Gretchen Marie Miller, the Bend woman once accused of embezzling nearly $200,000 from the painting company where she kept the financial records, plans to sue Bend Police and the district attorney for defamation and malicious prosecution.

On Friday, Miller’s Portland-­based civil attorney Dennis Steinman sent a notice of tort claim to Bend Police, the Deschutes County District Attorney’s Office and Bend Police Detective Russell Skelton asserting investigators and Deschutes County District Attorney John Hummel erred numerous times pursuing a felony embezzlement case against Miller.

“The defendants committed multiple acts of unlawful conduct against (Miller) in violation of state and federal law,” reads the notice. “Defendants acted with malice in the prosecution of (Miller) and with an improper purpose.”

Under Oregon law, a notice must be sent to government agencies prior to litigation.

Miller’s tort claim notice states she intends to seek economic and noneconomic damages for, among other claims, withholding evidence that clears her name and gender-based discrimination. It also includes new details about her case.

In late 2017, Bend Police started investigating a complaint by Bend Painting Company owner T.J. Iams, who told detectives Miller stole money from his business and falsified records during her four years with the company, Bend Police said at the time.

Miller had left Bend Painting in December 2016, and Iams told police her alleged embezzlement scheme came to light after a new bookkeeper discovered financial irregularities.

Miller was interviewed by police in her home, and she denied wrongdoing.

She claimed some money had come to her in the form of gifts from Iams, with whom she said she was having an illicit affair, according to court documents.

At the time, Miller was a single mother who “struggled financially,” and Iams was married with children.

Miller turned over her phone to investigators, but they were unable to find evidence on it of an affair between Miller and Iams, the court documents state.

She was asked to take a polygraph test but declined on the advice of her attorney.

Miller was arrested Dec. 22, 2017.

Facing a decade or more in prison, she pleaded not guilty to 15 criminal counts and hired prominent Portland defense attorney Stephen Houze.

As her trial date approached, Houze sent Hummel’s office information that one of the state’s key witnesses — the office manager said to have discovered the supposed financial irregularities — had recanted much of her testimony, according to the tort claim.

An attorney from Houze’s office also informed Hummel that Iams had engaged in improper contact with a person serving on the grand jury hearing Miller’s case.

On Oct. 23, Hummel filed a motion to dismiss charges against Miller.

He issued a press release stating his reason was the tainted grand jury process.

In her tort claim, Miller accuses Bend Police and Hummel of omitting a description of the exonerating information in Miller’s case, “in order to hide their conduct and further harm (Miller).”

Reached Tuesday, Hummel denied he dropped charges against Miller because he didn’t think she’d be found guilty.

“I dismissed the criminal charges due to the fact the alleged victim communicated with a grand juror about the facts of the case when the grand jury was considering whether to charge Ms. Miller,” Hummel said.

He said he declined to charge Iams for jeopardizing the investigation due to “insufficient evidence.”

When The Bulletin reached Iams in January, he said the “No. 1 defense” for women accused of embezzlement is falsely claiming an affair with the male owner.

But according to Miller’s tort claim, Iams professed to her their alleged relationship was “more than an affair.”

He routinely provided Miller financial assistance with Bend Painting funds, usually by directly paying monthly expenses and giving cash gifts, the claim states.

Miller said Iams became increasingly controlling, and when she alluded to her desire to terminate their relationship, he responded with gifts of greater sums of cash.

According to her tort claim, Miller left Bend Painting in an effort to cut off all contact with Iams.

One week before her arrest, Miller reported to police seeing Iams “prowling” around her home.

She filed a petition for a stalking order in Deschutes County Circuit Court on Dec. 15.

Iams could not be reached for comment Tuesday.

He founded Bend Painting nearly 20 years ago. He’s now divorced, according to several people who know him.

Miller is married, lives in Bend and has four children.

— Reporter: 541-383-0325,