NEW YORK - The US government has agreed to distribute proceeds from the sale of a Manhattan skyscraper linked to Iran to families who were affected by attacks aided by the Islamic Republic, according to a court document filed Thursday.

The settlement between the Department of Justice and the families marks the latest step in a long-running case over ties between the Manhattan building at 650 Fifth Avenue and Iran.

The skyscraper was majority owned by the Alavi Foundation, a non-profit organization that promotes Islamic culture and the Persian language. The 36-story, 382,500 square-foot building stands at the corner of Fifth Avenue and West 52nd Street, near Rockefeller Center and St. Patrick's Cathedral.

In a 2009 lawsuit, the Manhattan U.S. Attorney's office claimed the Alavi Foundation was controlled by Iran. It also said two minority owners, Assa Corp and Assa Co Ltd, were shell companies backed by Iran's Bank Melli.

Last year, US District Judge Katherine Forrest in Manhattan federal court ruled that the owners were deliberately "shielding and concealing Iranian assets," in violation of US law, and that the skyscraper was subject to government forfeiture.

In March, Forrest ruled that a group of private plaintiffs, who won court judgments that they were victims of or affected by attacks aided by Iran and who had filed claims against the building, were entitled to take control of the skyscraper and other properties owned by the defendants.

In her rulings, Forrest did not address whether the government or the private plaintiffs had priority over the properties. The settlement gives the plaintiffs priority.

The sale of the properties is not imminent, however. One private plaintiff has not joined the settlement and Alavi and Assa are expected to appeal Forrest's decisions.

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