The Republic | azcentral.com Fri Mar 7, 2014 11:41 AM

State officials are set to pay $99,999 to a former criminal investigator for Attorney General Tom Horne who claimed she faced retaliation for reporting allegations of wrongdoing to the FBI, including that Horne may have violated campaign-finance laws, The Arizona Republic has learned.

The dollar amount compensates former criminal investigator Margaret “Meg” Hinchey for the salary and benefits she lost while on medical leave due to stress caused by the alleged retaliation.

The settlement is far below the $10million Hinchey initially sought, and one dollar shy of the $100,000 threshold that would have allowed Horne to reject it. Settlements under that amount can be approved by state officials without approval from individual employees.

Jeff Grant, speaking on behalf of the state Department of Administration, said he could not confirm details of the settlement since it was not yet official. Court documents posted Friday indicated a settlement had been reached and that Hinchey’s lawsuit would be dismissed.

“The parties have reached a settlement in principle and all the appropriate documents are expected to be executed and filed at the beginning of the week,” Grant said. “Until that time, details cannot be disclosed.”

Horne, who is running for re-election and faces a Republican primary opponent, was unavailable for comment Friday. In the past, he has said Hinchey’s allegations are “false, absurd, and completely without merit.”

Horne’s spokeswoman wrote in an e-mail to The Republic that Horne and a top aide, Rick Bistrow, opposed settling the case “because they expected to win at trial.”

“Decisions for the state are made by the Department of Administration,” wrote spokeswoman Stephanie Grisham. “ ...The Department of Administration therefore agreed to settle the case for $99,999, because it did not need the consent of Horne.”

In a statement, Hinchey wrote she wants to move past the drama.

“This has been a long and difficult process and I am glad that it is over,” the statement said. “This was never about money, contrary to what some think. All I have asked for from the beginning is included in the settlement agreement and now I would just like to move past this.”

The settlement comes as Horne faces what could be a tough bid to retain his post.

The information that Hinchey passed on to the FBI triggered a joint investigation by federal and Maricopa County authorities. That probe later resulted in determinations by two separate Republican county attorneys that Horne violated the law while running for office in 2010, and that he should repay $400,000 in donations. The FBI investigation also revealed embarrassing, and potentially damaging, information about an alleged intimate relationship between Horne and a subordinate.

Horne has maintained he did nothing wrong.

Despite the settlement, Hinchey’s attorney, Suzanne Dallimore, asserted she would have prevailed at a trial. “Evidence at trial would not have proved a giant damages amount, but would have shown that she suffered from retaliation for doing her job as a peace officer sworn to protect and serve the people of the state of Arizona,” Dallimore told The Republic Friday.

In her June 2012 notice of claim, Hinchey, who worked for three attorneys general, asked for $10million for her damaged reputation, future earnings and stress caused by Horne’s actions.

Hinchey claimed that Horne and his staff slandered her by questioning her integrity as an investigator and that Horne and his staff wrongfully created the impression she is a political “hack,” a liar and “rogue” investigator. Hinchey also claimed Horne and others spread false rumors that she had an intimate relationship with Horne’s 2010 Democratic opponent, Felecia Rotellini, and was therefore disloyal to her boss.

Rotellini, who narrowly lost to Horne in 2010, is again challenging him for the Attorney General post in this year’s elections.

Hinchey alleged that Horne and his staff sought to destroy investigative materials, that the office overlooked potentially criminal behavior by Horne and favored staff members, and that it retaliated against her after she reported the information to the FBI.

Hinchey also alleged that Horne collaborated with an independent expenditure committee known as Business Leaders for Arizona to craft TV ads to paint his Democratic challenger in a negative light. State law prohibits candidates from coordinating with independent campaign committees on such activities.

An administrative law judge is considering evidence from a January hearing on that matter.