PEABODY — The Kansas Department of Commerce made a deal with officials in Peabody to allow completion of a $1.5 million infrastructure improvement project designed to spark economic renewal in the central Kansas town.
The community of less than 1,000 people was deeply shaken six months ago by alleged financial mismanagement of economic development aid and the mysterious death of a local consultant involved in monitoring state grant funding awarded to the Peabody Main Street Association.
“We have worked in every possible way to avoid compounding the tragedy,” said Lt. Gov. David Toland, who also serves as secretary of the Department of Commerce. “It’s my assessment that our best approach is to allow this work in Peabody, that we believe is important and that will be catalytic for that community long term, to get done.”
HALF OF PEABODY’S infrastructure grant was spent rebuilding walls and roofing or replacing electrical and heating systems of architecturally endearing 1880s commercial buildings in risk of collapse. The remainder of the grant to Peabody was frozen when disturbing claims surfaced that interim Peabody clerk Jonathan Clayton, an adviser on economic development projects in Peabody and Mullinville, as well as a former administrator at the Department of Commerce with oversight of $100 million in funding, allegedly embezzled more than $100,000 of Mullinville’s $425,000 state infrastructure grant and reportedly stole $70,000 from a Mullinville cemetery association.
Clayton previously had been ousted from the Department of Commerce when it was discovered that he was simultaneously controlling economic development funding at the state agency while also coordinating a Building a Stronger Economy, or BASE, grant funneled through the state to Mullinville. As that conflict-of-interest controversy percolated, it was revealed the Department of Commerce had hired Clayton in 2020 while unaware he had been sentenced in 2018 to probation for felony theft and forgery after stealing at least $210,000 in Pennsylvania.
DEPARTMENT OF Commerce officials said they were worried Clayton may have engaged in criminal behavior while collaborating with Peabody. Clayton repeatedly ignored the state agency’s request for routine documentation intended to hold the Peabody grant recipients accountable, said Bob North, an attorney with the Department of Commerce.
As Department of Commerce officials closed in on Clayton in August 2024, he vanished. His body was found three weeks later in a wrecked truck in Harvey County. Shortly after his disappearance, a letter attributed to Clayton was made public that asserted Toland engaged in malfeasance in deciding who received economic development grants tied to government aid during the COVID-19 pandemic. The lieutenant governor said claims in the Clayton letter were false.
Starting in July 2024, the Department of Commerce sent correspondence to Clayton saying the second-phase grant of $760,000 to the Peabody Main Street Association could be withheld.
The state agency also threatened to compel the Peabody association to repay the $740,000 first-phase grant expended on refurbishing downtown buildings.
Amber Cabrera, an attorney at the commerce department, sent the Peabody association a letter in August that said the agency was “proceeding forward with its right to terminate the agreement … and demands the return of the disbursed grant funds in the amount of $740,000.” Cabrera gave the Peabody association 15 days to complete full repayment or the state would “pursue any and all legal alternatives to collect outstanding amounts due and associated costs, including payment for legal fees and expenses.”
The repayment by Peabody didn’t occur, because the association had about $1,200 in its bank account.
However, Department of Commerce spokesman Patrick Lowry said in December the Peabody association’s failure to comply with requirements of a grant recipient necessitated cutting off the promised funding. He attributed the action to the “ongoing appearance of conflicts of interest” in Peabody and “lingering damage done by Jonathan Clayton in the administration of this grantee’s application.”
“Though this is not the outcome that many would have wanted initially, it is important to realize that $740,000 has been invested renovating historic buildings on Peabody’s Main Street that, thanks to these investments, can now be utilized for new businesses,” Lowry said.
TOLAND SAID THE Department of Commerce subsequently concluded there was no evidence of fraudulent expenditures related to the Peabody association’s handling of the grant before or after Clayton’s death.
“It’s been audited twice and we’re confident the funds were spent properly,” Toland said.
