5,000 Shun Prudential Settlement : Litigation: Lawyers say a surprisingly large number have opted out of an offer of pennies on the dollar for limited partnerships that went sour.

Lawyers estimated Friday that 5,000 investors--about twice the number expected--have opted out of a legal settlement with Prudential Securities that would have paid them only a few cents on the dollar for losses from limited partnership investments.

Separately, Idaho state securities regulators and three law firms filed formal objections to the class-action settlement, calling it unreasonable and inadequate.

There was a surge of opt-outs in the days before the Jan. 22 deadline for 128,000 eligible investors in the Prudential Energy Income Funds series of oil and gas limited partnerships.

News reports quoted independent experts and investors’ lawyers criticizing the settlement as inadequate.

At about 4% of those eligible, the proportion of investors refusing to participate in the settlement is unusually large, class-action experts said.

Investors poured $1.44 billion into the partnerships in the 1980s, allegedly at the urging of Prudential brokers, who sold them as safe investments for retirees and other small investors.

The market value of the partnership interests is virtually zero, although Prudential strongly disputes that investors are out the full amount.

The proposed settlement will pay investors a total of $37 million in cash, plus an interest in a reorganized concern that would be run by many of the people who managed the partnerships in the first place.

Investors who have opted out can pursue individual arbitration cases against Prudential. In several such cases, investors have won back all or most of their losses.

U.S. District Judge Marcel Livaudais Jr. is due to rule on the fairness of the settlement in a hearing in New Orleans on Feb. 9.

In an objection filed with the court, the Idaho Securities Bureau says the settlement provides too little for investors.

The state also argues that a final settlement should be postponed until regulators complete a series of investigations of Prudential.

The Securities and Exchange Commission, the National Assn. of Securities Dealers and various state agencies are looking into Prudential’s sale of limited partnerships.

Prudential spokesman William Ahearn declined to comment on the number of investors who opted out or on the pending objections.