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Portland Mayor Charlie Hales, pictured in June, said he takes full responsibility for signing a "distasteful" agreement that erases past discipline of controversial police Capt. Mark Kruger.

(Stephanie Yao Long/The Oregonian )

Amid growing outrage about a city settlement that wiped away discipline for a controversial Portland police captain, Mayor Charlie Hales claimed in an email to City Council members Thursday morning that he didn't know about certain terms of the agreement when he signed it, according to several city sources.

Hales, who serves as police commissioner, also consulted with legal staff to see if there was any way to back out of the deal.

The mayor's office declined to release the email, saying it was "a confidential communication to facilitate legal advice on the issue."

By Thursday afternoon, Hales released a prepared statement, describing the agreement with Capt. Mark Kruger as a "distasteful decision'' and called community outrage "right and just." But he said he was advised that the city "might well have lost a court fight."

"As mayor I signed the settlement agreement. I am not happy with this settlement. I wish it had turned out differently. But it did not, and I take full responsibility for signing the document, making it a binding legal agreement,'' he said. "Mayors often must make distasteful decisions for the good of the city. This is one of those times.

"My signature does not mean I condone, in any way, the actions of Kruger in 1999,'' Hales said.

Under the agreement, obtained by The Oregonian through a public records request, the city is dismissing past discipline against Kruger. That includes an 80-hour suspension without pay that Kruger faced in 2010 for his public tribute to five Nazi-era German soldiers at a city park sometime between 1999 and 2001, and a written reprimand he got this year for retaliating against a female lieutenant.

Mayor Charlie Hales statement on Capt. Mark Kruger settlement

THURSDAY, JULY 17, 2014 – On Wednesday, the community learned the details of a settlement between Capt. Mark Kruger and the City of Portland.

Community reaction has been outrage. I hear that outrage and agree with much of the substance of it. The issues involved bring up very personal, long-standing feelings of hurt and anger. These issues awaken our values as a community, especially where it comes to the behavior we expect from our public servants.

I do not minimize these feelings. The community has every right to feel this way.

The Portland City Council shares these values, as well as frustrations with this situation.

As mayor, I signed the settlement agreement. I am not happy with this settlement. I wish it had turned out differently. But it did not, and I take full responsibility for signing the document, making it a binding legal agreement. Mayors often must make distasteful decisions for the good of the city. This is one of those times.

My signature does not mean I condone, in any way, the actions of Capt. Kruger in 1999.

Instead, this complex settlement marks the end of multiple legal battles that have engulfed the city for more than a decade and involved four mayoral administrations. The constitutional issues present in the situation meant that past mayors were advised by counsel that the city might well have lost a court fight. I have been advised the same.

I’m not happy with the settlement. But I signed it. The final decision was mine.

Regarding the Portland Police and relationships with the community, we have implemented significant structural changes, including:

-The hiring of a more diverse workforce

-Creation of a new discipline guide

-Implementation of new rules of conduct regarding use of force

-Implementation of officer performance evaluations

We also have pushed forward with the implementation of reforms negotiated after a Department of Justice investigation, even though a judge has not yet ruled on the issue. We did not wait for the judge, but are working with the DOJ, the Police Bureau, and others in Portland to improve the relationship between the Police Bureau and the community.

Here's what we have not done but will do: Create a better process by which the details of major, important disciplinary issues - regardless of which bureau - are flagged for the attention of the full City Council. Currently, this process involves the City Attorney, Human Resources, the city's Risk Management, the bureau and a single commissioner, but does not always include a full discussion with the full City Council. That will change.

I and other members of the Portland City Council intend to address that process immediately.

But in regards to the legal issue between the city and Capt. Kruger: The outrage felt by the community is right and just.

This case needs to be resolved. I take responsibility for ending the legal dispute about past performance, and for setting clear expectations for future performance in service to Portlanders.

The city also paid Kruger $5,000, gave him an extra 80 hours of vacation time and had Police Chief Mike Reese write a complimentary letter to Kruger praising his work and how he's strengthened ties with immigrants.

The deal settles Kruger's legal claim against the city. He filed a notice of intent to sue the city in January 2013 over texts that police Director of Services Mike Kuykendall sent to Lt. Kristy Galvan characterizing Kruger as a Nazi sympathizer.

Hales signed the settlement on June 16. Reese signed it two days later. Senior Deputy City Attorney Jenifer Johnston signed it on June 24 and Anna Kanwit, the city's human resources director, signed it June 30.

Kruger's lawyer, Sean Riddell, questioned the mayor's explanation of his role in the agreement. "His comments about the settlement are disingenuous,'' Riddell said.

City Council members didn't learn of the agreement until The Oregonian wrote about it Wednesday. Commissioner Steve Novick was particularly angry about being kept in the dark.

Only settlements that require the city to pay out more than $5,000 require council approval, under current city rules.

"That will change,'' Hales said Thursday. The city must flag "major, important disciplinary issues'' for the attention of the full council, he said.

Commissioner Nick Fish, a former labor lawyer, said the city should have gone to court instead of settling.

"I am deeply offended by the alleged conduct of Capt. Kruger, and I am disappointed that this settlement was authorized and approved without the mayor or police chief ever consulting the Portland City Council,'' Fish said. "There are times when settling a case is the prudent course of action. Unfortunately, in this case, the City should have let the courts decide the dispute in a public forum.''

In Kruger's notice of intent to sue the city, he argued that the city and Kuykendall slandered him in a series of texts. Kuykendall, in messages to Galvan, repeatedly referred to Kruger as a Nazi.

Kuykendall, a close friend of the police chief, resigned once the text messages surfaced in an internal police investigation and then became public in Kruger's tort claim.

Outside lawyers negotiated the settlement with Kruger because of a conflict of interest in the city attorney's office.

City Attorney Tracey Reeve had represented Kruger when he faced federal lawsuits between 2002 and 2005 that accused him of excessive force during an anti-war protest in the city's downtown. During the lawsuits, a plaintiff's attorney had sought to obtain plaques Kruger posted on Rocky Butte as a memorial to Nazi-era soldiers. Reeve, representing the city and Kruger, vigorously objected and didn't turn them over.

The plaques weren't uncovered until 2010 when Portland Commissioner Dan Saltzman ordered a full police internal investigation of what happened on Rocky Butte. That's when an internal affairs investigator discovered the plaques had been stashed in the city attorney's office.

The mediation for Kruger's settlement occurred at the outside counsel's office in Portland and lasted a full day, stretching into early evening. The police chief wrote up the complimentary letter for Kruger, with lawyers from both sides then asking for changes or additions.

As part of Kruger's tort claim, he also shared with the city emails he received from Assistant Chief Larry O'Dea and then-East Precinct Cmdr. Mike Lee. O'Dea and Lee told Kruger in separate emails that they'd been in a meeting with Chief Reese and heard Reese say that he wouldn't promote Kruger because Kruger had filed a tort claim notice with the city.

Earlier this week, the City Council approved paying $50,000 to settle a tort claim notice that Galvan had filed against the city. Galvan, who has since resigned, alleged Kruger had harassed her on the job and retaliated against her.

Kruger now serves as head of the bureau's Drugs and Vice Division.

--Maxine Bernstein