Dear Mr. Berko:

I’m the chief financial officer of a small private company that has 422 employees. We are going to establish a thrift plan, and Prudential Financial has made us a fairly good proposal.

Can I have your opinion of Prudential as the trustee of our thrift and, if you don’t recommend Prudential, please suggest another company that you believe can give us the best service for our employees. And what do you think of Prudential’s common stock as an investment?

A.H., Oklahoma City

Dear A.H.:

You do not want to use Prudential Financial Inc. (PRU-$75.54) as the trustee or administrator or investment adviser of your employee thrift plan. I don’t trust the company, its management or its products.

In the late 1980s and early 1990s, PRU sold billions of dollars’ worth of overpriced, highly leveraged, fee-intensive, quality-deficient and terribly risky real estate limited partnerships. Its crack insurance people and its pushy stockbrokers used abusive and high-pressure tactics to sell PRU’s corrupt real estate products. This claptrap was pushed on the naive investor, thrust on those who were about to retire as well as those who were retired and those who could not afford the risks.

These patently unsuitable investments were hawked to tens of thousands of gullible, trusting clients. The commissions were enormous, the fee-splitting was egregious and the product performance was toxic. After owning these limited partnerships for a year or two, PRU’s clients became suspicious of the arbitrary values, concerned about projected cash flows and worried that the property mortgages exceeded the property values. And they were too right, as many of you know.

So they began to ring PRU’s home offices in the Big Apple but couldn’t get past the automated operator instructing customers to press 1, then 2, then 3, then 4, then 5 and wait and wait and wait. “Your call is important to us …” the automated operator would say and say and say.

Frankly, I can’t name one of Prudential’s numerous real estate limited partnerships that kept its promise to the thousands of sad sacks who got suckered by a PRU salesperson.

In the late 1990s, PRU was forced to reimburse thousands of believing fools about $3 billion, which was just a portion of their real losses.

It seems that the company may be up to its old tricks again. I reckoned I would ring PRU’s home office and get some background on its personal financial services division. The automated answering service placed me on hold. “Your call is important to us …” Sure it is. I waited nine minutes, hung up and called again. I waited for seven minutes and then called for the phone number of PRU’s personal financial division.

I listened to the four terribly long menus and was lucky to make the right choice on the third try. I spent 44 minutes waiting to speak to a human being, and I failed.

I’d certainly go to great lengths to avoid using Prudential as your trustee and administrator for your company’s thrift plan. Certainly your employees would complain that PRU’s mutual funds and other high-commission proprietary products have lousy performance, that PRU may not invest their contributions in a timely fashion and that they need help in understanding the entries on their quarterly statements.

I believe that PRU at $75.54 a share and 12 times earnings is vastly overpriced. MetLife Inc. (MET-$49.92) trades at eight times earnings and is the largest life insurance company in the United States. Prudential’s annuity products are client costly and as weak as old tea. MET’s annuity products are fairly priced and the investment choices are far superior to PRU’s.

PRU and MET have the same $36 billion market capitalization, but there’s no doubt in my mind that MET is a superior company. Its numbers are better and its past has not been stained by fraud, lies and distrust. In my mind and the opinions of many investors who lost their life savings in PRU’s faulty products, Prudential will always be a second-class company looking for a second chance.

So use MetLife as a trustee, buy MET stock and stay kilometers away from Prudential.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.

© Copley News Service