Jeffrey Thompson speaks in April 2010 at a ceremony honoring Dorothy Height. (C-SPAN via AP)

Federal investigators are asking questions about the District’s decision two years ago to pay out millions of dollars to the former city contractor at the center of the ongoing probe into Mayor Vincent C. Gray’s 2010 campaign.

Renewed interest in the $7.5 million settlement with D.C. businessman Jeffrey E. Thompson comes as Gray (D) is close to making a decision about whether to seek a second term. It has also left top officials in his administration bristling at the ongoing questioning of what they consider an equitable, aboveboard deal.

In recent weeks, prosecutors have asked the District attorney general’s office for thousands of e-mails and other documents related to the city’s decision to settle a long-running contract dispute with Thompson over reimbursement rates for dental care at his firm, D.C. Chartered Health Plan.

Attorney General Irvin B. Nathan has refused to hand over the records, citing attorney-client privilege. He criticized the line of questioning from federal law enforcement officials as “preposterous.”

“If this is all they’ve got, they are in desperate shape,” Nathan said in an interview this week. “If they’ve got a claim, make a damn claim in court or get off it.”

In a statement Wednesday, U.S. Attorney Ronald C. Machen Jr. urged the attorney general to reconsider, saying that the “withholding of relevant documents is currently preventing federal investigators from fully understanding actions taken by District officials.”

D.C. residents “would be best served by a comprehensive and unfettered investigation that resolves any doubts about criminal wrongdoing by elected officials or others,” according to the statement from Machen’s office.

Investigators have also sought to interview a top deputy at the Department of Health Care Finance, the office that negotiated the settlement deal with Thompson’s Chartered.

The fresh inquiry into the 2011 settlement is one element of a sprawling investigation involving an alleged $653,000 secret campaign to help Gray become mayor in 2010. Prosecutors have been building a case against Thompson, who is described in court documents as the alleged financier of the “shadow campaign” for Gray and as the alleged mastermind behind illegal “straw” donations for a long list of local and federal political campaigns.

Neither Thompson nor Gray has been charged with a crime. Gray has denied any wrongdoing and portrayed himself more recently as an unwitting victim of corrupt campaign advisers.

Thompson’s attorney, Brendan V. Sullivan Jr., declined to comment.

Frustrations reflected

For a dispute over a sensitive ongoing criminal investigation to be publicly and pointedly addressed by high-ranking officials is unusual and reflects the frustrations of the parties involved.

Prosecutors are under pressure to bring closure to their investigation, which dates to early 2011, while time runs out for Gray to pursue a second term. Four D.C. Council members and several other candidates are seeking his job, and Gray has until Jan. 2 to qualify for the April primary ballot. Gray’s aides and supporters have expressed exasperation that Machen, the U.S. attorney, has neither charged nor cleared the mayor.

It is unclear why federal investigators are revisiting the dental-contract dispute. Wayne Turnage, director of the Department of Health Care Finance, said he talked with the FBI about the settlement in September of last year. He said he told investigators then that no one had intervened in the settlement talks on Thompson’s behalf.

“The mayor never called me and asked me to settle anything with Jeffrey Thompson,” Turnage said in an interview Tuesday. “Never.”

Authorities have sought to interview Ganayswaran Nathan, the department’s deputy director for Medicaid who was also deeply involved in settlement talks, about the city’s dealings with Chartered. Nathan, who is not related to the attorney general, said he canceled a meeting set for mid-October because of personal travel.

The meeting has not been rescheduled, but Nathan, the health official, said Tuesday that he is willing to answer any questions investigators might have.

An embattled Chartered

For years, Thompson controlled Chartered, the city’s largest contractor coordinating care and managing billing for more than 100,000 needy D.C. residents. During the administration of Mayor Adrian M. Fenty (D), Chartered was accused of bilking the city out of millions — a claim it settled in 2008 for $12 million with no admission of wrongdoing. Over the next two years, Chartered’s finances deteriorated, in part because a class-action lawsuit required the city to pay more to dental providers. The Fenty administration rebuffed Thompson’s appeals for a rate adjustment.

Less than two weeks after Gray beat Fenty in the 2010 Democratic mayoral primary, Chartered filed a contract appeal, seeking nearly $15 million from the city for paying “actuarially unsound” rates.

In its waning days, the Fenty administration fought the claim, and city lawyers continued to oppose it in the early days of the Gray administration. But in late June 2011, the administration reversed course and announced that it had agreed in principle to a settlement while the city’s request to dismiss the case remained pending.

City officials said they were forced to reconsider their position after independent actuaries determined that the rates should, in fact, have been adjusted. They also point out that federal Medicaid officials signed off on the settlement, which was mostly paid with federal funds.

Investigators appear to be interested in learning more about how the government came to shift its position. In a Nov. 1 phone call, Machen asked the attorney general to turn over records related to the settlement talks.

“There’s not one word in these e-mails that I’m aware of that is embarrassing, much less incriminating, in this matter,” Nathan said of his office’s decision not to release the records. “It’s entirely a matter of principle. . . . There’s no stonewalling here.”

Nathan said he told Machen that he’d consider releasing documents if federal authorities had evidence of wrongdoing. “We have received no evidence and have received no further communications with them,” he said.

In 2011, the initial $10.2 million settlement proposal was fiercely questioned by D.C. Council member David A. Catania (I-At Large), then chairman of the D.C. Council’s health committee. The deal was withdrawn, renegotiated by the attorney general’s office and settled that fall, with the city agreeing to pay Chartered $7.5 million.

Nathan defended the decision to settle with Thompson.

“There was not one dissent in our office, to my knowledge, about the advisability of this settlement,” Nathan said, adding that he “had never heard of Jeffrey Thompson” when the matter crossed his desk.