SAN FRANCISCO — San Diego city attorney Michael Aguirre on Friday announced a $4.35 million settlement of the city's malpractice lawsuit against the law firm Vinson & Elkins LLP.

San Diego hired the firm in 2004 to investigate its financial disclosure practices and to represent the city before the Securities and Exchange Commission after its pension fund scandal. The city fired Vinson & Elkins in 2005, and Aguirre filed suit against the firm in 2006, saying it failed "to protect the city's interests" and seeking $10 million in damages.

Aguirre said the Houston-based law firm which charged San Diego $6.2 million failed to provide a thorough, reliable, professional, and unbiased report that identified the culprits in the pension scandal. The city subsequently hired another firm, Kroll Inc., to complete the investigation at a cost of over $20 million.

Vinson & Elkins last week agreed to refund part of its fees to the city, Aguirre said Friday. The settlement must be approved by the City Council before going into effect.

A spokesman for Vinson & Elkins could not be reached by press time Friday.

The SEC sanctioned San Diego for securities fraud in 2006 and charged five former officials with fraud earlier this year.

City finance officials have spent much of the past four years working to regain access to the capital markets and to release comprehensive annual financial reports that were delayed following the 2004 scandal. It released the last of the overdue audits in March and regained its withdrawn credit rating from Standard & Poor's last month. It plans to return to market later this year.

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