Newly unsealed court documents illuminate how a Bend woman is alleged to have embezzled nearly $190,000 from the painting company where she worked as office manager and accountant.

Gretchen Marie Miller, 33, told investigators last month the money she’s alleged to have stolen from Bend Painting Inc. over four years was given to her in the form of gifts from the owner, with whom she says she was having an intimate affair, according to the court documents.

Miller, who used the surname “Lupton” from 2012 to 2016, is scheduled to be arraigned on indictment in Deschutes County Circuit Court next month on one count of aggravated first-degree theft. More charges could be added when prosecutors take their case to a grand jury, which is expected to occur early this week.

A search warrant affidavit, unsealed last week, outlines the ways investigators believe Miller defrauded the company. It also highlights Miller’s own accusations of improper business practices against Bend Painting owner, T.J. Iams.

On Dec. 8, officers were called to the Bend Painting office on Boyd Acres Road. Miller had left the company amicably in 2016 when she got married, Iams told The Bulletin last week. The 14-year-old company had recently hired a new office manager who noticed irregularities in the business’ financial documents.

Police began looking into evidence files prepared by the new Bend Painting office manager and began their investigation.

Miller’s alleged methods include writing checks to herself then changing the ledger to show a payment to someone else, or deleting the entry entirely, the documents state. When Bend Painting was to have garnished income from Miller’s own paychecks, she allegedly paid the balance with a company check and changed the check coding to show payments for “licenses and permits.”

Five days later, in an interview with police at her house, Miller said she and Iams had sex numerous times during her employment at the company, the documents state. Miller claims Iams, who was married at the time, would give her money through corporate accounts to avoid being caught by his wife.

“(Miller) claims she received an unknown amount of money from Iams that she refers to as ‘hoe money,’” Officer Scott Schaier wrote in the affidavit.

Miller additionally alleged Iams illegally paid painters in cash to avoid taxes and would direct her to cash checks for illegal payroll.

Iams admitted to police to paying painters in cash but denied he approved any of the alleged fraudulent payments to Miller. He told police he trusted Miller, and denied the affair, saying he “never once even kissed her.”

Miller turned over her phone to police and agreed to take a polygraph test. And though police found numerous “sexually charged” texts between Miller and Iams, they found no evidence of an affair, Schaier wrote.

For nearly a week last month, Schaier wrote he “took additional steps to corroborate Miller’s statements and I have not been able to find any evidence that would validate her account.”

A day before she was to take the polygraph, Miller’s attorney told police she was unable to take the test because she was potentially pregnant.

Miller could not be reached for comment. But Miller’s attorney, Erick Ward, said Friday he was preparing a thorough defense.

“We are at the beginning of what will be a long and comprehensive investigation,” he said. “We look forward to a full and fair examination of the facts.”

For his part, Iams told The Bulletin the attention on the case in the news and on social media has been difficult for his family, particularly his children.

“This is the number one defense for any woman who works in an office and gets accused of this kind of stuff, that they had an affair,” he said. “But you got to have proof.”

Potentially damaging to Iams are messages found on Miller’s phone that discuss tampering with a Department of Labor audit, according to the affidavit.

He declined to address that or other accusations of improper business practices to The Bulletin. He said he expects many more charges to be added to Miller’s case after it goes to a grand jury.

“She’s just trying to distract from the actual focus,” he said. “It’ll all come out in the wash.”

— Reporter: 541-383-0325,