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Lending Fraud Suit Against Prudential Is Dismissed

May 31, 2003|From Bloomberg News

Prudential Financial Inc. can't be sued for aiding and abetting alleged predatory lending by now-defunct First Alliance Corp. because the events occurred too long ago to bring a lawsuit, a U.S. judge in Santa Ana ruled this week.

Prudential was sued for financing Irvine-based First Alliance, formerly one of the nation's largest lenders to people with bad credit, from the mid-1990s to 1998.

The Prudential case could be refiled later naming a different alleged fraud victim, plaintiffs' attorney Joey Langston said Friday.

The statute of limitations for fraud starts running when the deception first comes to light, and the victim in the original action turned out to have been alerted to it earlier than first believed, Langston said.

The dismissal of the suit Wednesday against Prudential leaves Lehman Bros. Holdings Inc. as the only Wall Street firm fighting accusations that it aided and abetted First Alliance's alleged fraud.

A jury in Santa Ana has been deliberating for almost three weeks whether Lehman should be held liable.

Prudential couldn't be reached for comment.

Shares of Newark, N.J.-based Prudential rose 91 cents to $33.52 in New York Stock Exchange trading Friday.

U.S. District Judge David O. Carter last year dismissed Wachovia Corp.'s First Union from the borrowers' suit, ruling that plaintiffs were similarly time-barred from making claims against the bank.

The trial against Lehman on behalf of an estimated 4,500 borrowers is believed to be the first against a Wall Street firm accused of aiding and abetting fraud for doing business with an alleged predatory lender. Lehman, the fourth-largest U.S. securities firm, has argued that it doesn't believe First Alliance cheated borrowers.

First Alliance in 2000 filed for Chapter 11 bankruptcy protection. Last year, it agreed to pay $75 million to end suits brought by the Federal Trade Commission, six states and individuals plaintiffs who said the company didn't disclose fees and loan terms to 18,000 home equity borrowers.

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