Newport Beach agrees to settlement with three former officers

Newport Beach has agreed to a nearly $1-million settlement with three former officers who claim they were victims of a corrupt and retaliatory police department that passed them over for promotions by using tests designed to favor hand-picked candidates.

Two of the ex-officers said a pair of past police chiefs and a former city administrator engaged in favoritism, and the third said he was demoted when he complained about the promotion practices.

Former police lieutenants Craig Frizzell and Steve Shulman will each receive about $425,000 in the settlement. Former officer Robert Morton will be paid $100,000, according to city officials.

The city spent about $650,000 defending the lawsuits but ended up settling before trial.

Newport Beach has been buffeted by similar allegations in recent years, as former officers and employees filed lawsuits and legal claims saying they’d been fired, demoted or overlooked for promotions.

Allegations of favoritism and unfair practices date to the 1990s, when four women said they were victims of sexism.

One former officer, Sgt. Neil Harvey, won a $1-million judgment against the city in 2009 after alleging that he was passed over for promotions because of rumors he was gay.

Christine Hougan, a former dispatcher, claims she was sexually harassed, discriminated against and ultimately fired.

In 2012, her husband, John Hougan, alleged in a lawsuit that he was investigated and demoted after testifying on behalf of Harvey.

Last year, a former parking control officer, Zachary McEligot, claimed he was wrongfully fired after revealing allegations that officers were taking thousands of dollars of freebies from a hotel in the city.

All three cases are pending.

City officials said they settled the most recent cases at the insistence of the city’s insurer. Newport Beach will pay $350,000 of the settlement, and its insurance company will cover the remaining $600,000, according to a news release.

Without the settlement, the city’s bill could have climbed to $1 million before the case even went to trial, said City Atty. Aaron Harp.

Newport Beach continues to deny the three former officers’ claims but said the insurance company concluded it would be cheaper to settle than to continue fighting the cases.

“We understand the business decision made by our excess insurance carrier, given they are paying two-thirds of the proposed settlement,” Harp said in a prepared statement.

The insurance carrier decided to settle the two lawsuits together because they arose from the same facts and circumstances, Harp said.

jeremiah.dobruck2@latimes.com