You can fee her or if you choose not to you can talk to her second in-command down in the docks. You can convince him to take over the group and leave the psycho in jail and that will fulfill the requirement.
[Edited by Drakonis, 3/15/2012 11:09:10 AM]
great. thanx. i saved at that point not wanting to do anything stupid. this does help. thank u.
I have had problems with that as well, when it is a Citadle quest, check out the map, that will really help locating things.