So Niebaum was innocent after all?

Yes, the über-villains paid him to destroy evidence.

Niebaum came into the scheme late, but he was definitely a "bad guy" by most definitions.

The lower-ranking SWAT guys in on the fraud were submitting phony disability claims and Frost (the high ranking guy who tried to kill himself at the end) was approving them and presumably conceived the whole thing. Nick (Danny's murdered partner) was an informant for internal affairs (Niebaum's division) and was actually describing himself when he talked to Danny about there being an informant who had evidence that their friends were involved. After Niebaum got the evidence, he went to the low-ranking guys, who offered to cut him in if he looked the other way, and he accepted. He claimed that he didn't know who was running the whole thing, and I don't think we see any evidence that he's lying about that particular point. Regardless, he's complicit in the embezzlement, framing Danny, and possibly the murder of Nick.

Did you not catch the part where he admitted to helping them out for some money? It was a one time deal.

Yes he was. He wasn’t a part of the conspiracy but he found out about it and accepted bribes to keep quiet. He was partially responsible for Nate’s death. I’m sure if he wasn’t shot and he testified he could have gotten some kind of deal considering he wasn’t the one who killed Nate and he wasn’t one of the main players in the conspiracy