The police commissioner has dropped a legal fight against sacked chief constable Sean Price to recoup more than £500,000.
A civil court hearing was due to take place next month but the case has been withdrawn after an agreement has been made between Cleveland Police and Crime Commissioner Barry Coppinger and Mr Price.
Mr Price, who was fired by the force in October 2012 for gross misconduct, was sued for the cash by the police commissioner after his office replaced the former Cleveland Police Authority.
Mr Coppinger said today he did not “shy away from legal action” but due to budget cuts to the force he decided it was the “best course of action” to settle.
Mr Price has previously branded the move by his former employer “vindictive”.
The force was suing Mr Price for £450,000 of alleged unlawful salary and bonus payments it says he was not entitled to - plus interest.
But the former chief constable says he was given the “golden handcuffs” deal over several years to keep him in post.
And after a preliminary hearing at Newcastle Crown Court in October he accused Cleveland Police of wasting taxpayers’ money.
He said his legal costs of the claim had already reached £50,000.
Today Mr Price, from North Yorkshire, said it was a “difficult” decision to settle as he had a “strong case that the payments were lawful and should not be repaid 10 years later”.
“However the case has cost me several thousand pounds already and the public a great deal more,” he said.
“The only people benefiting have been lawyers.
“I made the decision that the best course of action was to settle now to prevent the costs escalating further.
“Not withstanding our differences, I would like to pass my best wishes to all at Cleveland Police in dealing with the financial challenges facing the force in the future.”
Mr Coppinger said today: “I can confirm that this matter has been settled and the case has been discontinued.
“In reaching this decision I took into account the chances of winning the case. I also considered the potential six figure cost implications to the force if we were to go to court and lose or go to court and win but be unable to recover our costs.
“I will not shy away from legal action where I believe it is in the best interests of Cleveland Police but the stark reality is that any money spent on litigation, means less money for frontline policing.
“The force has had to manage the extremely difficult task of losing 350 policing posts and £37m from the budget since 2011 and there is every possibility of further budget cuts.
“I have concluded that, in this case, the best course of action is to agree to settle this matter and for the force to move on.”
Father-of-two Mr Price was arrested in August 2011 and sacked in October 2012 - the first police chief to be fired in 35 years - after a disciplinary hearing found he had lied about the role he played in the recruitment of former police authority chairman Dave McLuckie’s daughter. Mr Price has denied any wrongdoing.
When he took up his role as chief constable in 2003, his original salary of £125,000 included a £32,000 car allowance, £4,000 a year towards private school fees for his son, and £1,000 towards private health insurance. By 2011, he was on £191,000-a-year.
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