The District of Columbia will pay $3.53 million to settle a whistleblower lawsuit by a city contracting officer in a long-running dispute over his firing and the award of a lottery contract.

The settlement should resolve the case brought by Eric W. Payne, the former contracting director in the office of then-D.C. Chief Financial Officer Natwar M. Gandhi.

Payne claimed he was terminated for refusing to yield to pressure to cancel a contract won by a joint venture of multinational lottery firm Intralot and a local partner co-owned by a friend of then-Mayor Adrian M. Fenty (D). Payne said he was punished after Gandhi found out he had gone to two investigative agencies in the city government to report the pressure.

A judge dropped Gandhi from the whistleblower retaliation suit but allowed to go forward Payne’s claims that he was punished for complaining that then-D.C. Council member Jim Graham (D-Ward 1) and then-council Chairman Vincent C. Gray (D) sought to steer the $228 million contract.

The contract ultimately was rebid and awarded to Intralot. Graham and Gray vigorously denied any wrongdoing.

A federal jury last year found that the city contracting officer was wrongfully fired in 2009 for objecting to the contract and ordered the government to pay Payne damages.

D.C. Attorney General Karl A. Racine initially had vowed to continue litigating the case.

The settlement in the case was agreed to this week by Racine and announced Friday by Payne’s attorneys, Brian K. McDaniel and Donald M. Temple. It calls for the city to pay the full amount within 60 days, McDaniel said.

Racine said in a statement that “we reached a resolution to this case that we believe is fair to Mr. Payne and fair to the District. I wish him luck.”

The Washington City newspaper first reported Racine’s decision to settle.

The amount includes back pay for Payne, plus $1.7 million in compensatory damages for the firing that the jury awarded last year. The settlement also includes $1 million in attorney fees for the case, which was filed in 2010.

Payne said during the trial that he had moved to Saudi Arabia for several years to manage a U.S. Air Force contract for a Saudi firm because he had been unable find work in the Washington area after being fired.

“You never get everything you ask for. But I think it goes a long way toward attempting to put Mr. Payne in a position the likes of which he would have been financially, had the District not terminated him wrongfully,” said McDaniel.