Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, October 22, 1993                   TAG: 9310220067
SECTION: BUSINESS                    PAGE: A7   EDITION: METRO 
SOURCE: JOHN M. DOYLE ASSOCIATED PRESS
DATELINE: WASHINGTON                                LENGTH: Medium

PRUDENTIAL TO SETTLE FRAUD CASE

The settlement was the largest ever reached between regulators and a brokerage firm arising from allegations of sales abuses at the consumer level.

It is exceeded only by the $650 million that now-defunct junk-bond firm Drexel Burnham Lambert Inc. agreed to pay in 1989.

Unlike Prudential, Drexel did most of its business with corporations and savings and loans. Prudential sold the partnership investments directly to retirees and other individual investors.

Without admitting or denying wrongdoing, Prudential agreed to set up a $330 million fund to compensate investors who may have been defrauded by improper sales practices. The company also will pay fines of:

$10 million to the Securities and Exchange Commission;

$5 million to the National Association of Securities Dealers, the brokerage industry's self-regulatory group;

$26 million to the 50 states, Puerto Rico and the District of Columbia. Texas is the only state that hasn't approved the agreement.

SEC Chairman Arthur Levitt Jr. said the compensation fund does not have a ceiling and the $330 million is "only a down payment; for if Prudential's liabilities to limited-partnership investors exceed $330 million, the firm is under a court order to make all additional payments necessary to compensate injured investors fully."

Prudential will be required to notify investors "in plain English" that they may be eligible to file a claim. The SEC said 300,000 to 400,000 Prudential customers invested in limited partnerships in the 1980s, but it was not known how many were eligible to file a claim.

The settlement arises from the marketing of 700 separate limited partnerships in the 1980s by Prudential-Bache Securities, as the firm then was known. An estimated $8 billion was raised in oil, real estate, entertainment and other ventures.

Limited partnerships are investment vehicles, usually sold through brokerage firms, in which investors put up money often goes towards real estate or oil drilling projects. Such investments often are earmarked for retirement.

In a complaint filed at federal court in Washington, the SEC accused Prudential - a Wall Street giant owned by Prudential Insurance Co. of America - of selling high-risk partnerships that were unsuitable for customers seeking safe investments for their savings.

The North American Securities Administrators Association, a state-level stock regulator group, has established a 24-hour toll-free telephone hot line to inform investors about the settlement and how to make a claim. The toll-free number is (800) 220-9125.