The city spent more than $200,000 and invested dozens of hours in hearings to prove that its human resources commissioner should be fired for failing to do her job.
But when when the time came to challenge Karla L. Thomas' eligibility to collect unemployment, Mayor Byron W. Brown's administration made no attempt to block payments.
So Thomas has been collecting the maximum benefit of $405 a week since shortly after her termination in January.
Since the city must pay the tab, its auditors want to know why the administration didn't fight Thomas' claim for jobless benefits.
Michael DeGeorge, the mayor's spokesman, said Brown learned about the payments made to Thomas only Wednesday and immediately ordered attorneys to try to reopen the case in hopes of recouping the money.
"The mayor was furious upon finding out," DeGeorge said.
Interim Corporation Counsel David Rodriguez said that, without the knowledge of top administration officials, City Benefits Director Antoinette Palmer had decided not to protest Thomas' benefits.
But Darryl McPherson, the city's chief auditor, said he met with Palmer in the early stages of his inquiry.
"At that time, she left us with the impression that someone above her had told her to do it this way," said McPherson, who unearthed the irregularity. "She indicated that they were concerned about a lawsuit."
But in a follow-up conversation late Wednesday afternoon, Palmer said she did not know why a protest was not filed, McPherson said.
The auditors in the Comptroller's Office discovered the payments after the state submitted its quarterly bill listing former city workers receiving unemployment benefits. Auditors quickly determined that "K. Thomas" was the onetime department head.
"It automatically triggered a question," McPherson said. "Why would she be getting unemployment benefits when she was terminated for cause -- with the cause even documented in hearings?"
South Council Member Michael P. Kearns, chairman of Common Council's Finance Committee, said he was "stunned" to learn from The Buffalo News that Thomas was collecting unemployment.
"Unbelievable," he said. "I think we paid her enough during her tenure. I thought the [termination] hearing was the final chapter. I guess this is the sequel."
Kearns said he wants officials to appear before the Council to explain the latest developments.
McPherson said his office is preparing a report on numerous cases in which city employees were terminated, then received unemployment benefits. In most instances, he said, the terminations involved civil service issues and were not triggered by employee incompetence.
Rodriguez said a state official told him Wednesday that the city could try to reopen the case and recover the payments. If the city succeeds, the state would reimburse the city, then would have to decide whether to seek repayment from Thomas.
The latest twist in the controversy arose on the same day that State Supreme Court Justice Shirley Troutman rejected most claims made by Thomas in a lawsuit, filed in May, that challenged her termination, city attorneys said.
Thomas argued that she was denied a fair hearing and was barred from presenting key evidence about problems in other departments. Troutman, however, ruled she has no jurisdiction over Thomas' claim that the city lacked sufficient evidence to fire her, so this allegation will be forwarded to an appellate court.
Sean P. Beiter, a private attorney who represents the city, said Thomas also lost a case before the state Division of Human Rights. Beiter said Thomas had alleged that she was the victim of age and gender discrimination by the Brown administration.
The mayor removed Thomas from her $91,734-a-year job in January, shortly after Michael Battle, a former U.S. attorney, conducted a hearing and concluded that Brown was justified in firing in his onetime political ally.
Battle's 23-page report criticized Thomas for ignoring Brown's order, issued a year earlier, to correct deficiencies in her department. They included an embarrassing discovery unearthed by the City Comptroller's Office: The city had been paying health insurance premiums for 170 dead retirees.
According to figures released Wednesday by the Comptroller's Office, the city paid Battle $134,600 -- or $425 an hour. While the city could have conducted the proceeding without hiring an outside hearing officer, the Law Department had recommended that Brown appoint Battle.
Beiter, who also represented the mayor in the matter, charged the city $185 an hour and was paid more than $79,000 for work related to the Thomas case, according to the comptroller.
The mayor had served Thomas with her termination papers four months before her firing. But Thomas had the right to make her case in a hearing, and the public proceeding took some lively turns. At one point, Thomas accused the mayor of forsaking her.
"Shame on you, Mayor Brown, for not standing up for me after I, like others, have taken bullet after bullet for you," Thomas said to Brown.
Thomas previously headed Grassroots, the political group that Brown helped build.
During the unusual termination hearing, Thomas depicted herself as an administrator who inherited a severely dysfunctional system that city leaders had ignored through numerous mayoral administrations.
While most commissioners serve at the mayor's pleasure, the human resources chief has state protection. Because the commissioner oversees civil service tasks, state mandates try to protect the position from political pressures by setting a six-year term. Thomas' term was not set to expire until September 2014.