Californians Sue PaineWebber Over Limited Partnerships
Californians who lost $15 million on investments with PaineWebber Group Inc. sued the New York securities firm, accusing it of fraud in its sales of limited partnerships.
The suit, filed in Sacramento County Superior Court, was lodged by 200 investors who opted not to be included in a $332.5-million settlement PaineWebber announced last month with other investors.
PaineWebber brokers told the California customers, whose investments averaged $75,000, that they weren’t taking a big risk, when in fact they were placing daring bets, said Archibald M. Mull, the lawyer representing the investors.
The firm said Jan. 18 that it had agreed to pay $332.5 million to settle charges with the Securities and Exchange Commission, state regulators and customers concerning allegedly misleading sales pitches for limited partnerships.
The cost of the settlement caused the fourth-largest U.S. brokerage to take a $30-million charge against fourth-quarter earnings. The firm already reserved $200 million in July for the settlement and paid out $102.5 million to customers.
Joseph Grano, president of the firm’s PaineWebber Inc. brokerage unit, said at the time that he believed the settlement put the limited-partnership problems to rest.
A spokeswoman for the firm declined to comment immediately on the California suit.
The SEC investigated whether PaineWebber used misleading sales tactics to attract investors to its Geodyne energy, Pegasus aircraft and real estate partnerships, many of which lost value in the 1980s.
