NEW YORK -- Federal prosecutors have broadened their inquiry into the fraud scandal at Prudential Securities and have begun to advise a number of current and former executives that they should hire criminal lawyers, people involved in the case said yesterday.
The actions of a wide array of those executives, including George L. Ball, the former chairman and chief executive, and Loren Schechter, the current general counsel, are being examined by prosecutors as part of a broad criminal inquiry into the firm's sales of limited partnerships in the 1980s.
Even with Prudential's October settlement of fraud charges with regulators, prosecutors were said to be exploring indictments not just against the securities firm, but also against the parent Prudential Insurance Co. of America.
The prosecutors, in the office of the U.S. attorney for the Southern District of New York, have recommended that the executives get independent lawyers, particularly in instances where the interests of the executives and those of Prudential might be at odds, attorneys involved in the case said.
Criminal lawyers for some executives have also been contacted by prosecutors asking if their clients were interested in providing evidence in the case, lawyers said.
The activities of almost every senior executive in Prudential's Direct Investment Group, which packaged and sold the limited partnerships, are being investigated, people involved in the case said. Many of those executives, most of whom have left the firm, have hired lawyers.
Because the actions of certain individuals are being investigated does not necessarily mean that they face indictment, or that prosecutors have evidence of wrongdoing.
William Ahearn, a spokesman for Prudential, said: "We are cooperating fully with the U.S. attorney's office. From the firm's standpoint, there have been no new developments."
Kenneth Vianale, the prosecutor of the case, declined to comment.
But, even as Prudential says it has shed itself of all senior executives who were involved in any wrongdoing, a number of current executives have retained lawyers to represent them in the criminal investigation.
The prosecutor's investigation is touching near the top of the firm's current management. Mr. Schechter, Prudential's general counsel, is said to be the most senior current officer whose activities are being reviewed by prosecutors. Alan Cohen, Mr. Schechter's criminal lawyer, said his client "fully intends to cooperate with the prosecutors and the SEC in any way possible."
The investigation is examining what role the firm's legal department might have played in reviewing sales material for the Prudential partnerships, people who have been briefed on the inquiry said. The Securities and Exchange Commission charged in October that this material was rife with misrepresentation about the safety and investment returns of $8 billion worth of limited partnerships.
No member of the operating committee of seven of Prudential's most senior officers other than Mr. Schechter has retained a criminal lawyer, executives and lawyers said.
Only a handful of subpoenas have been issued so far, with government prosecutors spending much of their time reviewing the hundreds of thousands of pages of documents obtained in civil suits against the firm.
But people involved in the case said they expect that a number of individuals will be served with subpoenas early next month. They added that, if any indictments were handed up, they could come in the next nine months because of the mountains of evidence that have been produced in civil cases.
Prudential is said to be picking up the bill for many lawyers, most of whom are among the top level of the white-collar criminal defense bar. Indeed, the case has brought to the table many of the former prosecutors and defense lawyers from the celebrated investigations of Wall Street in the 1980s, including that against Michael R. Milken, the former head of the junk bond unit at Drexel Burnham Lambert.
Mr. Cohen, Mr. Schechter's lawyer, is the former head of the securities fraud unit of the U.S. attorney's office in Manhattan, and played a leading role in the Milken case. Mr. Ball, who is represented by a number of lawyers, has hired Michael Armstrong, who represented Lowell Milken, Michael Milken's brother, in the Drexel case.
"We had represented George Ball in connection with other matters before this," Mr. Armstrong said. "He asked me to represent him on this matter."
Frank Giordano, chief counsel for Prudential Mutual Fund Management and a former executive with the limited partnership division, has hired Henry Putzell 3rd, a former prosecutor in the early 1970s with the U.S. attorney's office for the Southern District of New York. Mr. Putzell declined comment.
James M. Kelso, the current head of the limited partnership division, has hired Alan Levine, another former prosecutor who now works with Kronish, Lieb, Weiner & Hellman.