Intuit, Electronic Clearing House drop merger plan

(Adds details, share prices)

NEW YORK, March 27 (Reuters) - Payment processing company Electronic Clearing House Inc. (ECHO.O) said on Tuesday that it was a witness in a federal investigation and would no longer be acquired by financial software maker Intuit Inc. (INTU.O), pushing its shares down 37 percent.

The two companies, which had entered a merger agreement on Dec. 14, said they agreed to release each other from all claims.

Electronic Clearing House said it had been cooperating as a witness in a federal investigation of "Internet wallet" providers, which offer funds to online game participants.

Electronic Clearing House, which provides payment processing services to merchants, said in October that several of them were "Internet wallet" providers. The company stopped all processing and collection services for Internet wallet customers earlier this year.

It said it agreed to give up an estimated $2.3 million in profit from processing and collection services provided to its Internet wallet customers since 2001 and to continue cooperating as a witness in the investigation.

Electronic Clearing House also said it expected to incur additional legal expenses because of the investigation. It expects a nonprosecution agreement with the government, it said.

Electronic Clearing House shares were down $6.96 at $11.65 in early Nasdaq trade, while Intuit rose 22 cents to $27.59.

((Reporting by Ritsuko Ando, editing by Lisa Von Ahn; Reuters Messaging: ritsuko.ando.reuters.com@reuters.net; +1 646 223 6084)) Keywords: ECH INTUIT

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