Independent report blames Lake Elmo council for ‘dysfunction’ at city hall

Six employees at Lake Elmo City Hall have quit since March. At least three have publicly cited a hostile work environment as a factor. (Gazette staff photo by Alicia Lebens)
Turnover at Lake Elmo City Hall has been high in the past year, with some former employees publicly citing a hostile work environment as a factor in their resignations. An independent investigation into an internal complaint at the city concluded the elected officials are the root of the problem. (Gazette file photo by Alicia Lebens)


When the Lake Elmo City Council in late 2014 approved an independent investigation regarding internal allegations against former city administrator Dean Zuleger, little did they know that council members themselves would eventually become the focus of the investigation.

A confidential, third-party investigation in Lake Elmo last year concluded that city council members — and specifically Councilmember Anne Smith — appeared to be the root cause of a “dysfunctional” work environment at city hall, according to documents obtained by The Gazette.

The city paid Jessica Schwie, of the law firm Jardine, Logan and O’Brien, $11,289.09 (at $210 an hour) to conduct a four-month investigation into a complaint made by finance director Cathy Bendel against then-city administrator Dean Zuleger in 2014. Schwie was hired in November 2014 and presented her findings to the council in closed session April 7, 2015.

The city has refused to release any part of Schwie’s report, but The Gazette has a copy of the report. The Washington County Sheriff’s Office has opened an investigation into the alleged breach of data security at the city.

Based upon an independent review of the situation, Schwie concluded in her report that the allegations made by Bendel against Zuleger were not supported. However, she found an underlying problem with the city council’s behavior, which she believed was negatively affecting the city’s operations.

“It is fair to say that the environment at the City of Lake Elmo is dysfunctional,” Schwie wrote. But she concluded the dysfunction did not stem from staff misconduct. “Rather, it appears that the dysfunctional communications and operations of the Elected Officials of the City have led to extreme levels of stress and anxiety which has in turn engendered abnormal relationships amongst City staff and a dysfunctional communication system.”

Schwie singled out Councilmember Anne Smith, saying that “nearly all individual(s) interviewed indicated that the real problem was neither Zuleger, nor Bendel, but the behavior and policies of the Elected Officials to City Council, in particular Anne Smith.”

The investigation

During her investigation, Schwie (or an associate) interviewed 12 current and former city hall staff, observed and communicated with the city council, and reviewed Bendel’s and Zuleger’s personnel files, as well as other documents and evidence presented by Bendel and Zuleger. Schwie also viewed city council meetings.

In her report, Schwie said she found several individuals who cited no shortcomings in either Bendel or Zuleger. However, others told Schwie that both Bendel and Zuleger were difficult to work with. Schwie’s own observations of Bendel and Zuleger  were sometimes critical of both.

She wrote that although Zuleger is an “intelligent leader,” he can be “abrasive and abrupt,” and “when his handling of matters was questioned, he would initially engage in tactics that appeared to be for purposes of gaining control of situation and the direction of the conversation.”

Schwie observed that Bendel “has solid accounting skills, but that her municipal financing skills were weaker.” Schwie also wrote that Bendel “knew that she did not get along well with others,” but that Bendel was professional in her communications.

But Schwie went on to say that neither Bendel nor Zuleger seemed to be the cause of the problem. Instead, she concluded a dysfunctional council was at the heart of the problem.

“The Elected Officials of the City, by any reasonable person standard, demonstrate dysfunctional communications and patterns of behavior,” Schwie wrote. “When given the opportunity to address the same, there is an apparent lack of insight by a number of Elected Officials regarding (1) their personal behavior and that of others, and (2) how such ill-behavior could contribute, and does contribute, to abnormal working relationships.”

Anne Smith was the only member of the city council singled out by name in the report.

Due in part to an association between Smith and Bendel, Schwie wrote, city staff members admitted they did not seek out communication with Bendel, effectively isolating her, because they feared their words might find their way to Smith and be used against them.

In Schwie’s words, uniform among the reasons for not seeking communication with Bendel was “that City Council Member Anne Smith is hostile and abusive in her communications with City staff, that Smith further seeks to publicly embarrass city staff, that the other Elected Officials tolerated or even supported the conduct, that based on the recent (2014) election results the public appears to be unconcerned and unsupportive, that Bendel is believed to be a source of fodder for, and confidant of, Smith …”

Smith declined an interview request from The Gazette, citing the advice of the city attorney and city administrator.

“I have been advised to not speak with you on this matter because there is going to be a Criminal Investigation concerning the release of this information,” she wrote in an email.


As part of her final report, Schwie made several recommendations to improve the work environment at the city, as well as ease the tensions between Bendel and Zuleger.

The first recommendation on Schwie’s list was for elected officials:

“All Elected Officials of the City of Lake Elmo should be required to:

“a. Be subject to a communications plan that includes specification of what is considered a reasonable turnaround time by staff in response to inquiries made by councilmember(s), limits all email communications, and limits the use of staff resources.

“b. Undergo the following training: Elected Official training in order to obtain a better understanding of the laws relating to municipal operations, Emotional Intelligence training, and attend the necessary training to understand what measurable performance goals should be in place for their direct reports and senior management.

“c. Implement a plan for the objective measurement of the performance of direct reports and senior level management and execute the plan within six months.

“d. Watch at least 1 of the recent city council meetings in the presence of youth of adequate maturity and eloquence, request that the youth provide his/her observations regarding their behaviors, and that each Elected Official truthfully and accurately report the observations together with a plan for improving the leadership and practices of the City Council.”

The remainder of Schwie’s recommendations related specifically to improving the relationship between Bendel and Zuleger. During the review process, Schwie gave Zuleger and Bendel a communication plan and, according to her report, the plan was making progress in providing a better working environment. Schwie suggested that the communication plan continue between Zuleger and Bendel until a more permanent plan could be put in place.

Asked whether the council followed through on any of Schwie’s recommendations, Mayor Mike Pearson declined to comment, saying he didn’t want to comment on matters involving private data.

Zuleger, who no longer works at the city, recently told The Gazette that in his role as city administrator at the time of the report he was not aware of what recommendations Schwie made or of any implementation of said recommendations.

“A council-staff communication plan was never put in place, nor was staff aware that this action was recommended,” Zuleger said in an email.

Schwie’s qualifications

With 15 years of experience working with private and public employers, Schwie was selected by then-city attorney David Snyder to complete an investigation into the complaint filed by Bendel.

Schwie practices principally in the areas of insurance defense, government liability defense, employment law and appellate law. She has been involved in other employment investigations with issues of discrimination, harassment and discipline.

Despite Schwie’s qualifications, the council chose not to use her services the next time a complaint was filed.

When another complaint was made against Zuleger, the city council chose to hire attorney Susan Tindal, of Iverson Reuvers Condon, to investigate for $190 per hour. The complaint Tindal investigated is now listed as resolved without disciplinary action. However, because Zuleger left his position with the city while the investigation was ongoing, The Gazette requested the results of the investigation be released in accordance with Minnesota Statute 13.43 Subd. 2.

The city said no written report had been given.

The aftermath

Now, nine months after Schwie’s report was delivered to the council, the situation at city hall doesn’t seem to have improved.

With the recent departure of city attorney David Snyder, the city has lost eight employees since the beginning of 2015. Only two employees who worked in city hall at the beginning of 2015 are still there — Bendel and her sister, Joan Ziertman.

Several employees publicly cited a hostile work environment as a factor in their resignations, and the city has had difficulty filling vacant positions. It is currently seeking a city planner and administrative assistant.

Council meetings continue to extend late into the night on a regular basis, often ending after 11 p.m., despite the council hiring a parliamentarian to run meetings since November for $200 per hour.

In October, the League of Minnesota Cities warned the city council that its behavior could cause the city’s liability insurance rates to rise, and could ultimately lead the League to deny Lake Elmo liability coverage, if the city’s situation didn’t improve. The city would then need to purchase coverage from the private sector, where the cost would be significantly higher.

The League did, however, offer suggestions reminiscent of recommendations provided by Schwie.

On Oct. 13, the city council had a workshop with Dan Greensweig, assistant director of the League of Minnesota Cities Insurance Trust, to discuss ways council members could improve interactions with each other, with staff and with the public in order to avoid expensive lawsuits and settlements.

At that time, Greensweig offered the services of the League to help draft a policy for better meeting management, and suggested the city work on the council’s interactions with staff.

“We would like to have a discussion on that staff-council role and how to find that proper balance,” Greensweig said. “There is more discussion to be had on that, and we would like to put our heads together with your administrator and your city attorney and think about what kind of training might be useful to you.”

Criminal investigation and suppression attempt

Upon learning The Gazette had a copy of Schwie’s report, Lake Elmo’s interim city administrator, Clark Schroeder, asked the Washington County Sheriff’s Office to investigate the data breach. Schroeder also attempted to dissuade The Gazette from publishing a story about the report or releasing any information in the report.

“We consider this whole report to be protected information and as such, might open the Stillwater Gazette up to civil litigation if protected information was published,” he wrote.

“In my opinion, the ethical thing to do when you received ill-gotten information is to return it to its rightful owner and not publish or share it,” he continued. “This information was forwarded to you in an illegal fashion and will be prosecuted as such.”

According to state statute, knowingly violating the Minnesota Data Practices Act is a misdemeanor. However, it is not illegal for The Gazette to receive or to print information that is not publicly accessible. Schroeder said the city will seek to find and prosecute the source of the alleged leak.

That’s different from the city’s response last spring when the press obtained a draft complaint filed by then-city administrator Dean Zuleger. The draft complaint alleged multiple instances of harassment by Smith against Zuleger and others. The city did not launch a criminal investigation to identify or prosecute the source of the potential leak.

Withholding report was controversial

The city’s vice grip on all information contained in Schwie’s report has itself been controversial.

Lake Elmo has repeatedly refused to release even a redacted copy of the report. In September Zuleger’s attorney, Doug Micko, told The Gazette that both Zuleger and Micko’s law office had requested to see and make the complete report created by Schwie public information. The city refused to release any part of the report.

Lake Elmo’s new city attorney, Sarah Sonsalla of Kennedy & Graven, told The Gazette Jan. 12 that the entire report is private personnel data and not public, pursuant to Minnesota Statute 13.43, Subd. 2(f). For the same reason, she said, the employees are not authorized to receive a copy of the report.

However, private data can be released under some circumstances. In fact, it is required to be made available to the individual who is the subject of that data. (In a follow-up email after this story went to press, Sonsalla wrote that she could not tell The Gazette whether or not Zuleger had requested to see the report, because that data is private, and that the issue is between the city and Zuleger and does not involve The Gazette.)

Statute 13.04 Subd. 3 states that “an individual who is the subject of stored private or public data on individuals shall be shown the data without any charge.” It also says, “The responsible authority or designee shall provide copies of the private or public data upon request by the individual subject of the data.”

Minnesota Newspaper Association attorney Mark Anfinson says the situation is complicated because of the fact that the report includes private data about Bendel, in addition to Zuleger.

“Even if names or other identifying information are removed, it probably wouldn’t be difficult for people to figure out who many of the unredacted references are to,” Anfinson wrote.

But he doesn’t believe that lets the city off the hook completely.

As one of the subjects of the data, Zuleger has access rights beyond the rights of the general public, Anfinson wrote. Although Zuleger’s access rights are complicated by the fact that the report contains private data about Bendel, Anfinson believes Zuleger should be allowed to see parts of the report.

“He should definitely be entitled to all portions of the report referring to him,” Anfinson wrote.

  • CCJr

    It is really too bad that our city gets the wrong type of attention. This is beyond ridiculous.

  • dearlydeparted

    Important to see it confirmed by an objective third party, but none of us that know the dynamics at city hall are surprised by report – not even the staff “sister act” that reports directly to Ms Smith (and were hired at Smith’s urging/pressure for just that purpose). As long as that relationship remains, little will change. Reading the report should be mandatory for any LE job applicants – particularly City Administrator applicants. Be forewarned!

  • dearlydeparted

    BTW, “Good job Stillwater Gazette” for opening the door on the shenanigans at LE City Hall. Keep digging. There’s even more!

  • dearlydeparted

    Good job with this investigation/story Stillwater Gazette! It is a story in need of telling. But wait, there’s more…

    • dearlydeparted

      Sorry for the “double-up”. The first kudos to the Gazette did not post – I thought. Oh well, they deserve two anyway.