Pre-Paid Legal

[Number Six]

Was hoping to get some feedback on this MLM business. I have heard some people that swear by it as a form of legal insurance. http://www.prepaidlegal.com/

[bmielke]

They appear to be up to date with their SEC filings.

From there website it looks like they aren't so much selling legal services as selling Legal Insurance. I would be interested to know what law firms they use, and how they provide services nationwide. It looks like the company is on the up and up.

They have had over 100 complaints to the BBB but have resolved the vast majority of them, and the ones that have not been resolved they have tried to resolve.

They are upfront in that they say they don't provide Legal Advice but rather insurance. They are Headquarted in Oklahoma.

[Blup]

As an attorney, I wouldn't suggest people buy their legal "insurance" for any price. The list of things it doesn't cover stretches from here to the moon. Read the fine print. For $whatever/month you get a couple of letters and a couple of hours of a lawyer's time. For crimes, it doesn't cover DUI, which most arrests are for; it doesn't cover a whole lot of other things either, such as divorce or bankruptcy. And AFAIK it just randomly assigns you a lawyer, which is bad. You can bet if a lawyer is working for you through PPL, and doesn't know you from Adam, he'll be padding his hours like mad.

You should hire a lawyer based on a recommendation from someone you trust, and if that lawyer is good you should hang on to him for life.

I hate to say it but most attorneys are crap. The ones who work for PPL are not ones I would trust. Not because they're bad people, but because they have no incentive to do a good job for you.

[Blup]

From their web site, one of the $25/month plans:

---------
Trial Defense Services

Lawsuits cause tremendous emotional and financial stress. Your Pre-Paid Legal membership offers assistance when you need it most.

Up to 75 hours of lawyer time...

During your first membership year, you have up to 75 hours of your Provider Lawyer's time at no additional cost when you or your spouse is named defendant or respondent in a covered civil or criminal action filed in a court of law. The criminal action must be one which arises out of the direct performance of the covered person's employment activities. Your Provider Firm can advise you of the documents required to determine coverage under this benefit.

Of these 75 hours, up to 17.5 hours may be used for all legal services rendered in defense of the covered suit prior to actual trial. Up to 57.5 of the remaining hours are available for actual trial time including covered criminal preliminary hearings.
---------

It appears that they only cover you for criminal defense if you allegedly committed a crime while performing your job??? How many arrests are for job-related crimes? Not many. Plus, only 17.5 hours can be used for trial prep. If your lawyer spends only 17.5 hours preparing for your trial, you will lose.

---------
IRS Audit Legal Services

Your Pre-Paid Legal membership will help you defray the costs of an IRS audit and give you the legal support you need.

Up to 50 hours of lawyer time...

You have up to 50 hours of your Provider Lawyer's time available at no additional cost when you or a covered family member receives written notice of an IRS audit or are requested to appear at IRS offices regarding your tax return. Your 50 hours are available as follows:

Up to one hour for consultation, advice, and assistance when you receive written notice from the IRS of audit or appearance.

If there is no settlement within 30 days, you have up to 2.5 hours for audit representation, negotiations, phone conversations, and settlement conferences prior to litigation.

If there is no settlement without litigation, up to 46.5 of the remaining hours are available for actual trial appearance if the IRS sues you, or you pay the disputed tax and sue the IRS.
-----------

You get one hour of time for "advice," after which you'll be charged. 2.5 hours for audit representation, after which you'll be charged. And almost never will the IRS sue you, and even less frequently will you sue the IRS. So the lawyer will charge you several hours for going over your case, research, and negotiations with the IRS and you'll be on the hook for all but 3.5 hours of it.

It's because they put all the hours on the back-end, when 90% of a lawyer's work is on the front end. This allows them to look like they're giving you a lot, when in fact you'll be paying for prep work and all the trial hours will go to waste.

[Nikki]

If there is no settlement without litigation, up to 46.5 of the remaining hours are available for actual trial appearance if the IRS sues you, or you pay the disputed tax and sue the IRS.

Uh, HELLO

99+% of "trial appearance" legal interactions between people (artificial or real) and the IRS occur in Tax Court where the PERSON SUES (or more specifically petitions the court) THE IRS.

Of those Tax Court cases, the vast majority of the time is spend in writing the petition and other pre- and post-trial activities.

In effect, PrePaid legal will be of no use at all in the vast majority of tax cases. Also, they seem to skip all the legal support which could be useful for tax-PLANNING.

[Blup]

If there is no settlement without litigation, up to 46.5 of the remaining hours are available for actual trial appearance if the IRS sues you, or you pay the disputed tax and sue the IRS.

Uh, HELLO

99+% of "trial appearance" legal interactions between people (artificial or real) and the IRS occur in Tax Court where the PERSON SUES (or more specifically petitions the court) THE IRS.

I have to plead ignorance on tax law, but I had no idea that most trials the IRS is involved with consisted of a taxpayer "suing" them. I figured it would be mostly tax evasion trials.

[Nikki]

The IRS is "involved" in many different types of legal actions.

However, the only situation (with minor exceptions) where IRS attorneys are the actual representatives of the government is in Tax Court where, as previously stated, the cases are instituted by the taxpayers (plaintiffs) and the Commissioner of the IRS (as represented by staff from the Office of Chief Counsel) is the defendant (Respondent).

All other trial situations involving taxes are prossecuted or defended by staff from the Department of Justice. These include (but are not limited to)

criminal prosecution
civil actions for lien enforcement, collection actions, seizure and sale of real estate
summons enforcements
requests for injunctions against tax evasion marketers

All the DoJ actions, combined, amount to a small fraction of the number of cases in Tax Court.

This year to date, over 10,000 petitions have been filed in Tax Court.

[Judge Roy Bean]

...

It appears that they only cover you for criminal defense if you allegedly committed a crime while performing your job??? How many arrests are for job-related crimes? Not many.
...

Actually, it's far more common than you might think. The plague of mortgage fraud comes to mind immediately. According to the US Chamber of commerce, half of a company's employees have stolen from the company, and half of those have done it more than once. Companies hate the publicity so you don't often read about those arrests. And think about the number of stock schemes that have been uncovered.

Many years ago I lost what I thought was a really good manager when someone found out he was operating a very clever scheme involving allegedly leasing equipment to shell companies but actually selling it to his network of shady brokers. He'd make as many as three or four payments and then the "company" would go out of business and the equipment just vanished into the industry. But one of our buyers bought a piece of used equipment at a bankruptcy auction and when they got it in to refurb they found we still owned it! (Damn those hidden serial numbers!) The FBI arrested him in the lobby one morning when he arrived and he wound up in prison for three years. The total loss was close to seven figures.

[Nikki]

I'd be willing to bet that the "while doing your job" restriction excludes anything you weren't supposed to be doing as part of your specifically assigned duties.

Embezzlement -- not part of your job

Kick-back scheme -- likewise

It probably only covers lawsuits which are already covered by your employer's blanket business policies.

[Judge Roy Bean]

...
It probably only covers lawsuits which are already covered by your employer's blanket business policies.

In my experience, criminal acts are specifically excluded in business policies.

[Blup]

This is hardly a scientific survey, but when I was in law school I worked at the local jail helping arrange bail for people and giving them sort of basic legal counsel (certified student). I went through probably 500-700 booking records while I was there--a few weeks during a summer--and I don't remember seeing ONE crime that was "directly related" to anyone's job.

The main crimes were DUI, drug possession, theft, burglary, and violation of parole. Those made up like 90% of all arrests that I saw.

[Number Six]

Thanks for the excellent feedback on this topic. I am trying PPL out, because every time in the past I have spoken to an attorney, the free consultation given is not really "free" or legally informative, and any subsequent hiring comes with steep retainers or hourly expenses.

There is this article on Pre-Paid Legal today on the Zero Hedge site: (http://www.zerohedge.com/article/breaki ... l-services)--A plea for legal regulation for MLM schemes.

[Emet]

I thought I'd write a quick update on this little MLM. Unlike most MLMs that sell products, PPL sells a service--well, two: legal services and ID theft protection.

I'll start with a few summaries:

MFI STOCK REVIEW: PRE-PAID LEGAL SERVICES INC. (PPD)
Quick Look

Date: Apr 26, 2010
Growth: D
Competitive Moat: C
Management: C-
Financial Health: C
Opinion: All kinds of shady issues. Avoid.

Pre-Paid's legal coverages are fairly narrow. Hours covered in pre-trial expenses are anemic, usually less than 3 hours, with the rest fully payable by the member. Alcohol related vehicle incidents, a rather common occurrence, are not covered at all. IRS audit protection and will preparation coverage are both of little value; audit protection is usually provided by tax prep firms, and will creation can be easily done using computer software. I just don't see much value in these memberships. Few individuals or families will face a need for these protections in any given year.

http://www.magicdiligence.com/articles/ ... PD-2010-04

“Total memberships continue to fall despite an increase in new memberships.

Though the company was able to increase total new members that joined in 2009, higher membership cancellations lead to an overall decline in total number of memberships outstanding at the end of 2009.

Total memberships at the end of 2009 declined 0.7% to 1,547,585 from 1,559,154 at the end of 2008, primarily off a 1.9% increase in membership cancellations to 579,664 from 568,975 in 2008. However, the decline in total memberships was partially offset by a 2.9% increase in new memberships to 568,095 from 552,327 in 2008.

Consequently, total revenues and net income declined for 2009″

http://seekingalpha.com/article/194853- ... urce=yahoo

"The ID theft protection racket": http://money.cnn.com/2005/08/22/pf/idtheft_0509/

[GlimDropper]

Reggie Middleton, a financial blogger has several articles about Pre paid Legal on his BoomBustBlog.com.

The Latest on PrePaid Legal Services – The Story of a Publicly Traded Ponzi Scheme?

Every now and then, you come across a company and wonder, “How the hell are they still in business?” Well, in my opinion, Prepaid Legal Services fit that bill to the “T”. I announced what I believed to be a ponzi scheme, (see Flim, Flam, Scam: Would a PPD Ponzi and Pyramid scheme cause your wealth to Scram?, A Demonstration of How PPD Management is Destroying the Company and Reggie Middleton’s Continued Public Service Announcement on the Flim Flam Scam). Since then, the company has announced that it is being investigated by the FTC and the SEC . Prepaid Legal released a press release yesterday which I have excerpted below:

(There are links to previous articles on that page)

His primary contention is basically the same as Barry Minkow's ( on his website devoted to PPL), namely that PPL's ownership is using corporate profits to prop up the company's stock price through an aggressive share buy back program while simultaneously selling off a significant amount of their own shares in the company.

[Reggie's comments: It is no wonder how this stock is potentially manipulated. A very small group of insiders control 73% of the public float, with the balance trading on very thin volume. My analysis in the past has made it clear that the company allows management to sell shares into company buyback programs, which effectively "manages" the share price in conjunction with allowing management to bail!]

The outcome of the SEC and FTC investigations of PPL should prove to be interesting.

[Emet]

Reggie Middleton, a financial blogger has several articles about Pre paid Legal on his BoomBustBlog.com.
<snip>
The outcome of the SEC and FTC investigations of PPL should prove to be interesting.

Yes, I have read all of Mr. Middleton's articles. The Yahoo finance boards have a lot of posts that dissect the membership benefits (or lack of), and the shady shenanigans of Mr. Stonecipher and the board of directors.

I am hoping that someone will wander on over to defend this collapsing company, as I have tons of rebuttals and links ready to post. But I suspect that since PPL's blastoff network recruiting alliance was a failure, no one will stop by.

The one tried and true PPL defender over at the scam forums has ben AWOL for a while, and some angry person showed up recently with the screen name, "hate ignorant ppl" to actually defend the company.

Oh, the irony...

[Emet]

The outcome of the SEC and FTC investigations of PPL should prove to be interesting.

Yes, indeed. Unfortunately the FTC has been investigating for some time now, and I don't think it's on the SEC's high priority list... but I have no idea how backlogged either agency is, or how easy it is for a company to delay proceedings.

[Emet]

This e-mail was posted on the Yahoo! Message Boards yesterday:

"This is a short summary of what I spent on pre-paid legal over the
course of 12 months.

- $249 Associate fee (1 time)
- $204 Membership fee ($17 x 12 months)
- $108 Identity theft shield ($9 x 12 months)
- $240 E-services package ($20 x 12 months)
------ $759 (yearly minimum total for being "active" in the business)

This is not including the cost of local and regional trainings
(brainwashing sessions) that can range anywhere between $5 to $100,
which would run about another $300.
----- $300 for meetings (over 12 months)

Add in plane tickets ($600 total) and hotel fees ($600 total) to
Nevada and Oklahoma for national "conferences" (called "big events",
$200 total), rental cars ($10 split among a group), gas (can't even do
the math this was so much from driving around people without cars),
etc. and that was probably another $1500 right there.
----- $1500 for conferences and travel (over 12 months)

Add in marketing supplies like tapes, books (propaganda) like
"Profiles of Success" and the "Pre-paid Legal Story", dvds, flip
charts and business cards to pass to out and that's another $100
----- $100 (over 12 months)

If you were really "serious" like me, you also signed up for the dvd
auto-ship program that was "debuted", which was $50 a month.
----- $150 ($50 x 3 months)

Which leads me to an end of year cashflow statement of:
- $2809 (expenses)
+ $500 (income)
-------------------
-$2309

That is the approximate amount of money I lost after 12 months with
prepaid legal services, and Team Platinum.

Yet that is not all I lost. I lost much of my self-respect and
integrity while I was being trained to manipulate people into buying a
service that they more than likely didn't need. I sacrificed my
dignity as I tried to get people to think that they were hopeless, and
prepaid legal and Team Platinum was the vehicle for their dreams. I
also lost the respect of some friends because I called them for no
other reason than to get them to "see the light" and buy into this
scheme."

http://messages.finance.yahoo.com/Stock ... of=2&frt=2

[Number Six]

We all need a lawyer once in a while--to help us with legal advice, to run contracts by, to get the street smarts and savvy lawyers are known for. I believe that this was a good idea, but from what I have read here and elsewhere, I have serious concerns. I have used the PPL system to talk to a lawyer on various issues--I think there are satisfied customers. I have not yet had a situation where they have sent out a letter or made a phone call in my behalf yet, though. Lawyers can be very intimidating, and we shouldn't just call them when our legal situation has become critical. Many years ago I had a lawyer who billed by 10 minute increments. That is a consumer-friendly deal in my opinion.

[Arthur Rubin]

A system of "legal insurance" (an hour of face time with a lawyer, and perhaps discounted rates thereafter), for a monthly fee, is probably a good thing.

The Pre-Paid Legal model combines that with MLM (sorry, fee-splitting with non-lawyers is usually illegal, network marketing), making it more expensive to the consumer, and providing fewer covered services, then, say, Legal Services Plan ( http://www.legalhelpnow.com/ )

(Disclaimer; I'm now a customer of Legal Services Plan, but I do not get a referral bonus if anyone signs up, even if I had a referral code to give you.)

[Number Six]

Thanks, I'll look into that system. My PPL tax attorney referred to tax protestors as star-spangled a$$hs.