DURHAM — A University of New Hampshire professor who exposed himself to a mother and her 17-year-old daughter in Milford nearly two years ago will keep his job, according to an arbitrator’s ruling provided to the New Hampshire Union Leader.

UNH has been trying to fire Edward Larkin, a professor of German, since September 2009, about two months after he showed his genitals in a Market Basket parking lot. Larkin contested his termination, arguing it violated the terms of the faculty union contract, and was put on leave, earning his full salary of about $88,000, as the dispute dragged on.

In April, an arbitrator sided with Larkin, ruling that the crime was not severe enough for termination, according to a 39-page report released by the UNH faculty union.

“In sum, I find that while (Larkin’s) conduct on July 19, 2009, constituted moral delinquency, it was not moral delinquency of a grave order,” arbitrator Michael Ryan wrote, referencing the contract language. “The university did not have just cause to terminate him.”

The arbitrator instead recommended that UNH enact a punishment previously proposed by the faculty senate’s professional standards committee and suspend Larkin without pay for the fall 2011 semester and allow him to return the following term under the condition he have no other similar incidents.

The senate committee also recommended that Larkin be placed on probation for three years, until he is “eligible to apply for annulment of his criminal record, an application which, if successful, enables professor Larkin to be treated as though he ‘never has been arrested, convicted, or sentenced.’”

The arbitrator’s ruling is binding.

UNH criticized the report yesterday in a statement issued in response to an inquiry by the New Hampshire Union Leader.

“The president and the provost believe that Larkin’s behavior constituted ‘moral delinquency of a grave order,’ which is stipulated as grounds for dismissal in the faculty contract and, in fact, that his actions fell far short of expectations for any university employee,” the statement said.

The school said it would follow the arbitrator’s recommendation, which also says Larkin should receive a formal letter of reprimand.

“Officials are in the process of determining Larkin’s responsibilities when he returns to campus with an emphasis on ensuring his conduct will not further adversely impact the university community,” the statement said.

Milford Police Chief Fred Douglas said he was “appalled” that Larkin would remain a professor.

“People don’t do this by mistake, this was no mistake. This was done purposely,” he said, adding, “It sounds to me like people are trying to mitigate this. For someone to take the position that this is not an egregious act, then I’d like for somebody to tell me what is an egregious act.”

Douglas said if one of his officers did something similar, he would “terminate him at any cost.”

He also said he planned to fight any request by Larkin to annul the conviction.

“As long as I’m here I will attend the hearing and oppose it,” he said.

Larkin pleaded guilty to misdemeanor indecent exposure in November 2009. He received a $600 fine and was ordered to undergo a psychiatric evaluation and attend 10 hours of counseling.

Larkin does not have to register as a sex offender.

Larkin did not return a call for comment yesterday, but in a written statement to UNH, and included in the arbitrator’s report, he said the school has nothing to fear about his return to campus.

“The university is certainly correct to want to look after the safety of its students … The question is whether my return to UNH as a fulltime member of the faculty, which is my desire, would endanger the students or the university community,” Larkin said. “I do not believe that it does.”

Larkin reported his arrest in Milford to his boss, College of Liberal Arts Associate Dean Ted Kirkpatrick, soon after it happened. Kirkpatrick initially wanted Larkin to remain as a professor, the arbitrator’s report says, but changed his mind after he “recognized that the situation presented a major ‘public relations’ problem for the university.’”

University of New Hampshire President Mark Huddleston thought the incident was bad enough that it could affect UNH’s funding, the report said.

“Because of the extensive media coverage, parents and potential donors in New Hampshire and beyond were well aware of (Larkin’s) crime (or would easily discover it as soon as they Googled the university), and Huddleston believed most of them would find it ‘reprehensible,’” the report said. “(Larkin’s) reinstatement would be detrimental to the university’s reputation, a handicap in its competition for the best students and a continuing threat to its funding.”

During a hearing in January regarding Larkin’s employment, Huddleston testified: “Reputation is all we have.”

UNH officials said previously they were pursuing Larkin’s termination via arbitration, but no public announcement was made about him prevailing in the process. The arbitrator’s report is signed April 12.

Faculty union president Deanna Wood said the arbitrator’s decision was fair.

“I think it was a just ruling,” Wood said. “What we were concerned about was not whether this was a moral lapse, or even a behavioral lapse, but that the conditions of the contract were being followed and this statement about moral delinquency of a grave order had never been tested before.”

While the phrase “moral delinquency of a grave order” has been in the union’s contract since it was drawn up more than 20 years ago, it has never been defined or even ruled upon until Larkin’s case.

Wood said she has spoken with Larkin numerous times since the ruling and for him, “to have the case resolved is a great relief.”

“He has willingly met the conditions of returning to campus,” she said, noting he is in counseling. “From the very beginning he understood he needed to resolve personal issues.”