No Fraud Evident in Prudential Fund Failure, Witness Says
Expert witnesses for Prudential Securities Inc. testified Thursday that they had found no sign of fraud in the firm’s failed, $1.44-billion oil and gas limited partnership program known as the Energy Income Funds.
“There are no villains to look for, there are no culprits,” said Ben C. Ball Jr., an oil and gas consultant and former Gulf Oil executive.
The second day of a federal court hearing marked Prudential’s first opportunity to call witnesses in open court to dispute allegations that the partnerships falsely promised steep returns to elderly investors and paid them their own money back in the guise of profits.
U.S. District Judge Marcel Livaudais Jr. is holding the hearing to decide if he should approve a class-action settlement that would pay $90.7 million to about 125,000 investors.
Ball testified that the partnerships’ projections for oil and gas prices were in line with industry and federal government standards. He said investors lost money only because oil prices in the mid-1980s confounded the projections, plunging instead of rising.
The partnerships would have made money even if oil prices had been flat, Ball contended. “It was the unpredictable events in the oil and gas industry which account for all of the out-of-pocket losses of investors,” he said.
Under cross-examination by investors’ lawyer Stuart C. Goldberg, however, Ball acknowledged that individual Energy Income partnerships lost money even though they were formed during periods in the late 1980s when oil prices were rising.
Goldberg and Jeff D. Ferentz of Newport Beach are the only attorneys opposing approval of the settlement, which they argue is grossly inadequate.
Prudential’s other expert witness, Kenneth M. Burke, a senior accountant with Ernst & Young and a longtime specialist in oil and gas accounting, said he had found nothing improper in the Energy Income funds’ prospectuses or in the way Prudential accounted for the money paid out to investors.
The hearing is due to conclude today.
