However, the problem isn't one of conflict of interest (if disclosure that her husband was a contract) was made. And I'm not sure fraud was involved.
What did occur--from your recounting of the facts--is that an offer was made which was not presented to you. And that is a serious, serious problem unless you had given her some direction such as: "Don't even bother presenting any offers to me unless they're above $4 million." But, otherwise, all offers should be presented to you in a timely fashion.
As far as conflict of interest: If you were aware that her husband was the contractor and you made the decision to use him, there's no conflict of interest. In fact, the first house I bought, the Realtor's husband was a contractor. She recommended certain modifications be done to the house. His bid seemed reasonable. He did the work (and did it well). No conflict of interest.
As far as fraud: I'm not sure where the fraud comes in. Are you suggesting she misjudged the value of your property, either before or after the renovation? Or are you suggesting that she was in collusion with the person making the offer? I'm just not sure what the fraud is.
There's another lesson here--not for you, but for everyone else out there worried about making a low offer that might "insult the seller." You put your home on the market for $5.5 million. You would have sold the home for $3 million "as is." The lesson to all buyers is: Make an offer that works for you. Don't worry about "insulting the seller." And the lesson for sellers in such situations is to emphasize to your agent that you welcome all offers. I'm not defending your agent's actions for a second, but it's possible she thought such a low offer would insult you.
So: Report her. But recognize that your case is based on her not presenting an offer, and thereby not representing your best interests.
Hope that helps.
Could it be poor communication?
Could it be lack of clear vision as to what your goal was in that transaction?
Like others, I am not trying to defend the agent. She should have known better.
However, could it be that you contributed to the unintended outcome, as well?
I certainly hope that you did not fire the agent to wiggle out of paying the commission that the agent was rightfully entitled to - after her husband did all the renovations and made your home more marketable.
A lawyer may advise you not to file a complaint and to file a lawsuit because the agent's insurance company may settle with you for the amount of money money you may have lost.