet with him and 2 detectives, I am angry, I am confused. I didn’t do what they are accusing me of.”

She also texted that Coon requested she schedule an executive session with him, the fair board and an attorney on Nov. 1.

She said Coon suggested that she take a polygraph test, which she declined. “I personally don’t believe in those.”

McDonald recommended she take one anyway to show cooperation.

The suicide

At approximately 7:35 a.m. on Oct. 31, a fairgrounds security camera recorded Smith’s vehicle driving toward the woods behind the fairgrounds before it passed out of view, according to the police report for her death investigation.

At 7:40, the sound of a gunshot was recorded on the camera.

The vehicle was discovered by fairground staff that afternoon.

Sandpoint police arrived at the scene at about 3:20 p.m. and observed both the driver’s door and the front passenger door were ajar, and some of Smith’s belongings were strewn on the ground.

The officers found Smith’s body lying in the woods away from the vehicle.

She had a single gunshot wound to the head. A silver 9mm handgun was found under her body. The gun was later confirmed to belong to her.

No one else was seen on the camera going to or from the scene until the employees found the vehicle, according to the police report.

Coroner Robert Beers determined the death was a suicide.

She was 41 years old.

Darcey Smith was diabetic, and James Smith told detectives that her blood sugar had been low over the weekend.

The police report included an Oct. 30 entry from her diary that read:

“I have these ups and downs, more downs really. I’m trying! I’m excited for (redacted) and the football team to go state! (Smile face) I hope they win this year. Ive had so many fluxuating #’s lately. I feel like I am going to throw up constantly. I think I’ll go for a walk today to maybe help clear my mind. I’m scared that I will turn out like my mom. I don’t want to be depressed or worse.”

The sheriff’s justice facility

Three days after posting his news release, Wheeler held a public meeting at a church in Kootenai, Idaho, where he made his case for a future criminal justice facility.

He argued that a disputed parcel of land adjacent to the fairgrounds was designated years ago to expand the county jail. That expansion is incompatible with a proposed RV park expansion on the same ground, he said.

The 4-acre lot sits southwest of the fairgrounds, part of a 20-acre parcel the county purchased in 1990, most of which became the current sheriff’s office complex and jail.

The jail was built in 1998 and has 124 beds. Wheeler said it is in poor condition and the inmate population often exceeds capacity. More than 100 additional beds are needed for the future, he said.

Idaho law says sheriff’s offices must be located within city limits of the county seat. With rising property prices and short supply, the county would not be able to afford an equivalent 20-acre parcel anywhere else in Sandpoint, Wheeler said.

First elected in 2008, Wheeler is running next year for what he said will be his last term. He wants to make retention of this land the central issue in the election, he said, and encouraged voters to replace commissioners Bradshaw and Luke Omodt, who support the RV park.

After a proposal to put an ice rink on the empty lot fell through, Smith began working on a plan to build an RV park there instead. She applied for a $473,000 grant from Idaho Department of Parks and Recreation.

Wheeler vocally opposed the effort.

The field has been sitting fallow for decades, generating no revenue. An expanded RV park could help the fairgrounds be more self-sufficient, said Omodt, who was sworn in this January.

Both the current county commissioners and the previous board drafted alternative layouts they say could fit a new jail on the sheriff’s existing property and still allow for the RV park.

Omodt said there was never a binding decision to dedicate that land to the sheriff, and it remains under control of the commissioners.

The fair board also opposed the RV park. In May, they rejected the grant because they said they had not been included in the planning.

“Why the fair board would not want that money is beyond me,” McDonald said.

Wheeler’s news release

At a county commissioner meeting a couple of weeks ago, Bradshaw, the chairman, responded to Wheeler’s news release by reading a statement he said was written by Marshall, the prosecutor.

“Ms. Smith remains entitled to the presumption of innocence,” he said in the statement. “Ms. Smith was never charged or convicted in a court of law regarding these alleged crimes.”

Bradshaw defended the integrity of Swan, the private investigator, who used to work for Wheeler at the county jail and whose son continues to work for Wheeler as a deputy.

Still, to protect everyone involved, Bradshaw said he and Marshall asked the state attorney general to take a second look at the investigation for any discrepancies.

Additionally, Commissioner Asia Williams said she wants a root cause analysis to identify how the misappropriation was able to happen and how to prevent it from happening again.

Bradshaw was not the only one who took issue with Wheeler’s statement.

County Clerk Michael Rosedale wrote a short response rejecting an assertion that his office failed to exercise oversight of the fair board.

Omodt said Wheeler’s statement was “statutorily and materially inaccurate.”

He said the Idaho statute about county fair boards is clear that financial oversight of the fairgrounds is their responsibility, not the sheriff’s.

“The sheriff 100% has my support in conducting the duties of his office,” Omodt said, “but the sheriff’s responsibility in regard to the audit is clear.”

Wheeler’s statement accused McDonald, the former chairman, of helping Smith interfere with the investigation.

“Throughout the 2022-year period, 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.”

McDonald, who retired at the beginning of the year, called Wheeler’s statement “fantastic” and a piece of “creative writing.”

He denies interfering in the investigation and said he told the human resources department that if there was an investigation, it should be done by law enforcement. He supported Smith by advising her to cooperate with the police.

“What I said is, I won’t prejudge her until we have evidence,” McDonald said. The evidence presented at the time was flimsy and easily explained, he said.

Smith began working for Bonner County in 2012 as a clerk for the commissioners, who hired her as the fairgrounds director in 2018 “because of her abilities, creativity and work ethic,” McDonald said.

He opposed attempts to put her on administrative leave because “that bell is hard to un-ring” if the accusations turned out to be false.

McDonald said Smith was under pressure from numerous county officials – including members of the fair board, rodeo committee, fair staff and the prosecutor’s office – who supported the sheriff and opposed the RV park development.

James Smith agreed with McDonald that his wife had been under tremendous pressure that had been building for more than a year.

The suicide still came as a devastating shock.

“I knew my wife had stress,” he said. “I had no idea it was to the level she would go to work one day and take her own life. My entire world collapsed.”

She didn’t take her life because of the fraud accusation, he said.

“It was the cherry on top. She didn’t have the emotional bandwidth to continue,” he said.

At a community forum last week hosted by Williams, members of the fair board would not answer questions about the investigation.

Instead, they deferred to Bauer, who said the fair board is developing internal controls moving forward, including training a new treasurer in Idaho codes related to financial reporting.

Marshall and Wheeler did not respond to interview requests.

Bauer’s grievance and lawsuit

While Darcey Smith’s harassment grievance was never investigated, three separate harassment grievances filed by Bauer against McDonald and the county commissioners were investigated by outside firms.

Bauer is suing Bonner County and McDonald over these complaints.

A public records request for these investigations was denied, but a court filing said investigators found that the commissioners retaliated against Bauer for his sound advice by removing him as their legal advisor, and that McDonald publicly attacked Bauer’s competence.

Bauer filed his third complaint on Nov. 16, 2022, alleging that McDonald made defamatory statements “falsely and maliciously alleging Bauer bullied former Fair Manager Darcey Smith into suicide.”

McDonald called the lawsuit and harassment claims “baseless.”

Bauer’s lawsuit, which was amended two days after Wheeler’s release, echoes Wheeler’s claim that McDonald tried to disrupt the internal investigation of Smith.

Like Wheeler’s statement, it also described her harassment grievance as “spurious.”

Remembering Darcey

Crochet was Smith’s hobby, and she made many hats and blankets for newborns or for people who had lost a loved one.

“Darcey was a kind soul,” James Smith said.

She was a sports mom, not only to her two children but to the many kids on their teams. Her bubbly personality uplifted those around her.

McDonald said she also was passionate about the fairgrounds, where she dedicated many long hours.

“If she was here today,” James Smith said, “she would tell you, ‘I love it there. It’s the last job I’ll ever work.’ ”