In August 2018, Macomb County Treasurer Lawrence Rocca informed the Macomb County Board of Commissioners of potential misspending of approximately $1.8 million in funds from four accounts controlled by Smith's office that were mostly generated via civil forfeiture through drunken driving convictions. The accounts were created after Smith took office in 2005 and were never audited because they were not part of the formal county budget.[18] In February 2019, the Board of Commissioners approved hiring a forensic accounting firm, UHY Advisors, to conduct a formal audit of the funds.[18] Rocca was concerned that Smith had not saved any receipts to match up with his spending, while Smith accused Rocca, a Republican, of using the issue for political purposes.[18] The board fired UHY Advisors one day after hiring them after learning that one of the firm's partners had served as the treasurer for the campaign committee for Democratic Macomb County Executive Mark Hackel. Hackel, who spent 10 years as Macomb County Sheriff, claimed the dismissal was orchestrated by Smith's brother Bob, who was chairman of the Board of Commissioners.[19]
On February 25, 2019, Hackel announced he was seeking a criminal investigation into Smith's activities from the office of Michigan Attorney General Dana Nessel and was requesting the Michigan Department of Treasury to conduct a forensic audit.[20] Smith said Hackel was only making the recommendation to divert attention from his relationship with UHY Advisors and called for investigations into expenditures and funds controlled by Hackel and Rocca.[20] On April 1, 2019, Nessel's office and the Michigan State Police confirmed they had opened a criminal investigation upon Hackel's request.[21]
The State Police executed a search warrant at Smith's office on April 17, 2019,[22] and his Macomb Township home on May 14, 2019.[23] The Detroit News also reported that the FBI was conducting a criminal investigation of Smith.[23]
On March 24, 2020, Smith was formally charged by the Michigan Attorney General's office with 10 felonies; five counts of embezzlement by a public official and one count each of conducting a criminal enterprise, official misconduct in office, tampering with evidence in a civil proceeding, accessory after the fact to embezzlement by a public official and conspiracy to commit forgery. The penalties for convictions range from four to twenty years in prison.[24] Smith turned himself in to the Michigan State Police and was formally arraigned via video conferencing on March 27, 2020, and released on $100,000 personal bond.[25] Also charged with Smith were former Macomb County Treasurer and state representative Derek Miller, who was an assistant prosecutor and served as Chief of Operations, second-in-command under Smith; Benjamin Liston, a retired assistant prosecutor who served as Smith's Chief of Operations before Miller; and William Weber, owner of a security company. In September 2020, Liston agreed to plead guilty to three misdemeanor counts of willful neglect by a public official and testify against Smith, Miller and Weber, in exchange for the attorney general's office dropping four felony charges against him. Prosecutors agreed to a sentence of 60-days in the Macomb County Jail and Liston agreed to surrender his law license and pay approximately $16,000 in restitution.[26]
Following the charges being announced, Smith once again said the investigation was political payback, this time saying it was because he did not initially support Nessel in her 2018 election for Attorney General.[27] Despite professing his innocence, Smith resigned from office on March 30, 2020.[28] It was later revealed that Smith's resignation was a condition of ongoing plea negotiations between Smith and federal prosecutors.[29] A probable cause hearing and separate preliminary examination scheduled for October 2020 were postponed to January 2021 because the courtroom at the 41-B District Court in Clinton Township had not yet been approved to host such hearings because of the COVID-19 pandemic.[30] The probable cause conference was delayed until March 26 and the preliminary examination was delayed until April 21–23.[31]
In September 2020, Smith was charged obstruction of justice in the United States District Court for the Eastern District of Michigan by U.S. Attorney Matthew J. Schneider. Smith was accused of taking $75,000 from his campaign account to use for personal expenses, then encouraging potential witnesses to lie on his behalf.[32] Smith agreed to plead guilty to the federal charges, with federal prosecutors recommending Smith serve between 15 and 21 months in prison.[33] Smith was formally arraigned before U.S. District Court Magistrate Anthony Patti on September 18, 2020, and released on personal recognizance bail and ordered not to leave the state without the court's permission.[34] Smith was to formally plead guilty on October 28, 2020, but the hearing was delayed because Smith and his family were exposed to someone that had tested positive for coronavirus and the Smith family had gone into quarantine.[35] The plea hearing was again rescheduled in November 2020 when Smith revealed he had tested positive for COVID-19 and had been recently hospitalized for treatment for the virus.[36] The hearing was again postponed by U.S. District Judge Linda Parker to January 27, 2021, with Parker saying that Smith's continued recovery from COVID-19 "...preclude him from meaningful participation in his pending plea hearing."[37]
Smith formally pleaded guilty in federal court on January 27, 2021, saying "...I fully accept responsibility for my actions, I acted alone. I acted for my own benefit. I deeply regret my actions and the shame I brought to my wife, my children, the office I spent almost 30 years working for and the people of Macomb County. And I accept the punishment and the plea that's here before you today." Smith's sentencing was scheduled for April 27, 2021, and his plea agreement with the federal government recommended a sentence of between 15 and 21 month in prison and for Smith to agree to a civil forfeiture of approximately $70,000.[38]
On February 16, 2022, Smith was sentenced to 21 months in federal prison. He was also disbarred effective June 15, 2022.[1]
On January 31, 2023, the Federal Bureau of Prisons released Smith from prison. At the time of his release, he had served seven months of his 21-month sentence. Smith was transferred to community confinement, which officials said may consist of home confinement or a halfway house.[3]
Smith is facing a May 15 trial on state charges which allege misuse of drug and forfeiture funds in his former office.[3]