In my current game I have 4 cities and was creating the 5th.  When I clicked on "Settle" the city was created but for another faction.  First time it named the city Imperium, the city HUD showed it was building a Palace, the city detail showed the city to be level 4.  However, in my list of cities, on the left of the screen, the city icon with the proper name was displayed and indicated it was not producing anything.  I have no control over the city.  I reloaded and just built an Oupost instead.  That worked fine.