The Interior Department has concluded that its legal system was not "compromised" when one of its chief lawyers, David E. Lindgren, discussed job possibilities with a firm involved in a controversial lawsuit his office was handling.

Lindgren, regional solicitor for the western states, has been under investigation since early last year on conflict-of-interest allegations stemming from his job discussions with a Sacramento, Calif., law firm that represented the Fresno-based Westlands Water District. At the time of the discussions, the Interior Department was negotiating a settlement with Westlands in a long-running lawsuit over how much low-cost federal water the district would receive.

Last month, the Justice Department declined to file criminal charges against Lindgren, saying that the case "lacks prosecutive merit."

According to documents released yesterday by Lindgren's lawyer, an Interior Department review also found no evidence that Lindgren showed favoritism to the law firm's clients. The review, conducted by Associate Solicitor Thomas E. Robinson, concluded that Lindgren had performed his official duties in "a loyal, competent and professional manner."

Because the review was done for management purposes, Robinson wrote, "no opinion is expressed as to whether the regional solicitor's actions . . . constituted violations of criminal statutes or departmental ethics violations."

Lindgren was relieved of legal duties last July when an Interior Department inspector general's report on the matter was referred to the Justice Department. An Interior Department official said yesterday that the report also has been referred to the Office of Government Ethics and that Lindgren will remain assigned to administrative tasks until the ethics office has completed its review.

"We are running all the lines," said the official, who declined to be named. "We want to make sure the department's credibility is maintained."

In a statement released by his lawyer, Lindgren said he has been "cleared" by the Justice and Interior departments. "I have no doubt that I will receive fair treatment from the secretary," he said.