Former banker's charges spurred U.S. action against Prudential on gifts.

WASHINGTON -- Prudential Securities Inc. has agreed to pay $550,000 for fund-raising activities in a case the Federal Election Commission brought after one of the firm's public finance officials complained that employees were being coerced into making political contributions.

The commission began investigating Prudential Securities in 1992 after Mark D. Schwartz, a former investment banker at the firm and treasurer of its political action committee, made the charges.

The civil penalty, which the commission announced on Thursday as part of a settlement with Prudential Securities, is the largest it has ever levied in its 19-year history.

The commission also said that it has "reason to believe" that eight top officials of the firm engaged in illegal fund-raising, including Gerald McBride, a former senior vice president and current executive vice president and manager of the tax-exempt department, but added that it would take no further action in those cases.

The FEC said the violations were "knowing and willful."

McBride could not be reached for comment by press time Thursday.

In its case against Prudential, the FEC said the firm used corporate facilities to engage in fund-raising events, solicit contributions from employees, and improperly contribute a total of about $250,000 from 1986 to 1993 to at least nine candidates for federal office. Several of the candidates were on the congressional committees that deal with tax and securities issues.

Under the federal election laws, corporations are not permitted to engage in fund-raising activities and make political contributions to federal political candidates unless it is through a political action committee that they have established for that purpose.

Charles Perkins, Prudential's spokesman, said the firm "acknowledges that there were mistakes made between 1986 and 1990." Perkins would not comment about Schwartz's allegations or the role they played in the commission's findings.

"The actions involved happened a significant time ago," Perkins said. "We are pleased to put this behind us."

In a news release, Prudential said "we believe the activities in question were undertaken in good faith by employees exercising their rights to participate in the electoral process. The employees in question regularly consulted counsel at all times and believed that their conduct was fully lawful."

The lawmakers that received contributions from Prudential include: Sen. Max Baucus, D-Mont.; Sen. Bill Bradley, D-N.J.; Senate candidate Pete Dawkins, R-N.J.; Sen. Robert Dole, R-Kan.; presidential candidate Pete du Pont, R-Del.; Rep. Frank Guarini, D-N.J.; Rep. Charles Rangel, D-N.Y.; former Sen. Terry Sanford, D-N.C.; and Senate candidate Christine Todd Whitman, R-N.J.

In an arbitration case before the National Association of Securities Dealers, Schwartz also claimed he was fired after complaining that Prudential executives, including John C. Glidden Jr., a former managing director in charge of public finance, threatened to dismiss employees or withhold their bonuses if they refused to contribute.

Schwartz met with FEC officials and provided them with some documents, according to commission records.

But in May 1992, the NASD rejected Schwartz's claim that Prudential fired him because of his complaints about the firm's fund-raising activities.

Glidden, who left Prudential in 1992, said Schwartz's charges have no merit. Glidden also said that the FEC's charges do not involve activities of Prudential's municipal department.

"It was very clear that Schwartz's allegations against the tax-exempt division of Prudential and myself were totally baseless," said Glidden, now a partner at E.A. Moos & Co. in Summit, N.J.

Schwartz, in a telephone interview, said, "Now people know what kind of firm I used to work for.

"I complained about certain activities to executives at the highest levels of the company, and I received no response," he said. "I'm heartened by what the FEC has done and I stand by everything I complained of in the arbitration. I feel I received no justice from the NASD."

Schwartz said that "in light of these developments" he may take legal action against Prudential. "I expect to receive a long overdue apology, compensation, and satisfactory evidence of true reform at Prudential Securities."

In May, The Bond Buyer reported that the Securities and Exchange Commission had begun an inquiry into Schwartz's allegations. Commission executives asked several former Prudential employees, including Schwartz, about the charges in the arbitration case. It could not be determined if the commission continues to examine the matter.

The Federal Election Commission's settlement agreement with Prudential does not say that employees were coerced into giving contributions to candidates for federal office.

But a review of the documents obtained by the FEC in the case showed that George Ball, Prudential's chief executive, and other top officials at the firm sent memo after memo to employees urging them to contribute to various political candidates. The memos repeatedly complained that employees were not giving enough to the firm's PAC.

The firm organized fund-raisers for Bradley and others and then circulated lists of employees showing whether or not they contributed or were planning to contribute to those candidates.

The documents show that employees in the public finance department were among the largest gift givers, bestowing $88,000 of the total of the $161,000 in corporate contributions that Prudential Securities made in 1987 and 1988.

The documents showed that in March 1988, Prudential launched a Muni-PAC to serve as a corporate-sponsored conduit for employee contributions to state and local candidates and political committees.

The PAC raised about $71,000 and made contributions to at least 10 state or local candidates by the end of July 1988.

In a letter dated May 12, 1992, McBride urged a Prudential employee, James M. Taylor, to voluntarily contribute $500 to Elizabeth Holtzman's campaign for the Democratic Senate nomination from New York State. McBride noted that the firm's PAC had already contributed to Holtzman, but "the costs of campaigning in the primary in New York are so high ... her candidacy needs the support of voluntary contributions. I would like you to consider giving $500 to Liz's campaign."

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