American multi-level marketing company
LegalShield
|
Formerly
|
- Sportsman's Motor Club (1972?1976)
- Pre-Paid Legal Services, Inc. (1976?2011)
|
---|
Company type
| Private
|
---|
Industry
| Legal services
|
---|
Founded
| 1972
; 52 years ago
(
1972
)
|
---|
Founder
| Harland Stonecipher
|
---|
Headquarters
| ,
U.S.
|
---|
Areas served
| |
---|
Key people
| |
---|
Products
| |
---|
Services
|
- Legal services
- identity theft monitoring and restoration
|
---|
Revenue
| est. $400 million
[1]
(2014)
|
---|
Owner
| MidOcean Partners
Stone Point Capital
[4]
Further Global
[5]
[6]
[7]
|
---|
Number of employees
| 700
[8]
(2014)
|
---|
Website
| legalshield
.com
|
---|
LegalShield
(previously known as
Pre-Paid Legal Services
or simply
Pre-Paid Legal
) is an American corporation that sells
legal service products
direct to consumer through employer groups and through
multi-level marketing
[9]
in the
United States
, and
Canada
. It was available in the
United Kingdom
from 2019
[10]
to 2021.
[11]
According to LegalShield's income disclosure regarding associates selling the product: "For Associates with 0-2 years of experience who made at least one sale, average annual earnings were $798 for 2019. Approximately 73% of all Associates across experience years made less than $1,000 in 2019."
[12]
The company was founded in 1972, as the Sportsman's Motor Club. In 1976, it was incorporated as Pre-Paid Legal Services, Inc., and made its
initial public offering
in 1984.
In 2011, Pre-Paid Legal went from being traded on the
New York Stock Exchange
back to being a private company when it was acquired by
MidOcean Partners
and subsequently changed its name to LegalShield.
Services
[
edit
]
LegalShield develops and markets
pre-paid legal service
plans through a network of more than 6,900 independent provider
attorneys
across the U.S. and Canada.
[13]
The company also markets IDShield, a privacy and
reputation management
service that also provides
identity theft
monitoring and restoration.
[14]
[15]
The company's membership plans are sold as employee benefits, through its multi-level marketing division, and direct to consumers.
[9]
History
[
edit
]
Sportsman's Motor Club
[
edit
]
LegalShield started as Sportsman's Motor Club in 1972 in
Ada, Oklahoma
.
[16]
[8]
[17]
Harland Stonecipher (1938?2014) was the company's founding president and
chief executive officer
(CEO).
[18]
[19]
The
life insurance
salesman from Ada, Oklahoma, created the "motor service club" after being in a car accident in 1969. The other party in the crash was cited for fault but still filed suit against Stonecipher for the accident. Although he had
health
,
life
, and
vehicle insurance
coverage, he was required to hire a lawyer to defend himself in court and struggled to pay the legal expenses.
[20]
After researching the industry of European legal expense plans, he established the Sportsman's Motor Club to reimburse members for legal fees relating to vehicle accidents.
[20]
[16]
Pre-Paid Legal Services
[
edit
]
The club changed its name and incorporated as Pre-Paid Legal Services, Inc. in 1976,
[21]
becoming the first company in the United States to provide pre-paid legal plans for individuals.
[20]
Initially, members could choose their own lawyer and seek reimbursement from Pre-Paid, but by the 1980s, the company directed members needing legal help to pre-selected firms.
[20]
Pre-Paid Legal went
public
in 1984.
[22]
Pre-Paid was first listed on the
NASDAQ
, then moved to the
American Stock Exchange
in 1986,
[23]
[24]
followed by the
New York Stock Exchange
in 1999, where it was listed as "PPD".
[19]
[25]
[26]
In 1998 Pre-Paid acquired The People's Network, a marketing company based in
Dallas
.
[27]
[28]
In 1999 the company began offering plans in Canada in 1999, with some modifications to suit the Canadian legal system. By 2009, it covered 28,000 Canadian families across four provinces.
[29]
[30]
In 2000 Pre-Paid Legal was criticised by
CBC's Marketplace
for operating as a
multi-level marketing
model and encouraging sales associates to buy training material.
[31]
In 2003, the company moved into a new corporate headquarters in
Ada, Oklahoma
.
[30]
In November 2006, Pre-Paid announced plans to spend $27.4 million to repurchase shares owned by executives.
[25]
In 2010, Stonecipher resigned from the positions of president and CEO. Randy Harp and Mark Brown were appointed as co-CEOs, with Harp assuming the role of company president. Stonecipher retained his position as chairman of the company's board.
[30]
Controversies
[
edit
]
In 2001, a
Wyoming
attorney general
announced, "When we discovered that Pre-Paid was using prohibited income representations to promote their multilevel marketing program, we warned them that the representations were prohibited by Wyoming law." Pre-Paid denied violating the law, but agreed to adjust its marketing messaging and pay $7,000, including $2,000 refunded to participants who alleged the company had misled them.
[32]
[33]
In the same year, the
U.S. Securities and Exchange Commission
(SEC) required Pre-Paid to stop counting the commissions paid out to sales associates as
assets
instead of
expenses
, which reduced reported earnings by over half.
[18]
As a result, Pre-Paid amended its reporting and filed its 2000 financial statements in February 2002. The statements showed huge decreases in earnings (from $43.6 million to $20.5 million) and stockholder equity (from $147 million to $42 million).
[34]
Later that year, however, the
Denver Business Journal
reported that Pre-Paid earned a $27.1 million profit on $303.7 million in revenue, a large increase from its $1.9 million profit on revenues of $129.6 million in 1997, and its members had access to a network of 46 firms with 1,270 lawyers.
[35]
In 2004, approximately 250 plaintiffs filed about 30 lawsuits in
Alabama
against Pre-Paid, all of which were dismissed or settled by 2006.
[25]
Pre-Paid faced two lawsuits in
Mississippi
, one in October 2004, and the other in February 2005. A jury ruled in favor of the company in the first suit. In the second, a jury found Pre-Paid and Stonecipher guilty of deceptive advertising and fraud
[18]
and required them, in November 2005, to pay $9.9 million in punitive damages.
[36]
TheStreet.com
reported that Pre-Paid faced additional lawsuits filed by 400 Mississippi plaintiffs which were ultimately settled.
[25]
TheStreet.com also noted that the company had had some success in court, including the overturning of a fraud verdict and the defeat of a
class action
lawsuit alleging the company was a
pyramid scheme
.
[36]
The company and the U.S. Chamber of Commerce, which had Stonecipher on its board of directors,
[19]
called the lawsuits "frivolous" and "abusive".
[37]
Pre-Paid's independent auditor was unable to approve the company's 2004 financial statements because of "material weaknesses" related to the processing of commissions.
[18]
Two weeks later, Pre-Paid filed 2004 financial statements approved by its auditor,
Grant Thornton
.
[38]
New rules proposed by the
Federal Trade Commission
(FTC) required Pre-Paid to disclose to potential associates that less than 25 percent of its sales representatives sold multiple insurance plans in 2005, which the company confirmed in an SEC filing.
[25]
In 2007, the FTC began investigating Pre-Paid's marketing of its identity theft service and Affirmative Defense Response System (ADRS), which the company developed to increase group sales.
[39]
Pre-Paid changed its marketing materials in 2009 after regulators found the company's claims about ADRS misleading.
[40]
According to an SEC filing, the FTC and Pre-Paid "[reached] a mutually agreeable solution", and in 2010 the agency ended its three-year investigation without any action.
[39]
PrePaid was the top corporate donor to the 2008 re-election campaign for Utah Attorney General
Mark Shurtleff
, who has defended the operation of multi-level marketing firms in that state.
[41]
LegalShield
[
edit
]
In January 2011, Pre-Paid Legal agreed to be bought out for $650 million USD with entities formed by
MidOcean Partners
, a New York
private equity
firm that describes itself as "focused on the middle market".
[42]
The deal closed on June 30, 2011, and the company once again became privately held.
[43]
In July 2011, Rip Mason began serving as LegalShield's CEO. In late 2011, the company changed its name to LegalShield as part of an overall re-branding initiative.
[44]
In July 2014,
Jeff Bell
replaced Mason as CEO, and Mason became
chairman of the board
.
[45]
He retired in 2022.
[46]
Stone Point Capital, another private equity firm, purchased a majority stake in LegalShield from MidOcean Partners in 2018.
[47]
In 2019, the company expanded into the UK with offices in
Oxford
and an arrangement with
Slater & Gordon UK
providing legal advice via the LegalDefence app.
[10]
[48]
The venture in the UK went into liquidation in May 2021.
[11]
Former
Dish Network
and
Sling TV
executive Warren Schlichting became CEO in December 2022.
[49]
References
[
edit
]
- ^
a
b
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.
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- ^
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- ^
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.
- ^
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.
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2021
.
- ^
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.
S&P Global
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2021
.
- ^
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.
Mergr
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2021
.
- ^
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.
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2021
.
- ^
a
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.
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.
- ^
a
b
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.
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. Retrieved
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.
- ^
a
b
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.
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- ^
a
b
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.
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.
- ^
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.
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- ^
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.
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- ^
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.
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.
- ^
a
b
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.
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. Retrieved
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.
- ^
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.
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.
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. Retrieved
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.
- ^
a
b
c
d
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.
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. Retrieved
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.
- ^
a
b
c
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.
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. Retrieved
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.
- ^
a
b
c
d
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.
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.
- ^
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.
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. Retrieved
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.
- ^
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.
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. Retrieved
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.
- ^
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. Retrieved
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.
- ^
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.
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. Retrieved
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.
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.
- ^
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.
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. Retrieved
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.
- ^
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.
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. Retrieved
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.
- ^
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.
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.
- ^
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.
- ^
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c
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- ^
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.
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.
- ^
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. Archived from
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.
- ^
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.
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. Retrieved
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.
- ^
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.
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.
- ^
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.
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.
- ^
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.
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.
- ^
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.
- ^
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.
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.
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- ^
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.
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- ^
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- ^
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- ^
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.
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.
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.
External links
[
edit
]