$300 Million Class-Action Suit Charges Dean Witter with Widespread Fraud in Sale of Managed Futures Funds.

LOS ANGELES--(BUSINESS WIRE)--Sept. 9, 1996--Charging Dean Witter Reynolds Inc. and several other defendants with a scheme to defraud tens of thousands of middle-class investors nationwide, a California-based securities law firm and a New York-based law firm have filed a $300 million class-action suit in California's Superior Court here.

The suit was filed by the Carlsbad firm of John Lawrence Allen and the Manhattan-based firm of Milberg Weiss Bershad Hynes & Lerach, LLP.

It alleges that Dean Witter and the other defendants sold their clients very high-risk "managed futures" funds, which invest in commodities and currency futures, on the false premise that such funds reduce volatility and risk while generating high returns.

The suit follows an historic arbitration decision last May, when a panel of arbitrators leveled the largest NASD punitive damage award ever, in percentage terms, in a complaint against Dean Witter involving managed futures. The three complainants in that case were represented by Allen's firm.

"Punitive damages in securities arbitration are rarely imposed, but Dean Witter's behavior was so reprehensible that the panel awarded an unprecedented 500%," Allen said. "What we're going to prove now is that the same outrageous abuse of trust was committed against many thousands of other unfortunate investors who thought they were making conservative investments."

"This is like the `Prudential' scandal all over again," Allen said. "It demonstrates that after all the foul publicity, the refunds and supposed soul-searching, the brokerage industry is still riddled with deception and disregard for the well-being of its customers."

The attorney was referring to the sale by Prudential Securities and other brokerages of high-risk real estate and oil and gas limited partnerships to hundreds of thousands of unsophisticated investors in the 1980s. In a settlement with the SEC after the partnerships went sour, Prudential agreed to provide more than $1 billion in refunds to investors.

Today's suit against Dean Witter includes ten of the firm's managed futures limited partnerships, Demeter Management Corp., a Dean Witter subsidiary, and two trading advisors.

The suit says the defendants falsely told prospective investors that buying managed futures limited partnerships "would reduce the volatility and risk of their portfolio and increase their portfolio's yield." In fact, investments in futures are "highly speculative" and "routinely subject investors to losses of capital in a very short period," said the complaint.

"For the sake of lining their pockets with high fees and commissions, Dean Witter took a category of investment suitable only for the most experienced professional traders, and sold it as a hedge to people who didn't know any better," Allen said. "The result was predictable -- the investors lost many millions of dollars of capital while Dean Witter and its brokers pocketed many millions in profits."

In addition, the suit charges that investors were not given prospectuses, which contain warnings about risk, until after purchasing their fund shares.

"In fact, Dean Witter's registered representatives were not expected or encouraged to even read or understand the prospectuses of the limited partnerships," the complaint said. "Instead, defendants used training and sales materials which were conveyed to investors in essentially identical form."

The suit is requesting restoration of lost capital and unspecified damages.

CONTACT: LVM Group Inc.

Bob Rumerman or Alice Newcomb-Doyle, 212/751-2800