Atlanta officials found themselves with an enviable problem early this decade: $453 million in the bank and no pressing need to spend it.

So they decided to invest that money to make more money.

Along the way, the city got caught up in what court records and regulatory filings describe as a massive, nationwide bid-rigging conspiracy. Allegedly illicit payments jeopardized the tax-exempt status of city bond issues worth billions of dollars, potentially crippling such projects as the reconstruction of Atlanta's water and sewer system.

Federal officials finally lifted the cloud over Atlanta's municipal bonds late last year. But both the cost to the city and the extent of its victimization from the alleged conspiracy remain uncertain.

"We're going to investigate," said Janice Davis, the city's chief financial officer. "We will spend some time checking to see if the city suffered. We just need to try to assess what our potential impact was."

Atlanta's adventures in high finance came to light recently through a federal criminal investigation and two lawsuits filed in Washington. No Atlanta officials have been implicated in the wrongdoing, and there is no indication the tainted transactions contributed directly to the city's $60 million budget deficit.

For more than a year, a federal grand jury in New York has investigated possible collusion among the nation's largest investment banks and other financial firms. Authorities suspect the companies secretly set prices on municipal bond derivatives, a type of investment used by governmental bodies to recoup the cost of borrowing money with tax-exempt bonds.

Such a conspiracy might have limited the returns that cities, counties, states and other entities made on the deals, inflating their cost of borrowing.

Bank of America, the nation's second-largest financial institution, which handled Atlanta's investment in 2002, says it is cooperating with investigators and has been granted immunity from prosecution. Several other large financial firms — some of which have done business with Atlanta and other Georgia governments — have disclosed that the grand jury is investigating them or their employees.

The Atlanta deal is a prime example cited in the two nearly identical lawsuits, which accuse three dozen companies of engaging in a bid-rigging and price-fixing scheme. The suits, filed last month, allege that Bank of America paid kickbacks to other companies vying to handle Atlanta's investment. Those payments would call into question the legitimacy of the bidding process.

The suits claim that, in deals such as Atlanta's, financial firms have taken turns winning bids on derivatives business since at least the early 1990s. Sometimes, the suits say, a firm submitted "courtesy bids ... to create the appearance of competition where there was none."

"It's not the investment that failed here," said Michael Hausfeld, a Washington lawyer who represents the plaintiffs. "It was the broker deal that was fixed."

In 1999, Atlanta had borrowed $1.1 billion to begin reconstruction of its water and sewer systems. About a year later, with some bills from the project not yet due, the city was sitting on nearly half the proceeds of the bond issue — $453.3 million. That's when officials hired a broker to set up a deal in the sometimes speculative, largely unregulated derivatives market.

Derivatives, some of which require a gamble on the rise and fall of interest rates, are not subject to securities regulation. Therefore, they do not require public disclosure of all fees paid to participants and receive far less scrutiny than the underlying bond issues.

The city's broker, CDR Financial Products of Beverly Hills, Calif., received six bids to handle the investment. All offered a guaranteed rate of return, according to city records.

On CDR's recommendation, the city chose Bank of America.

Three years later, the Internal Revenue Service notified the city that CDR and Bank of America had engaged in questionable transactions following Atlanta's derivatives deal, city records show.

In e-mails cited in the class-action lawsuits, two Bank of America executives discussed paying $182,393 to CDR and three of the other firms that bid on the Atlanta deal. Those payments, according to the lawsuits, "were described as a bid to build ... Bank of America's relationship with these companies."

A spokeswoman for CDR did not respond to requests for an interview. Shirley Norton, a Bank of America spokeswoman, would not comment on allegations in the lawsuits.

Such insider deals, the IRS said, could jeopardize the tax-exempt status of the original bonds. Without that status, investors who bought the bonds would have to pay federal taxes on the interest they earned.

"The investors would have sued us," said Davis, the city's financial officer.

The IRS investigated Atlanta's derivatives for more than two years. Finally, last December, it determined that the alleged conspiracy had not harmed Atlanta's bond issues, according to city records.

"It became apparent," Davis said, "the issue was more with the people who had done the transaction than with the city."

Hausfeld, the lawyer who filed the class-action suits, would not say whether he believes other Atlanta deals were rigged. In the past five years, the city has made at least four other derivatives deals.

Davis said city officials are weighing whether to seek compensation from earnings lost from the alleged bid-rigging conspiracy. Hausfeld said Atlanta has inquired about joining the class-action suits.

Elizabeth Chandler, Atlanta's city attorney, would say only: "We're aware of the cases, and we're not in a position to discuss our plans."