An outside review has concluded that the former general counsel of the National Consumer Cooperative Bank didn't violate the bank's conflict of interest rules by continuing to approve the bills of a Washington law firm while he was negotiating a partnership with the firm.

The report by David T. Austern, a legal ethics expert, said that Richard A. Gross, who became a partner in Wald, Harkrader & Ross in April, had an "insubstantial and speculative" financial interest in the firm at the time. Gross told his superiors about the negotiations. Removing himself from reviewing the bills "would have been a juxtaposition of appearance over substance," the report said.

The Washington Post reported last month that the Wald firm was paid $660,000 in the past 15 months by the bank, and that Gross approved $160,000 of those payments in late March, during the negotiations. Austern also concluded that the firm acted properly in the discussions with Gross.

Thomas S. Condit, the new president of the bank, said that management should have handled the Gross negotiations differently and will now move conflict of interest questions from the general counsel's office to the bank's audit committee. He added that he is now studying whether to keep Wald, Harkrader & Ross as the bank's main outside counsel.