OpTree

While many businesses are shutting down or laying off employees, Pre-Paid Legal believes they are well positioned, despite its recent release of membership results and the ongoing problems with Barry Minkow.

Chief Financial Officer of Pre-Paid Legal Services, Inc, Steve Williamson had this to say about this year’s growth: “In tough economic times we see increased interest in people wanting to market our Legal Services Plans as Independent Sales Associates. This increased interest will lead to our 16th consecutive year of growing our Membership revenues.”

One Independent Associate, Beth Taylor started her Pre-Paid Legal business 12 years ago. Taylor, a single parent, has a theory as to why people are signing up with Pre-Paid Legal: “People are losing their jobs today, airlines are going bankrupt, and they’re laying off the mortgage industry. People are really in need of finding something they can sink their teeth into. And that’s what I love about this business. I get up every day knowing that I make the difference. If I’m going to work, I’m going to make a difference in the lives of other people. So it’s very rewarding and fulfilling,” said Taylor.

The company, publicly traded on the New York Stock Exchange (NYSE: PPD), develops, services, and sells Pre-Paid Legal Plans to its members across the United States and four provinces of Canada. Plan benefits include: unlimited attorney consultation, letters and phones calls made by the attorney on a client’s behalf, document/contract review, assistance with traffic violations, and defense services for automobile-related criminal charges or general trial defense. An Independent Associate can market Pre-Paid Legal Plans from home to individuals, families, small businesses, or groups such as schools and local businesses.

Pre-Paid Legal also offers an Identity Theft Shield plan that can be purchased as a standalone product or in addition to a legal plan membership for a discounted rate. This valuable service provides each member with a credit report, continuous credit monitoring, and identity theft restoration services. “You can’t stop your identity from being stolen, but what you can do is have a very proactive professional company that will go to bat for you and restore it if you should become a victim. We have that product,” said Mark Brown, Senior Vice President and Chief Marketing Officer at Pre-Paid Legal. “And then you couple it with the fact there is no other company that I’m aware of anywhere in the world that has access 24/7 for their clients to great law firms. We do,” said Brown.

Pre-Paid Legal Membership benefits can also be added as employee benefits, by employers. Independent Associate, Rob Vest, top group producer at Pre-Paid Legal, says the legal plans are a benefit employees can use right away, “This is a NOW benefit. That’s the real key. The more economic problems that we are having out there, the worse the economy is, and the more legal problems that come up. If the employees are having those problems, that affects the employer.” Vest believes people want to spend their money on something they can get value from immediately, “So we are in the perfect place right now in the market, and we have a perfect solution to the problem.”

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Pre-Paid Legal Services released their reports on new memberships and new sales associates enrolled for the third quarter 2008. Overall, numbers were down compared to last year. Not surprising given the current state of the economy, but were up slightly over the second quarter.

For third quarter 2008, memberships produced decreased 6% percent while new sales associates enrolled decreased 13.2% percent compared to the same time last year. The one bright spot was the active membership base which increased 0.1% percent from the previous year.

The company also reported that their membership persistency rate was 73.5% for the 12 month period ended September 30, 2008. The membership persistency rate is the percentage of members who still enrolled at the end of the 12 month period who were enrolled at the beginning. This was a slight increase from the 12 month period ending September of 2007.

Pre-Paid Legal has been working hard during the past few years on a share repurchase program. During the 3rd quarter the company returned $9 million to shareholders through the repurchase of over 200,000 shares of common stock. Since the program began in 1999, the company has returned almost $400 million to shareholders.

Earlier in the year, Pre-Paid ran into some problems with Barry Minkow and the Fraud Discovery Institute. Although there has been no word lately, Minkow can be relentless and I’m sure he will cause more problems in the future. For now however, while the company’s numbers weren’t spectacular, given the current economy, they aren’t doing too badly.

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We reported a few months ago about the barrage of claims against Herbalife regarding high lead content in several of their products. After a couple months with no word about it, Herbalife has announced that the claims made by the Fraud Discovery Institute. Something smells very fishy here.

We’ve told you all about the FDI and its Founder, Barry Minkow and his determination to take Herbalife down, as well as several other MLM companies, and made claims back in May that the group had scientific proof from independent labs that Herbalife products were dangerous and contained illegal levels of lead (interestingly enough, the letter has been taken down from Fraud Discovery’s website).

Now, Herbalife and the FDI have apparently reached an agreement to avoid any further litigation, and the FDI has retracted its original claims against the nutritional supplement company. No other details of the agreement were made public. But wait a second…if you had alleged scientific proof, was it all just a lie or did FDI disappear for some other reason? Something absolutely doesn’t make sense here.

“It is evident to the Fraud Discovery Institute that Herbalife produces products that are safe, and that the company strives for continuous improvement in product quality,” the company said in a statement. Say what? Minkow has been going after Herbalife with a vengeance listing 3 separate exhibits of “proof” that Herbalife’s products contained excessive amounts of lead. In fact, there was even a lawsuit filed by a woman claiming to suffer from liver damage as a result of the products and the lawsuit broke just days after Minkow’s “findings”.

There is something VERY fishy about what is going on here. This is the second time that a company Minkow and the FDI have gone after all of a sudden reached an agreement with no public announcement of the terms. if the findings were indeed proven to be false (which we would not be surprised by) why didn’t Herbalife sue Minkow and FDI for making false claims? You cant just make claims against a company, show “proof” by “scientists” etc and then retract it after you made the press. That is absurd.

This is the second time in a short period of time that Minkow and FDI have settled against a company they were going after with no report on the settlement. Just last month, USANA reached an agreement and all of a sudden all of the negative statements Minkow and FDI were saying about that company disappeared as well. Maybe this is all in relation to the FDA cracking down on false claims made but from companies in the industry and against them but either way, Minkow is losing a lot of credibility and kudos for both USANA and Herbalife to make this noise go away.

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Now that Barry Minkow has settle his dispute with USANA, its time for the former criminal, and founder of the The Fraud Discovery Institute to look for a new target. Unfortunately for Pre Paid Legal, they are it.

The Fraud Discover Institute released its first ever “Top 10 Red Flags for Fraud” list and it details many alleged claims of fraud and misrepresentations made against Pre-Paid.

The list is backed by MLM expert, Robert Fitpatrick, who explains the sources and mathematical equations used to back up the claims on the top ten list, “News media exposes and lawsuits have combined with a mathematic threshold of ‘information saturation’ to bring [Pre-Paid Legal] to this position of lost faith within its market. The saturation point is based on the mathematical limits that the company has already reached in the North American market. Unlike other multi-level marketing schemes that also quickly saturate home markets, [Pre-Paid Legal] cannot expand to other countries with its current product offering.”

Minkow used a strange analogy when describing the motivation behind the creation of the list, saying that they list was designed to show a similarity between Pre-Paid’s recent second quarter announcement and an iceberg, “Both an iceberg and Pre-Paid Legal’s reporting of their earnings have one thing in common: Their true realities exist below the surface and are concealed from the casual observer’s sight.”

The list is a compilation of claims about the company withholding info about recruitment, reporting less than accurate numbers, declining sales, declining number of associates and artificially inflating stock prices.

Minkow, along with the FDI spent years torturing USANA, and now that everything has been settled, he had to find a new target. Unfortunately for Pre-Paid Legal, they are it. Minkows new website dedicated to bringing down Pre-Paid (prepaidillegal.com) is pretty fancy and it seems as if he is really committed to bringing Pre-Paid down. I’m sure there will be much more to the story as Pre-Paid responds to the allegations made by the FDI.

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