£29m sex case payout

One of the world's biggest investment banks has been forced to pay out £29 million ($54 million) to settle a sex discrimination case involving hundreds of its employees.

The largest single payout, £6.5million ($12million), will go to a senior woman executive in a case which could have major implications for financial institutions in Britain.

Morgan Stanley has agreed the huge damages deal with £800,000-a-year former bond trader Allison Schieffelin to avoid weeks of damaging publicity in a sex bias trial.

Her case has startling similarities to that of senior Merrill Lynch banker Stephanie Villalba whose £7.5 million employment tribunal case is the biggest of its kind ever heard in Britain. The hearing in Croydon is still in its early stages.

Like Ms Villalba, Ms Schieffelin, 39, had been a valued employee for many years before suddenly being denied promotion. She also claimed the male-led culture excluded women from company "bonding" trips to strip clubs and casinos in Las Vegas. Despite being a keen golfer she was never invited to company golf events attended by male colleagues.

Ms Schieffelin claimed her boss had no serious professional relationships with women beyond "cute banter" and thought women were "snippy" while men were "aggressive". The result, she alleged, was that she was denied the chance to bond with colleagues and passed over for promotion.

Until yesterday's settlement, Morgan Stanley had insisted it fired Ms Schieffelin for " insubordination, inappropriate behaviour and verbal abuse".

As part of the deal - agreed by the bank just before the case was about to open in New York - hundreds more female Morgan Stanley employees will share £21million ($40 million). Some of the money will be used to fund scholarships for women wanting to work in financial services.

Ms Schieffelin had claimed she had been denied a managing director's post within the company but Morgan Stanley said they had sacked her in 2000 after she had a row with her boss. After learning of her huge cash award she said outside court that the settlement was "good for everybody".

The case was the first to be brought by the Equal Employment Opportunity Commission (EEOC) to reach trial.

US District Judge Richard Berman, who was to hear the case, said of the settlement: "The consent decree is a watershed in safeguarding and protecting the rights of women on Wall Street."

The last-minute settlement was the result of intervention by Morgan's chief executive Philip Purcell. Following the announcement he defended Morgan's track record.

"We are proud of our commitment to diversity, and would like to thank the EEOC staff for working with us to conclude this matter in such a positive way," he said.

The EEOC had alleged Morgan Stanley had a "pattern or practice" of discrimination against women. It was due to call 20 witnesses.

Morgan Stanley, which still denies discrimination, has also agreed to change its working practices and provide additional training in " compensation and diversity".

The bank has set aside $2 million for an awareness campaign at its London and New York offices.