Tulsa World: Pre-Paid Legal says FTC may sue

MAKE US YOUR HOMEPAGE | Tuesday, February 09, 2010 | WIRELESS

Home > Business

Newspaper View Print this story

Comment

RSS

Bookmark

Pre-Paid Legal says FTC may sue
The company receives a draft complaint as part of an investigation.

By LAURIE WINSLOW World Staff Writer
Published: 11/20/2009 2:24 AM
Last Modified: 11/20/2009 9:20 AM

Pre-Paid Legal Services Inc. announced Thursday it has received a proposed draft complaint from the Federal Trade Commission as part of an inquiry that began more than two years ago.

The draft document seeks "permanent injunctive relief, disgorgement of proceeds and other relief, including costs, relating to our Identity Theft Shield and Affirmative Defense Response System (ADRS) Program," the Ada-based company said in a press release.

The FTC alleges that Pre-Paid's ADRS Program and related materials violate a section of the FTC Act "regarding asserted misleading representations, express or implied," the release stated.

"We were surprised by the reaction of the market today," said Randy Harp, Pre-Paid's chief operating officer, in a phone interview. "What the FTC is questioning is really a marketing approach that we use. They're not questioning the underlying products."

In a previous interview, Harp had explained that the company's ADRS Program is a marketing methodology that centers around identity theft and data security. With the program, Pre-Paid goes to companies and presents — at no charge — informational materials to them and their employees that help them understand data security.

The marketing approach is used as a door opener that provides Pre-Paid's associates access to groups, Harp said. The associate speaks to employee groups and provides basic information about some of the new data security laws and the importance of protecting against identity theft. The associate also spends about 15 minutes explaining the company's Life Events Legal Plan and identity theft product, he said.

Harp noted that the business generated through ADRS "by no means represents the majority" of Pre-Paid's business.

The FTC's proposed draft complaint also names Pre-Paid CEO Harland Stonecipher and Mark Brown, chief marketing officer, as defendants.

For about two years, Pre-Paid has been disclosing in its public filings the questions the FTC has had about ADRS.

In March 2007, the company received a civil investigative demand from the FTC about the ADRS Program. Pre-Paid voluntarily revised the marketing materials originally provided to the FTC in 2007 and 2009, according to the company's release.

All of Pre-Paid's disclosures and public documents have reflected the status of the FTC's inquiry, Harp said.

"We have responded to all of the FTC's inquiries," he said. "We've provided all the data they've asked for. We've made some voluntary changes in the marketing materials, etc., and we thought we were making progress toward mutual resolution. And, I have to say we were a little surprised by the notice that we received" on Wednesday.

The FTC may decide to begin federal court proceedings with this proposed draft complaint, the company stated in its release. The FTC did not respond to a request for comment by press time.

"The ultimate outcome of the matter is not determinable but we will vigorously defend our interests in this matter," Pre-Paid stated.

In a separate matter, Pre-Paid last month received a subpoena from the Securities and Exchange Commission to produce a variety of documentation, including information pertaining to a stock repurchase program that Pre-Paid has had since April 1999.

Other documents requested include those also pertaining to the company's ADRS program and other marketing practices, membership statistical information, and other operational practices.

Pre-Paid provides legal-service plans through a network of independent provider law firms.

Laurie Winslow 581-8466
laurie.winslow@tulsaworld.com By LAURIE WINSLOW World Staff Writer

Newspaper View Print this story

Comment

RSS

Bookmark

Reader Comments

Show: Most Recent Comment First

Add your comment

1 comments have been made on this story so far. Tell us what you think below!

Reporting Comments

If you see a comment that violates our terms and conditions, please help us by clicking the "Report this Comment" link next to a comment. That will alert the web staff to review the comment. Thank you. -- Web Editor Jason Collington

Report Comment

Source_Code, (11/20/2009 9:09:14 PM)

scam-way in disguise.

Add Your Comment
In order to post a comment on this article, you must sign in to Tulsaworld.com. If you do not have a site account, you can create an account for free.