HERCULES -- The city has settled a lawsuit against former City Manager Nelson Oliva and his family company for $3.15 million, virtually the entire amount it sought.

Two separate settlements and stipulated judgments -- one for $1.65 million against Oliva, the other for $1.5 million against NEO Consulting Inc. D.B.A. Affordable Housing Solutions Group -- "serve to vindicate the public interest in enforcing the violations of (the) Government Code ... that occurred in this case," Mayor John Delgado announced at Tuesday's Hercules City Council meeting, as a gallery of council-watchers broke into applause. The council approved the settlement by a 5-0 vote in closed session, City Attorney Patrick Tang announced earlier.

Under the settlement, Oliva's debts to the city cannot be discharged through bankruptcy "because the judgment provides a remedy for Mr. Oliva's fraudulent conduct and misrepresentations of fact made while he was acting in a fiduciary capacity," Delgado said in a statement.

The settlement dismisses claims against Oliva's daughters Taylor, Gabrielle and Adrianna Oliva, who were co-defendants; the three were CEO, secretary and chief financial officer, respectively, at NEO.

The suit, filed in August 2011 in Contra Costa Superior Court and moved to Alameda County pursuant to a change-of-venue request by the defendants, had accused Oliva of breaching his fiduciary duties and having a conflict of interest when he continued to hold a financial interest in a company with which he executed contracts on behalf of the city during his tenure as city manager, which ran from April 2007 to January 2011. The suit had sought $3.2 million, the total amount of NEO's contracts with the city during Oliva's tenure in the top post.

Oliva had told city officials he had divested himself of his interest in the company before he became city manager. He had originally come to Hercules in 2004 as a consultant with the company he founded.

Under the settlement, Oliva must pay the city $1.65 million; the other stipulated judgment, for $1.5 million, is against NEO. The company's new owner is Walter McKinney, a former police chief of Desert Hot Springs. The city agreed not to seek to enforce the $1.5 million settlement against McKinney personally. Instead, NEO and McKinney agreed to post for sale some company-owned property in Los Angeles County.

Under the settlement, Oliva also relinquished a counterclaim for $112,500, plus interest, representing the outstanding second installment of his exit pay under a separation agreement with the city.

The settlement calls for Oliva to cash out his CalPERS retirement account, currently at $64,079.82, and pay it to the city; that payment has already been made, Delgado announced. Oliva also agreed to pay the city $5,000 a month for 10 years, beginning with August 2013, from his future long-term disability benefits or other income, up to $600,000.

As long as Oliva abides by the terms of the agreement, the city will not try to enforce the stipulated judgment against his personal residence in Apple Valley or other disability income or the salary of his wife, a public schoolteacher.

Oliva's attorney, Richard Ewaniszyk, did not respond to requests for comment. McKinney did not respond to an email this week.

It is unclear how much money from the settlement Hercules will get to keep, since NEO contracts were paid mostly out of redevelopment funds; such funds are supposed to be used to pay redevelopment bond debt service and other redevelopment debt.

City Attorney Patrick Tang said last week that the money paid to NEO over the years included both city funds and redevelopment funds.

Contact Tom Lochner at 510-262-2760. Follow him at Twitter.com/tomlochner.