HR director calls Mill Creek city manager a ‘workplace bully’

Newly obtained records reveal complaints that went beyond her previously reported spending habits.

Rebecca Polizzotto

Rebecca Polizzotto

MILL CREEK — A penchant for buying alcohol and lavish meals at taxpayer expense isn’t the only aspect of the Mill Creek city manager’s conduct drawing scrutiny.

Four high-level administrators lodged written complaints about Rebecca Polizzotto in April, spurring a workplace investigation. Those questioning her ethics include the city’s police chief, human resources director, finance director and communications director.

“She regularly exhibits dishonesty, manipulation and selfishness,” HR director Laura Orlando wrote in an April memo to the city attorney. “I would characterize her behavior as disrespectful of others, verbally abusive and purposefully intimidating. She is the clearest example of a workplace bully that I have ever seen. Although this is my personal opinion, I want to qualify that by explaining that I have been an HR professional (primarily in management) for almost 30 years, and have never experienced a leadership style that concerned me more.”

The city hired a specialist in employment law to look into the allegations. It’s unclear how much attorney Rebecca Dean’s investigation is likely to cost, as the decision to hire her occurred outside of public view. There’s been almost no mention of it during City Council meetings.

Polizzotto has been on paid administrative leave since late June. She has not been at work since April, when she went on sick leave. Her future with the city could depend on a special City Council meeting later this week.

Her attorney, Joel Nichols, of Everett, issued a response on her behalf Monday.

“After arriving at the city, the council charged Mrs. Polizzotto with being a change agent. As a result, she has faced criticism as she has implemented changes that are focused on lean principles and fiscal responsibility.

“The facts are that she has received outstanding performance evaluations and a retention bonus.

“Mrs. Polizzotto believes in holding public officials to the highest standards of accountability, top to bottom, but she is prevented by law and city policy from discussing personnel issues of others.”

The statement echoes comments that Polizzotto herself once made about being hired to make hard decisions, not popular ones, for the city of 20,000.

The Daily Herald obtained copies of the internal complaints under state public records laws.

Police Chief Greg Elwin’s ran four pages.

“My concern, however, is the fact that her integrity and honesty are regularly in question and that she has built and maintains an environment that is best described as divisive and deceitful,” he wrote to the city attorney April 20.

Elwin said he appreciated some aspects of the city manager’s performance, including efforts to improve the city’s organizational structure and its budget. The chief wrote that he decided to “share my concerns in hopes that the toxic environment in City Hall can change.”

The City Council hired Polizzotto in 2015 after a nationwide search. At the time, she was a senior assistant state attorney general in Alaska, where she had been working for more than a decade. Before that, she had been the city manager in Conyers, Georgia, near Atlanta.

She replaced city manager Ken Armstrong, who resigned in early 2015, soon after the City Council voted to terminate his contract. Since Mill Creek was incorporated in 1983, the council has forced out half of its managers.

Polizzotto is the city’s top administrator, with a nearly $174,000 annual salary plus a car allowance. Dissatisfaction with her leadership has been building among staff since 2016, when current and former employees said she was responsible for creating an exodus of city workers.

A June report from state auditors described a new layer of problems. They questioned spending patterns on city credit cards, especially Polizzotto’s, including alcohol purchases and meals with no obvious public purpose.

Detailed receipts showed about two dozen charges for cocktails and other alcoholic drinks on her city credit card. On city business trips, she charged a $158.14 tab for a steak dinner on her city credit card, along with room service when conferences were supposed to be providing meals.

Polizzotto did pay back many of the charges, but only weeks after state auditors began digging through city records to take a close look at her spending habits. In at least one case, the reimbursement came nearly two years after the fact.

Polizzotto issued an earlier statement through her attorney about how she handled those expenses.

“Of the charges during the three-year period on my city credit card, only $269 were identified as being for ‘alcoholic beverages,’ or eight one hundredths of one percent,” the statement reads, in part. “When brought to my attention, pursuant to city policy and state statute, I initiated the recoupment and immediately reimbursed the city of Mill Creek for any and all disallowed expenses. Due to lack of clarity on receipts, I even reimbursed the city for charges that would be allowed under city policy. The city of Mill Creek has never billed me for disallowed charges. Any disallowed charges were due to a lack of proper internal controls, and not due to any intent to misuse city funds.”

(Polizzotto’s full, verbatim statement about her city credit card charges is posted at the end of this article.)

Finance director Peggy Lauerman, in her complaint, wrote that she grew uneasy as she aided state auditors with the paper trail.

Lauerman said she rebuffed Polizzotto’s request to send detailed receipts to the city manager’s personal email rather than her city email account that is subject to public scrutiny. In reviewing Polizzotto’s expenses, the finance director said she was struck by “falsified and/or implausible detail.”

The complaints from Lauerman and the police chief both describe Polizzotto offering them $5,000 bonuses that made them feel uncomfortable.

City spokeswoman Joni Kirk’s complaint accused Polizzotto of hampering city cooperation with the Mill Creek Police Foundation, a nonprofit. Elwin raised that issue as well.

In May, Kirk sent an email asking city attorney Scott Missall why the decision to hire an independent investigator wasn’t approved during an open City Council meeting.

Missall, who is contracted from an outside law firm, clarified that he retained the investigator. It wasn’t a council decision.

His reply elaborated: “I have the obligation, and personally want to assure, an impartial and thorough investigation of the issues.”

The city manager’s paid administrative leave is set to expire Friday. It’s unclear what action city leaders might take beforehand. It could come up at a special City Council meeting at 7 p.m. Thursday. The only agenda item is an executive session to discuss potential litigation and the performance of a public employee.

The council scheduled that meeting after an executive session last week. Two councilmen made brief remarks at that time.

“It is important that we get this right, so it is important that we let processes go that are collecting information so that we make a good decision,” City Councilman Mike Todd said. “ … I think many of us are disappointed we can’t move faster, but things only work at a certain pace, and so I fully agree that we ought to meet next week. That is the best time for us to all get together and hear what more information we’ve got.”

Councilman Jared Mead mentioned an investigation, but didn’t go into details. Mead thanked the public for their patience.

“You have to trust that we all want to do the right thing,” he said, “and we want to do this as expeditiously as possible.”

Noah Haglund: 425-339-3465; nhaglund@herald Twitter: @NWhaglund.

Statement of Rebecca Polizzotto in Response to Credit Card Audit

I have proudly served the City of Mill Creek as its City Manager since 2015. The City hired me to be an agent of change and fiscal responsibility. When hired, the City was running a $2.5 million deficit. Under my management, the City balanced its budget while maintaining the lowest tax increase to Mill Creek residents in six years. I initiated work to revise and update the City’s 30 year-old policies to promote a more efficient government. The City Council recognized my efforts, giving me excellent performance evaluations in 2016 and 2017.

I support 100% transparency of cost controls, accountability, and compliance by all City employees, including myself, in the use of City credit cards. Taxpayers deserve to know their hard-earned money is being spent judiciously and wisely to improve service to them at all times.

When I started with the City, I asked the Washington State Auditor’s Office (SAO) to review credit card procedures and policies because I was concerned about the use of credit cards city-wide. The SAO then conducted an accountability audit. The Auditors never raised any issues with me in 2015 and 2016 regarding my credit card usage. I relied on the fact that the auditors reviewed my receipts and believed there were no issues.

Following the SAO’s recommendation, in 2017 I implemented a policy of checks and balances relating to expenses for city business. Part of this system included having the City Finance Director review and approve the City Manager’s expenses, and vice versa.

In 2017 and 2018, the SAO conducted another Accountability Audit for the calendar year of 2016, and expanded their audit to purchases on my credit card occurring between 2015 and 2017. The SAO never asked me any questions in 2017 regarding credit card statements.

In 2018, I sought an opinion letter from the City Attorney regarding the permissibility of the City to rely on a state statute authorizing a City official or employee to reimburse a local municipality for disallowed expenses on a municipal credit card. The City Attorney, in turn, provided me with an opinion confirming the appropriateness of relying on the statute in lieu of any formal City policy.

All charges on my City credit card were approved by the City Finance Manager and the City Council. The total amount of charges on all eleven City employee credit cards for 2015 – 2017 was $312,820. Of that amount, the SAO was unable to validate only $761 in purchases, or two tenths of one percent.

Although the SAO was unable to find a clear public purpose for $2,497 in purchases on all City credit cards over a three year period ($875 on others’ cards, and $1,622 on the City Manager’s card, or five tenths of one percent of total charges), many of these charges included costs such as providing meals during collective bargaining and fire department contract negotiations.

Of the charges during the three-year period on my City credit card, only $269 were identified as being for “alcoholic beverages”, or eight one hundredths of one percent. When brought to my attention, pursuant to City Policy and State Statute, I initiated the recoupment and immediately reimbursed the City of Mill Creek for any and all disallowed expenses. Due to lack of clarity on receipts, I even reimbursed the City for charges that would be allowed under City Policy. The City of Mill Creek has never billed me for disallowed charges. Any disallowed charges were due to a lack of proper internal controls, and not due to any intent to misuse City funds.

Charges at Ruth’s Chris Steakhouse were incurred during a conference at a hotel in San Antonio, TX. Ruth’s Chris was a conference hotel restaurant. Even though there were City and non-City charges, I paid for the entire restaurant bill without seeking any reimbursement. The City paid the credit card bill before I was provided with the detailed receipts and given an opportunity to reimburse the city. When the charges were brought to my attention, I immediately paid the whole bill, including the allowed charges. My receipt for Ruth’s Chris was approved by the City council.

The City incurred several thousand dollars in additional audit fees for the detailed credit card review. In May 2018, the City attorney advised me that the City would be relying on the SAO audit to determine whether any misuse of funds occurred. On June 21, 2018, the SAO issued an Accountability Audit Report for the City of Mill Creek from the time period of January 1, 2016 to December 31, 2016. That report made no finding of fraud or misuse of public funds.

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