By Ray Stern
By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
Pope Duzy was out of town when her husband caved in. It was 1985, and for months, the Duzys' broker had been badgering them to put their retirement money into oil and gas.
Limited partnerships in energy investments were hot, the Prudential Bache Securities broker said. Double-digit returns were all but guaranteed, and as oil prices rose, profits would pile up.
"He said there was lots of room for money," Albert Duzy recalls. "He said you're bound to make money. He was talking about 16 percent, 20 percent."
Pope Duzy resisted. Oil sounded risky to her. But her husband was tempted. It didn't hurt that the alluring sales pitch came from a broker working for a subsidiary of the Prudential Insurance Company. The Rock.
When Pope Duzy was on vacation, the broker finally had his way with Albert Duzy--a 65-year-old engineer who, after three strokes, could scarcely walk without help.
Albert Duzy bought in. At his broker's continued urging, he eventually would sink almost $60,000, a huge chunk of the money he had saved for retirement, into the oil and gas partnerships.
Eight years later, the investments are all but wiped out. The couple's retirement house on a golf course in Sun Lakes is on the block. Their finances are in tatters. Their former broker won't take Pope Duzy's calls.
"My husband was 65 years old when Prudential Bache sold him these worthless, risky investments," Pope Duzy says bitterly. "He's a stroke patient. He's on permanent disability. How could any broker morally do something like this?"
A lot of brokers were doing it. The Duzys are but two of an estimated 100,000 investors across the country who sank about $1.3 billion into what would prove to be questionable energy partnerships peddled by Prudential Bache (which has since changed its name to Prudential Securities Incorporated).
Burned investors from coast to coast are suing, saying the company engaged in a massive, nationwide pattern of misrepresentation because it claimed the partnerships were safe, low-risk ventures when in fact, they were highly speculative.
Investigations are reportedly under way by the federal Securities and Exchange Commission and the regulatory agencies of several states, including Arizona. At least one Prudential Bache broker has been indicted in Dallas for pushing the energy partnerships.
Prudential Bache, Arizona investors say, not only lied about the risk of the investments, but fudged its investors' account statements for years to make it look like the partnerships were healthy while the investors' money was vanishing in the depressed energy markets.
While it has admitted no wrongdoing, the company is attempting to settle many of the suits out of court. Phoenix attorney Tom Galbraith, who is representing Prudential in a class-action lawsuit brought by Arizona investors, says he is not allowed to comment on the case.
The Duzys, and as many as 2,000 other Arizona investors, have something on their side that investors in other states do not.
Because of its history of land scams and inventive swindles, Arizona has some of the nation's toughest fraud laws, passed in 1978, after the state's reputation for scams became too embarrassing.
If attorneys for Arizona investors are successful in the class-action lawsuit, Prudential could be forced to pay back threefold the money people like the Duzys invested in the partnerships.
State law also allows fraud victims to win punitive damages--for hardships like that Pope Duzy faces in selling her home and in trying to care for her disabled husband--and have their legal fees paid by the company that victimized them.
Time will tell what the Duzys and other Arizona investors might recover from Prudential. But they may be among the last victims to benefit from the state's stringent securities-fraud laws.
With little notice, the most powerful business and economic interests in Arizona are moving to rewrite the state's racketeering and securities statutes.
Waving the banner of economic growth, lobbyists for key business interests have allied with Republican legislative leaders to press changes that critics say will "eviscerate" protection for fraud victims, particularly for elderly retirees like the Duzys, who are taken in by promises too good to be true.
It is supported by virtually every banking company, securities trade organization, major corporation and chamber of commerce in the state, who say reform is needed to entice capital into the state.
The bill would, among other things, significantly curtail the damages fraud victims can recover, set a higher standard of proof before plaintiffs in fraud cases can prevail, shorten the time victims have to file lawsuits and, in some cases, prevent companies from being held responsible for the actions of their employees.
While more visible debates about the state budget and Native American gaming have dominated the headlines, the bill has already slipped through the Senate with little scrutiny, and now awaits debate in the House. Governor J. Fife Symington III, a Republican and a failed businessman who has stiffed investors in his ill-fated real estate projects, reportedly has said he will sign the bill if it passes.
Fraud victims and lawyers who represent them are now engaged in a last-ditch effort to block the new laws. But they say they are being steamrollered by a Republican-dominated legislature so hell-bent on adjourning within 100 days that it is passing pro-business legislation with little time to consider the effect on people like the Duzys.