Crooked western madam in early American settlement (3,9)
I believe the answer is:
new amsterdam
'early american settlement' is the definition.
(settlement which became New York)
'crooked western madam' is the wordplay.
'crooked' indicates anagramming the letters.
'western'+'madam'='westernmadam'
'westernmadam' is an anagram of 'NEW AMSTERDAM'.
'in' is the link.
(Other definitions for new amsterdam that I've seen before include "NYC formerly" , "settlement" , "old city" , "Former name of New York" .)