Illustration by Wilder Schmaltz

LAST NOVEMBER, Mayor Charlie Hales seemed reasonably clear about why he was firing Jack Graham, who'd worked for years as the city's top administrator and finance official.

Noting the din of unwanted headlines—led by the Oregonian's scoop that Graham had been investigated over an attempted transfer of protected utility reserve funds, but also including tiffs between Graham and his subordinates—Hales signaled he wanted a bit of peace and quiet.

"I want this city to do its work without distraction," Hales, who oversees the Portland Office of Management and Finance (OMF), wrote in a statement. "Controversies involving OMF have become a distraction."

Graham officially left his job early this year, giving notice this spring that he planned to sue the city—on accusations of racial discrimination (Graham is black; his employees and superiors largely white), defamation, and a lack of due process. And in light of that threat, Hales has since clarified his official reasoning.

The mayor has written a letter formally declaring that "to my knowledge, at no time during his employment with the city did [Graham] commit any financial improprieties." And in return, as soon as this Wednesday, August 27, Graham will agree not to press his claims in court.

The Portland City Council, as of press time, was expected to approve a legal settlement with Graham that includes $40,000 for his legal fees, but not any actual damages, along with the previously mentioned "letter of reference" from Hales.

Beyond saying that Graham did nothing wrong, Hales' letter, obtained by the Mercury, praises Graham's "exceptional" work in a former post as the fire bureau's business manager, and calls him an "extremely dedicated and hard-working" chief administrative officer (CAO). It also blames Graham's firing on Hales' desire to focus on his "own priorities and vision for the city."The distractions mentioned in November are instead chalked up to "speculative coverage by the press."

"In November 2013, I determined that achieving those priorities would be best supported by selecting a new CAO," Hales now writes. "Mr. Graham accordingly left the city's employ in January of 2014."

Hales' office has declined to comment on either the settlement or the substance of the mayor's letter. Sources, however, say city commissioners were fully briefed on the details.

Hales eventually replaced Graham with Fred Miller, a 72-year-old former state department head and PGE executive—and promptly handed Miller the keys to some major projects.

Miller ran point on an effort to shake up OMF's organizational structure, shepherding through a consultant's report that called for the restoration of a (slightly altered) chief financial officer position after Hales, during budget negotiations, cut the job in 2013. The über-bureau's back-office mission is as unsexy as it is important, overseeing things like building maintenance, investment, human resources, and the city's fleet of vehicles.

Miller's also taken the lead this summer on another of Hales' major priorities: tweaking this year's controversial push for new road maintenance and safety revenue.

Graham kept quiet about his announced sacking until January, when he finally stepped down.

In March, he and his attorneys found themselves across a table from Hales and City Attorney Tracy Reeve—for a rare, public "name-clearing hearing" where Graham submitted evidence in his favor and called witnesses in a bid to reclaim his reputation.

Graham railed against reports that in 2012 he tried, despite his subordinates' warnings, to improperly spend $200,000 in reserve funds from the city's sewer and water bureaus.

Some of those employees filed whistle-blower complaints, and the transfer never went through. But an independent investigation, finished in late 2012, found "credible evidence" that the accusations were correct.

Graham insisted, in the hearing, that he was never warned his transfer would have violated policy, and argued it would have been technically permissible.

He also wondered why a similar transfer, done by one of the whistleblowers, wasn't ever investigated. Those arguments were crystallized in April, when Graham formally sent the city notice that he planned to sue. Graham, who had been the city's highest-ranking African American employee, wrote in his tort claim notice that city officials and his subordinates had used his race as grounds to question his competency. He said employees had questioned diversity hiring in OMF, complaining about Graham's "agenda" and reverse discrimination. One employee, according to the tort claim, wrote an email asking why "colored" was an unacceptable way to refer to someone who's African American.

Graham also accused Commissioners Steve Novick, Amanda Fritz, and Nick Fish of besmirching him in media reports.

It's not clear whether Graham's race allegations—drawn from easily referenced documents like emails and letters—ever resulted in internal discipline. Anna Kanwit, the city's human resources director and a former subordinate of Graham's, did not return messages seeking comment.

But an analysis from the city's risk management office, which helps vet tort claims, would seem to suggest otherwise.

In recommending the $40,000 payout, far less than what Graham said he was seeking, it makes clear that sum is meant only for Graham's legal fees and that "the allegations in the tort claim have not been substantiated."

Reeve, the city attorney, declined to comment on the settlement agreement. Graham and his attorneys, however, say there was more at stake than money. They've declared victory.

"The letter from Mayor Hales, on behalf of the city," Graham said in a statement, "is a major step in clearing my name."