New London - Former police Capt. Michael Lacey filed a lawsuit against the city Thursday, alleging city officials breached a retirement contract Lacey signed in January and libeled him by releasing "false, negative or derogatory information" to local news media.

The seven-count lawsuit, served Thursday to New London City Clerk Nathan Caron, names Mayor Daryl Justin Finizio, Police Chief Margaret Ackley and Bernadette Welch, the city's personnel director.

The suit, filed by attorney Morris J. Busca, claims breach of contract, infliction of emotional distress and libel per se, among other counts.

Lacey, a 28-year police department veteran, claims he agreed to a "boilerplate" retirement agreement on Jan. 6 that included additional benefits he "would not ordinarily be entitled to receive."

The suit says Lacey hasn't received a paycheck since Feb. 9.

Last month, the City Council voted for the third time not to appropriate extra money to pay for Lacey's separation package or those of two other police administrators who left the police department in January.

The libel count claims Ackley publicly and falsely accused Lacey of tainting a 2009 investigation he headed into a nightclub incident involving off-duty officers and former City Councilor Michael Buscetto III.

The suit also says Welch had prepared a written "retraction or clarification" about Ackely's claims for Finizio to submit to the media, which, the suit claims, he never did.

Lacey was assigned to complete an April 2009 investigation of an incident at Shrine nightclub at Foxwoods involving off-duty New London police officers celebrating a birthday. According to statements by police officers during the internal investigation into alleged inappropriate and lewd behavior by off-duty officers, Buscetto groped three women, including a female officer, at the casino nightclub.

The suit claims Lacey learned of the allegations against Buscetto as he conducted his investigation, but was directed by city attorney Brian Estep and then-police Chief Bruce Rinehart not to investigate the allegations because the investigation "was being 'bifurcated' and that another file was established for the Law Director."

Lacey completed his investigation June 16, 2009, according to the suit, which resulted in the offending officer being disciplined.

Once Ackley took over as chief in late June 2009, the suit claims, she "initiated her own personal and unauthorized investigation" into the nightclub incident.

The suit claims officer statements about Buscetto were added to the "Shrine" file in August 2009, after Lacey had completed his investigation, and included documents Lacey had not seen until they were released to the media early this year.

"Such documents were used by the defendants to discredit Lacey's investigation, even though they knew he was ordered not to investigate such allegations concerning Buscetto," the suit reads.

Ackley, in an Aug. 4, 2009, email to Estep, said two officers "felt the need to talk about Mike Buscetto in their statements, yet Captain Lacey felt that he did not want that information in the file and refused to accept the statements. Based on the unsigned statement, missing statements, missing tape recordings etc. the investigation has the appearance of being tainted."

That email and the Shrine internal investigation was released to the media Jan. 6 during a sweeping press conference where Finizio announced, among other things, the retirements of Lacey and former Capt. William Dittman, who also has sued the city. Finizio also announced that day that former police Deputy Chief Marshall Segar's contract would not be renewed.

Lacey's suit claims he approached Welch about the false statements. Welch, the suit says, told Lacey she was preparing a retraction or clarification that the mayor planned to release to the media.

"Lacey saw the draft of the document on Welch's computer, but the document was never submitted to the media," the suit claims.

Under Lacey's retirement agreement, which is attached to the lawsuit as "Exhibit A," he would have received a $20,000 payment this year and another $160,000 over the course of four years, which equals $40,000 a year to cover the difference between his retirement benefits and his salary.

"The Mayor signed the Agreement in Lacey's presence on January 6, 2012," the suit reads. "The Mayor told him the Agreement was valid."

Editor's note: Information revealing Michael Lacey's address and birth date were obscured in the complaint document.

s.goldstein@theday.com