Updated from 12:14 p.m. EDT

More than two years after he was dismissed from an entry-level job, Christian L. Curry dropped his $1.3 billion bias and wrongful termination lawsuit against

Morgan Stanley Dean Witter

( MWD), citing the emotional strain of litigation.

The New York-based financial services firm announced Friday that it will pay nothing, but it agreed to drop its claim for reimbursement of legal expenses. It concurrently announced a $1 million gift to the

National Urban League

, a civil rights advocacy organization, intended to "underscore our strong commitment to furthering minority interests."

Morgan Stanley had bandied about the idea of a gift to the Urban League for more than a year, said Raymond O'Rourke, a spokesman for the Wall Street investment bank. The firm has given "nothing of this size" to the organization before, he said. A spokeswoman for the league, Leslie A. Dunbar, could not immediately be reached. William Lewis Jr., a managing director of Morgan Stanley, serves on the organization's board of trustees. Through his secretary, he declined to comment.

Curry's claims against the company gained attention in August 1998, when he was arrested for allegedly asking an undercover detective of the

New York Police Department

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to plant phony racist emails in the firm's computer networks. At the time, it appeared that Curry hoped the bogus records would bolster his discrimination claims. He was 24 when he lost the junior investment banking analyst job.

Manhattan prosecutors dropped criminal charges against Curry in May 1999 after they discovered that the Wall Street firm had paid an informant $10,000 to gather incriminating information against him.

In his case against the firm, Curry, who is African-American, contended that Morgan Stanley fired him because of his race and because of his perceived sexual orientation. The firm said it fired Curry because of expense account violations. The dismissal came shortly after nude pictures of Curry appeared in a gay pornographic magazine.

While the settlement allows Morgan Stanley to claim vindication, the episode has

embarrassed the firm and put it at odds with New York prosecutors. In June 1999, two of its lawyers resigned after the $10,000 payment became public.

Of the settlement, the firm said in a statement that "there was no discrimination or misconduct against Mr. Curry by Morgan Stanley Dean Witter. We were fully prepared for trial and confident we would win."

Benedict P. Morelli, a lawyer for Curry, said that "while I initially thought Mr. Curry had a good case, we now understand that Morgan Stanley Dean Witter engaged in no discrimination or misconduct against Mr. Curry."

Morelli said he came to that conclusion after hearing extensive pretrial testimony and reviewing documents.

And Curry said he is pleased with the terms of his settlement, though he will receive no payment.

"The Urban League does wonderful work for the African-American community, of which I am a part," he said.

Morgan Stanley finished Friday regular trading down $6.44, or 6%, at $98.50.