Your Money : Prudential Pay-Back Fund Grows, but Claims Are Few as Deadline Nears

The pot of money for paying off wronged investors has just gotten another $300-million infusion. But state securities regulators say that as a Jan. 10 deadline approaches, fewer than 38% of 339,000 eligible Prudential Securities customers nationwide who lost money from limited-partnership investments have filed claims.

California officials said only 35% of 42,000 eligible investors in the state have put in claims, despite a campaign by the Department of Corporations to let customers know they should apply for reimbursement.

“There are a substantial number of people who have not participated--and should--and just don’t understand what’s going on,” said G.W. (Bill) McDonald, head of the department’s enforcement division.

The open-ended fund was established with $330 million after Prudential, in October, 1993, settled civil charges filed by the Securities and Exchange Commission. The agency alleged massive fraud in the brokerage firm’s aggressive marketing of limited partnerships to small investors throughout the 1980s.

Last week, Prudential agreed to immediately pay another $300 million into the fund as part of the settlement of a federal criminal investigation. Under the settlement, charges will not be pressed if the firm does not violate federal laws over the next three years.

State securities regulators said payments to investors who have filed claims have been relatively high, with many getting back all of their out-of-pocket losses plus interest. Nationwide, 130,442 claims had been filed as of Oct. 19; the 55,581 that had reached a final resolution resulted in payments totaling $312.8 million.

“Our message today is a simple one: If you are one of the investors who was affected by the misconduct of Prudential and who has not yet participated in the settlement process, your time to do so is running out,” said Wayne Klein, chief of the Idaho Securities Bureau who headed a task force of state regulators that investigated Prudential.

Under the settlement program, investors send in claim forms to an independent administrator in Washington. Under the administrator’s supervision, Prudential evaluates the claims and makes an offer on those it finds have merit. Investors can either accept the sum or appeal through an expedited arbitration process.

Regulators and private lawyers offered several reasons for the relatively low rate of participation in the settlement.

Some of the investors--many of whom were retirees--have died, they noted. Others may have lost their claim forms or been so embittered by their experience that they gave up hope of recovering their money.

Still other investors are continuing to pursue private lawsuits or arbitration cases instead of going through the SEC procedure; private actions leave open the prospect of obtaining punitive damages and attorney’s fees, which are not available under the settlement.

Investors who need claim forms can call the Prudential Claims Processing Center at (800) 774-0700. California residents who have had problems with the claims procedure can contact the Department of Corporations’ Prudential “outreach coordinator” at (800) 589-4678.