The city of San Bernardino has rejected a claim by its former finance director for redevelopment, who alleges she was fired for reporting suspected corruption at City Hall and sought $2 million in damages.

Lori Tillery alleged in her claim, filed on Nov. 1, that her May 18 firing was part of a "well orchestrated and unlawful campaign and pattern of practice designed to force her to resign or be demoted."

The city rejected the claim, a precursor to a lawsuit, on Dec. 10, and Tillery has six months from that date to file a lawsuit, which will automatically be stayed due to the city's pending bankruptcy proceedings, City Attorney James F. Penman said.

On Dec. 21, a bankruptcy court judge in Riverside rejected a motion by the California Public Employee Retirement System, or CalPERS, to lift a stay that prohibits anyone from suing the city during its bankruptcy proceedings.

CalPERS is trying to sue the city to force it to pay at least $13 million in contributions to the CalPERS retirement system. The city stopped paying into CalPERS on Aug. 1, the day it filed for Chapter 9 bankruptcy protection.

The city has no plan to settle with Tillery should she press forward with a lawsuit after the city gets past its bankruptcy crisis, Penman said, calling Tillery's allegations "bogus."

"It's not the type of lawsuit we'll settle. We'll want to take it all the way to trial," Penman said.

He said Tillery may be making a preemptive strike against the city, which investigated Tillery for allegedly deleting financial information from her office computer after several employees reported her.

"The best offense is a good defense," Penman said. "I think she may be concerned about future action against her by the city or other authorities."

A joint investigation into allegations of corruption and fiscal mismanagement at City Hall is now under way by the San Bernardino Police Department, the Sheriff's Department and the District Attorney's Office.

Tillery's attorney, Sanford Kassel, said Thursday that Tillery was a "stellar employee and a tremendous asset to the city and the mayor."

"Unfortunately, this case will continue to unravel facts and circumstances surrounding the difficulties that Mayor (Pat) Morris and the city of San Bernardino have experienced with Mr. Penman for some time," Kassel said.

In her claim, Tillery alleged she had been subjected to unlawful employment practices since July 2008, when Morris tasked her with investigating suspected corruption at City Hall.

Tillery claims she subsequently turned up evidence of suspected time card falsification, misuse of public funds and part-time employees working full-time hours, with no benefits, for years. She reported her findings to Morris, Penman and the Police Department, which turned its investigation over to the District Attorney's Office, according to Tillery's claim.

Kassel said he has not yet decided if he will appeal to the bankruptcy court judge to proceed with the litigation, as did CalPERS.

Morris could not be reached for comment Thursday.


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