The $550,000 settlement agreement between the District and Banneker Ventures prevents the city from reclaiming millions in previous payments and makes it impossible for the District to sue the company if investigators determine the contract was obtained through fraud.

The July 1 settlement reached by D.C. Attorney General Peter Nickles and Omar Karim, a longtime friend of Mayor Adrian Fenty, ended a Banneker claim that the city owed the company $2.3 million on the parks and recreation contract. The D.C. Council expects to receive an independent investigator's conclusions on the contract next week.

Late last year, the council canceled the Banneker contract after it determined the Fenty administration had circumvented a law requiring the council to vote on contracts exceeding $1 million.

On Wednesday, D.C. Council members Mary Cheh, Harry Thomas and Phil Mendelson sent a letter to Chief Financial Officer Natwar Gandhi requesting that he not issue payments on the settlement because it's still under investigation by the council.

"It's extraordinarily irregular and questionable to settle this without first settling all of the issues against Banneker and on top of that determining first whether Banneker should be paying us," Cheh said.

The settlement requires Banneker to pay its subcontractors a total of about $285,000, allowing the company to keep $265,000 on top of the $2.5 million it already received in a controversial Christmas Eve payment.

Nickles responded to the council members' threats to cancel the payments, saying "I don't think that would be lawful." He added, "it might lead to a test in the courts and they would have a whole bunch of contracts tied up in litigation."

A. Scott Bolden, who represents Karim, echoed Nickles.

"A deal is a deal," Bolden said. "Any effort to thwart these agreements that make sense and allow projects to move forward is extremely shortsighted and will undoubtedly lead to further litigation."