UPDATE 1-Siemens settles case with von Pierer - sources

* Von Pierer to pay more than 4 mln euros - sources

* ex-CEO Kleinfeld to pay 2 mln euros - paper (Adds details from newspaper report, recasts)

MUNICH, Dec 1 - Siemens AG has struck a deal with former Chairman Heinrich von Pierer on payments for part of costs of a corruption case, paving the way for an amicable ending to the biggest bribery scandal in the country.

Two sources familiar with the matter told Reuters on Tuesday that Siemens has agreed to reduce the amount von Pierer would pay as compensation for damages which the world's largest maker of industrial automation equipment had suffered as a result of the corruption case.

Two sources said Siemens had agreed in principle to reduce its demand from von Pierer to more than 4 million euros ($6 million) from the original 6 million euros.

Von Pierer was not accused of crimes and he denied any wrongdoing.

Siemens had agreed in December to pay more than $1.3 billion to settle corruption probes in the United States and Germany, ending two years of controversy that rocked the German engineering conglomerate. ID:nN15508680

Analysts said failure to reach an agreement would have forced the company to take von Pierer -- called "Mr Siemens" during his heyday -- to court over the damages.

Siemens had said it had spent around 2.5 billion euros on lawyers' fees, settlements with U.S. authorities and tax penalties.

It had said it wanted to claim damages from 11 former top managers, including von Pierer, for failing to stop illegal practices and bribery at the company.

"If it goes to court, the image of Siemens would be affected. You would have this string of bad stories," said one analyst who did not want to be identified.

German daily Frankfurter Allgemeine Zeitung said in a statement ahead of its Wednesday edition that von Pierer would pay 5 million euros in installments.

Former CEO Klaus Kleinfeld, now Chief Executive of Alcoa Inc, as well as former Siemens board members Johannes Feldmayer, Juergen Radomski and Uriel Sharef have also agreed to make payments to Siemens, the daily added, citing sources.

Kleinfeld is to pay 2 million euros, it said.

The sources said Siemens' supervisory board, which is due to meet tomorrow, would have to formally approve the agreement.

Von Pierer's lawyer declined to comment, as did Siemens. ($1=.6638 Euro) (Reporting by Jens Hack; Writing by Marilyn Gerlach; Editing by Gerald E. McCormick) (