In re Prudential Bache Energy Income Partnerships

Settled: February 10, 1993
Firm Chairman Lawrence Sucharow and Partner Joel Bernstein served as members of the executive committee of class counsel in In re Prudential Bache Energy Income Partnerships, a major class action litigated in federal court in the Eastern District of Louisiana beginning in early 1991, which resulted in a $91 million settlement.

Seven actions related to the sale of risky Prudential limited partnerships were filed in various district courts and were consolidated before the court in Louisiana is pursuant to an order of the Judicial Panel on Multidistrict Litigation dated August 13, 1991. Thereafter, lead counsel filed a Consolidated Complaint alleging that between September 1, 1983 and February 22, 1991, Prudential raised more than $1.4 billion from the sale of 35 energy "income fund" limited partnerships to more than 130,000 investors. The partnerships were designed to permit the investors to purchase interests in proven oil and gas producing properties for the purpose of receiving cash distributions.

The Consolidated Complaint alleged violations of federal securities laws, federal racketeering laws, and applicable state laws. More specifically, it alleged that defendants made misrepresentations and omissions of material fact in the offering prospectuses or in uniform oral presentations to investors, including that the investments in the partnerships were safe, provided tax advantages and that the defendants had an extensive track record of professional management of oil and gas properties and limited partnerships. Plaintiffs further alleged that the defendants misrepresented and omitted material facts concerning cash distributions to investors by creating the appearance that the partnerships were distributing monies derived from operating income when in reality the distributions were returns of capital and were being paid from monies generated by reductions in the purchase prices of producing properties, the premature sale of properties on unfavorable terms and loans being taken out by the partnerships.

The Settlement Fairness Hearing was held on February 9 and 10, 1993, and included testimony from three experts. The court certified a class for settlement purposes on August 27, 1993.

A settlement was reached in November of 1992. On November 9, 1992, the Court issued its Preliminary Order in connection with Settlement Proceedings and, among other things, certified for settlement purposes a class which was later changed, in August 1993, to include all persons who purchased or held interests on or before July 15, 1993, in any of the Energy Income Partnerships offered and sold by Prudential.

The Settlement Fairness Hearing was held on February 9 and 10, 1993, and the Court thereafter approved the settlement as fair, reasonable and adequate.