Merrill's Ice Maiden humbled

The High Court case billed as a clash of the City's superwomen came to a spectacular end today when pension manager Merrill Lynch struck a multi-million pound settlement with household products giant Unilever.

The deal is thought to have cost Merrill at least £70million and represents a humiliating end to the career of its star fund manager Carol Galley, known as the Ice Maiden and one of the Square Mile's richest and most powerful women.

Galley was a senior executive at Mercury Asset Management, now owned by Merrill, when it managed Unilever's £1billion pension fund in the Nineties.

Unilever, which employed Wendy Mayall to oversee its fund, sued Mercury, claiming it was entitled to £130million compensation for the poor performance of the fund in 1997 and 1998.

Both parties refused to comment on the details of the settlement, but it is believed they agreed to pay their own legals costs, which are thought to total as much as £10million between them.

The peace agreement will generate a huge sigh of relief from pension managers throughout the City, who were worried the legal precedent set by a Unilever victory would open the floodgates to legal action against them by pension funds around Britain.

News of today's settlement was immediately followed by a warning from Sainsbury, which also had part of its pension fund managed by Mercury, that it was considering legal action against the group.

Galley, whose personal wealth is thought to be as high as £100million, was the star witness during the 28 days of court hearings. Dressed immaculately in a range of designer suits and with never a hair out of place, she retained her cool throughout several days of cross-examination. Under aggressive questioning from Unilever counsel Jonathan Sumption QC, Galley told a packed courtroom she was "sad and sorry" to be in the witness box defending her reputation.

But the 53-year-old, who is due to retire at the end of this year, defended Mercury and the 27-year-old fund manager Alistair Lennard, who she had placed in charge of managing Unilever's pension.

She accused Unilever of making a "crude attempt at blackmail" during earlier talks aimed at settling the dispute.

"I was told that either we paid compensation to the pension fund or Unilever and the fund would take steps to sack us as publicly as possible and to ensure that the damaging publicity associated with losing such a client would reflect not only on Mercury as a house but also on me personally," she said.

But Galley admitted she failed for two years to tell Unilever she had handed daytoday management of its fund to Lennard, something which she had come to regret.

Mr Sumption told the court that Lennard was a "wild card" fund manager who had taken "huge bets" with the pension fund's money. He said the share portfolio managed by Lennard for Unilever fell way short of the agreed performance targets.

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