ROCKLAND – In a last-minute agreement, the city reached a $100,000 settlement with former police officer William Donnelly the day before the case was set to go to trial.

Donnelly had filed a $1 million suit against the city and City Manager Tom Hall claiming that both played a role in his losing his job as an investigator with the Maine Drug Enforcement Agency. Donnelly had transferred to MDEA from the Rockland Police Department.

A jury already had been selected and testimony was scheduled to begin in U.S. District Court in Portland on Wednesday when the terms of the settlement were announced on Tuesday.

“We came right down to the wire,” Donnelly’s Portland-based attorney Lee Bals said Wednesday. “This was brinkmanship and the city blinked. They didn’t want to try this case.”

In accepting the $100,000, Donnelly also agreed not to pursue any further legal claims against the city or its management. The city in turn denied any wrongdoing.

City Manager Hall said it was the Rockland’s insurer, the Maine Municipal Association risk pool, that made the decision to settle the case. Hall said he was prepared to testify in the case and was disappointed that the city did not have an opportunity to have its position stated in court. He said the city continues to deny all claims made by Donnelly.

“Settlements are beyond our control. The insurance company makes that decision,” Hall said Wednesday. “I’m certainly relieved and pleased to get this matter behind us. I think that it’s important to close that chapter in our history.”

Donnelly was a veteran city police officer who was transferred to MDEA three years ago after he filed a complaint with the Maine Human Rights Commission alleging sexual and racial discrimination within the department.

The city denied those allegations and under the terms of a settlement in that case awarded Donnelly back pay and legal fees. The city also assisted Donnelly in getting a position with the MDEA while remaining on the city’s payroll.

Donnelly filed his suit against the city after he was dismissed from the MDEA and the city refused to take him back with the department. He charged in the suit that the city conspired to get him dismissed in January 2005. He charged the city with breech of contract, defamation and the infliction of emotional distress.

Bals said Donnelly is working as a private security consultant and is currently assigned to the security team of a United Nations diplomat in Kosovo.

Bals contended that it was a letter written by Hall that contained “a number of unsubstantiated allegations” that triggered Donnelly’s dismissal from the MDEA. He said Donnelly wanted to clear his name and that the settlement brought that about.

“This was never about the money with Bill Donnelly,” Bals said. “This was a way to force them to take steps to protect officers who point out things that are wrong. This is a complete exoneration and total vindication for what he did.”