The following narrative summarizes fairgrounds-related fraudulent financial activities of former Bonner County Fair Manager Darcey Smith (Smith) as explained in detail in the attached redacted investigative report. 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.
In June of 2022, the Bonner County HR Department received several tips that former Fair Manager Darcey Smith (Smith) was misappropriating Bonner County Fairgrounds’ assets. The HR Department, consequently, assembled a team to formulate a response plan and present it to the Fair Board. This HR Team advised the Fair Board that both the Fair Board and the Board of County Commissioners (BOCC) needed to immediately reclassify the Fair Manager position as reporting only to the Fair Board, prior to commencing the investigation, to ensure the investigation was managed according to state statute.
In July of 2022, the HR Team advised the external auditor that there was suspicion of fraud at the Fairgrounds. The HR Team notified the external auditor, because the external auditor would be conducting a statutory external audit on the 2022 financial statements, which included an audit of Fairgrounds’ financial assertions that might be the subject of fraudulent internal reporting.
In August of 2022, the HR Team notified the Internal Auditor of the embezzlement risk. (The Internal Auditor assists the BOCC in approving reliable financial statements based on reliable bookkeeping data, as required by statute.) This known embezzlement risk undercuts the reliability of Fairgrounds’ financial assertions in the prospective 2022 financial statements. At this point the Internal Auditor (as the BOCC’s financial advisor) and the BOCC should have reviewed the relevant Fairgrounds’ internal controls, including cash controls, prior to issuing 2022 financial statements (based on potentially erroneous bookkeeping data).
Immediately after the HR Team met with the Fair Board, Smith filed a spurious harassment grievance against the HR Team. This grievance was tailored to hamper the internal investigation. Commissioner McDonald (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.
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.
Because an internal investigation was being blocked, and because Prosecutor Louis Marshall had serious concerns about possible mismanagement of Bonner County Fair Funds, Marshall determined a criminal investigation was both necessary and warranted.
Sandpoint Chief Corey Coon initiated the investigation, as the fairgrounds is located within the City of Sandpoint. Chief Coon and his officers determined there was probable cause to believe the crime of misuse of public funds had been committed by then Fair Director Darcey Smith. Chief Coon and detectives interviewed Ms. Smith on October 27, 2022, at which time she denied any wrongdoing. Ms. Smith took her own life on October 31, 2022. Coroner Beers determined the cause of death to be a single gunshot wound, and the manner of death to be suicide. Coroner Beers consulted with a forensic pathologist in making his determination. Additionally, gunshot residue was found on the decedent’s hand.
Due to rampant speculation at the time, Prosecutor Marshall, Sheriff Daryl Wheeler, and Chief Coon issued a press release urging members of the public to not speculate and make baseless accusations. While many followed that advice, unfortunately, some did not, and there were reckless allegations made against Fair Board members, Bonner County employees, and even against elected officials. This investigation has provided conclusive proof that those allegations were made based on false information.
After Ms. Smith took her life, the criminal investigation concluded, and Prosecutor Marshall initiated a personnel investigation to determine the extent of wrongdoing and loss. A thorough investigation was completed, and the findings are being made available to the public with this statement. Due to this being a personnel investigation, the names of the witnesses are being redacted. The reason for this is two-fold. First, many of these people have already received threats and intimidation throughout the past year, and we will not accept this behavior toward the Fair Board members and Bonner County employees. 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.
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.