U.S. probing possible fraud at Prudential Securities

June 19, 1993|By Los Angeles Times

NEW YORK -- The U.S. Attorney's Office in Manhattan has begun a federal criminal investigation of Prudential Securities and suspected fraud by brokers and managers, sources close to the inquiry said.

Launched over a month ago, the probe was broadened within the past week to include the firm's huge limited partnership program, which took in $6 billion from investors in the 1980s and resulted in big losses.

The sources said that federal prosecutors were looking into the possible payment of kickbacks and attempted bribes to senior Prudential Securities officials by outside companies that managed individual partnership programs. Among the programs being looked at are the Energy Income Funds, which took in $1.44 billion, mainly from retirees and other small investors.

The federal criminal investigation adds to numerous investigations of Prudential Securities already under way.

The Securities and Exchange Commission has been conducting a high-priority investigation of the company and its limited partnership sales. In addition, a six-state task force -- working on behalf of securities regulators in all 50 states -- is conducting a probe. Several of the states have their own criminal investigations pending, state regulators confirmed.

The New York federal investigation initially centered on allegations of forgery and fraud against customers by certain former Prudential brokers and managers, including some

in the firm's Dallas office.

Prudential Securities spokesman William J. Ahearn declined to comment, saying it was the company's policy not to talk about pending "regulatory matters." Prudential has denied wrongdoing in connection with with its partnership program and noted that individual brokers who may have acted improperly are no longer with the company.

As is its standard practice, the U.S. Attorney's Office would neither confirm nor deny that it has an investigation under way.

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