Criminal investigations by state and federal law enforcement focus on a former Casper resident who allegedly funneled some $2 million in federal community development funds to her then-boyfriend’s construction company and took expensive trips to see him on taxpayers’ dime.

Court documents say Gayle Scarborough, also known as Gayle Brownlee, “may have breached a public trust and abused her position as a state official” by improperly awarding contracts, using federal grant money to pay for personally-motivated trips and taking kickbacks in exchange for “showing bias in the performance of [her] official duties.”

The Wyoming Division of Criminal Investigation’s fraud and theft case, which ran parallel to an ongoing federal investigation by U.S. Housing and Urban Development and the Federal Bureau of Investigation, is ongoing.

Scarborough was the Director of Federal Programs for the Wyoming Community Development Authority when a WCDA employee went to a member of the WDCA Board of Directors with a “whistleblower complaint” of criminal activity by Scarborough.

The board member later went to an investigator in the Office of the Inspector General with U.S. Housing and Urban Development in Denver, Colo., with documents reportedly indicating Scarborough “falsified state and federal document in regards to travel reimbursements, and removed WCDA-owned property for personal use.”

The authority, a state agency created in 1975, finances affordable housing by raising capital, in part through selling tax-exempt mortgage revenue bonds to investors. The Authority says it receives no state funding, but uses federal grant money in administering federal programs.

Most recently, the authority allocated over $38.8 million in federal stimulus funds to affordable housing, according to the WCDA website.

Scarborough, who was responsible for funds from U.S. Housing and Urban Development, was allegedly involved in a romantic relationship with Gerry Hammond, who owns Cheyenne-based Valley Construction.

Court documents say Hammond’s company received “a large volume of work from WCDA in the Casper and Cheyenne areas,” and federal investigators believed the relationship between Scarborough and Hammond affected the use of federal funding under Scarborough’s oversight.

An audit by the Office of the Inspector General for U.S. Housing and Urban Development found the WCDA did not properly use funds from two federal programs, did not ensure fair and open competition in using contractors, did not perform proper inspections prior to paying Valley Construction and incurred unreasonable costs while traveling.

Under a program administered by Scarborough, Valley Construction received $92,245 in contracts to test for drugs, mold and asbestos on 74 WCDA properties. Investigators allege Scarborough awarded the jobs without any bid process for other companies.

Following that testing, Valley Construction undertook hazard remediation on 34 of the 74 properties. For that work, WCDA paid the company $222,861. Again, according to court documents, the jobs were awarded without any bid process for other companies.

After the hazard remediation, Valley Construction submitted bids for, and received, contracts totaling $2,212,564 to remodel 29 of the 34 properties. Investigators allege Valley Construction submitted 11 bids by fax, which was reportedly “in direct contradiction to the process laid out by the WCDA Federal Program policies implemented by Scarborough.”

The federal audit determined $918,000 of the total contracts awarded to Valley Construction were improper, or WCDA was unable to show the amount was “fair and reasonable.”

A former employee of Valley Construction reportedly told an investigator that Scarborough had called Hammond on numerous occasions and solicited him to fax a bid for an open WCDA job.

The employee allegedly heard Scarborough tell Hammond something to the effect of “You can get this one.” The employee also suspected the pair “had an arrangement” regarding the bids for remodel/rehabilitation on WCDA-owned property, and believed they communicated about amounts that would win the bid for Valley Construction.

If proven, court documents say, those activities would constitute violations of federal conditions for use of funds provided to WCDA.

Through 19 interviews with former employees of WCDA and Valley Construction, respectively, investigators learned Scarborough often traveled to the Cheyenne area for what she said were “open houses, ‘document reviews,’ home buyer education classes, inspections, and closings.”

She often stayed in hotels for multiple nights, claiming the travel was necessary for her work, and was reimbursed by WCDA with funds from federal programs.

Scarborough self-approved those reimbursements, despite many expenses exceeding established amounts.

She submitted a total of $152,181 in travel expenses over the 31-month period audited by HUD, according to an affidavit. The audit validated $49,618 of those costs, but determined the remaining $102,563 to be “unreasonable or unnecessary.”

The audit goes on to cite hotel costs of $509 per night in Denver while the per diem was $163 per night as well as a cost of $414 per night in San Francisco, Calif. where the per diem was $155 per night.

Court documents say, “These exorbitant travel expenses were a direct result of Scarborough’s exclusive control of the funds in the Federal Programs,” and Scarborough allegedly was reimbursed for all the costs via direct deposit into her bank account.

In December 2016, investigators spoke with a Cheyenne realtor who had exclusive listing rights for WCDA properties in Cheyenne. Agents learned details which largely refuted Scarborough’s claims of traveling to Cheyenne for work on weekends; the realtor said when she was in town, Scarborough had to do all her work from his office, as WCDA did not have facilities in Cheyenne.

“So when she was in town working [he] knew,” court documents say.

The realtor specifically pointed to one property that had been occupied by an elderly woman, who lived in the house for decades prior to her death. The realtor had encouraged WCDA to purchase the property, as it only needed cosmetic updating and would be inexpensive to turn around.

But records from WCDA showed Valley Construction claimed to have found “high levels of methamphetamine and cocaine in multiple rooms of the house,” according to the affidavit.

The realtor avoided showing houses that had a drug history, and most of the 50 or more Cheyenne-area properties WCDA purchased with the realtor had no history of drug use. He told investigators he didn’t think every property needed to be tested for drugs, and there was “absolutely no reason” for full drug mitigation work on the 34 properties – including the elderly woman’s house.

Court documents say WCDA administrators and their legal counsel, Jim Bell, were reluctant to let agents interview employees and, at one point, prohibited employees from speaking with investigators.

Bell allegedly refused to honor a federal investigator’s subpoenas at first, and as slow in providing requested documents when he did finally comply.

“These actions hindered the investigation for a time, and have resulted in a lengthier time spent on the investigation,” investigators write in an affidavit.

Investigators accuse Scarborough of using the contracts awarded to Hammond and lack of management oversight at WCDA as pretense to participate in “excessive, valueless trips” to Cheyenne for weekend visits with Hammond and her family. Scarborough allegedly claimed to be working during the trips, which the realtor confirmed was not the case.

Scarborough, who had final approval over awarding WCDA contracts, routinely awarded Hammond contracts despite knowing the bids had been submitted “in a manner that violated federal procurement guidelines, and should have been rejected.”

The HUD audit made nine recommendations, some of which would require WCDA to develop and implement a travel policy in accordance with federal travel regulations and guidelines when using federal funds for travel purposes, and put in place a policy requiring more oversight of the approval of travel authorizations and travel vouchers.

In a Sept. 22 letter responding to the audit findings, WCDA Executive Director Scott Hoversland disputes a number of the recommendations, including a requirement that WCDA “provide support for the unreasonable amount of hotel costs above the local per diem rate… For any portion of the $22,083 in unreasonable costs… that the Authority cannot support,” HUD should require WCDA to repay two of its federal programs with non-federal funds.

“OIG is taking the position that the Federal agency per diem charge is the maximum allowable charge,” the letter reads. “WCDA believes most of the hotel charges were reasonable based on location and for safety of staff.”

Aaron Gagne, Director of HUD’s Office of Community Planning and Development in Denver, told K2 Radio that HUD is giving WCDA a months-long period to implement the recommendations made by auditors.

The DCI investigation remains active. Neither Scarborough nor Hammond have been arrested or charged in connection with this case at the time of this writing.