Prudential’s Fraud Costs Now Top $1 Billion : Securities: The additional reserves for investors’ claims will more than erase the brokerage’s profit for the first half.

Prudential Securities said Tuesday that it has set aside an additional $305 million to pay investors’ fraud claims, making its limited partnership debacle one of Wall Street’s costliest scandals ever and more than wiping out the firm’s profit for the first half of the year.

Prudential Securities also disclosed that parent company Prudential Insurance has injected $180 million of new capital into the Wall Street subsidiary.

The new reserve pushes the total amount Prudential Securities has had to set aside for customers’ claims over the last three years to more than $1.1 billion. The claims stem from Prudential Securities’ limited partnership debacle, which led to charges last year by the Securities and Exchange Commission, numerous lawsuits and a pending federal criminal investigation.

The reserve means Prudential Securities will report a net loss of $215 million for the second quarter of 1994 and a net loss for the first six months of the year of $180 million.

The capital injection by Newark, N.J.-based Prudential Insurance marks the first time the parent has had to put in money as a result of the brokerage firm’s legal woes. The parent last had to put in $215 million in 1990, after Prudential Securities’ costly failure to expand its investment banking business.

But Joseph Vecchione, the parent firm’s chief spokesman, said there are no plans to oust Prudential Securities’ management or to sell the firm. “We think that Prudential Securities is doing a good job of dealing with a very difficult problem from the past,” he said.

The additional capital restores the brokerage’s capital base to $887 million, where it was at the end of 1993, the company said.

Until earlier this year, the exceptionally buoyant stock market had enabled the brokerage to show a profit despite having to pay investors’ claims. But the recent downturn in the market raises questions about Prudential Securities’ ability to keep paying claims that repeatedly exceed estimates.

Even without the $305-million reserve, the brokerage said, it would have shown a loss for the second quarter of $35 million, because trading profits and securities sales dropped with the falling market.

Last year, the firm settled SEC charges and agreed to create a fund of $330 million to reimburse investors. But the firm has had to set aside much more than that because of pending private lawsuits and arbitration claims. Prudential Securities spokesman William J. Ahearn said the firm is being forced to pay out more in interest on investors’ losses than anticipated.

The legal woes resulted from Prudential’s sale of about $8 billion in limited partnership interests, mainly to small investors, beginning in the early 1980s. Most of the investments produced heavy losses.