There's big bucks in asbestos litigation, and late Wednesday the sharks were circling around Halliburton ( HAL), the Texas-based energy-services company facing a mountain of asbestos-liability cases.

The legal feeding frenzy over the Halliburton asbestos cases spilled over to Wall Street after the market closed Wednesday. That's when one of the lawyers in the case purportedly let it slip that Halliburton might pay up to $4.2 billion to settle asbestos cases. Some 200,000 claims are pending against the company.

A published report late Wednesday afternoon indicated the company had agreed to set up a trust to pay existing and future asbestos exposure claims. The report, attributed to plaintiffs' lawyers, said the settlement trust would be funded by as much as $2.8 billion in cash, with the balance in stock.

The company's stock jumped 5% after hours on the report of a tentative settlement, as investors saw an indication that the oil services company might be able to put its asbestos woes behind it. But as quickly as news of a possible settlement broke, the story began to unravel -- even though it appears the company and the plaintiffs' lawyers are getting close to a deal.

Twists and Turns

The lawyer who was cited as the source of the initial news report began to back away from his statement. Though Peter Kraus, one of a dozen plaintiffs' lawyers in the bankruptcy case of Halliburton's Harbison-Walker unit, said he believed a deal would get done, he said the parties hadn't reached an agreement yet.

"It is not a done deal," Kraus said via email to TheStreet.com. "Substantial structural issues remain unresolved."

Halliburton representatives didn't immediately return a call seeking comment.

The report of a settlement agreement took an even stranger turn when Frederick Baron, a co-counsel for the plaintiffs in the Halliburton case, said Kraus has played a minimal role in the negotiations and was in no position to speculate on the parameters of a settlement.

Baron said Kraus represents a small number of plaintiffs and may be trying to sabotage a deal by discussing it with the media.

"Peter Kraus would like to break up the deal," said Baron.

Still, Baron said the parties were getting closer in their negotiations. However, he said a deal was unlikely to be announced this week.

A status conference on the Harbison-Walker asbestos case, taking place before a federal bankruptcy judge in Pittsburgh, was continued to Dec. 13 to allow the parties more time to negotiate.

Worries

A settlement certainly would help Halliburton, whose shares were hit hard earlier this year by fears that asbestos liability might drive it into bankruptcy.

Halliburton's asbestos worries began just around this time last year, when a Baltimore jury ordered the company to pay $30 million in damages in an asbestos liability case. The jury verdict, which came close on the heels of two other negative asbestos rulings, sparked a wave of analyst downgrades and sent the company's stock plunging to $12 a share. The stock has rallied in recent months, climbing from $8.60 this summer, on hopes of court reform from the Republican-led Congress.

Halliburton's asbestos headaches are a leftover curse from the days when Vice President Dick Cheney was at the helm as CEO. At one time, Cheney's ability to steer a Halliburton merger with Dresser Industries was considered the high point of his career. But since then, Dresser has become something of an albatross, carrying with it huge asbestos-liability exposure from its former Harbison-Walker unit.

Halliburton has drawn criticism for failing to disclose, when investors voted on that merger, that such liability existed. But the company has steadfastly maintained that the merger was a good one, and that Cheney served Halliburton well as its CEO.

Staff reporter Melissa Davis contributed to this report.