New London - City Council President Michael Passero released a report Saturday of an investigation into Police Chief Margaret Ackley's claims of interference and harassment against former Councilor Michael Buscetto III, raising questions about a proposed settlement calling for the city to pay Ackley $25,000.

Hours later, Mayor Daryl Justin Finizio announced that he, with the cooperation of Ackley and State's Attorney Michael Regan, has requested the assistance of the Connecticut State Police Central Division in an ongoing investigation into possible corruption in the city's police department.

"The state police acting on this request became involved in the investigation today, seizing a police vehicle and several pieces of evidence," Finizio said in a statement. "The state police and the state's attorney are working in close cooperation with the police chief and the administration on this matter."

The mayor said the investigation would take up some of the same matters examined in the probe of Ackley's claims.

The city's agreement with Ackley is not a done deal, Passero said Saturday night, who noted that all contracts and appropriations have to be approved by the City Council, which has not yet been presented with the proposed settlement.

In the report on Ackley's claims, former Superior Court Judge Beverly J. Hodgson, whom the city hired to conduct the investigation, found that in her opinion the city would not find itself liable in court either for actions or negligence in connection with complaints Ackley made against Buscetto.

"Most of the conduct … constitutes political animosity but is not actionable at law," Hodgson wrote.

The release of the report, which the mayor had said would be withheld from the public at least until a special closed-door meeting of the City Council Wednesday, occurred during "Bash at the Beach," an annual fundraiser organized by Buscetto to benefit New London youth programs.

Buscetto reacted to the report Saturday night while in the midst of hosting the event at the Port 'N Starboard at Ocean Beach Park.

"I have an announcement to make," he said, addressing hundreds of people shortly after 8 p.m., summoning his wife and children to join him on stage.

"Chief Ackley didn't provide any evidence of a hostile work environment," he said, holding a microphone and reading from a sheet of paper. "The judge ruled that no evidence was brought forth to support claims of interference or sexual harassment. All of her allegations were based on reports of others. There was no basis to cover her claims for attorney's fees.

"We were accused of a lot of things," Buscetto said. "It looks like someone lied, but it wasn't me."

The audience rose and applauded.

Hodgson's nine-page report, addressed to Jeffrey Londregan, the city's law director, had been disseminated hours earlier by Passero, little more than 24 hours after Finizio announced at a press conference that the city had agreed to pay Ackley $25,000 to settle her claims against Buscetto.

The mayor Friday also released statements from a 2009 investigation of an incident at the Shrine nightclub at MGM Grand at Foxwoods, in which police officers claim Buscetto groped three women, including a female officer. Ackley claimed that members of the police department had kept Buscetto's name out of a report of the investigation.

Passero said Saturday it was inappropriate for Finizio to release the Shrine report that contained damaging and unflattering descriptions of Buscetto's behavior, without also releasing the judge's report, which found the police chief had no basis for any lawsuit against the city.

"I disagree strongly that he only released the Shrine report,'' Passero said. "How do you release information that is damaging on one side and not release the one document that gives an unbiased opinion.''

Passero said he received the report Friday night but did not read it until Saturday. He immediately sent it to all councilors and the media.

He classified the Shrine report as "raw investigative data,'' which is rarely made public.

"It can hurt people's reputations,'' he said. "You don't treat people like that."

Passero said he met Friday morning with Finizio about the judge's report and all other documents and they agreed to meet next week with the entire council in executive session to decide how to proceed.

"I'm not sure what action the council will take,'' he said.

Hodgson's report focused on the potential liability of the city and individuals as a result of allegations raised in an Aug. 24 letter to the city by Ackley's attorney, Shelley Graves.

"The chief's theory appears to be that Mr. Buscetto acted on behalf of the city in disparaging her and undermining her authority by remarks made to others, including police department personnel," Hodgson wrote. "It seems most like to me that the outcome of a trial would … result in a conclusion that acts complained of are those of Mr. Buscetto, as an individual politician, not acting on behalf of or by the authority of the city, and the motivation is likely to be found in political rivalries and allegiances rather than gender discrimination."

Hodgson found that Ackley would have an "extremely difficult time" recovering damages in a lawsuit against the city. Nevertheless, the former judge wrote that the "settlement value" of Ackley's claims would be under $30,000, "though the expense of defending against a lawuit, if it were brought, would be much higher."

Finizio, in his statement Saturday night, criticized Passero's release of the Hodgson report.

"The settlement reached with Chief Ackley was within the recommended settlement suggested in the Judge's report," the mayor said. "While this report was not conclusive, ongoing investigations are further examining some of the same matters previously examined by the judge. I have always believed that only with an outside investigation can such matters be fully and properly investigated. I base this on my experience as a former criminal justice analyst who conducted oversight investigations into the New York Police Department from 2000-2002.

"I ask all New Londoners to reserve judgment on this developing matter until a thorough outside investigation can be concluded."

b.hallenbeck@theday.com k.edgecomb@theday.com