It’s been nearly five years since the City of Warren sued the now-defunct economic development entity GRO-Warren over the mismanagement of a $500,000 state grant.

The parties involved in the case have now reached a settlement.

Warren City Council approved the settlement agreement on Monday night while the Redevelopment Authority (RDA) consented on Wednesday.

“The parties have agreed to settle the case,” Arthur Martinucci, the city’s attorney in the case, said. “The dollar amount is $140,000.”

City Manager Nancy Freenock said that the funds would be paid by the Philadelphia Insurance Company and that the case would be discontinued with prejudice, meaning that the claims in the suit could not be raised again.

The funds are to be paid from a directors and officers liability insurance policy under the auspices of GRO-Warren.

The lawsuit, filed Jan. 24, 2013, was the result of the failure of the Allegheny Center for the Arts building project, which was the subject of a $500,000 Anchor Building Grant provided by the state Department of Community and Economic Development in May 2009.

While the money was given to the city, it was to be provided, in turn, to GRO-Warren as a loan.

GRO-Warren was to use the money to rehabilitate and develop properties on Liberty Street in downtown Warren as an arts center, repaying the city from rents generated by the building after its completion. The city would then use those repayments to create a revolving loan fund that could be used for subsequent economic development projects.

“The Contract…expressly restricted the use of the grant money to specific purposes, namely building renovations,” according to the complaint. “GRO-Warren had an obligation to ensure that the grant funds were expended in accordance with the contract. Despite these obligations, GRO-Warren did not ensure that the grant funds were expended in a manner consistent with the contract.”

The suit alleges that very little of the grant money was used in accordance with the contracts between the city and the state, and the city and GRO-Warren. Of the $500,000, the complaint identifies $417,057 as “impermissible expenditures.”

“We have yet to finalize a settlement agreement,” Martinucci explained, indicating that no money will change hands until the agreement is complete and everyone has signed off on it.

The plaintiffs on the original suit included the City of Warren, the RDA as well as councilmen Maurice Cashman, Sam Harvey, John Lewis, Christopher Park and James Zavinski while the defendants were identified as the Warren Business District Coalition, Inc., Gro-Warren, Inc. and Christine and James Cheronis.

This settlement covers all of those parties.

The WBDC “is not considered the same thing” as GRO-Warren, Martinucci explained. “This is going to be a global settlement agreement (and) will resolve all claims as to all parties.”

Martinucci said finalizing the agreement will require amending the names of the plaintiffs to include current council members and removing former councilmembers.

He said that the agreement would be “wrapped up within about a month.”

“How long did it take to get to the settlement? The parties had to go through a fair amount of searching in terms of documents, reviewing information, attorneys exchanging thoughts.”

The discussion also included the insurance company.

“Ultimately we came together in a mediation and things just worked through,” Martinucci said.