An investigation began in December into the alleged misuse of public funds after an audit of the town's finances by Gerry Buckner of Hafen, Buckner, Everett & Graff.
The St. George accounting firm allegedly found irregularities in the town's bookkeeping.
Buckner said the audit found overspending in two budgets, money not moved into proper accounts and personal items -- including gasoline for travel -- charged to the town by an employee.
The same employee also received wages five months in advance and by June 2002 had received $6,000 in advance pay.
Lee is serving his second four-year term in the town of nearly 400; it expires in December 2005.
Lee did not return calls from The Tribune on Wednesday, but according to The Associated Press, he said he has no plans to step down as mayor.
Town attorney Russell Gallian said Wednesday that he was surprised when he heard the charges were filed.
"If anything it was a misjudgment," he said. "I don't believe there was criminal intent on the mayor's part. He certainly didn't steal anything. I think he had the wool pulled over his eyes."
Gallian has only been the town attorney since March, replacing after the previous attorney who quit to avoid a conflict of interest with a development project.
Lee "is in a tough situation," said Gallian. "It's a serious crime he's accused of and casts a cloud over his head, but I don't know all the facts."
Arraignments for Lee and Higbee are scheduled for May 30 in St. George.
Lee has taken an unconventional approach to municipal government, championing an ordinance that was passed by the Town Council requiring each household to keep a gun. The ordinance was later determined to be unconstitutional.
It was changed to read that a resident just had to be "armed."
He also was criticized by some in the community for charging $25 to get on the agenda at the town Planning Commission and council meetings.