A state investment group has reached a $4.8 million settlement with an auditing company accused of misleading the Arizona governments into keeping their money with a failing firm.

In 2002, a local government investment pool run by the state Treasury Department lost $131 million in taxpayer money it had staked on National

Century Financial Enterprises when the securities firm filed for Chapter 11 bankruptcy protection.

The investment group filed suit in federal court against several of National Century’s business partners, with Deloitte & Touche, the firm’s auditor, among them.

Deloitte’s settlement, if ratified, will be distributed to the scores of Arizona cities and other state entities that lost money, said Blain Vance, state deputy treasurer.

“This is the first of the civil litigants that have come to the table,” Vance said.

The suit continues against Bank One, Credit Suisse and JP Morgan Chase Bank.

Scottsdale lost $7.7 million when National Century filed for bankruptcy and would receive $257,000 under the settlement.

Mr. Vance said the state has already recovered $15 million from National Century through bankruptcy proceedings.

Chandler lost $14.8 million, the most of any state entity. Arizona’s General Fund lost $14.3 million. Mesa, Gilbert, Tempe, Apache Junction, Queen Creek and Paradise Valley also lost money. —

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