Prudential Ups Settlement Offer in Fraud Suit : Law: Securities firm would pay $120 million in cash as part of a $320-million global pact.

Prudential Securities said Thursday that it had agreed to pay $120 million in cash to settle a class-action lawsuit over failed energy partnership investments.

The proposal is substantially richer than a previous settlement that was thrown out by a U.S. District Court judge earlier this year after strenuous objections were raised by some of the 137,000 investors who poured $1.44 billion into the partnerships.

The $120 million likely will be counted toward the $320 million that Prudential tentatively has agreed to pay as part of a global settlement with federal and state regulators of inquiries into a range of partnerships sold by Prudential in the 1980s.

The earlier agreement called for Prudential to pay $37 million in cash; investors also were to receive shares in a new company formed to manage the remaining partnership assets.

Over the summer, however, those assets were sold for $491 million. Prudential said the new settlement, combined with the money from the sale and the $655 million in distributions from the partnerships, meant that investors would receive 88% of the money they originally put in.

Investors’ attorneys, however, have disputed Prudential’s calculations, noting that they do not include interest or the investment returns promised by Prudential brokers.

Attorneys who had objected to the earlier settlement--and in many cases urged their clients to instead pursue individual claims against Prudential--reacted cautiously to the deal announced Thursday, saying they had not yet seen the details.

“It’s a big improvement over the earlier one, where most of the cash went to (the class-action) attorneys, and there was this unknown security,” said Tim Karen, a Del Mar attorney who represents a number of Prudential investors. “Whether it’s adequate or not is a difficult question.”

Edward Grossman, the lead class-action attorney, said no formal objections ever were raised to lawyers’ fees in the earlier settlement agreement. Fee arrangements in the new settlement are similar, he added.

The proposal will be reviewed Oct. 24 by the U.S. District Court in New Orleans, where the suit was filed.