THE CITY'S INVESTIGATION of Chief Derrick Foxworth included interviews with 29 witnesses. IMAGE: STEPHEN VOSS

Here's what that report and Potter's decision mean for Oswalt, Foxworth and the Police Bureau:

The accusations: Almost from the moment Oswalt went public, Foxworth has conceded the two slept together for 18 months beginning in April 2000. Although Foxworth is Oswalt's superior, there is no city policy that prohibits this. While Oswalt and her attorney, Victor Calzaretta, knew the relationship and the steamy emails Foxworth sent her (released by Calzaretta and published in WW at wweek.com/media/7416.pdf) would generate all the publicity, the accusations that carried policy implications were far less "sexy"—that the chief misused resources, among others. But the city investigation concluded that only one minor claim could be substantiated: that Foxworth engaged in unprofessional conduct when he gossiped with Oswalt about an internal police investigation. In fact, it's hard not to conclude, though the city has not yet released all of its documents and interview transcripts, that Oswalt is, at minimum, paranoid and at maximum, someone who willingly had an affair with Foxworth and is now trying to cash in.

The accuser's future: Calzaretta could still sue the city and convince a jury that Foxworth abused his power. The chief's naughty emails would certainly carry an emotional wallop. Then again, he'll likely be forced to make public the emails Oswalt sent Foxworth, which he has managed, so far, to keep private. Meanwhile, Oswalt remains out on paid administrative leave, earning her full salary of $34,132.

Foxworth's future: Potter's decision to demote the chief had less to do with the one finding that Foxworth was a gossip than the political embarrassment over the emails. It may be perfectly legal to pen fantasies to a girlfriend about exposing his "naked brown chocolate body...for you to take and enjoy in any way you choose," but it creates a PR problem when the author is the police chief. So Potter demoted Foxworth to captain. (On Tuesday, interim chief Rosie Sizer appointed Foxworth to Southeast Precinct commander, a post that is held by a captain but pays more than a captain's salary.) He'll get a cut in salary but won't lose his full pension, which will be figured based on his chief's salary of about $146,000.

Conspiracy theories: There's a buzz at City Hall that this scandal has more to do with union matters—specifically, police pension reform that threatened the jobs of Oswalt and James Hester, the boss at AFSCME 189 (the union that represents Oswalt and the other civilian police clerks). In April, Potter wrote Hester that he was "disappointed that you chose to play this out in the media before approaching my office." Some insiders, including Commissioner Randy Leonard, question whether Oswalt's complaints, which came four years after the affair ended, were as much about monkey-wrenching a proposal to replace civilian clerks with disabled officers. Leonard went so far as to suggest that the entire effort was "possibly orchestrated."

The future: Potter is, in many respects, one lucky dog. He rid himself of Foxworth, with whom he had growing disagreement, and will keep the media-savvy Sizer. "Had this not happened, I think the mayor would have stuck with ... Derrick," Leonard says. "Instead, he's gotten Rosie to illustrate how things at the bureau could be a whole lot better."