Feds Taking a Look at Pre-Paid Legal's Practices

October 2009

The MLM, Pre-Paid Legal, has been served a subpoena from the Securities & Exchange Commission (SEC) demanding documents related to its treasury stock repurchase program, marketing practices, membership information, and disclosure practices, among other matters. Pre-Paid Legal acknowledged the federal inquiry in a press release.

Pre-Paid's stock plummetted more than 20% when the news became known.

Pre-Paid Legal's executives have used company revenue in a massive stock buy-back scheme that reduced the company's net worth by nearly 50% while pumping up its stock price. Top insiders have been selling off millions of dollars of their personal stock at the higher prices, while Pre-Paid's revenue declined in recent quarters, recruitment of salespeople dropped and sales to Members went down.

Related Information:

• Overview Analysis of Pre-Paid Legal's Business Practices.
• Relevance of Recent Federal Court Ruling about Deceptive Sales Pitches
• News of SEC Subpoena to Pre-Paid Legal