Thursday, 19 November 2009 00:00

First PPD Gets SEC'd, Then it Gets FTC'd. It Seems to be a Bad Year for Ponzi Schemes.

When I first came out with the PPD research (which I released for free as a public service, may I add), many were doubtful as the market was literally manipulated upward. I feel by blog's patrons were confusing the alleged "scam's" fundamental viability over time (and ability to avoid regulatory discipline) with the overall movement of the market. As you can see below, things are not going well for this company. If one had faith in the research and rolled puts and protected shorts over, one should start seeing some decent gains. If I am right and this market is simply in a bubblicious bear market rally, any aggressive action by the SEC will drive this beta driven stock into the ground, making what you see today and last month look like an actual rally. Hey, it couldn't have happened to a better company.

Prepaid Legal press release:

Pre-Paid Legal Services Announces FTC Developments

ADA, Okla., Nov. 19 /PRNewswire-FirstCall/ -- Pre-Paid Legal Services, Inc. announced that on November 18, 2009, we received a proposed draft complaint from the Federal Trade Commission ("FTC") seeking permanent injunctive relief (there goes that revenue stream), disgorgement of proceeds (that will hurt, a lot) and other relief, including costs, relating to our Identity Theft Shield and Affirmative Defense Response System ("ADRS") Program. The proposed draft complaint alleges our ADRS program and related materials violate Section 5(a) of the FTC Act regarding asserted misleading representations, express or implied. The proposed draft complaint also names Harland Stonecipher, our Chief Executive Officer, and Mark Brown, our Chief Marketing Officer, as defendants (That is something. The officers of the company are named personally, as well as the entity itself). We previously received a Civil Investigative Demand from the FTC on March 23, 2007 on the ADRS program. We have made voluntary revisions to the marketing materials originally provided to the FTC in 2007 and 2009. The FTC may decide to commence federal court proceedings with this proposed draft complaint. The ultimate outcome of the matter is not determinable but we will vigorously defend our interests in this matter.

Let's see what comes of this. If the SEC hits them, I would consider this a penny stock.

Previous opinions, and more than a few "I told 'ya so"'s' on the Flim Flam Scam:

  1. Flim, Flam, Scam: Would a PPD Ponzi and Pyramid scheme cause your wealth to Scram? Wednesday, 18 March 2009
  2. Reggie Middleton's Continued Public Service Announcement on the Flim Flam Scam Friday, 03 April 2009
  3. A Demonstration of How PPD Management is Destroying the Company Tuesday, 07 April 2009
  4. Additional Commentary on PPD Tuesday, 07 April 2009
  5. The Flim Flam Scam gets SEC'd - I'm not going to say I told you so, again! Tuesday, 06 October 2009

Last modified on Thursday, 19 November 2009 00:00


  • Comment Link Reggie Middleton Saturday, 21 November 2009 05:42 posted by Reggie Middleton

    Actually, I think the SEC has made it clear that they are quite intent on rehabbing their image and reputation. Ms. Shapiro doesn't appear to be planing around. She has produced more SEC enforcement in a year than I am aware in the history of the SEC.

    Chances are if they issued an official fact finding inquiry, they feel they are on to something. They could do investigative research (like I, and others have) without the subpeona.

  • Comment Link jarret Friday, 20 November 2009 13:36 posted by jarret

    I think we all will agree that it is a little scary to be hoping/counting on the SEC doing their job :-)

  • Comment Link Reggie Middleton Friday, 20 November 2009 13:26 posted by Reggie Middleton

    Remember, part of the likely reason the SEC is looking into them is their share buyback program which I think is literally a ponzi scheme. It is the share buybacks combined with low volume that allows bthem the ability to manipulate and levitate the stock. Any sanction by the SEC and the stock collapses without this artificial support.

  • Comment Link mjfpilot Friday, 20 November 2009 13:11 posted by mjfpilot

    It's up over 9% today.

  • Comment Link ReallySparky Friday, 20 November 2009 11:48 posted by ReallySparky

    I checked this morning and short interest had exploded on the stock since yesterday. Up 18.04%, short interest now is 17.20% of float. I believe the slight run up is a result of HFT trading, surley the 70.50% institutional owned shares will be gradually sold off over the coming weeks, those guys are not stupid, or perhaps the ramp was done on purpose for the institutions to get out? Agree with Jarrett, extremely hard to trade this market for the little man or woman. How long can the powers that be, continue this charade?

  • Comment Link NDbadger Friday, 20 November 2009 10:47 posted by NDbadger

    but really, isn't it just an opportunity to take the short up?

  • Comment Link NDbadger Friday, 20 November 2009 10:46 posted by NDbadger

    it's weird.

  • Comment Link jarret Friday, 20 November 2009 10:24 posted by jarret

    This stock is a perfect example of how challenging it has been to be short any stocks over the past 6 months. Even with the SEC and FTC it is still approx 20% higher than when it was first discussed on this site.

    At one point the fundamentals of companies will matter again and I for one hope that happens sooner rather than later. I think we are all in agreement on the "fundamentals" of PPD as I cant imagine who is looking at this company and seeing postive risk/reward on the long side.

  • Comment Link NDbadger Thursday, 19 November 2009 16:13 posted by NDbadger

    I too expect another big leg down in PPD tomorrow. Will probably be in the money by then. I too believe it should be a penny stock.

  • Comment Link ReallySparky Thursday, 19 November 2009 16:07 posted by ReallySparky

    NDbadger, It trades in the 30's because Motley Fool recommeded it on November 5. Wait till Joe sixpack gets home tonight and checks his etrade account...

    Pre-Paid Legal Services, Inc. Cited by The Motley Fool as Undervalued Stock PPD.N
    ADA, Okla., Nov. 4 /PRNewswire-FirstCall/ -- Pre-Paid Legal Services, Inc.
    (NYSE: PPD) has been listed as one of 20 undervalued small cap company stocks
    by "The Motley Fool" Analyst and Contributor Anand Chokkavelu in a recent
    article updated on October 31.

    In developing the list of undervalued small cap companies -- those with market
    capitalization between $200 million and $2 billion -- Mr. Chokkavelu
    considered both positive earnings, through the price/earnings (P/E) ratio, and
    the positive free cash flow (P/FCF) ratio for the past five years. As noted
    in the article, "We want companies that are both accounting profitable and
    generating cash off of that profitability." Among the 20 small cap companies,
    PPD's ratios were listed as P/E (7.3) and P/FCF (6.3).

    "This is another in a series of favorable articles about Pre-Paid Legal
    Services and we're pleased to see this recognition," said Harland C.
    Stonecipher, Pre-Paid Legal Services Founder and CEO.

    In addition to small cap companies, "The Motley Fool" article, "The Most
    Undervalued Stocks in the Market," examines the stocks in the banking and oil
    industry. It was originally published on August 21, 2009.

    About PPD

    We believe our products are one of a kind, life events legal service plans.
    Our plans provide for legal service benefits provided through a network of
    independent law firms across the U.S. and Canada, and include unlimited
    attorney consultation, will preparation, traffic violation defense,
    automobile-related criminal charges defense, letter writing, document
    preparation and review and a general trial defense benefit. We have an
    identity theft restoration product we think is also one of a kind due to the
    combination of our identity theft restoration partner and our provider law
    firms. More information about our products and us can be found at our homepage

    Forward Looking Statements

    Statements in this press release, other than purely historical information,
    regarding our future plans and objectives and expected operating results,
    dividends and share repurchases and statements of the assumptions underlying
    such statements, constitute forward-looking statements within the meaning of
    Section 21E of the Securities Exchange Act of 1934. The forward-looking
    statements contained herein are based on certain assumptions that may not be
    correct. They are subject to risks and uncertainties incident to our business
    that could cause actual results to differ materially from those described in
    the forward-looking statements. These risks and uncertainties are described in
    the reports and statements filed by us with the Securities and Exchange
    Commission, including (among others) those listed in our Form 10-K, Form 10-Q
    and Form 8-K, and include the risks that our membership persistency or renewal
    rates may decline, that we may not be able to continue to grow our memberships
    and earnings, that we are dependent on the continued active participation of
    our principal executive officer, that pending or future litigation may have a
    material adverse effect on us if resolved unfavorably to us, that we may have
    compromises of our information security, that during an economic downturn in
    the economy consumer purchases of discretionary items may be affected which
    could materially harm our sales, retention rates, profitability and financial
    condition, that we could be adversely affected by regulatory developments,
    that competition could adversely affect us, that we are substantially
    dependent on our marketing force, that our stock price may be affected by
    short sellers, that we have been unable to increase our employee group
    membership sales and that our active premium in force is not indicative of
    future revenue as a result of changes in active memberships from cancellations
    and additional membership sales. Please refer to pages 15 - 17 of our 2008
    Form 10-K and pages 7 and 8 of our September 30, 2009 Form 10-Q for a more
    complete description of these risks. We undertake no duty to update any of the
    forward-looking statements in this release.

    SOURCE Pre-Paid Legal Services, Inc.

    George Snyder of Pre-Paid Legal Services, Inc., office, +1-580-421-6339, cell,
    © Thomson Reuters Limited. Click for restrictions.

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  • Comment Link NDbadger Thursday, 19 November 2009 15:47 posted by NDbadger

    amazing that this thing still trades above $30.

  • Comment Link NDbadger Thursday, 19 November 2009 15:44 posted by NDbadger

    almost in the money but have never given up in this one. I continue to believe it will pay off handsomely.

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