UPDATE 2-Banker's charges to be dropped in NY cab fare tussle

(Adds that Jennings no longer works for Morgan Stanley)

By Michelle Conlin and Dan Burns

NEW YORK, Oct 12 (Reuters) - Charges against a high-ranking Morgan Stanley banker accused of stabbing a New York City cab driver in a dispute over a long-distance fare are set to be dismissed, Connecticut police and the cabbie's attorney said on Friday.

The banker, William Bryan Jennings, of Darien, Connecticut, is due in court on Monday in Connecticut Superior Court in Stamford, about 40 miles (64 kilometers) northeast of New York. In March, he pleaded not guilty to charges of intimidation as a hate crime, theft and assault against cab driver Mohamed Ammar of Queens.

Immediately after the incident, Morgan Stanley put Jennings on leave. He is no longer with the firm, according to a source close to the situation.

The charges stemmed from a late-night taxi ride from New York City to Connecticut after a Morgan Stanley holiday party last December at which Jennings had been drinking. When they arrived at Jennings' driveway, a fight broke out over the fare, which the driver said had been agreed at $204.

Ammar's attorney, Hassan Ahmad, confirmed the charges were being dropped.

"On October 5th, 2012, Mr. Ammar met with the Connecticut State Prosecutor and was informed that the state is no longer willing to press charges against the defendant," Ahmad said in a prepared statement. "Mr. Ammar is outraged by the prosecutor's decision and continues to demand justice."

Eugene Riccio, Jennings' lawyer, would not comment on the matter other than to say, "We have a court date Monday, and we will be there."

"It is my understanding that the charges were nolled," Darien Police Captain Frederick Komm said in an email, using shorthand for the legal term "nolle prosequi" in which a prosecutor declines to pursue charges against a defendant. Komm said, however, his office had not received an official disposition document from the court.

A spokesperson for Morgan Stanley declined to comment on the matter.

The bank immediately put Jennings on leave after the incident. Jennings, who remains on leave, was not replaced as co-head of U.S. bond underwriting.

Jennings' attorney, Riccio, had previously asked for the judge to throw out the charges on the grounds that Ammar "told a completely different story" to police on different occasions about key elements of the taxi ride.

In one example cited in his brief, Riccio said that on the night of the incident Ammar did not mention to police that Jennings used a racial slur. He only brought it up a week later, Riccio said.

Riccio also argued that Ammar's wounds were not as extensive as claimed. According to Ammar's hospital report from the night of the incident, the driver suffered a laceration to his right index finger, not the multiple wounds to his hand that he and Darien detectives said he had suffered in Jennings' alleged assault against him.

Riccio also argued that Darien detectives were incorrect and inconsistent in several of their assertions about the incident.

Advocates for New York cab drivers expressed displeasure with the plan to drop the charges.

"There's something inherently wrong when the justice system has two sets of rules," said David Pollack, Executive Director of the Committee for Taxi Safety. "One rule for taxi drivers. One set of rules for everybody else."

"We all know that driving a taxi cab in any city is a thankless job, and at times it can be a dangerous job," Pollack said.

(Reporting By Dan Burns and Michelle Conlin; Editing by David Gregorio, Alden Bentley and Gunna Dickson)