Negotiations toward a settlement in the Select Telephone Technologies scandal that could net Salt Lake City $2.5 million are progressing well, Mayor Palmer DePaulis said Thursday.

"There is no signed, sealed and delivered settlement, but I believe it is very close," he said.An assistant city attorney was expected to return from Washington, D.C., Thursday where City Attorney Roger Cutler said he was participating in settlement talks between the U.S. Justice Department and defendants in a civil suit, which was filed by the city in connection with the 1984 collapse of Select.

DePaulis said the Washington negotiations are revolving around a $2.5 million settlement paid by the defendants, including the Texas law firm Akin, Gump, Strauss, Hauer & Feld to the federal government.

If an agreement is reached, the city may be able to keep the money by applying for its return through the U.S. Department of Housing and Urban Development, DePaulis said.

HUD was the agency that loaned the city $4.2 million that the city contends in a 1986 lawsuit in U.S. District Court was fraudulently obtained by Akin, Gump, Select founder Robert Gyemant and 11 other defendants.

"We're hoping that if a compromise settlement is reached . . . that the money would come back to Salt Lake City," DePaulis said, adding the money would "be a shot in the arm" for downtown development efforts.

If the city retrieves the $2.5 million, it must be treated just as the original HUD grant, an Urban Development Action grant, the city contends was fraudulently used by the 13 defendants in the Select suit. The money could not be used for general-fund purposes.

Instead, the money must be used for specific economic development projects, DePaulis said, adding the city is discussing with HUD officials using the money to support parking facilities for two recently proposed downtown office towers.

"It could make the difference in a downtown project," he said, noting that the city's central business district has seen "tough times." The downtown area is enjoying an improvement in vacancy rates but is nevertheless suffering from poor economic conditions.

DePaulis said the city will not be held responsible for any liability in the loss of the grant money. In 1986, HUD told the city it must compensate HUD for the loss.

DePaulis was reluctant to comment on specifics in the negotiations because they are still in progress. He said, however, that whether Salt Lake City receives money is not contingent on any settlement.

Select, a telephone refurbishing company, went bankrupt in 1984, taking with it the $4.5 million grant the city obtained from HUD.

In 1986, Salt Lake City sued Akin, Gump and others after HUD said the city owed HUD for the lost grant money.

The U.S. Justice Department said this spring it may join Salt Lake City in the suit, and negotiations for an out-of-court settlement between the Justice Department and the defendants has been ongoing.