A hearing examiner for the city of Seattle has ordered the city's Human Services Department to reinstate two employees who were fired as part of an investigation into misappropriation of city funds by Senior Services of Seattle, a nonprofit senior-services group that contracts with the city.

The two HSD employees, Georgiana Arnold and Ginny Adams, were fired or demoted for failing to take seriously a whistleblower complaint filed in 2010 alleging that Gregory Townsend, a program manager at Senior Services, was misusing city funds. At the time, Adams defended her dismissal of the complaint by calling it a standard complaint, not a whistleblower claim. This January, Townsend was charged with creating a fake company and fraudulently billing the city $91,000 for moving and hauling services he never performed. The program Townsend worked for supports grandparents taking care of their grandchildren.

Former HSD director Pam Piering resigned after Mayor Mike McGinn put her on indefinite leave and HSD director Dannette Smith recommended firing her as a result of the investigation, writing,  “Minimal questioning would have led to a determination that the investigation of the whistleblower claims of misappropriation was cursory at best."

In a letter that went out to all HSD employees Wednesday, Smith wrote, "

The Hearing Examiner confirmed our findings that the HSD employees involved did not adequately investigate the fraud allegations and that disciplinary action was just. The Hearing Examiner further concluded that the severity of the disciplinary action HSD imposed July, 2011 was too high and that both should be reinstated. ...

This situation has impacted our entire department. It is never easy to conduct such an investigation and have to take action against fellow employees. It is important now for us to put this incident behind us and continue to focus on providing high quality services to the people of Seattle.

Townsend remains under investigation by Seattle police.