N.J. Puts Off Prudential Deal Amid New Questions

NEW YORK —  In one of several signs of mounting problems between Prudential Insurance Co. and regulators, the chief of New Jersey’s Securities Bureau said Wednesday that he has indefinitely postponed signing a settlement with Prudential Securities, the brokerage unit of the giant insurer.

The delay stems from new questions about possible wrongdoing by Newark-based Prudential Insurance.

New Jersey was one of the 49 states that agreed in October to join in a Securities and Exchange Commission settlement under which Prudential Securities is to pay at least $371 million in penalties and restitution, mainly due to alleged fraud in the brokerage’s $8-billion limited partnership program.

But A. Jared Silverman, the New Jersey securities official, said in an interview that recent press accounts of possible improprieties by Prudential Insurance prompted him to delay signing the settlement because its terms might prevent further state action against the parent company. Silverman said he has directed a number of questions to the insurer.

Prudential Insurance spokesman Joseph A. Vecchione said the firm has “already provided most of what (Silverman) asked for” and expects to provide the rest by week’s end.

Several other states, including California, have also delayed signing the settlement, but for unrelated, mainly technical reasons, state officials said.

Word of New Jersey’s decision follows confirmation that four state insurance departments--in Alaska, New Jersey, Oregon and Texas--have begun investigating Prudential Insurance.

Their probes center on a fee-splitting arrangement--first reported by The Times in June--under which Prudential Insurance agents received fees from Prudential Securities brokers for selling limited partnership interests, even though many of the agents were not licensed to make such sales.

Alaska Insurance Director David J. Walsh, the newly elected president of the National Assn. of Insurance Commissioners, said that, to the best of his knowledge, none of the states had yet obtained firm evidence of wrongdoing.

Elena Stern, a spokeswoman for California Insurance Commissioner John Garamendi, said state rules prevent her from disclosing whether California has also opened an investigation.

“We are aware of what the other states are looking into,” she said. “Because Prudential has done business in California, we would work with those states in their investigations.”

Vecchione said the insurer is cooperating with the state investigations.

According to Silverman, both the New Jersey securities bureau and the state’s insurance department are looking into the fee-splitting arrangement.

Prompted by press accounts suggesting that Prudential Insurance may have deliberately overvalued properties in a real estate fund for institutional investors, the bureau is also looking into whether any of Prudential Securities’ limited partnerships may have acquired properties from Prudential Insurance--and if so, whether they were fairly valued.

In addition, state regulators are looking into a 1989 transaction--the subject of a Times story last week--in which Prudential sold oil and gas properties to a small New Jersey Jesuit college, creating a tax loss for the firm.

Vecchione denied that any Prudential Insurance assets were ever sold to the Prudential Securities partnerships. Prudential has said it has launched an internal investigation of its real estate fund.