Smith Barney Inc., the international banking and securities firm, paid more than $1 million yesterday to settle a lawsuit filed because one of its employees allegedly arranged for the purchase of a $2,200 ticket to the 1994 Super Bowl for then-Agriculture Secretary Mike Espy.

In a statement, Smith Barney denied the allegations, but said it "agreed to settle the matter to avoid costly and protracted litigation." By settling, the company also avoids criminal charges.

The lawsuit and $1,050,000 settlement were made public yesterday by independent counsel Donald C. Smaltz, who is investigating Espy's acceptance of gifts from companies he was supposed to be regulating while he served as secretary from January 1993 to December 1994.

Smaltz, in the lawsuit filed in U.S. District Court in Washington, portrayed Smith Barney as a company trying to curry favor with a Cabinet-level official to help one of its clients.

According to the lawsuit, Smith Barney's client, Oglethorpe Power Corp. of Georgia, was trying to avoid $286 million in prepayment penalties and wanted to refinance $3.1 billion in debt it had to the federal government. Espy allegedly supported Oglethorpe's efforts -- even after the Treasury Department turned the electric company down -- by going so far as to approach Vice President Gore twice, at least once in person at the end of a meeting on another matter, according to sources.

Ginny Terzano, a spokeswoman for Gore, said the vice president "doesn't recall whether {Espy} raised this matter with him." But Gore's staff did "look into" the Oglethorpe issue and "concluded it could be worked out among the agencies," she said.

"That agents of a prominent securities firm would jeopardize the firm's reputation and callously disregard the law by seeking the continued assistance of the secretary of agriculture with a $2,200 gratuity is disgraceful," Smaltz said in a statement. "Such conduct demonstrates an absolute disregard of the gratuity statutes and precious little respect for the integrity of public officials."

Smaltz said this is the first time an independent counsel has brought such a civil conflict-of-interest suit.

Officials at Smith Barney were baffled by Smaltz's strong statements. "We are frustrated," said Michael Schlein, a Smith Barney senior vice president. "We have cooperated fully with federal authorities throughout the investigation of this matter. . . . We deny that we gave a gratuity to the secretary."

Schlein said that the employee who arranged the purchase of the ticket was "unaware" -- as Smith Barney also was at the time -- that the lobbyist planned to give it to Espy. The employee, identified in court papers as Steven B. Carosso, is on administrative leave, Schlein said.

Greg Jones, a spokesman for Oglethorpe, said, "I have not seen the complaint, but I can tell you that we have been questioned on this matter, and we have cooperated fully with the investigators. We are very confident that any of our actions regarding this issue were very appropriate and proper."

In all, Carosso arranged for the purchase of three Super Bowl tickets, at a total cost of $6,600, Smaltz alleged in court papers.

Smith Barney and Espy kept pushing Oglethorpe's cause even after then-Treasury Secretary Lloyd Bentsen rejected the Georgia power plant's request in early January 1994, saying that it would benefit only it and its customers and cost federal taxpayers more than $286 million.

During a meeting with Smith Barney and Oglethorpe employees only days after Treasury's decision, a "principal" of EOP Group Inc., a Washington lobbying firm run by Michael O'Bannon, mentioned that Espy was going to be in Atlanta attending the Super Bowl. O'Bannon, who did not return a phone call yesterday, allegedly proposed that they meet with Espy on the Saturday before the game. The tickets allegedly were passed in an envelope to O'Bannon during that meeting. CAPTION: MIKE ESPY