San Diego will pay $269,000 to settle a former top official’s retaliation claim involving Mayor Todd Gloria’s chief of staff, adding to scrutiny over costly City Hall employment disputes.
San Diego taxpayers will pay $269,000 to settle a former high-ranking city official's claim alleging she was fired after investigating and disciplining an employee she says was romantically involved with Mayor Todd Gloria's powerful chief of staff, Paola Avila, according to documents obtained by inewsource. The extraordinary allegations raise new questions about the inner workings of Gloria's administration, including what the mayor knew, when he knew it and why the city ultimately agreed to pay more than a quarter-million dollars to prevent the dispute from proceeding into litigation.
The allegations have not been proven in court, and Gloria and his administration strongly deny wrongdoing. But the settlement adds to a growing and expensive series of employment disputes involving Gloria's City Hall, including separate settlements with former Chief Operating Officer Eric Dargan and former homelessness official James Carter that bring the combined taxpayer cost of the three matters to approximately $705,000.
At the center of the latest controversy is Alia Khouri, formerly one of San Diego's deputy chief operating officers. Khouri alleged through attorney Michael Conger that she became a target after participating in an investigation of a city employee accused of creating a hostile work environment and later reporting potential ethics violations involving that same employee.
According to the 11-page March 3 settlement demand obtained by inewsource through the California Public Records Act, the trouble began in September 2023 when Khouri received a complaint about one of her subordinates. The complaining worker allegedly described more than a year of hostility so severe that it caused nausea and anxiety and led the worker to begin seeing a therapist.
Khouri and then-Human Resources Director Julie Rasco investigated, according to the claim. Conger wrote that multiple witnesses provided similar accounts and that investigators obtained a recording of what the claim described as offensive conduct, ultimately concluding that termination was warranted before recommending the lesser punishment of demotion.
Then, according to Khouri, one of the most powerful people in San Diego City Hall intervened.
Khouri alleged that Avila attempted to stop the disciplinary action and contacted the employee directly, encouraging her to challenge it. Conger characterized the mayor's chief of staff becoming involved in what he described as an otherwise routine personnel matter as "highly unusual."
The Gloria administration disputes a significant part of that account. Deputy Chief of Staff Nick Serrano told inewsource that the employee was not demoted but instead applied for another position, although he declined to identify that position.
The employee eventually left city government in March 2025 for a private-sector job, according to Khouri's claim. The dispute did not end there.
Khouri alleged that city employees later complained the former worker was using relationships inside City Hall to benefit her new employer, potentially implicating San Diego's one-year "cooling off" rules restricting certain lobbying activity by former city officials. Khouri said she forwarded complaints about the former employee to the City Attorney's Office and the city's Ethics Commission.
The Ethics Commission would not tell inewsource whether an investigation existed. That is consistent with the commission's policy of not commenting on the existence or nonexistence of investigations.
The situation became considerably more complicated in July 2025. Khouri's claim alleges that Avila and the former city employee announced that month that they were romantically involved. Conger went further, asserting that he possessed "abundant evidence" that the relationship began considerably earlier, although that assertion has not been tested in court.
Avila unequivocally disputes the allegation that a romantic relationship existed during the period relevant to Khouri's accusations. She told inewsource she was "disheartened" by what she described as an invasion of her personal privacy and said she was not romantically involved with the person "at any relevant time."
The chronology alleged by Khouri puts Gloria himself directly into the story. Khouri said she personally briefed Gloria about the situation in September 2025. Approximately two months later, on November 12, she was summoned to the mayor's office and informed that she was being terminated, according to the claim.
Khouri alleges Avila was present during that meeting. According to Conger's letter, when Khouri sought an explanation for her termination, Avila told her words to the effect of "you just need to go" and that she could not question the mayor. Those allegations are particularly striking when compared with what the public was told at the time.
When news of Khouri's departure surfaced in November 2025, Gloria's office did not publicly characterize it as a retaliation dispute. Instead, Avila told Voice of San Diego that changes to the executive team were part of a "thoughtful, organization-wide realignment," while declining to confirm reports that Khouri and another deputy chief operating officer had been fired.
Khouri ultimately left city employment on December 2. Her attorney later alleged there was nothing in her personnel record indicating a performance problem and characterized her termination as unlawful retaliation and sexual harassment based on alleged sexual favoritism. The city never admitted those allegations were true.
Instead of litigating them through discovery, sworn depositions and potentially a public trial, the City Council agreed behind closed doors on April 6 to settle Khouri's claim. On September 15, the council formally approved paying her $269,000, with Councilmembers Raul Campillo and Vivian Moreno voting against the settlement and Councilmember Kent Lee absent.
The city expressly characterized the settlement as a "business decision," not an admission of wrongdoing, and disclaimed liability. Khouri had sought substantially more: Conger said she was willing to resolve her claims for $1 million, an amount he said represented approximately two years of compensation. Gloria has stood firmly behind Avila.
"These allegations were fully investigated, and not substantiated," Gloria said in a statement provided to inewsource. He said he continues to have "full confidence" in Avila's ability to ethically and professionally serve the city.
Yet the Khouri matter is not the first time taxpayers have recently paid to end an employment dispute involving Gloria's executive operation.
Earlier in 2025, Gloria eliminated the city's chief operating officer position amid a massive budget deficit and dismissed then-COO Eric Dargan. Gloria initially described the reductions announced at the time as "budgetarily driven," but after Dargan sued, Avila publicly said Dargan had actually been "terminated for cause."
Dargan alleged discrimination and said Gloria had reneged on a promise to provide three months of severance. The city denied wrongdoing but ultimately paid $146,000 to settle the dispute in June 2025.
Then there is James Carter. Carter, a former deputy director in San Diego's homelessness department, sued the city alleging racial discrimination and retaliation surrounding his departure. His lawsuit alleged that Avila told another city official that Carter would never become department director and characterized him as someone who was not a "team player" and had management problems, which Carter's lawsuit connected to his prior discrimination complaints.
Avila adamantly denied Carter's allegations and said Gloria's administration did not tolerate racial discrimination. City payroll records cited by Voice of San Diego also showed Carter received several raises during the period at issue, a fact the city could point to against aspects of his allegations. But that case, too, ended with taxpayers writing a substantial check rather than the claims being resolved at trial.
On April 9, 2026, the City Council authorized a $290,000 settlement of Carter's lawsuit from the city's Public Liability Fund. The city's own resolution identifies Carter's lawsuit as alleging discrimination and retaliation arising from his city employment. Taken together, the Khouri, Dargan and Carter settlements total approximately $705,000.
That figure does not prove Gloria, Avila or anyone else engaged in misconduct, because settlements can be made for many reasons, including avoiding the expense and uncertainty of litigation. It does, however, mean taxpayers have paid substantial sums to resolve three separate employment disputes involving significant figures in Gloria-era City Hall.
Avila herself has been one of Gloria's closest and most influential advisers since he became mayor. Gloria selected her as chief of staff when assembling his administration in 2020, and the city's current website continues to list her in that position.
Her history with San Diego's ethics rules also predates the Gloria administration, although the matter was minor and unrelated to the current allegations. In 2009, the San Diego Ethics Commission imposed a $200 penalty after Avila acknowledged failing to timely file a quarterly lobbying disclosure report; the commission's stipulation states that the required report was subsequently filed.
That old violation does not establish anything about Khouri's allegations today. But the new controversy involves far more consequential questions about the exercise of power inside the mayor's office, including whether personal relationships influenced city personnel decisions and whether an official who raised concerns was subsequently removed.
There is also an important unanswered question for Gloria himself. If, as Khouri alleges, she personally briefed the mayor about the situation in September 2025, then Gloria had been placed on notice of her concerns before she was terminated approximately two months later. His administration's response is that the allegations were investigated and unsubstantiated, but neither the mayor nor Avila sat for an interview with inewsource about the matter.
That leaves San Diegans with two dramatically different versions of what happened inside City Hall. Khouri's version is that she investigated misconduct, reported potential ethics concerns, briefed the mayor and was subsequently pushed out while the mayor's chief of staff allegedly told her to stop asking questions. Gloria's version is that the allegations against his chief of staff were investigated, found to be unsubstantiated and did not shake his confidence in one of his closest advisers.
What is undisputed is that Khouri is gone, Avila remains chief of staff and San Diego taxpayers are paying Khouri $269,000 to resolve the dispute without litigation. The payment joins $436,000 in settlements authorized for the separate Dargan and Carter employment disputes, bringing the three matters to roughly $705,000.
Khouri's attorney, meanwhile, offered a much different assessment of his client's departure than the "organization-wide realignment" the public heard about when she left.
"She got fired for doing the right thing," Conger told inewsource.
The city paid $269,000 to ensure a court would not have to decide whether he was right.
Originally published on September 28, 2026. Information first reported by Greg Moran of inewsource.
