Deadline looms for claims in Prudential Securities debacle.

More than half of claimants have yet to be heard from

Southland investors in failed Prudential Securities real estate, oil and other partnerships have only until Jan. 10 to file certain claims.

In the 1980s, thousands of investors in the Southland put money into Prudential Securities-sponsored real estate and oil partnerships, some of which collapsed within two years of their initial offering dates.

The New York-based brokerage admitted in October to fraud in relation to several of the energy partnerships, and has agreed to pay $330 million to settle criminal charges, in addition to still-undetermined, but larger, civil penalties.

Generally speaking, the troubled partnerships were offered in Southern California and nationwide through Prudential's network of branch offices. Branch managers encouraged brokers -- some brokers say they were coerced under threat of dismissal -- to sell the partnerships to clients.

In a unique action, the Securities and Exchange Commission in October of 1993 established a special claims administrator, Irving Pollack in Washington, D.C., to handle claims of investors against Prudential Securities.

Only those investors in 700 or so Prudential Securities partnerships formed in the 1980s are eligible to file claims with the special administrator. Even investors whose claims would have expired due to various statute of limitation laws can file through the SEC process, said Philip Aidikoff, partner in the West Hollywood law firm Aidikoff & Kesluk and expert on the Prudential matter.

Although the deadline for filing claims is Jan. 10, some 60 percent of potential claimants have yet to get their paperwork in, said Aidikoff. "There is still a lot of confusion out there," he said.

Some claimants have moved or died, said Aidikoff. Others may have gotten fed up with the whole process of seeking compensation, which has dragged out for the better part of a decade.

And part of the confusion stems from the somewhat bewildering array of choices investors have in seeking compensation from Prudential.

Some investors have chosen to go into binding arbitration proceedings under the aegis of the National Association of Securities Dealers (NASD).

Other investors, in some of the larger partnerships, have -- sometimes unwittingly, and sometimes on the dubious advice of their brokers -- participated in class action lawsuits filed against Prudential Securities, said Aidikoff.

And, since October of 1993, there has been the third option of the SEC claims administrator.

Each option has different pluses and minuses, said Aidikoff, although most industry observers regard the class-action settlements as rather small.

"The problem with securities class-action settlements is that the plaintiff lawyers get rich, and investors get pennies on the dollar," said Aidikoff.

Those seeking settlements with Prudential should obtain legal advice, said Aidikoff. "It appears that when Prudential knows the claimants are well represented, they take the claims process more seriously," he said.

Settlements small

Prudential is trying to pay as little as possible on many claims, said Aidikoff. "What we have encountered in every single case, in arbitration, is a concerted defense, an effort to hold the claim down," said Aidikoff. And seemingly innocuous responses made on claims forms can be used by Prudential lawyers against claimants, he added.

Prudential Securities relies heavily upon the services of Long Beach law firm Keesal, Young & Logan in preparing its defense against claims.

The firm has gained a national reputation for its expertise in securities arbitration.

"They (Keesal, Young & Logan) are good lawyers, well-prepared, and extraordinarily experienced,' said Aidikoff. "I can imagine some poor guy going in -- even an intelligent, sophisticated businessman -- to represent himself against these guys. He would be way out of his league; it would be like running into a buzz saw."

As an example of the tightfisted nature of Prudential, Aidikoff cited the case of a client of his -- 71-year-old Rose Crocker of Palm Springs.

On the advice of her broker, Jerome Babich in the Palm Springs office of Prudential, Crocker invested $145,000 into three Prudential funds: the Energy Income Fund 16, the Polaris Aircraft Lease Fund 3, and the Polaris Aircraft Lease Fund 5, said Aidikoff.

Taking advantage of the SEC claims process, Crocker filed for compensation in May of 1994. On Aug. 10, Prudential responded that "Prudential Securities does not believe your claim is meritorious, and therefore, we are unable to extend to you an offer of settlement."

In other words, "they offered zilcho," said Aidikoff.

After a paperwork fight before the SEC claims administrator, Prudential eventually backed down, and coughed up the maximum settlement possible, which was $61,605, said Aidikoff. The settlement did not equal Crocker's entire $145,000 investment because she had received some distributions from the funds, the funds still had some residual value, and other factors, said Aidikoff.

Another client of Aidikoff's was Michael Kapnas, a commander in the U.S. Navy. Kapnas had invested $30,000 -- his total net liquid worth -- into two partnerships, on the advice of Prudential broker Philip Jacobs in the brokerage's Carlsbad, Calif. office. The partnerships tumbled steeply in value.

Prudential offered a $2,300 settlement, but eventually offered $11,200 right before arbitration was scheduled to begin, said Aidikoff. Kapnas accepted the $11,200.