TeamStaff Inc.  (NASD: TSTF) reported it settled a $1.8 million claim with former owners of RS Staffing following the end of a government investigation.

TeamStaff acquired RS Staffing, which provides staffing to federal government facilities, in June 2005. However, TeamStaff received a federal grand jury subpoena in April 2007 for information going back to 1997, according to its annual report. The subpoena was in connection with possible violations of federal law at the U.S. Department of Veterans Affairs – RS Staffing provides staffing at some of the agencies hospitals. Investigators also issued a search warrant at the Monroe, Ga. office of RS Staffing Services.

TeamStaff reported no charges were brought against it or the former owners of RS Staffing. However, TeamStaff had $1.8 million in expenses associated with the government in its investigation. The company then pursued an indemnification claim against the former owners of RS Staffing and withheld payment on $1.5 million, which represented the balance owed under the acquisition.

Under the settlement, TeamStaff is paying the former owners $200,000 in cash, releasing 200,000 shares of stock that were frozen and providing 300,000 additional shares of stock, and as a result “the entire outstanding $1.5 million principal balance of the note, all accrued interest and all the claims of the parties were fully settled,” according to an announcement by TeamStaff. The deal will eliminate more htan $1.7 million in liabilities from its balance sheet.