Waddell & Reed agreed last week to pay $7.9 million to settle an arbitration case with its former financial advisor, capping a dispute which stretched for eight years.

In a statement last week, Overland Park-based firm said it expects to post an after-tax charge of approximately $3.8 million in the fourth quarter.

Stephen Sawtelle, whom the Overland Park-based firm had fired in 1997, won $25 million in punitive damages from an arbitration panel twice on his allegation that Waddell & Reed had interfered with his prospective clients after he had left the company.

New York courts have rejected the punitive damages, saying the amount was excessive.

Sawtelle’s attorney, Jeffrey L. Liddle said interest, legal fees and a sanction during the arbitration hearing increased the company’s total payments to Sawtelle to about $10 million, according to The Kansas City Star.

With the Sawtelle dispute now resolved, Waddell & Reed has one more major legal issue that has yet to see closure.

New York Attorney General Eliot Spitzer issued a subpoena to the company in 2003 as part of an industrywide probe into improper fund trading practices.

The company recently said it has submitted an offer of settlement to regulators but received no response. 

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