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The Monterey County civil grand jury has rewritten the script on the controversy that has consumed Carmel City Hall in recent years. Its recommendation, essentially, is to forget most of what you thought you knew about it, particularly the parts you read in the Carmel Pine Cone.

The old script, written largely by the weekly paper, had now-departed City Administrator Jason Stilwell bungling his job by arrogantly and even illegally dismissing solid employees before a grassroots community uprising drove him from office.

The new script, backed up by personnel records and interviews with numerous City Hall insiders past and present, portrays Stilwell as a highly competent if imperfect administrator operating at the direction of a mayor and City Council that wanted to eliminate the cronyism that had flourished under the former mayor, Sue McCloud.

In a remarkably detailed and wide-ranging report released Friday, the grand jury found that Stilwell operated professionally and legally but was cut loose for purely political reasons when the newspaper, a vigorous booster of the McCloud administration, began a series of lopsided articles taking up the cases of city employees who, for the most part, had been appropriately terminated.

3d people - man, person and directional sign.True or falseThe grand jury paints City Hall under McCloud as a monument to her power with few checks and balances. Though Carmel employs a city administrator, technically making the mayor little more than president of the City Council, the grand jury found that McCloud essentially functioned as the chief executive with often unquestioned authority. As a result, city employees and many of those on the council never learned their proper roles and felt unable to challenge McCloud, a retired CIA agent.

After young Jason Burnett succeeded McCloud as mayor in April 2011, Stilwell was assigned to modernize government functions. His task was greatly compromised by short-staffed departments, years of informal decision-making processes and a public that knew little about City Hall except what it read in a newspaper openly disdainful of the new administration, the grand jury concluded.

Rather than provide Stilwell with the support he needed to carry out the council’s wishes, “the actions of the mayor and City Council appeared to place more importance on avoiding public criticism, unfavorable media exposure and the threat of litigation than on conscientious oversight and governance,” the jurors concluded.

To a large extent, the jury continued, Stilwell’s departure last October was driven by news coverage that “heightened or escalated local concern by echoing the one-sided viewpoints of terminated employees since the city was prohibited by law from disclosing its reasons for terminations.”

One example was a long Pine Cone piece trumpeting the military and municipal experience of the city’s longtime building official who had been terminated by Stilwell. The article complained that he had been unfairly dismissed despite years of strong service, “and the city won’t even say why.” The implication was that the city was being unfair to the employee by not making the grounds public and even that the city might not have informed the employee. The fact of the matter, fully known to Pine Cone publisher and editor Paul Miller, was that the city was legally prohibited from disclosing its basis for termination.

Burnett denied Saturday that he had felt pressured by the news coverage. He argued that the administrator had brought on his own troubles by not following proper personnel procedures while claiming otherwise internally.

Specifically, Burnett said, Stilwell falsely claimed to have used “progressive discipline” before terminating employees. That refers to the practice of warning employees about substandard performance and following that with corrective action and discipline of increasing seriousness before any termination. “I was deceived,” the mayor said.

Although not legally required, progressive discipline has become standard practice in most bureaucracies. Unfortunately for someone attempting to reshape an organization quickly, as Stilwell was expected to do, it can be a slow process made more difficult when an institution has little history of documenting employee transgressions.

“We did not have the full picture,” Burnett continued. “That came to us subsequent to the resignation” of Stilwell.” The grand jury, he added, did not have access to complete information.

Burnett added that several of the recommendations from the grand jury have already been put into place.

The grand jury report says that by not following formal disciplinary and termination procedures of the type used by most government agencies, Stilwell provided the departed employees obvious grounds for litigation. The grand jury concluded the processes he followed were appropriate but that they also created drama that might have been avoided.

Stilwell, who has been hired as deputy city manager in Santa Maria, could not be reached to comment Saturday. Miller, who nominated his City Hall reporter for a Pultizer Prize, did not respond to an emailed request for a response.

Through the courts, the grand jury received highly unusual access to city personnel files, allowing it access not available to the Pine Cone or others. On several subjects, however, the jury received limited information because city officials including City Attorney Don Freeman declined to waive attorney-client confidentiality.

Despite some limitations on its access, the grand jury performed an unusually detailed, seven-month inquiry into the city’s hiring and firing practices, its contracting procedures and other areas. Its report asserts, among other things, that security procedures for the city’s computer system are horribly deficient and need to be revamped immediately.

The grand jury also reported, with little detail, that a 150-page forensic audit of the information technology operation, costing more than $383,000 and pointing out some 800 security issues, has disappeared.

The report portrays Jason Stilwell as a victim of the crony system that existed when he was hired in 2011 and a victim as well of a largely untrained and naïve administration that came into power after McCloud’s departure. Its numerous findings undoubtedly will be spun widely, and even wildly.

It seems unlikely that the Pine Cone will object to its portrayal as a civic shot-caller if not a bully, but it undoubtedly will seek to diminish the findings, positioning it as a somewhat unlikely ally of Burnett. Burnett’s political ambitions have suffered because of the turmoil surrounding Stilwell’s rise and fall and the grand jury findings could amount to an even larger blow.  Longtime City Attorney Don Freeman, who performs the same role in Seaside, is portrayed as surprisingly distant from the governance and even the legal issues of the city, so some no doubt will question why he remains in office.

The grand jury started its inquiry in late 2014 at the request of city residents alarmed by word-of-mouth complaints from City Hall veterans and what they had read in the Pine Cone. Some asserted that City Hall was in meltdown, that employees were being treated unfairly and that Stilwell’s administration was ignoring public records requests in order to mask his failings.

With tensions growing rapidly, Burnett and the council joined in the request for grand jury investigation into the adequacy of internal controls and the effectiveness of recent corrective actions.

The grand jury says it reviewed the city code, state law on municipal governance, minutes of all council meetings from January 2012 to November 2014, significant correspondence, city contracts, attorney agreements and billings, newspaper articles, investigative reports, court records, employee emails, and records obtained via subpoena

Interviews were conducted with 24 people including past and present city officials but City Attorney Freeman and private counsel told some of the subjects not to answer questions involving personnel matters.

Unavailable to the grand jury was the 150-page audit report, commissioned by the city in 2013, into the city’s information technology system, an inquiry that also touched on a criminal investigation into allegations that the city’s former information technology chief, Steve McInchak, had illegally accessed employee emails and other off-limits materials. The grand jury report says the audit report, listing more than 800 vulnerabilities within the city’s computer system, could not be found.

The grand jury report provides some new background in that area. It says Stilwell discovered that computer security was almost nonexistent and that several employees reported that their computerized files and emails had been viewed without their permission.

The lost audit report found that security updates for the computer system had lagged seriously, the city’s networks were accessible via wi-fi to passersby, and many computers were not password protected

A subsequent investigation found that some employees had gained unauthorized access to the city’s system from home. Among the information obtained were police payroll matters, personnel documents including medical records, and performance appraisals.

This week the city announced it would pay $275,000 to the widow of McInchak, who died of a heart attack while on leave from his position as informational technology director. His family had contended he was unfairly kept under lengthy suspension during the criminal investigation into computer security issues, an investigation that failed to result in any criminal charges.

The grand jury says it also was hampered by the city’s refusal to waive attorney-client confidentiality in some areas. Through a laborious courtroom process, the grand jury was, however, able to review a considerable number of personnel files that generally would be deemed off limits.

The report says, “Although the city has not fully cooperated in providing information that would conclusively corroborate certain of the findings, the (grand jury) nevertheless believes that this report is accurate and complete.”

The following summarizes the jury’s findings and should be attributed to the report issued this week:

Until as recently as 2011, the City Hall staff was collegial but city business was conducted “in a quietly unorthodox manner. Many city policies were outdated, ignored, or didn’t exist,” especially in the areas of finance, personnel and administration.

City Council members from that era lacked a clear understanding of their roles and the roles of the mayor and the city administrator.

“City Council members also consistently explained that they had had no authority regarding the actions of the city staff, despite the fact that the Carmel Municipal Code clearly cites the city council’s supervisory responsibility over the city administrator, city attorney, city engineer and city treasurer.

“None could explain why the treasurer was not involved in the tracking of contract disbursements, a chronically troublesome area.”

Former City Administrator Rich Guillen left the city in 2011 and was replaced by Stilwell, who had considerable local government experience, mostly in Santa Barbara County. A little over a year later, he hired an assistant of sorts, former colleague Susan Paul, who had 30 years experience in city government elsewhere. Though the Pine Cone repeatedly attacked Stilwell for hiring Paul, the grand jury found that she was hired through a competitive process in which he did not participate.

As instructed by the council, Stilwell and Paul dug into the way things were being done. They discovered “compliance violations, mishandling of contracts and payments, human resource issues, network security breaches, and other procedurally deficient activities.”

They “also uncovered employee behavior that they judged to be improper or dishonest, that put the city at risk, or that was a misuse of the city’s resources for personal gain. Such behavior was dealt with swiftly by Ms. Paul, sometimes resulting in terminations, or in suspensions followed by terminations.”

The jury credits Stilwell and Paul for aggressively dealing with problems but mentions a couple of trouble spots. They seldom made use of “progressive discipline,” and Stilwell, despite his technical skills, was not as adept at communicating, failing to recognize the power of the longtime culture at City Hall. And Paul, meanwhile, could be loud and blunt.

Structural defects they inherited continued to cause technical and professional difficulties as they were trying to correct problems, and the flurry of personnel actions led to time-consuming litigation and media attention.

Unfortunately for Stilwell, the mayor and City Council largely failed to provide oversight or guidance during this difficult period, the report concludes.

“And when the public pressure to remove Mr. Stilwell and Ms. Paul and to rehire previously terminated employees became overbearing, it appeared that the mayor and City Council chose public appeasement over problem solving.”

The grand jury found that, before Stilwell’s arrival, raises were granted without proper approvals and employees without experience or training were assigned to personnel functions. Missing from city records were explanations for discipline.

After Stilwell’s arrival, six employees were terminated and one was placed on indefinite leave. Two people resigned.

“Some employment terminations were preceded by a period of administrative suspensions with pay; others were done swiftly. All of the terminations occurred after extensive review by, and with advice from, outside legal counsel, hired at significant expense to the city by Mr. Stilwell.”

Managers had sought some of those terminations years earlier.

“When Ms. Paul arrived, personnel actions moved to the front burner and, with the endorsement of outside counsel, went forward.

“Although the Carmel Municipal Code has a discretionary progressive discipline process, according to witnesses this process was largely unused either before or after 2012. … The city administrator has the exclusive authority to administer employee discipline, including terminations, and the City Council has the right of inquiry into these matters before they are made final. Several witnesses reported that the mayor and City Council were made well aware of the circumstances surrounding these termination issues. However, most council members erroneously believed that an inquiry into these employee matters was not permitted until a termination was complete and litigation was threatened or filed against the city.

“Most suspensions, terminations, and resignations during this period were made public by articles in the local media (primarily the Carmel Pine Cone). As noted earlier, only the employees’ versions of the acts or omissions leading to the adverse employment actions were reported, since the city was restrained by law from reporting the employer’s side to the local media concerning any individual employment matter. This one-sided reporting was instrumental in defining the public perception that most of the involved employees were treated unfairly and that the city was losing valuable talent and ‘institutional knowledge.’”

The grand jury concluded that the employee conduct that led to terminations “violated commonly accepted employment standards and/or specific provisions of the CarmelMunicipal Code. The terminations and suspensions that followed took place with the assistance of counsel and followed an appropriate process.”

The grand jury reported serious concerns about the rehiring of some of the employees following Stilwell’s departure. Three were hired with back pay, retroactive benefits and damage payments.

“In at least one case, the salary at rehire was significantly higher than the new position would otherwise warrant.”

The misimpression created by the rehiring was that the employees had been wrongfully terminated and were victims of the “Stilwell/Paul administration.”

“That conclusion indicates (in the jury’s opinion) a desire to quell political unrest rather than address serious employment issues.”

An issue repeatedly addressed by the Pine Cone was the city’s response to public records requests.

The jury found that until late 2011, after Burnett became mayor, there was no process for logging requests or recording the information provided. There was no formal procedure for determining whether something was public information.

Stilwell established procedures but eventually was overwhelmed by requests as controversy grew over his tenure.

“As the threat of legal actions grew, requests swelled to the point where a timely response was almost impossible. Outside counsel and other advisers were brought in to assess and edit requests and relieve city staff of the additional workload.”

The grand jury made 21 findings. The first six apply to the time before Stilwell was hired and, for the most part, before Burnett was mayor.

FINDINGS

  1. City operations were undisciplined, as policies were outdated, nonexistent or ignored. Employees worked hard to keep up and paid little attention to standard municipal procedures
  2. There were serious flaws and vulnerabilities in network system security, placing the city at risk financially and legally.
  3. Contracts were mismanaged with regard to public bidding, purchase order processing, and services provided with expired contracts.
  4. The City Council was not provided with contract payment schedules or accumulated payment tracking reports.
  5. The Human Resources process was mismanaged with regard to pay grades, progressive discipline, and proper staff training, and was lacking in leadership.
  6. The Public Records Act request process was unstructured, noncompliant, and ad hoc.
  7. The mayor and City Council did not fully execute their responsibilities of inquiry and oversight.
  8. Neither the mayor nor the City Council members received any formal training or substantive orientation on the responsibilities of their positions.
  9. The mayor and the City Council members were more responsive to political pressure than to the need for effective governance.
  10. Stilwell was a well-qualified city administrator who recognized and diligently addressed widespread city management problems and tried to implement shifting City Council priorities, maintaining a professional attitude in spite of external pressure and criticism. “He may have avoided much of the upheaval surrounding his administration by having a clearer perception of the nature of small-town government and exercising a more thoughtful and measured approach to change.”
  11. Paul quickly recognized areas of mismanagement and risk and implemented solutions within what she understood to be her areas of authority with due diligence and proper municipal procedure but “her  decisive by-the-book actions and abrupt manner caused resentment among longtime employees and city residents.”
  12. There was no credible evidence to support allegations of contract splitting, cronyism or any other wrongdoing under Stilwell or Paul.
  13. The general law/weak mayor structure was often misunderstood by Carmel citizens and the City Council.
  14. The local media provided easy access for city employees to vent their side of a story when the city’s hands were tied.
  15. The governance and administration of the city is unduly influenced by the reportorial and editorial practices of the Pine Cone.
  16. The position of city treasurer is underutilized and so provides little benefit to the city.
  17. The treasurer was isolated from any meaningful role in the contract/invoice disbursements and tracking system.
  18. There was no evidence of any systematic review of contracts in excess of $25,000 by legal counsel as to form or content.
  19. A significant amount of money is spent on outside counsel as it supplements the city attorney position in numerous matters including but not limited to labor and employment concerns, public records requests, general business and facilities, joint powers agreements, municipal law, and miscellaneous lawsuits.
  20. Historical averages of amounts spent on outside legal services over the past five years would support a full-time city attorney and staff.
  21. The City Council seriously failed to exercise its power of inquiry in its decision-making process regarding rehires, by excluding the city’s outside defense counsel from the process and by negotiating hasty settlements of claims in the early or pre-litigation stages, which precluded any meaningful scrutiny of these employment issues.

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500_F_53293135_27J85jZn71YPw8YyiI93FVhmRFHQ1gFuThe following is a letter from Bill Hood to the Monterey County grand jury, which is looking into the personnel actions and other issues that have rocked Carmel City Hall in recent months. Hood lives in Carmel and is a former executive director of the Association of Monterey Bay Area Governments.

I am a former full-time resident of Carmel, and currently live on the Peninsula as a part-time resident.  I am a semi-retired member of the California Bar and follow closely the actions of local government agencies, including the city of Carmel.   I have spoken out, both personally and in the media, about issues relating to lack of leadership relative to realization of a reliable water supply, transparency in decision-making, and prudent management of public funds.

This past week, an article appeared in the Carmel Pine Cone calling for an immediate response to the grand jury, given the fact that the above-referenced investigation is currently underway.   I respectfully request that this letter be distributed to the jury members and staff, and that it be incorporated as part of the record that is being compiled during the investigation.

The Pine Cone article states that Mayor Jason Burnett sent a letter in November  2014 requesting the grand jury to “review our organization, our corrective action and make any additional recommendations.”   While his request, taken out of context, would seem to be a prudent action, when considered within the context of the history of Jason Stilwell’s time as city administrator, it is very telling, indeed.

Mr. Burnett’s letter and the request therein can only be interpreted as a too-late attempt to cover the fact of his and his council members’ continuing failure to exercise any reasonable level of oversight in the face of numerous actions taken by Stilwell and his senior staff that would have raised red flags to even the casual observer.

While I am focusing on the belief that those involved negligently failed in their official responsibilities, the possibility exists that the actions of Stilwell and some of his staff were actually in response to direct orders to do so.  If that is found to be the case, then negligence, while still unacceptable, would  not be involved, and the level of breach of the public trust would become more serious.

Interestingly, when the string of Stilwell decisions first became public knowledge, and in spite of the immediate concern and indignation that arose in the community, Mr. Burnett’s first reaction was to praise Stilwell.   And, importantly, the mayor’s request, in looking to the future by asking for “recommendations,” ignores the past.   Past failures in responsibility that actually caused harm to others, and which are proven by your investigation, clearly cannot be overlooked.   Such failures demand appropriate and relevant responses that are not confined to “Yes, you made a mistake; we are not going to punish you, but will simply tell you what not to do in the future.”

Recommendations for future corrective action are necessary, but it would be a whitewash to completely allow harmful actions already taken to get by with a slap-on-the wrist and no more.  The “corrective actions” to which Mr. Burnett refers are a valid request, but, once again, on their face they ignore any responsibility for all of the time in which prior harmful actions took place, but no “corrective actions” (“oversight,”  from my perspective) were to be found.

For example, Burnett, the council and the city attorney apparently sat idly by while undeserving staffers were fired by Stilwell’s assistants, out-of-area consultants were hired and paid exorbitant amounts, rubber-stamped by those who were elected or appointed to protect the public trust.  To the extent they looked the other way or asked no questions regarding Mr. Stilwell’s questionable actions and the results that flowed from them during the time when they took place, the mayor, council members, and even the city attorney abdicated their responsibilities, and by doing so, violated that trust.

Some have told me that the city attorney was deliberately kept out of the loop with respect to much of what Stilwell did.   That may be true.  But, in his capacity as city attorney, I would have hoped that person would have immediately realized that reality, and spoken up as to what his position should expect of him.

As an attorney who has served as in-house counsel for several major corporations and government agencies, I did not need to be told that my responsibilities included primary involvement in the careful selection and ongoing management of outside counsel.   And, with respect to both lawyers and other consultants, I routinely reviewed contracts and other legal documents binding my clients for legal accuracy and to ensure that questionable or detrimental provisions were properly addressed.

Under Stilwell’s tenure, available information seems to indicate that the city attorney was not asked to undertake that important role or that he did not exercise his own initiative to demand that he do so.  It is once again very telling that, this late in the game, he has been asked to go back and review and evaluate contracts entered into by Stilwell with respect to consultants and law firms.   A normal and necessary procedure would be for an in-house counsel (which the city attorney is for the city) to review communications and billing documents from outside counsel on a regular basis as part of hands-on oversight.  If the city attorney failed to do so, for reasons not his fault, then the mayor and council should assume responsibility for their failure in not requiring him and Stilwell to follow that procedure on every occasion.

Their collective failure to do this has, in part, led to the situation that has triggered your investigation.

Therefore, I respectfully request that your investigation:

  1. identify all  persons within the city’s governmental structure who had any element of responsibility for Stilwell and/or his staff’s actions that resulted in harm, but failed to do anything about them; or, in the alternative, specifically directed Stilwell and/or his staff to undertake those same actions;
  2. describe, to the greatest extent possible, the harm suffered by individuals targeted by the foregoing actions that caused the harm;
  3. take into account the harm caused to the greater Carmel community and to the city’s reputation as a result of the foregoing actions; and
  4. recommend corrective actions not only to prevent future recurrence of such failures, but also as to appropriate sanctions that should be levied upon those found guilty of any failures so identified.

In addition, in order for the investigation and its conclusions and recommendation to be acceptable and relevant, it must be undertaken in a completely objective and fair manner, with respect not only to those who may be targets of the investigation, but also to the public, which has already suffered harm as a result of the events that transpired.

Thank you for your time and consideration.

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