Procter & Gamble Reaches Accord With Bankers Trust

CINCINNATI — Procter & Gamble Co. and Bankers Trust Co. on Thursday settled P&G;’s $195-million lawsuit over money-losing investments P&G; made through the New York bank.

The settlement averts a May 20 trial in U.S. District Court here.

In the suit, P&G; alleged that Bankers Trust sold it two speculative derivatives contracts without explaining the risks involved. Derivatives are securities whose values are derived from other assets.

Bankers Trust had argued that P&G; officials were aware of the risks.

The two companies appeared to differ in their initial descriptions of the settlement.

Bankers Trust said P&G; will pay $35 million in cash and assign to Bankers Trust the benefits of a derivatives investment that the bank values at about $14 million.

P&G;, the giant Cincinnati-based consumer products manufacturer, said the settlement terms are that P&G; will absorb $35 million of the disputed amount and Bankers Trust will absorb the rest, which P&G; described as 83% of the total.

P&G; spokeswoman Elaine Plummer said the $14 million in securities to which Bankers Trust referred involved a derivatives transaction that was not part of P&G;’s lawsuit.

“We are pleased with this settlement and are glad to have this issue resolved,” said John E. Pepper, P&G; chairman and chief executive.

The companies have notified U.S. District Judge John Feikens of the settlement, Plummer said. The judge must approve the agreement before it can take effect.

This week, P&G;’s top lawyers said they didn’t expect to settle before the case went to trial this month. The agreement was worked out Thursday night and announced after Feikens rejected some of P&G;’s most serious claims earlier in the day.

P&G; took a $102-million after-tax loss on the two investments after they soured in 1994. Industry analysts had speculated for weeks that the companies would settle the lawsuit rather than engage in costly and potentially embarrassing courtroom encounters. They noted that Bankers Trust had settled similar disputes with other large corporate clients.

P&G; shares closed up $1.3125 at $85.5625. Bankers Trust stock rose 12.5 cents to $70.25. Both trade on the New York Stock Exchange.

P&G;’s case was weakened in recent weeks, and on Thursday Feikens, in a written ruling in Cincinnati, threw out its claims that Bankers Trust engaged in deceptive trade practices in its dealings with P&G.;

The judge also issued a summary judgment against P&G;’s allegations that Bankers Trust breached its fiduciary duty and engaged in misrepresentation and negligence.

The case started going against P&G; last month when Feikens ruled that the firm could not seek to get out of $65 million in losses on a disputed German mark interest rate swap because it knew the risks and losses it faced early on.

Earlier, Feikens barred P&G; from pursuing racketeering claims against Bankers Trust until after its original fraud allegations were decided in court.

Bankers Trust denied P&G;’s claims, arguing that the firm was a sophisticated investor that knew the risks it was taking. Its traders, the bank said, explained the risks fully and kept the company apprised of its investments.

The companies said they settled the lawsuit to avoid further multimillion-dollar legal costs and to put the issue behind them.

Pepper and Frank Newman, Bankers Trust’s chairman, president and chief executive, had met three times to discuss a settlement, Plummer said.