A former telecommunications industry CEO has agreed to pay $4.4 million to settle an investigation into insiders who gained windfalls in initial stock offerings, according to the state Attorney General's Office.

Clark McLeod, who had been chairman and chief executive of McLeodUSA, agreed to turn over $4.4 million in profits he was accused of receiving from the so-called act of "spinning," Attorney General Eliot Spitzer said. The deal was to be formally announced on Monday.

The former executive was accused of directing more than $77 million of McLeodUSA's investment banking business to Salomon Smith Barney. In exchange, the company "secretly" gave McLeod shares of 34 stocks before its initial public offering, which resulted in a windfall of $4.8 million on the first day of public trading of the stock, according to Spitzer's 2002 civil lawsuit.

There was no finding or admission of liability in the settlement, which dismisses Spitzer's action against McLeod.

McLeodUSA Inc., a telecommunications company based in Cedar Rapids, Iowa, emerged from Chapter 11 bankruptcy protection in January after eliminating more than $600 million in debt.

The settlement on Friday closes one of Spitzer's early Wall Street investigations. Some critics of the probe had initially said the practice of "spinning," in which CEOs receive stock in a company before it goes public and greatly increases in value, couldn't be proven to be illegal.

"Mr. McLeod is happy to get this litigation behind him and continue his more productive endeavors in the telecommunications industry," said his Manhattan attorney, Harold K. Gordon.

In February, state Supreme Court Justice Richard B. Lowe handling the Manhattan case called spinning a "sophisticated form of bribery."

Lowe issued summary judgment against McLeod and scheduled a hearing to determine how much he would pay in damages and restitution. The settlement avoids the hearing. The $4.4 million will go to New York law schools and will pay for arbitration clinics involving disputes over securities involving smaller investors, said Spitzer, who after two terms as attorney general is the leading Democratic candidate for governor.

Previous Spitzer settlements in the IPO spinning investigation resulted in $6.3 million in payments from Bernard Ebbers of WorldCom, Philip Anschutz and Joseph Nacchio of Qwest Communications, and Stephen Garofalo of Metromedia Fiber Networks.

John C. Coffee, a securities law expert from Columbia Law School, said the federal Securities and Exchange Commission hasn't yet banned quid pro quos such as spinning, although a measure was proposed two years ago. It is banned at a dozen of the top firms under Spitzer's 2003 "global settlement" of conflicts of interest by stock analysts at major brokerages.