U.S. Secretary of the Navy Richard Spencer was "fired for proposing a secret agreement with the White House" regarding the demotion of a Navy SEAL accused of war crimes who was pardoned by President Donald Trump, CNN reported, citing a senior U.S. defense official.

The Navy SEAL had been acquitted by a military jury in July of murdering a captured and wounded ISIL fighter in Iraq by stabbing him in the neck, but it convicted him of illegally posing with the detainee's corpse. He was then demoted, a decision Trump reversed a week ago despite the Pentagon's advice that the president "stay out" of the case.

According to the CNN report, sources said Spencer had proposed "a secret guarantee" to the White House that the SEAL Edward Gallagher would be allowed to keep his status, which would go against the ongoing review by the Navy.

Secretary of Defense Mark Esper has decided to retain Gallagher's Trident pin because he "has little confidence that Gallagher would get a fair shake now from the Navy," said in the report.

The pin would designate him as a SEAL - effectively ending the Navy's efforts to carry out a peer review that could have ousted him from the elite force.

Trump, who publicly opposed taking away Gallagher's Trident pin, cheered the moves.

"Eddie will retire peacefully with all of the honors that he has earned, including his Trident Pin," Trump said on Twitter.

Earlier, Gallagher went around his own chain of command, namely Secretary of Defense Mark Esper, and straight to the president, which is a violation of military policy.

The fired Navy chief last week suggested a possible split with Trump by telling Reuters that Gallagher should still face a peer review board.

In a letter published in media reports, Spencer took parting shots at Trump and defended the need to preserve "good order and discipline throughout the ranks" — something Navy officials had believed the peer review board would help ensure.

"The rule of law is what sets us apart from our adversaries," Spencer wrote.

"Unfortunately it has become apparent that in this respect, I no longer share the same understanding with the Commander-in-Chief who appointed me."

The Pentagon declined to immediately provide a copy of Spencer's letter.

However, Pentagon spokesperson Jonathan Hoffman offered a different version of events leading up to Spencer's dismissal, saying Spencer also had a private line of communications with the White House.

"Secretary Spencer had previously and privately proposed to the White House - contrary to Spencer's public position - to restore Gallagher's rank and allow him to retire with his Trident pin," Hoffman said.

Spencer never informed Esper of his private proposal, Hoffman said.

Trump said hours after Esper announced Spencer's oust that he would nominate the U.S. envoy to Norway, Ken Braithwaite, to replace Spencer as Navy Secretary.

"A man of great achievement and success, I know Ken will do an outstanding job!"

(With input from Reuters)