Suspected retaliation, a judge’s reproach, mounting legal bills and after-hours phone calls: The latest developments in a lawsuit alleging discrimination and harassment aren’t looking good for the city of Carmel-by-the-Sea.

In one developing side-note, the city cut off benefits for an employee deployed to military service in Afghanistan – shortly after he gave a deposition related to Human Resources Manager Jane Miller’s claims.

In September, Carmel Building Official John Hanson, who also volunteers as a reserve police officer, began an assignment with the U.S. Army National Guard’s agricultural development team. The city decided to cut off his paychecks in November, and his family’s medical benefits in late December.

The move comes after Hanson’s July 22 deposition in the Miller case, which was made in the presence of City Administrator Rich Guillen and lawyers for both sides. “[Hanson] was asked questions about his observations and opinions about the workplace, and he answered them,” says Miller’s attorney, Michael Stamp.

When Hanson deployed to Iraq in 2004, the city covered the difference between his military and city salaries and continued medical coverage for his wife and two children. This time, his wife Annette says, both Guillen and Assistant City Administrator Heidi Burch verbally offered the same perks. So a September letter from Burch, stating the payments would end when Hanson ran out of vacation time, came as a surprise.

Annette, who runs a massage business in Pacific Grove, suspects the city’s decision to drop her husband’s benefits may have been retaliation for his deposition in the Miller case. “Proving it’s another thing,” she adds.

Neither Guillen nor Burch returned calls, and city Finance Specialist Karen Love declined comment.

Former councilman Mike Brown calls the city’s action “appalling” and says he and other veterans plan to show their support for Hanson at the Nov. 3 council meeting. “We want them to reverse this decision,” he says.

During a hearing in Salinas Oct. 23, Judge Larry Hayes said he was “not inclined” to grant the city’s motion to disqualify Stamp from the Miller lawsuit, in part because of the city’s delay in making the motion. Stamp began communicating with the city on Miller’s behalf in May 2008, Miller sued in June 2009, and the city filed its motion in early September.

The city argues Stamp committed a “manifest and glaring ethical breach” by suing Carmel after advising it on personnel matters, including its harassment policy, over a 17-year period. Stamp says there’s no conflict, noting the city never protested his representation of four employees in the past six years.

Hayes chastised the city for refusing to give Stamp the documents allegedly proving his conflict. “I’m a little disappointed the city of Carmel did not provide those documents to Mr. Stamp at his request,” he said.

“Mr. Stamp already breached his judiciary responsibility to the city,” retorted the city’s attorney, Suzanne Solomon of Liebert Cassidy Whitmore.

“I don’t agree that is justification not to do it,” Hayes said. He agreed to review the documents privately and scheduled further arguments for Oct. 30.

As the lawsuit drags on, the city’s costs mount.

Between May 2008 and August 2009, the city paid LCW almost $85,800 for counsel related to the Miller case, according to public records provided to the Weekly. The city also paid $15,700 in February to Danville firm Kramer Wiese, which conducted an investigation into the matter, bringing the city’s case-related expenditures to more than $101,000 by September.

Before Miller filed suit, Guillen spent additional taxpayer funds calling former community services director Christie Miller – and to a much lesser extent, Burch – on city-paid cell phones, often during non-business hours. The lawsuit suggests Guillen had affairs with both women, rewarding them with raises and promotions; the city denies all allegations.

Call logs provided to the Weekly identify Miller as “Queen,” Guillen’s nickname for her, according to the suit.

From January 2004 until Christie Miller’s retirement in August 2008, she and Guillen were regular cell buddies. For example, Guillen’s December 2004-January 2005 billing cycle shows 55 calls placed to and from Miller, 24 of them after 5pm. Miller’s May-June 2006 billing cycle shows 40 calls to and from Guillen, 22 after 5pm (and five after 9pm). In November-December 2007 they made 42 calls to one another, eight after 5pm. In November 2005, during a two-week trip to Italy, Guillen called Miller’s cell phone 11 times.

City records indicate Burch received a city cell phone in late February 2009, nine months after Jane Miller’s formal complaint began. Twenty-seven of 103 calls in that cycle are to and from Guillen, eight after 5pm. The next cycle shows six conversations with Guillen, four during non-work hours and one as late at 8pm. Subsequently the calls cooled off, with only two (during work hours) in May, and none in June, when Miller’s lawsuit was filed.

Solomon declined comment. And Guillen – despite his record of phone chat – didn’t return calls.