The former officer, Samuel K. Miller, wrote a memo in 2006 criticizing the Police Department for failing to properly train officers in the helicopter unit and to properly maintain the helicopters.
The settlement was approved Wednesday by the Board of Estimates. It includes a $120,000 payment to Miller and $125,000 in legal fees and other costs, said City Solicitor George Nilson.
"Much of the case focused on whether [the memo] was First Amendment-protected or not," said Nilson.
Miller was recruited from an Arizona sheriff's department in 2001 to fly helicopter patrols, according to the suit. He received high performance evaluations but was abruptly transferred to a foot patrol post at the Inner Harbor after he wrote the memo, the suit said.
In his memo, Miller said that supervisors were frequently absent, that pilots lacked experience and that the helicopters were used for frivolous tasks outside the city, according to the suit.
Miller had sought $5 million in damages and to be reinstated.