Lehman Brothers last night agreed to pay $69.9 million (£39.7m) in cash to settle claims over equity transactions brought by Enron, the collapsed American energy supplier.

Lehman will also withdraw with prejudice its $173 million claim against Enron, which filed a complaint against Lehman asserting preferences, fraudulent transfers and conveyances and recovery of payments.

The settlement is subject to the approval of the US Bankruptcy Court and is unrelated to the federal trial of former Enron CEOs Kenneth Lay and Jeffrey Skilling, who are accused of lying about Enron’s financial health before it collapsed in December 2001.

If approved, the deal closes a case brought by Enron in November 2003.

The energy conglomerate sought to recover $236 million (£133 million) in payments Enron claimed should never have been made to Lehman in 2001.

Enron still has equity transaction cases pending against Credit Suisse First Boston, UBS and Bear Stearns.

Its case against Lehman claimed that "preferential payments to a stockholder; were made at a time when Enron was truly insolvent.

"An insolvent company - in this case, Enron - is not allowed to make payments to stockholders," said Enron spokesman Harlan Loeb.

Enron’s new management has been trying to recoup money from its financial advisers, alleging their guidance led to the company’s collapse.

In the ongoing trial of Lay and Skilling in Houston, a key witness alleged that they had concealed important data that would have shown two supposedly fast-growing businesses were "underperforming".

Mark Koenig, who was head of investor relations at Enron, said that Lay and Skilling failed to tell the truth about the woes of Enron’s ventures into energy management and high-speed internet.

Mr Koenig, the first witness in the fraud and conspiracy trial, said assurances from the chief executives masked major problems.

He said top management approved a plan to transfer hundreds of millions of dollars in losses from Enron Energy Services, which managed energy operations for corporate clients, to a profitable division where the losses would not be noticed.

The division "wasn’t performing very well ... primarily because of the loss we had mentioned," Koenig testified.

He said internal Enron documents showed the unit lost $230 million in the first quarter of 2001 and $726 million in the first six months of that year because of bad bets on commodities, including energy prices.

"Disclosing that one of Enron’s fast-growing, highly valued business units ... had accumulated losses of $230 million ... would have been a disaster had investors taken that into account," he said in response to a question from federal prosecutor Kathryn Ruemmler.

Mr Koenig said another newly created division called Enron Broadband Services had few revenues other than those from deals with entities created by Enron itself and from one-time sales.

The witness said comments by Skilling during the time he served as company president and CEO were often misleading to analysts and investors.

Mr Koenig said Lay, who resumed the post of CEO after Skilling’s resignation in August 2001, made similar comments.

In one conference call after resuming the CEO job, Lay was heard saying, "Our new businesses are doing great, Enron Energy Services is doing great ... we are facing a number of challenges but we are managing them."

On Wednesday, Mr Koenig had described the financial tricks used to keep the company flying high ahead of its spectacular collapse in late 2001, including the last-minute redrafting of at least two Enron quarterly earnings reports in order to meet or beat profit targets set by Wall Street analysts.

Skilling faces 31 counts of conspiracy, securities fraud and insider trading. Lay faces seven counts of conspiracy and securities fraud. Both face lengthy prison terms if conmvicted. The case continues.