June 27 (Bloomberg) -- The U.S. Justice Department agreed to a $5.8 million settlement with scientist Steven Hatfill, ending his lawsuit that claimed the government improperly identified him as a suspect in the 2001 anthrax attacks.

As part of the deal, the agency will pay Hatfill a $2.8 million lump sum and will purchase an annuity that will provide him $3 million through 20 annual payments of $150,000.

``The government has determined that the settlement is in the best interest of the United States,'' Justice Department spokesman Brian Roehrkasse said in a statement. He said the agency didn't admit to any violations of U.S. privacy laws and continues to deny liability in connection with Hatfill's claims.

Five people were killed when anthrax spores were mailed to news organizations and members of Congress in the weeks following the Sept. 11, 2001, terrorist attacks in New York and Washington. The crime has never been solved and Hatfill has denied any involvement.

The settlement is ``a lot of money and it will allow him to get on with his life,'' said Hatfill's attorney, Mark Grannis. ``We're pleased.''

Hatfill sued then-Attorney General John Ashcroft and other officials in 2003, contending they violated the Privacy Act by giving his name to the media. Ashcroft had labeled Hatfill as a ``person of interest'' in the anthrax probe.

In his statement today, Roehrkasse said the government ``remains resolute in its investigation into the anthrax attacks,'' which ``remains among the department's highest law enforcement priorities.''

Reporter's Contempt Case

Lucy Dalglish, executive director of the Reporters' Committee for the Freedom of the Press, said the settlement should end contempt of court proceedings against a former reporter who refused to identify, in pretrial depositions, the people who linked Hatfill to the anthrax attacks.

U.S. District Judge Reggie Walton in Washington had ordered former USA Today reporter Toni Locy to pay as much as $5,000 a day in fines. An appeals court heard arguments last month on her appeal.

In a letter today to the appeals court, Hatfill's lawyers said, ``Dr. Hatfill no longer needs Ms. Locy's testimony.''

``I hope this means that this ordeal is over and that I can get on with my life,'' Locy said in a telephone interview. ``I don't have anything at this point from the court of appeals or Judge Walton that says I am in the clear.''

Locy will begin teaching journalism later this year at Washington and Lee University in Lexington, Virginia.

The case is Hatfill v. Mukasey, 03-cv-1793, U.S. District Court for the District of Columbia (Washington).

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.

Last Updated: June 27, 2008 17:04 EDT