L'Oréal heiress Liliane Bettencourt and daughter call truce in legal dispute

France's richest woman, L'Oréal heiress Liliane Bettencourt, and her daughter have called a truce in the three-year family feud that sparked a political crisis.

The pair have agreed to cease the squabbling and hostilities that have torn apart one of the country's most famous families, cost a government minister his job, and thrown suspicion on the president.

The dispute that split Bettencourt, 87, and her only child, Françoise Bettencourt Meyers, 63, began with claims that the heiress was not in her right mind when she gave gifts worth nearly €1bn (£850m) to a charming society photographer.

It rumbled on in weekly, daily and, at one point, hourly instalments, bringing allegations of illegal donations to Nicolas Sarkozy's ruling political party, tax evasion in secret Swiss bank accounts, and the use of France's secret services to spy on journalists.

"Liliane and Françoise have been reunited and want to end all this arguing," said Olivier Metzner, lawyer for Bettencourt Meyers. "We are bringing an end to all procedures following this family reconciliation. There is no more case as far as we are concerned."

The plot of the Bettencourt affair, as it became known, took more twists and turns than a cheap thriller. Bettencourt Meyers sought to have her mother made a ward of court after discovering she had given photographer François-Marie Banier, a 63-year-old socialite, art masterpieces, life insurance policies and gifts. Bettencourt met Banier, who has taken pictures for the New Yorker and Vanity Fair magazines, in 1985 when he was commissioned to take her picture with Italian film director Federico Fellini.

Banier, once described as a "strategic master on the battlefield of charm" and a friend of Salvador Dali, Pierre Cardin, Yves Saint Laurent, Samuel Beckett and Johnny Depp, among others, charmed, flattered and, if his critics are to be believed, bullied Bettencourt. Soon she was transferring treasures into his name, including works by Picasso, Mondrian, Delaunay, Man Ray and Matisse, and giving him enough money to expand his property empire.

Bettencourt Meyers accused Banier of taking advantage of her mother's state of mind and took legal action against him.

The feud turned political when secret tapes made by the butler at Bettencourt's luxury home in the chic Paris suburb of Neuilly-sur-Seine came to light.

They revealed that the heiress had employed the wife of the then budget minister, Éric Woerth, to manage part of her fortune, while at the same time allegedly hiding millions from the taxman in Swiss bank accounts.

Shortly afterwards, the heiress's former bookkeeper claimed Bettencourt had made illegal cash donations to Sarkozy's 2007 presidential election campaign, an allegation vehemently denied by the French leader and his entourage.

At the height of the scandal, police quizzed Bettencourt's financial adviser, Patrice de Maistre, who, it was also revealed, had received a Légion d'Honneur from Woerth.

When Banier's trial for "abuse of weakness" opened in July, fact surpassed any possibility of invention as France's most famous leading lawyers traded insults, threats – and almost blows – in court

Woerth was later dropped from the cabinet in a government reshuffle, but is still facing investigation over the alleged donations. Meanwhile, Sarkozy was accused by Le Monde of ordering France's secret services to spy on its journalists reporting on the Bettencourt case. The surprise reconciliation between Bettencourt and her daughter, who met again for the first time in more than a year today, came after three weeks of secret negotiations.

It was reported that Bettencourt had agreed to have nothing more to do with Banier and De Maistre, while her daughter had agreed to stop all legal action.

Metzner said the pair had signed an agreement to end their various disputes but the details were "private and confidential". A joint statement said they were "looking to the future".

"The decision Françoise and I have taken is a source of hope for me," it said. "This agreement will allow us to rediscover our family harmony."

The L'Oréal group welcomed a "happy ending" to an affair which has seen its image tarnished.

Jean-Paul Agon, director general, said the reconciliation was "very positive for our company".