The Times has learnt that a second woman is suing Merrill Lynch for sex discrimination, victimisation and constructive dismissal. Elizabeth Weston, a 29-year-old solicitor, will claim that a senior lawyer at the firm made lewd comments to her at a Christmas lunch.

The American firm is already fighting a multimillion-pound sex discrimination claim brought by another female executive, Stephanie Villalba. She is seeking record damages for sex discrimination, victimisation, unfair dismissal and unequal pay. If she is successful the payout would be the biggest given by a tribunal for sex discrimination. Merrill Lynch denies her claims.

The case will highlight concerns that sexism is on the rise again in the Square Mile. Mrs Weston is the latest in a string of aggrieved women who claim to have fallen victim to the City’s macho culture.

Her allegations are a fresh embarrassment for Merrill Lynch which last month settled a ten-year-battle with 1,000 of its women brokers in America, who claimed the firm had a culture of bias against women.

Mrs Weston will claim that Nathaniel Norgren made “disgusting” comments to her after getting drunk at an informal Christmas lunch party on December 19.

She claims that he complimented her on her breasts, speculated about her sex life with her husband, and asked other men at the table whether they could imagine her masturbating.

Another woman lawyer at the lunch had long red hair and it is claimed that Mr Norgren said: “I know where I would like to wrap her locks.”

Merrill Lynch last night told The Times that Mr Norgren had been disciplined and no longer worked at the firm.

Mrs Weston, who is Australian, complained to her line manager the day after the party and Mr Norgren attended an in-house disciplinary hearing, which withdrew his $48,000 (£26,000) bonus.

It is understood that Mr Norgren then appealed and was repaid half the bonus.

Mrs Weston, who earned around £60,000 a year, claims she was ignored by colleagues after making the complaint.

When she asked to be transferred from the department she said she was told it would take more than a year. She is understood to have sunk into a depression and was signed off work by her GP. She left Merrill Lynch on June 4.

Mrs Weston declined to comment on her claims last night, saying she did not want to jeopardise her case.

A spokesman for Merrill Lynch Investment Managers (MLIM) said: “Boorish behaviour is not tolerated at Merrill Lynch.

“Merrill Lynch has a clear policy on inappropriate conduct. The full disciplinary procedures were immediately invoked following our strict HR compliance and legal guidelines and the individual was disciplined.

“The individual concerned is no longer at Merrill Lynch.”

Mr Norgren is understood to be on holiday before starting a new job at UBS in the Channel Islands. He could not be reached for comment yesterday.

Mrs Weston worked as a solicitor in the legal department at MLIM, one of the world’s largest investment management organisations with $500 billion of assets. She was the youngest person in the legal department and one of only a handful of women.

She and her Australian husband were staying in Britain on a five-year work permit organised by Merrill Lynch. They plan to return to Sydney when the dispute is resolved.

Mrs Villalba earned £1 million last year as a banker at Merrill Lynch until she was sacked on July 31, 2003. She told an employment tribunal in Croydon earlier this week that she was “bullied and belittled” by her boss, Ausaf Abbas, who told her to serve drinks to male executives on a corporate jet. Scores of senior bankers are expected to cross the Atlantic this month for the hearing.

Mrs Villalba was in charge of Merrill Lynch’s European private client business. She is the most senior woman to make such a claim. The organisation denies her allegations, saying she was removed from her post because she was not up to the job and could not stem massive financial losses in Europe. Her case has been adjourned until Tuesday and is expected to continue for another four weeks. Merrill Lynch last month settled a long-running battle with 1,000 women brokers in America. A panel of arbitrators ordered the firm to pay one banker, Hydie Sumner, £1.2 million in compensation. It ruled that Merrill Lynch had discriminated against Ms Sumner, and had consistently paid women brokers less than men and blocked them from promotion.

This was the first legal ruling that any Wall Street firm had engaged in systematic discrimination. Some commentators have suggested that the ruling could help to change the perceived anti-female culture in the industry.

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