Prudential’s Settlement Plan Gets Blasted : Securities: Lawyers for investors call the class-action proposal to pay pennies on the dollar inadequate.

Investors’ lawyers from across the country assailed a proposed class-action settlement Tuesday that would pay a few cents on the dollar to more than 100,000 investors who lost hundreds of millions of dollars in Prudential Securities limited partnerships.

U.S. District Judge Marcel Livaudais Jr. began a two-day hearing into the fairness of the settlement, which covers investors in Prudential’s Energy Income Funds series of oil and gas limited partnerships.

The partnerships allegedly were sold to large numbers of retirees and other small investors on the assurance that they were safe investments comparable to certificates of deposit. Investors put about $1.4 billion into the partnerships in the late 1980s. Witnesses confirmed Tuesday that the market value of the partnerships is almost nothing.

Lawyers opposing the settlement criticized it as inadequate, asserting that its terms were so vague that investors had no way of knowing the true value.

“It’s basically a pig in a poke,” said attorney Richard P. Alexander of Fayetteville, Ark. Others criticized the lawyers for the investor class--who stand to collect over $7 million--suggesting that they hadn’t vigorously pressed the case and had ignored evidence of fraud.

Securities regulators in at least five states, including California, also objected to the settlement.

But Prudential lawyers and Edward Grossman, the lead class-action lawyer, defended the settlement as reasonable. Called as a witness, Grossman testified that though he had done little research into the fraud allegations, he believed that they might not stand up in a trial.

Livaudais isn’t expected to rule on the settlement before the end of the week, though several lawyers at Tuesday’s hearing said he appeared to be leaning toward approving it.

The settlement was to have provided $37 million in cash plus an unspecified additional amount that investors could receive if the partnerships eventually are converted into a single, publicly traded corporation.

But such a large number of investors covered by the class chose to “opt out” and pursue individual claims against Prudential--about 12,000 investors, representing about 20% of total investments in the partnerships--that the cash portion for those still participating has been cut to about $30 million, Grossman said.