Winnipeg restaurant owner Joe Chan says he has turned down an offer to settle a conflict-of-interest lawsuit he has filed against Mayor Sam Katz.

Chan is taking Katz to court under provincial conflict-of-interest legislation, alleging that $2,900 in taxpayers' money was spent on Christmas parties for city staff at Hu's Asian Bistro, a restaurant that Katz owned at the time.

Joe Chan, seen in a CBC-TV interview in January, claims he has been offered a settlement in a conflict-of-interest court case involving Mayor Sam Katz. Chan said he has declined the offer. (CBC)

If Katz is found to have violated the law, he could be removed from office.

Chan, who owns Cathay House on Regent Avenue, has called on Katz to return the money that was spent on the parties to the City of Winnipeg.

While Chan would not reveal any details about the settlement he claims to have been offered, he told CBC News late Friday that he would rather see the matter heard in court.

"I offered him a settlement before. He wouldn't take it," he said.

"I told him to return all the money and that's it, OK? He turned it down. Like, it looks like this guy doesn't know what is a mistake."

Katz's lawyer, Robert Tapper, says he's outraged that Chan would speak publicly on a settlement offer.

Tapper said Chan is violating court rules and professional courtesy by disclosing any kind of offer, no matter how innocuous it may be.

"It's absolutely outrageous what he [Chan] has done," he told CBC News.

Tapper said he will be crafting a court motion to "effect some kind of remedy" against Chan immediately.

A hearing on the conflict-of-interest lawsuit is scheduled for April.

With files from the CBC's Sean Kavanagh