The House ethics committee ended its investigation of Rep. Charles Diggs (D-Mich.) yesterday after he admitted misuse of public funds for private use. Diggs apologized and agreed to repay the House more than $40,000 and to accept censure.

The committee had convened for what was expected to be the opening of hearings into the Diggs case, but it was all over in less than half an hour after Diggs' letter offering a settlement was read and the committee voted unanimously to recommend that the House accept it. Diggs sat silent, speaking only acknowledge the letter was his.

Diggs' problems with the committee grew out of his conviction in federal court here last fall on charges of payroll kickbacks. He was found guilty of diverting more than $60,000 in his employes' salaries to pay his personal and congressional bills. He has appealed the conviction.

Diggs did not admit to a crime in his proposed settlement with the House, only that he had violated a House rule in "misusing my clerk-hire allowance" to pay "certain of my personal expenses."

Only once before in this century has the House censured a member. That was nearly 60 years ago when a Texas congressman was punished for inserting objectionale material in the Congressional Record.

The unanimous committee vote makes it almost certain to win House approval and thus avoid the harsher punishment of emplusion from the House. Diggs also avoids, as he noted while talking to reporters later, a "protracted and expensive hearing" that could still be a live issue at next year's election time.

Diggs also claimed that the settlement should help his appeal because the Committee on Standards of Official Conduct did not press the charge, which ran through all 29 counts of his criminal indictment, that he had wrongfully used the money to pay his official expenses. The proposed settlement mentions only misuse of funds to cover personal expenses.

He issued a statement calling this "an important distinction. The committee is taking no action on my use of clerk-hire funds to compensate my employes for paying official expenses. Those charges were withdrawn. This distinction supports the theory of my pending appeal in the federal courts."

It appeared that the promised repayment and censure would be enough to satisfy the young Republican members who were pushing for Digg's expulsion from the House last January.

Rep. Newt Gingrich (R-Ga.), who had led that charge, called the settlement "realistically the strongest thing we can hope for . . . the House never had anyone apologize and make restitution before," he said. He said he did not expect to offer a substitute resolution to expel Diggs.

The Constitution empowers either body of Congress to expel its members by a two-thirds vote. It sets no limits on the power to expel, but some lawyers felt the House would be on shaky constitutional ground if it tried to expel a member who had been re-elected since his conviction and the voters had full knowledge of his actions.

After censure is voted, the member being punished must walk down to the front of the House chamber and listen in front of his colleagues as the resolution of censure is read. This time it will happen on live television.

Diggs has already lost his two committee chairmanships. The issue will probably go to the House for a vote between the Fourth of July and August recesses. Fi censure is voted, he would continue as he is now to serve as a voting member representing part of the city of Detroit.

A censure vote against Diggs would be the most severe punishment the House has imposed on a member since it voted 12 years ago not to seat the late Adam Clayton Powell of Harlem. Powell, like Diggs, was a leading black member. The action against him was later reversed by the Supreme Court. Recently the House has imposed the lesser punishment of reprimand on members who have misbehaved.

Diggs apparently decided to make the best settlement he could after the ethics committee rejected his requests for delay or dismissal of the charges because a election had intervened. The committee made it clear that it would press on to a decision.

The congressman's letter to the committee proposing the settlement was dated Wednesday. He agreed to repay $40,031.66 with interest which will bring the total to about $45,000. It will repaid by deducting $500 a month from his paycheck.

Diggs said in his letter he realized the committee could conduct a hearing and that if he were found guilty "I may be subject to any of the remedies available . . ." These include a recommendation of explusion. Diggs wrote that should the committee "accept this statement in lieu of a trial, I shall accept a committee recommendation to the House of Representatives of the penalty of censure."

"Finally", wrote Diggs, "I apologize to my colleagues for the discredit I have brought to the House by my conduct. I sincerely regret the errors in judgment which led to this proceeding."

The ethics committee's consel recommended that Diggs' proposal be accepted and it was approved, 11 to 0, with the one absent member later adding his approval.

Rep. Lee Hamilton (D-Ind.), a senior member of the committee who played a leading role in urging alternatives such as repayment rather than the traditional penalties of censure or expulsion, called the proposed settlement "just and sensible." CAPTION: Picture, Diggs appears after the hearing where he apologized to his House Collegues. By James K. W. Atherton - The Washington Post