An apology in the opinion section of the New York Times' website said that any inference that Lee Hsien Loong "did not achieve his position through merit," was unintended.
The article, entitled "All in the Family," was published on February 15 in the International Herald Tribune (IHT), the global edition of The New York Times.
Lee Hsien Loong is the son of independent Singapore's first leader, Lee Kuan Yew. The New York Times also apologized to Goh Chok Tong, who succeeded the older Lee as prime minister.
Davinder Singh, the lawyer acting for the leaders, told Reuters that the IHT's publisher, editor of global editions, and the article's author, Philip Bowring, also agreed to pay damages of S$60,000 to Lee Hsien Loong, and S$50,000 each to Goh Chok Tong and Lee Kuan Yew, as well as pay their legal costs.
Singh said the article was "libellous" and the Singapore leaders had demanded an apology, damages and costs.
He said it was in breach of an undertaking made by both the publisher of the IHT and Bowring in 1994 that they would not make further similar defamatory allegations to those made in an article by Bowring in the IHT in that year called "The Claims about Asian Values Don't Usually Bear Scrutiny," for which the IHT and Bowring also paid damages and costs to the three leaders.
A spokesman for The New York Times Co declined to comment beyond the apology, while Bowring did not respond to a Reuters query for comment.
Singapore's leaders have in the past sued and won damages, or out-of-court settlements, from opposition politicians and foreign media including the International Herald Tribune, Wall Street Journal, Bloomberg and The Economist.
Singapore, considered to have the lowest political risk among Asian nations by many risk consultancies, is a hub for manufacturers, banks and expatriates, who value its stability. The ruling People's Action Party (PAP) has governed for 50 years.
Singapore was ranked 133rd among 175 countries in the World Press Freedom Index 2009 by Reporters Without Borders.
(Reporting by Neil Chatterjee in Singapore and Tiffany Wu in New York; Editing by Nick Macfie and Raju Gopalakrishnan)
Here's the Times' apology, printed today:
In 1994, Philip Bowring, a contributor to the International Herald Tribune's op-ed page, agreed as part of an undertaking with the leaders of the government of Singapore that he would not say or imply that Prime Minister Lee Hsien Loong had attained his position through nepotism practiced by his father Lee Kuan Yew. In a February 15, 2010, article, Mr. Bowring nonetheless included these two men in a list of Asian political dynasties, which may have been understood by readers to infer that the younger Mr. Lee did not achieve his position through merit. We wish to state clearly that this inference was not intended. We apologize to Prime Minister Lee Hsien Loong, Minister Mentor Lee Kuan Yew and former Prime Minister Goh Chok Tong for any distress or embarrassment caused by any breach of the undertaking and the article.