MassDevelopment agreed to make a $425,000 severance payment to Ben Caswell, a former employee who the Patrick administration once dubbed the “poster boy” for excessive salaries and perks at state authorities.

The settlement is a major setback for the Patrick administration, which orchestrated the ouster of Caswell from his job running the state’s Health and Educational Facilities Authority after merging that agency in 2010 with MassDevelopment. Caswell’s contract said he was owed a $562,000 severance but the administration took the position that he wasn’t owed anything.

Top Patrick aides, including Secretary of Administration and Finance Jay Gonzalez, called Caswell’s pay package at HEFA ridiculous and vowed to fight any severance in court. They also launched a campaign to bring the compensation of all authority executives more in line with the rest of state government.

But Caswell, in a lawsuit seeking recovery of his severance, claimed the administration was retaliating against him for resisting Gov. Deval Patrick’s efforts to place former state Sen. Marian Walsh at HEFA with a $175,000 annual salary. Administration emails that surfaced during discovery in the case indicated Patrick was directly involved in the effort  to place Walsh at the agency.

The administration’s campaign against excessive salaries at state authorities had some success, with a variety of officials ousted and replaced by lower-paid executives. But some authority chiefs – specifically those appointed by Patrick – were exempted from the crackdown and allowed to keep their hefty salaries. Some agencies, including the MBTA and the Massachusetts Port Authority, have had difficulty finding replacements for their chief executives.

MassDevelopment says it spent $391,000 fighting Caswell’s severance in court, a sum that will be paid by the agency’s insurer. Caswell’s attorney could not be reached for comment.