NEW YORK (AP) _ Kidder Peabody & Co. denied reports Friday that a suspended senior employee accused in a major insider trading probe has been reinstated, but the firm said it has resumed paying his salary and legal bills.

In what it called a ''clarification statement,'' Kidder said press accounts concerning a change in the status of Richard B. Wigton weren't accurate. The accounts quoted attorneys for Wigton as saying Kidder had offered to reinstate Wigton, a 30-year employee of the prestigious brokerage.

The New York Times quoted what it called sources close to Kidder as saying management made the move to rebuild morale at Kidder, which has been tainted by the government's crackdown on Wall Street corruption.

Kidder underwent a major internal shakeup in June by its corporate parent, General Electric Co. The firm also paid the Securities and Exchange Commission a $25.29 million penalty to settle charges of insider trading, the illicit use of confidential information to profit in the securities markets.

''Mr. Wigton's status as a suspended employee remains unchanged,'' the Kidder statement said. ''However, since Richard Wigton is not currently under indictment and has not been for several months, it now seemed appropriate to pay his legal bills and compensation in line with Kidder Peabody and General Electric's practice in dealing with employees who are under investigation but not indictment.''

The statement said Wigton will continue to devote all his time to personal affairs and will not be involved in Kidder business. In addition, the statement said, if Wigton is re-indicted, his payment of his salary and legal fees will be suspended until the matter is resolved.

''These actions are not in any way a comment by the company on Mr. Wigton's guilt or innocence, but rather reflect the company's practice in dealing with employees who are the subject of criminal investigations,'' the statement said.

Wigton was arrested in February. After he was indicted in April, Kidder suspended him without pay, despite his assertions of innocence. In contrast, one of Wigton's co-defendants, Robert M. Freeman of Goldman Sachs & Co., has been fully supported by his firm and remains head of Goldman's arbitrage department.

Kidder's initial treatment of Wigton was widely criticized within the Wall Street community and was seen by his colleagues as an abandonment of a loyal professional.

Wigton, Freeman and a former Kidder trader, Timothy L. Tabor, were indicted on charges they were involved in an insider-trading scheme with Martin A. Siegel, once Kidder's top specialist in mergers and acquisitions. All three have denied the charges.

The indictment against them was dropped in May after the government said it needed more time to prepare the case. Federal prosecutors said at the time that they expect a broader indictment to be handed up.