Company officials confirmed press reports that the securities firm, a subsidiary of the Prudential Insurance Company of America, has been told that a year-long criminal inquiry will be concluded without recommending charges against the firm. But the firm has been obliged to spend more than dollars 1bn to repay customer losses and pay legal costs.
The firm, Wall Street's fourth-largest brokerage, has also dismissed many of the managers who ran what was then Prudential-Bache Securities during the period of the violations. These were committed by rogue brokers who sold dollars 8bn worth of highly speculative limited partnerships in property, oil and gas investments to about 400,000 clients.
A report in yesterday's Wall Street Journal said the US Attorney's office in Manhattan has agreed to a 'pretrial diversion', a long-term settlement that penalises the firm for failing to supervise the brokers, without forcing it into bankruptcy, as has been the case with other Wall Street firms charged with criminal offences.
Under the pact, the firm itself will be prosecuted only if new evidence of fraud emerges. Former executives of the firm will almost certainly be charged, however.
The scandal has been hugely costly to Prudential, which has lost more than 1,000 brokers this year alone, and whose reputation has been shattered.Reuse content