A San Francisco-based labor union has agreed to sell Konocti Harbor Resort and Spa in Lake County to settle a three-year-old federal lawsuit.

The settlement between Local 38 of the United Association of Plumbers, Pipefitters and Journeymen and the U.S. Department of Labor was signed Friday in U.S. District Court.

In addition to selling the Kelseyville hotel and nightclub, the union agreed to cede control of five employee health insurance plans.

The federal government contended in its lawsuit that the union had diverted $26 million from members? benefit plans to Konocti Harbor, which it owns.

The suit culminated 25 years of legal battles between federal regulators and the union leadership.

Under the agreement, five benefit funds will be turned over to an independent overseer, replacing all but two of the plans? trustees.

The union will refund $3.5 million to the pension funds, along with any money from the sale of the resort, which the union is required to sell, according to the settlement.

A sale of the resort to Darius Anderson, a lobbyist and developer who lives in Sonoma County, fell through in June. The plan included a proposal to add a casino at the resort.