PR peer pays out over billionaire 'smear'

Lord Malloch-Brown, a former Labour minister, was left humiliated last night after he and the PR company he works for agreed to make an out-of-court settlement to the controversial Israeli mining billionaire Beny Steinmetz over sensational allegations of a smear campaign.

Mr Steinmetz had been a client of the PR firm FTI, formerly known as Financial Dynamics, but alleged that Lord Malloch-Brown, FTI's chairman of Europe, Middle East and Africa, had been leaking confidential information about him to his enemy George Soros. Mr Soros had, Mr Steinmetz claims, been funding corruption investigations into his activities in the West African state of Guinea. There is no claim of wrongdoing against Mr Soros in the Steinmetz writ.

Lord Malloch-Brown, who served as the deputy to Kofi Annan, the former United Nations secretary-general, is closely involved with several of Mr Soros's business and charitable interests, such as the Open Society Foundations, of which he is a board member.

Rather than fight the claims in court, Lord Malloch-Brown and FTI yesterday opted to settle, making a payment of €90,000 (£76,000) to Mr Steinmetz's company and paying both sides' costs so far. Those are believed to run to hundreds of thousands. They said the settlement was not an admission of liability, and they continued to reject strongly the allegations of impropriety.

However, the decision not to fight the claim was hailed as a victory by Mr Steinmetz. His spokesman said: "When you are paid to advise people as their PR representative, you are not supposed to leak information about them to their enemies. It's as simple as that."

The settlement came as Mr Steinmetz fights to retain control of mining assets sold to him by the former president of Guinea. An investigation set up by the new government, which Mr Steinmetz claims is part-funded by a Soros charity, alleges that Mr Steinmetz paid a fraction of the true value of the mine. It was a deal that allegedly included a $2.5m (£1.6m) "commission" to the president's wife and the gift of a $60,000 diamond-studded gold watch – allegations Mr Steinmetz denies.

Meanwhile, US prosecutors are investigating whether a man linked to Mr Steinmetz's organisation paid Guinean officials as much as $12m.

FTI lost $36m last year and, insiders said, did not have the stomach for a costly legal battle with the deep-pocketed Mr Steinmetz.

Lord Malloch-Brown has courted controversy many times in his career, including a diplomatic row with the US while he was at the UN, when he accused the country of allowing "too much unchecked UN-bashing and stereotyping". Included in the Steinmetz writ is the allegation that Lord Malloch-Brown described him privately as "corrupt", and that members of the Steinmetz account team at FTI said Mr Soros has a "personal obsession" about Mr Steinmetz.

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