Found after the big battle with Bolgir, it points to the paladin
Inside a pocketwatch-like container on a chain is a portrait of a female kobold. The figure in the picture is ghostly and the picture itself moves as you look at it. Smoog recognized her; she was a trapmaker that was part of your tribe in Moontower Mountain, named Falla. She was killed in the adventurers’ assault on your home. When you pick the picture up, the image begins to shake, and the female kobold melts away, looking sad.
The frame itself is black, except for a single corner of it that is red. When you hold the portrait and turn around, the red corner moves along the frame, ensuring that the portion of the frame facing toward the direction of Bastion City is always reddened.
Currently carried by Smoog