Fund managers accepted a public apology and "substantial" undisclosed libel damages today over newspaper allegations that they intended to keep £1 billion of their investors' money for themselves.

David Price, their solicitor-advocate, told Mr Justice Eady at the High Court in London that the claim arose out of publication of an article in the Sunday Express last July headed "David Cameron's friend and the £1bn he won't give back".

It alleged that Lewis Chester, chief executive officer of Pentagon Capital Management PLC, and Jafar Omid, Pentagon's chief operating and managing director, "were intending to keep for themselves £1 billion of their investors' money, whilst dishonestly promising to return it to them".

Mr Price told the judge: "It was also alleged that investors had been dishonestly hoodwinked.

"It was suggested that Mr Chester and Mr Omid had refused to answer legitimate journalistic enquiries."

Mr Price said it was further alleged that they, together with David Chester, the founder of Pentagon and non-executive chairman until approximately two years ago, "have a longstanding and cynical business practice of exploiting their small investors in order to make massive gains for themselves at their investors' expense".

He added: "The truth is that there is no basis for these allegations. In fact, information has been provided on a regular basis to investors and very substantial sums have already been returned to them since the decision was made in March 2008 to wind down the funds managed by Pentagon.

"No attempt was made to put the allegations to anyone at Pentagon before publication of the article.

"There is no truth in the suggestion that Lewis Chester, David Chester or Mr Omid have prospered by exploiting small investors. To the contrary, Pentagon funds have performed well."

Mr Price told the judge: "What the article did not mention was the involvement of the Sunday Express proprietor Richard Desmond.

"Mr Desmond had investments with Pentagon which were fully refunded in 2007. However, a family member had a very small continuing investment which Pentagon advised was not within their control and would have been unlawful to repay.

"Mr Desmond accepts that it was his comments in the presence of Sunday Express journalists that prompted the Sunday Express to publish the article."

Mr Price, representing Lewis Chester, Mr Omid, David Chester and Pentagon, said that the defendants — Mr Desmond, the publisher of Express Newspapers, editor Martin Townsend and Sunday Express former city editor David Parsley — had agreed to pay the claimants "a substantial sum in damages together with their legal costs".

Ian Helme, for the defendants, told Mr Justice Eady: "I agree with everything that Mr Price has said and offer Mr Desmond and Express Newspapers' sincere apologies for the damage caused to the reputation of Pentagon by the article and the hurt and embarrassment caused to Lewis Chester, Jafar Omid, David Chester and their families."

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