The unraveling of the Bernie Madoff scandal last year rocked the investment management world. Few expected the chairman of one of the world’s largest stock exchanges, a prominent philanthropist, to be running one of the largest investment frauds in history. At least one financial analyst, however, figured it out and tried to tell the world.
In 1999, when working at Raptor Investment Management Co., Harry Markopolos was told to learn how Raptor could replicate Madoff’s double digit returns. Although colleagues labeled him as a “math whiz,” Markopolos could not figure it out. Eventually he concluded that Madoff was running a Ponzi scheme, or illegally “front-running” orders.
In 2005, Markopolos delivered a 21-page memo to the U.S. Securities and Exchange Commission explaining his theory. He wrote, “Madoff Securities is the world’s largest Ponzi Scheme. In this case there is no SEC reward payment due the whistle-blower so basically I’m turning this case in because it’s the right thing to do.” Despite this report and several previous investigations, the SEC remained oblivious to Madoff’s Ponzi scheme until his sons turned in their father Dec. 10 of last year.
Other fraudulent firms likely exist today, deceiving government regulators and investors. One such example is — I believe — a publicly traded company called Pre-Paid Legal Services Inc. (NYSE: PPD). Pre-Paid Legal uses multi-level marketing — more commonly referred to as pyramid scheme marketing — to sell legal expense plans in the United States and Canada. PPD does not advertise. Instead, it relies on sales associates to market the legal plan to their family and friends as well as recruit new salespeople. The company’s legal plan costs about $312 per year and initially covers 60 hours of phone consultation, but only 2.5 hours for pre-trial work, the point where most legal work gets done. The plan covers civil matters and “job-related” criminal charges, but many additional restrictions and exceptions apply.
Investors tout the stock because of its strong cash flows, low valuation and potential for growth. Yet deeper analysis shows that Pre-Paid Legal is a bogus scheme designed to swindle hundreds of thousands of customers out of money and time to the benefit of executive insiders. These insiders use sophisticated deception and diversion to keep Wall Street analysts focused on short-term indications such as quarterly earnings as opposed to the fundamentals of the business. In reality, Pre-Paid Legal is an endless chain recruitment business whose key metrics show the telltale signs of market saturation and imminent collapse. The company’s ultimate decline will likely be the result of public awareness of the company’s deceptions and manipulations.
The company’s legal plan could not be sold without highly misleading presentation of its services and their value. Once customers realize the extent of the plan, they quickly cancel. More than 50 percent of new customers cancel their legal plan within the first year. Before the end of the third year, 75 percent of customers have canceled their plan. The actual value of the plan can be seen in the cost to the company of providing the service. For each $312 per year policy, the company pays a flat fee to its attorneys of $80 each year, regardless of the legal services used. As Barron’s magazine stated, “$80 doesn’t buy a lot of legal services these days, when lawyers routinely bill at $200 or more per hour. Pre-Paid’s solution is to limit benefits.”
The company attracts new sales associates with prospects of $975/week in income. In reality, an estimated 99 percent of sales associates never earn a net profit. Third quarter results from this year show 80 percent of the company’s sales force fails to make even one sale annually and only 2 percent make 10 or more sales annually.
Almost all of Pre-Paid Legal’s sales force and customer base turns over within 24 months, minus a small group of top recruiters. New recruits are often not told the full extent of the fees required to join. They must pay a $72 enrollment fee, a $50 state license fee and additional fees for training material, in addition to purchasing the company’s legal plan for $36/month. In 2008, the company reported that sales associates paid more than $23 million in training and other certifications, a large amount considering less than 15 percent will ever make one sale.
Pre-Paid Legal executives are no strangers to fraud. In 2001, the company was fined by the SEC for accounting fraud. To lure new recruits, Pre-Paid Legal paid its salespeople a three-year advance commission on sales and then claimed these payments as assets, not expenses. In its restatement, the company slashed 2000 earnings by 42 percent and 1999 earnings by 66 percent. Numerous key personnel have been involved in high-profile fraud. The company’s top salesperson in 2002, David Draney, was indicted for making millions through the sale of bogus securities. Pre-Paid Legal Director Fran Tarkenton paid a steep settlement to quell charges in 1999 by the SEC for alleged fraud relating to an Internet software company. Tommy Vu, the infomercial star widely sued for his $15,000 real estate ‘boot camp,’ also worked for Pre-Paid Legal.
Executive insider selling is rampant and no insider has purchased the company’s stock within the last two years. Executives are committed to inflating the stock price through the company’s share repurchase program while simultaneously selling their own shares. Between 2004 and 2008, the company repurchased $237 million in shares, while executives sold more than $69 million of their personal holdings. Pre-Paid Legal is borrowing money and using cash generated to repurchase shares at any cost. In 2008, 70 percent of the cash provided by operations was spent on stock repurchases. Meanwhile, the company had $59.7 million in debt outstanding.
Last Tuesday, the SEC announced a fact-finding inquiry into Pre-Paid Legal’s operations. The subpoena requires the company to turn in documents related to its stock repurchase program, marketing practices, membership information and other practices. The stock lost 17 percent the day of the announcement. In conducting its investigation, the SEC has the opportunity to think critically about the company. Let’s hope it doesn’t drop the ball on Pre-Paid Legal as it did with Madoff Securities.
Rahul’s column runs biweekly Thursdays. He can be reached at r.gorawara@cavalierdaily.com.
Mr. Gorawara,
Your article about Pre-Paid Legal is completely misleading and loaded with untruths. I know thousands of people who have the Pre-Paid Legal services who have been helped in extraordinary ways through the value of their memberships–getting advice, letters written, contracts reviewed, their wills done, and countless other legal issues such as traffic tickets, divorce, arrests, lawsuites, IRS audits, wrongful discharge, and much more.
If every company in America was AS CREDIBLE as Pre-Paid Legal we would never see a Madoff scam or an Enron.
Check your facts. You are doing an enormous disservice to your readers and to your profession.
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Well, I guess that the Attorney General of Nevada and Utah are in on this too, as they spoke at the PPL Convention about a month ago. In addition, PPL must be very smart to cross an audience of ~30,000 people who all have practically unlimited access to attorneys…..
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Mr. Gorawara,
I agree with Mr. Drennan. Your article is harsh, slanted, and sounds to me like you have a personal problem with the company. I have an active membership and been a member for 2 years. I’ve personally used the attorneys 8 times and just having access to top attorneys to ask questions that may keep everyday citizens/consumers from being bullied or abused by others is of huge value. I think you’ll find that even the most successfull companies cannot please everyone all the time and there will be people that either don’t utilize their membmerships or expect the attorneys to do miracles. The company doesn’t market miracles but it does provide equal “access” to the legal system. The simple service they provide is affordable and necessary. The fact of the matter is that everyone pays for legal. Either pre-paid or post-paid; pre-paid is a lot cheaper than the other. I hope you heal from whatever motivated you to attack Pre-Paid Legal.
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May I suggest a correction to this statement:
“Pre-Paid Legal uses multi-level marketing — more commonly referred to as pyramid scheme marketing…”
Multilevel is more commonly, and more accurately referred to as network marketing or MLM, for short and
It is only referred to as “pyramid scheme marketing” rarely by people who are ignorant of the industry.
Here are a few facts for your readers:
There are about 2,200 such companies in the U.S., which is one of 80+ countries where this business model is recognized as legal.
MLM has existed for 73 years, and includes Shaklee, Avon, Mary Kay, Discovery Toys, Watkins, Tupperware, Pampered Chef (now owned by Warren Buffett) and many other good corporate citizens. These completely legitimate businesses include nine companies over 40 years old, and eleven that had sales in excess of ONE BILLION dollars last year.
Pyramid schemes do often try to disguise themselves as legal, legitimate MLM operations because they want to be perceived as LEGAL and LEGITIMATE. And yes, we do suffer a guilt by association with illegal pyramid schemes, but this is due precisely to nescient and wholly inaccurate portrayals within the media by those who make no attempt to understand the distinctions. (Thanks Len.)
Lou Abbott
Senior Editor
http://www.MLM-theWholeTruth.com
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Mr. Gorawara:
You are to be commended for an excellent article. Pre-Paid Legal (PPD) is a classic pyramid sales scheme. Its associates sell a so-so legal services product to gullible prospects while aggressively trying to recruit them to become associates themselves.In fact, most of the effort goes into the recruitment because, by bringing in new associates below them in the pyramid, senior associates share in any commissions the new associates generate and in the front-end fees they pay to join. As you point out, the vast majority of associates fail to sell even a single membership in a year (other than their own renewal), and the drop-out rates for both the legal services plan members and the sales associates are astronomical. That doesn’t stop PPD and its recruiters from painting a picture of vast wealth awaiting those who join their “team”. Yes,few people are born salesmen and many are too lazy to put in the effort needed to just to break even (i.e.to recover their front-end fees and ongoing fees.)But when only one in fifty associates sells ten or more memberships a year, and half of all new legal services members drop out in year one, one can surmise that PPD’s legal services product is not exactly a compelling value. The great threat to PPD is the ongoing decline in their associate ranks. At present they are trying to throw a “Hail Mary” pass by linking up with a new online pyramid sales scheme(the soon-to-be-launched online shopping portal, “Blastoff”), but it smacks of desperation.
PPD has its sales associates constantly imply that PPD’s listing on the NYSE is a sign of strength and stability (just like Enron or AIG, right?). It also puts retired state attorneys general on its advisory board and pays them to shill for the company.I wouldn’t buy a used car from any of them.
Note: The above are my opinions only. While I have endeavored to be accurate, there may be errors or ommissions. My employer currently has a short position in PPD shares.
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Wow….slanted article to say the least. The information you’ve gathered is extremely false and compiled into an article filled with more holes than aged swiss!
If this company was such a scam, then why is the National Chamber of Commerce CEO Mr Donahue on record stating “every family needs this plan”? Why is it that the National Black Chamber of commerce markets these plans through its website? Why is the Better Business Bureau heaping accolades on this company? Why is the NAAG (National Association of Attorney Generals) giving an EXTREMELY RARE endorsement to this company? Why is Grant Woods (fmr AG for Arizona), Andrew Miller (fmr AG for Virginia), Mike Moore (fmr AG for Mississippi) and Corporate Counsel Legend Duke Ligon all working for the newly formed Advisory Council for the company? Why would current Attorney Generals for the states of OK, UT, NV, IL, TX, AZ all ENDORSE this service as an American Family MUST HAVE? Getting my drift here?? See, what you fail to realize is that because MLMs have been purveyors of SHADY practices for years…a credible and solid company like this which offers MLM as one of its methods of distribution comes along and gets bunched together with the bad ones. I’m here to tell you…and as a student you should have been taught this….check your resources and ensure that your FACTS are indeed facts before you label them as such.
And FYI, this coming from a current serving federal agent who in my part time partnership with this company as an associate, has generated several tens of thousands of dollars.
Have a good one.
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Pre-paid Legal Law firms, In my opinion, help the majority of members with access, I believe the company’s integrity is whats in question. I believe the product does work to some degree, but that is irrelevant as it relates to the day to day operations of Ada OK. The company right now is under investigation by the SEC (October 6, 2009, Pre-Paid Legal Services reported the receipt of a subpoena from the Division of Enforcement of the United States Securities and Exchange Commission), they have linked up with another company called blastoff network *a viral marketing online mall/facebook type that launches tomorrow. Hopefully for investors, and for those who lend their reputation to Pre-Paid Legal; the company is cleared of any wrong doing.
Unfortunately, My opinion, the more I dig, the more muddy the water becomes. So Buyer BEWARE!
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Rahul –
Kudos for having the courage to bring the spotlight onto these scumbags. They have ruined many innocent (albeit naive) people’s lives, which is why they have so many former and pending litigation situations.
Please keep the heat on them! PPD pays quite a few morally compromised individuals in an attempt to give this bogus ponzi/pyramid scheme an air of legitimacy. They are not legitimate, they are crooks.
Before long, this small but vocal group of people writing in to defend Prepaid will disappear. Bernie Madoff had a lot of people defending him too… until everyone had to admit the Emperor did not, in fact, have any clothes after all. Until then, you are going to get flamed by them. Ignore it. They are desperate to try and keep the scam going a little while longer.
Keep digging – you are on the right track.
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The entire financial system is a Ponzi.
Wall Street Stock “Market” (Multi Level) is a game of chance.
A stock is only worth the price at which
a “specialist” is willing to sell it for.
“Last Tuesday, the SEC announced a fact-finding inquiry into Pre-Paid Legal’s operations.”
The SEC needs to go on a fraud finding inquiry.
Cops are Crooks too…
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I am a current Pre-Paid Legal member and consider myself a former associate, so I will speak to two aspects of the program.
I decided to quit marketing the program because of the high cancellation rate referred to in the article. When you receive an advance on a commission, and the member cancels before the commission amount has been reached, a charge back occurs. For example, if you receive nine months commission in advance, and the member cancels after three months, you have six months of commission charge back. This can leaves you with a debit balance to the company, especially if your renewal commissions do not keep pace. However, the the health and life insurance industry as well as property and casualty insurance, charge backs and debit balances also occur. But, as I understand it, and current Pre-Paid Associates may want to correct me, when you have a debit balance with Pre-Paid Legal, your renewals are not credited to your debit balance, nor do you receive the renewal commission if you have a debit balance. Therefore, the company is keeping the renewal commissions and not paying them out, resulting in loss of that money to the associate. I have been to workshops where sales leaders celebrate the payoff of their debit balances.
The reason that I kept my membership is two-fold. I believe that the greatest value occurs in the first year of membership because of the will service. A simple will would cost more or equal than the annual membership fee. You are also allowed a yearly will update for no charge. Other services, such as contract review are valuable and could prevent someone from entering into contracts that do not benefit them or potentially harm them. I have called the attorneys with questions when making decisions that may have legal impact. Each year have I gotten around $300.00 worth of advice and services? I believe that I have, despite the limitations on the plan.
Multi-level marketing can be legitimate business, however the majority of prople entering that type of business will not succeed for a number of reasons. In almost all of these companies, a monthly purchase of the product is mandatory. Everyone has heard stories of garages full of products that have not been sold. Not everyone is a salesman. But for certain individuals, profit is possible. It is being self-employed. Not everyone has the motivation or discipline or talent for self-employment. But I believe there is hype surrounding the opportunities. Weekly or monthly sales meetings encourage emotional connection. Sales tools are sold and extra training programs are offered. The sales force may be told that they don’t want to be successful if they do not buy in financially.
Multi-level marketing has many pitfalls, and I have chosen not to participate in this form of business. However, I believe that many people with the right motivations, discipline and training can be successful with many products. Others should examine their personality and decide if these businesses match their talents and resources, rather than being attracted to mostly inflated income promises.
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I have owned a PPL plan since somewhere around 1997 or 1998. I will keep it the rest of my life if I can.
The plan is not intended to be the last you’ll ever spend for a lawyer. It is a plan to allow you basic legal help. All the company information on the plans are very clear as to what it covers. There are some years I have not used it at all, and others I called them several times a month. It is well worth it for me to be able to call and ask a legal question anytime I need to. If that was all it offered, I’d still keep it.
Dave in Kentucky
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Multi Level Marketing – Network Marketing Has anyone ever worked for a company and the owner on down make money from the activities of those beneath them?
How many Real Estate Agents pay for training and licensing and never sell thier first piece of property?
How many insurance agents paid for traing and licensing fees and never sold a single policy?
Were these people lied to? No, they chose not to do the activities required to do well in those occupations. Sales sounds good until you have to make a sale and no one is interested in your product or service, does that make the product or service a scam? I don’t think so.
I am a Pre Paid Legal Associate, am I making millions of dollars a year? No, but I’m not wanting to trash the company because I don’t make that much money. What I do see is people buying the service as a voluntary employee benefit. I also have people come to me after a presentation and tell me they intended to NOT buy another benefit, but couldn’t wait to get signed up.
Somewhere along the line the author if this article believes someone cares about his or her opinion, that’s all it is, an opinion. My response is my opinion and that is all take it or leave it…
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We have established that the product works. No one wants to tackle or answer to the day to day business operations of Pre-Paid Legal Corp. They are a piece of work, and I can assure you if there is no wrong doing in Ada, OK; they have nothing to worry about. I will continue to dig and find out if the financial practices are inline with the SEC and encourage others to do the same, we have the right ask, PPD has the obligation to provide the answers.
Thats part of the deal when your “Publicly Held”.
Word on the the street is they’re sweatin! BUYER BEWARE
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This article is absolutely true. I have personally witnessed the bogus salesmen pitches that PPL uses to lure in their lower-class sales associates. I went to a PBR, personal business reception, and was shocked that the selling points were all hypothetical situations of how much money you CAN make, not how much the historical 25 + years of data has shown. Check out my article about PPL where I have information from their 2008 10-K and my interpretation of what it means. They disclosed numbers and I broke them down to show how PPL is a ponzi scheme.
http://www.takenallocation.com/2009/10/prepaid-legal-services-nyse-ppd-ponzi.html
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After an endless number of former associates comes forward saying that they were made promises that in hindsight are obviously overstated, you have to assume it is going on. On one hand, there are going to be individuals that excel in this business and others that fail. Too bad this company’s sales staff is more focused on building more “levels” than they are about the legal troubles of their members.
I want to commend Meredith Ille for writing a nice post from the perspective of someone who both tried and retired from being an associate yet still owns a legal plan.
Prepaid Legal PlansLegal Discount Plan
Legal discount plans are good products for many people – in fact over 100 million Americans have some form of legal discount plan. My friends are Attorneys in Miami and they run their own legal insurance plan company. They are regulated by the state and they provide many of the free services directly to their clients. They have a very high retention rate and the product is less than half the cost o the PPL product. The truth is there are legal insurance plans and just plain legal discount plans and both types offer a certain portion of the population a product with good value. Like Meredith Ille noted, just getting a simple will and updating each year is saving you about the cost of a plan.
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Very sad…..the problem with media today is they do not work with facts and write their articles with hearsay information.
The reason we have the Madoff’s of the world is because of writers like Rahul and an incompetent bureaucracy.
Just the title of this article tells you the story……sensationalism plus. Can you believe it!!!!!! THE UNDISCOVERED MADOFF……….PLEASE, YOU SHOULD BE ASHAMED OF YOURSELF MR. GORAWARA.
Oh, by the way is The Cavalier Daily owned by the Enquirer or Star tabloids?????
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The problem here is people are confusing arguments. What is under scrutiny here (besides the share buyback program) is NOT the legal insurance product. This is up to the buyer to decide its worth, and it very well may be a great product, though if is why resort to the MLM model? What IS under scrutiny is the business model and how much of the company’s revenue is solely based on the MLM “product” opposed to the insurance product. MLM as a business model is NEVER about the underlying product, it is about recruitment.
BTW, yes people have made money in MLM. SO people have made money robbing banks and scamming stuffing envelopes.
At some point this MLM will break down. At which point if the actual product (legal insurance) is not sellable in a traditional model, PPL will fail under the weight of a crashing MLM pyramid.
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My husband worked hard as an associate for 4 years and we did not make the kind of money they spoke of. He did do it by the book and also tried other methods.
However, we still have the services and I am very glad we do. It is something I hope to never go without. Because of PPLs lawyers my bridesmaids had dresses at my wedding. My husband got refunded over $1000 after an advertising company said they would not refund him. When I got arrested for traffic tickets, that went into warrant, I did not spend 8 days in jail at 5 months pregnant. Then they got one ticket dropped and one reduced to less than half. Sprint PCS corporate actually called to apoligize and correct the bill.
It is a fantastic product. I have met people who were misinformed of the benefits and ended up unhappy because they didn’t know what they bought. If you expect to get a lawyer on retainer for less than $40 a month you may want to rethink that. I have access to a lawyer whenever I have a legal question. Turns out a lot of things are legal questions we just never think of them that way because it is too expensive to ask. The lawyers are happy to write letters on my behalf. And they have often been all that was needed. Yes, further legal action would have cost money. But in my experience the letters were enough to get people/businesses to check their actions.
I didn’t like this article. We knew all the charges to get started and they were less than listed here. There were also other things said that sounded off or biased. But since my response is almost as long as the article I am stopping.
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It seems the author attacks the company on the basis of its failure to provide a successful
business model for the salesman rather than on the nature of its product and its success.
I hear the customers claiming the usefulness and value of the service; I hear the salespersons disappointment with their end results. So I intend to call PrePaid Legal and use the service, but do not intend to sign on as a sales rep.
Inexpensive legal advice is of paramount importance these days as corporations are getting astoundingly aggressive in their billing practices and relying on the average customer’s inability to fight it. I applaud the service even if they have a lousy compensation scheme for salespeople.
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I might add that Warren Buffett (Berkshire Hathaway) owns Pampered Chef, another “pyramid scheme”. And Donald Trump is in pre-launch on his own “pyramid scheme” right now. Oh, Sylvester Stallone and his wife put their reputation on the line and helped launch a “pyramid scheme” also.
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I smell astroturfing in these comments. Seems like Pre-Paid Legal is writing a lot of them. Don’t trust everything you read on the internet…
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Hey Mr. Terry Jefferson,
Is your response “slanted” because you work for pre paid legal services?
Terry Jefferson
Independent Associate at Pre-Paid Legal Services, Inc.
View full profile | Contact Terry Jefferson
Currently: Independent Associate at Pre-Paid Legal Services, Inc.
Courtesy of linked in
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The people who attack Rahul personally are absurd. Your pugnacious language only shows your own insecurity. There is an ancient Chinese saying that “a righteous man with his back straight does not have a slanted shadow.”
All of you who are providing fraudulent services to people should really consider the dire consequences of your action. If you are screwing with people, you WILL be punished, SEVERELY. There is simply no way around it. The FBI is stretching its arm now.
I hope you can sleep well at night.
May the Lord have mercy on your soul….
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LOL, you guys have way too much time on your hands
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Hmmm. So many things. I am an associate, but Im also a member, for over five years, and I wish the author would have all of his facts straight. Even before I get to my main point, she/he should have researched before making an assumption that our membership is regulated by individual states like insurance and the benefits will vary according to each states’ statues and regulations. I also wish he/she would check out the quarterly reports and compile all of that data, thats called thorough research, not the sensationalism he/she put up here to draw attention. He/she never compares the costs of startin Prepaid Legal with another individualized business apples to apples.
Now, two major things. One- If I were to sell a Mercedes S500, could I do so to a person that is uneducated about the costs of owning one of these? What if his bank approved him, am I at fault because it costs more to maintain it than he thought? The answer is no, as he should do his own do dilligence and make sure once he commits, he will. People forget that half of businesses fail in two years, and 90% of all business do not make it to five years. Can taking an employee and making him a business owner by itself make him or her successful? No, as he or she must count the costs of doing business. That is the reason most businesses fail- the owners do not count the cost of doing business and the same holds true in Prepaid. We do not push the business on people, but simply let them know it exists. They decide to take part, but look at the gym in january and again in April. NEWSFLASH, people quit for whatever reason. I cant say how many people have decided to make a few extra hundred dollars a month by sharing the plan with other family members, yet the next day, they will not do anything at all to actually get into profit mode, so that does not make it a bad business model. McDonalds has a much lower turnover rate, not because it has a much better system, but people have to save, borrow, and fight to get the ONE MILLION dollars, so of course they are more committed. To slight Prepaid or any other company or business model for that shows the lack of business competence that people have, which is why the average person only wants a job, which allows them to clock in, not work, yet still get paid, or half work, pretend to work, yet still reap a full salary. Owning a business either exposes a person for who he/she is or who he/she refuses to become, as the traits of a successful person are all learned, not inherited. Finally, the author was wrong, as PPL has never “front-loaded” people. It is impossible to market a car to someone and you have never ridden, used, or even seen one before. The same goes for us. Moreover, we make money when people purchase the membership, just like Comcast, your grocery store, and so on make money when someone purchases something. Now, all of those companies have huge return rates-I used to be a Manager for Walmart so I know, but its considered a part of business. If an associate wants to not worry about that, he/she can simply take his commission monthly. The company does not force him/her to take it. Last, “company attracts new sales associates with prospects of $975/week in income” is completely untrue, as well as “New recruits are often not told the full extent of the fees required to join.” The only fee required is the investment, but if I opened a lemonade stand, cant I open with just water, lemons, sugar, and cups? Yes, but I should invest more so I can have a stand, napkins, etc. New associates have freedom in choosing, but we educate them on the limitations of their choices.
Two, concerning the membership, it does exactly what it says, but the reason for the turnover is that people do not understand having access to an attorney. My little brother pays for it, but did not use it when he got a traffic ticket that caused his insurance to double because he forgot. Once people are trained to use that access- like with our cellphones, which we refuse to leave at home, as they are learned wants- people will keep the membership. Every now and then I still find myself forgetting it, as my mother and father did not sit me down and remind me of the family attorney and make sure I understood my rights, legal limits, and obligations. Nevertheless, this membership, for as little as $135 or so a year, provides that to a family. Will it address everything? Yes. Will it fix and work through everything, HELL NO. Otherwise, no insurance company would be able to stay in business. Where did this quote come from? “For each $312 per year policy, the company pays a flat fee to its attorneys of $80 each year, regardless of the legal services used.” It does not align with standard company payouts. I notice he rarely cites his sources of information. If he were a genuine journalist seeking truth without some other agenda, he would contact the home office in writing, requesting a response to his allegations and random reporting. I believe he would see more than his biases, wherever they have come from, and believe me, PPD is not perfect, but its surely better than what the average consumer has an alternative.
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If people are truly interested in knowing the truth about PPD, read its 10-Ks and it won’t be long until you see that it survives by operating a massive, endless-chain recruiting scheme.
Even with having over 400,000 vested associates and recruiting over 100,000 more every year, PPD’s legal membership numbers are declining. Even though it has recruited over 1.5 MILLION associates and has had well over a decade to build a sustainable sales force, it has fewer associates selling at least 10 memberships than it did several years ago.
I could go on and on, but if PPD’s allies were to actually research PPD’s 10-Ks, they would find that Rahul actually was too easy in his treatment of the company! If it weren’t for PPD sucking in over 100,000 new associates into joining its “opportunity” every year, the company would sink faster than the Titanic!
The ONLY thing keeping PPD from eminent collapse, is its recruiting scheme and if it weren’t for spending over $400,000,000 buying back its own stock, the share price would also be sinking. As it it, the company’s market is about $120,000,000 lower than it was a decade ago, even though the stock price has been artificially pushed up by taking close to 60% of the outstanding shares off of the market.
Liking or disliking PPD’s membership is a value judgement made by the purchaser, but based on PPD’s history, only a very small percent of members keep a membership for very long.
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Here’s some questions for those who defend PPD:
1. If PPD already has over 400,000 associates, why is it recruiting over 150,000 more in 2009?
2. Why is the number of associates selling more than 10 memberships going down when there are cumulatively more and more associates being recruited?
3. Why are the number of in-force legal memberships dropping when there are around 500,000 new memberships sold every year?
4. How does PPD’s current market cap compare to what it was 10 years ago?
5. What group makes up PPD’s second largest market for its memberships? (I’ll give you a hint, it’s the people that paid to sell PPD’s memberships).
6. How many memberships did PPD’s 5 highest paid associates sell in 2008?
7. With there being over 1.5 million associates recruited in the past decade, why do new associates represent the highest percentage of associates making any sales?
8. If PPD’s products are so good and needed, why do most people cancel them in such a short time?
Let’s see if PPD defenders are willing to give fact-based answers to the above questions.
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