By Sarah N. Lynch

WASHINGTON (Reuters) - A former internal investigator at the Securities and Exchange Commission who claimed he was fired for trying to blow the whistle on possible misconduct has reached a $580,000 settlement with the SEC, his lawyer said on Monday.

David Weber, the SEC's former assistant inspector general, filed a lawsuit against the agency last November following his October 31 termination.

Weber had already been on administrative leave after some employees complained that he spoke openly about his desire to carry a gun at work.

His lawyer, Cary Hansel, told Reuters at the time the SEC justified the firing by citing an incident in which Weber brought a firearm in the car with him during a work-related trip.

But Weber believes he was fired for trying to blow the whistle about numerous problems at the SEC, including allegations that former Inspector General David Kotz had inappropriate personal relationships with people that may have tainted his investigations into the SEC's handling of the Bernard Madoff and Allen Stanford Ponzi schemes.

Kotz, who now works as a director at the Berkeley Research Group, declined to comment. Previously, he has denied Weber's allegations against him.

"The SEC's job is to protect Wall Street whistleblowers and investigate the misconduct they report," Hansel said in a statement. "When Mr. Weber blew the whistle on wrongdoing in the SEC's own ranks, the SEC engaged in a retaliatory cover up."

SEC spokesman John Nester said the settlement "resolves the matter to everyone's satisfaction and permits the Office of the Inspector General to continue to focus on its important work."

Weber's lawsuit had sought to recover millions of dollars in damages, and laid out details about numerous concerns, from allegations of Kotz's potential conflicts of interest to claims that an office in the SEC's Trading and Markets Division failed to encrypt its computers containing sensitive stock exchange data.

The SEC has said the problem with the computers has been fixed and the two staffers responsible are no longer with the agency.

Weber took his concerns to the SEC's five commissioners at the time. But he was placed on leave after people within the inspector general's office complained that Weber kept talking about wanting to arm the internal watchdog's office and was creating a hostile workplace.

In a previous interview with Reuters, Weber defended his push to carry a gun, saying he was only trying to exercise legal provisions of a federal law that allows watchdog offices to have law enforcement powers.

INDEPENDENT REVIEW FINDINGS

Ultimately, the Postal Service Inspector General's office conducted an independent review and substantiated some of Weber's allegations. That report found that Kotz may have had conflicts of interest surrounding several key investigations under his watch, including relationships with people connected to subjects he was investigating.

The Postal Service watchdog's report also did not substantiate allegations that Weber created a hostile work environment, but it did say that two complaints about his management of SEC employees had some merit.

In addition to receiving a $580,000 payout, Weber's lawyer said the SEC also agreed to rescind his termination, reinstate him and remove all "negative references" from his employment file.

He is not returning to work at the SEC, an SEC spokesman said.

The accord between the SEC and Weber, which was reached May 22, settles both his lawsuit filed in federal court, as well as a related complaint he filed with the Merit Systems Protection Board.

Weber, in a statement, said he looks forward to "helping others" through his law and forensics practice, Goodwin Weber LLC.

(Reporting by Sarah N. Lynch; Editing by Maureen Bavdek)

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