Wall Street Journal 12/17/93
Prudential Plans To Reject Some Claims

NEW YORK - Prudential Securities Inc. plans to reject limited partnership claims made by many well-heeled customers as part of a recent settlement agreement with regulators.

At issue is $2.1 billion in private partnerships sold in the 1980s to wealthy investors: these "Regulation D" partnerships were exempt from some federal registration requirements and often were bought as tax shelters. Prudential said it sold 340 of these real-estate, energy and leasing partnerships, typically to investors with annual incomes of at least $200,000 or who had assets of $1 million or more.

Now, Prudential says many of those investors were sophisticated enough to know the partnerships' risks - and shouldn't get an award in the settlement process. Under the October accord, reached with the Securities and Exchange Commission and 49 state regulators, Prudential agreed to pay at least $330 million to investors who were allegedly defrauded into buying high-risk partnerships in the 1980s.

The Prudential case is even more heavily weighted toward investors, some plaintiff lawyers argue. That's because the SEC settlement accused Prudential of widespread fraud in selling about $8 billion of partnerships to 340,000 investors in the 80s. Robert Rex , a Boca Raton, Florida lawyer representing clients with claims against Prudential said: "You're never sophisticated enough that fraud is suitable".