Is PrePaid Legal a Scam?
Barry Minkow certainly thinks so.
He has set up this website, explaining why he thinks that PrePaid Legal is a scam.
Robert Fitzpatrick writes:
"To examine this trend of financial decline, the report focuses primarily on data of Pre-Paid's "sales" force, which is the driver of its marketing. Pre-Paid does no national advertising.
Marketing is ultimately borne by the sales people individually.
The sales force is also the core of the company's revenue. Their own purchases alone constitute about a third of all company revenue.
Each "Associate", on average, recruits only a handful (less than four) actual "customers" (called Members).
The "Members" are directly connected to the salespeople as family, friends or neighbors, as the "one-to-one" model dictates.
Therefore, as the trend of recruiting salespeople goes, so goes the company. That trend is clearly negative now. The reasons are fundamental, not cyclical, and therefore not reversible.
This report presents the mathematical and demographic basis for Pre-Paid Legal's inevitable and fully anticipated slide toward saturation and decline.
It details and explains the flawed and fraudulent business model - an endless chain recruitment scheme - that the Pre-Paid employs, which leads to this inexorable status.
This business model propagates, as all such pyramid schemes.
Read more from the Robert FitzPatrick's report on PrePaid Legal, is he right?
Read More From BizOp News
April 18, 2008
How to Help Yourself
This is the final piece of a five part series on Arlan Galbraith Pigeon King scheme. The other four other posts were: What is New in Family Farming?, Why being a Sucker Seems So Right, Pigeon King and Testimonials, and How Will Pigeon Scheme End?
We have learned that even when we see a Ponzi scheme for the illogical economic mess that it is, it still remains an attractive - as Charles Ponzi said about his own scheme: Many people who would not gamble can be tricked into experiencing the same hedonistic delight by dressing the scheme up as an "investment". The narcotic of gambling made all the more toxic by its illicit masquerade as an "investment" drives all Ponzi schemes, and pyramid schemes.
If you have come to the conclusion, as many people have including the Attorney General of Iowa, that Arlan's PKI is an illegal Ponzi scheme and you have a contract with Arlan what can you do?
What follows is general legal information and should not be taken as legal advice. Your own circumstances are different, and it would be unwise of you to rely upon an article even written by a lawyer as a substitute for purchasing legal services.
There are at least four legal methods you can use to try to get some of your money back from Arlan, before the whole scheme blows up.
State Business Opportunity Laws
In 26 States, there are Business Opportunity Laws - which regulate the relation between the seller of a business opportunity and the purchaser. Here is a helpful and short checklist from the FTC:
Look at the ad carefully. If it claims buyers can earn a certain income, then it also must give the number and percentage of previous purchasers who achieved the earnings.
Get earnings claims in writing. If the business opportunity costs $500 or more, then the promoter must back up the earnings claim in a written document. It should include the earnings claim, as well as the number and percentage of recent clients who have earned at least as much as the promoter suggested. If it's a work-at-home or other business opportunity that involves an investment of under $500, ask the promoter to put the earnings information in writing.
Study the business opportunity's franchise disclosure document. Under the FTC Franchise Rule, most business opportunity promoters are required to provide this document to potential purchasers. It includes information about the company, including whether it has faced any lawsuits from previous purchasers or lawsuits alleging fraud. Look for a statement about previous purchasers. If the document says there haven't been any previous purchasers but the seller offers a list of references, be skeptical: the references probably are phonies.
Arlan doesn't have a disclosure document, for either a franchise or business opportunity. He is likely violating many of the states Business Opportunity Laws, much in the same way Interlake Chemicals of Manitoba did.
Here is the list of the 26 regulatory agencies which control, in one way or another, Arlan's type of contract, the sale of a business opportunity. (Don't be put off by the name, it is simply a technical legal term.)
A group of individuals from any state ought to make complaints to the correct regulatory authority: your complaint will be that Arlan didn't register and has no disclosure document. You should obtain counsel to help you draft the complaint so that you are not ignored. You also want to make a complaint to the FTC -the FTC routinely acts to shut down business opportunities which do not have or give out the required disclosure documents.
Canadian Competition Bureau and Misleading Advertising
Although several Canadian Provinces have similar business opportunity laws, embedded in their franchise laws, no Canadian Province has the equivalent of the US Regulatory schemes.
However, at a Federal level, misleading advertising is both a criminal and civil offense. Arlan has been advertising his scheme to the public for a number of years now. In particular, he represents both that his company is debt free and that PKI intends to repurchase the pigeons back from the farmers.
If the Arlan scheme is a Ponzi scheme, then both of those representations are false, and knowingly false.
Unlike the US regulatory world, in Canada a group of individuals can directly petition the Competition Bureau to investigate a scheme. But the petition must be done correctly and with affidavit evidence. Again, you will need to obtain counsel familiar with the Misleading Advertising provisions in the Competition Act to help you draft your complaints.
Good luck with all your efforts.
Related Posts: What is New in Family Farming?, Why being a Sucker Seems So Right, Pigeon King and Testimonials, and How Will the Pigeon Scheme End?
