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Pyramid Scheme Alert (PSA) provides current and historical news items that are of interest to our members and visitors. None of the reports or commentaries is intended to imply that any of the referenced companies have been charged or convicted as illegal pyramid schemes.

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Class Action Lawsuit Against Pre-Paid Legal Services

Class Action Lawsuit Against Pre-Paid Legal Services

March 20, 2002

Lieff, Cabraser, Heimann & Bernstein, LLP and Dunn, Swan & Cunningham, P.C. announced today that a class action was commenced on March 1, 2002 in the United States District Court for the Western District of Oklahoma on behalf of all purchasers who at any time (the "Class Period"), purchased an "opportunity" from Pre-Paid Legal Services, Inc. to sell memberships for "legal insurance plans" (the "Class").

The defendants named in the complaint are Pre-Paid Legal Services, Inc., Harland C. Stonecipher, the Chairman and CEO of Pre-Paid Legal Services, Inc., and Randy Harp, the Chief Operating Office of Pre-Paid Legal Services, Inc.

If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from today. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiffs' counsel. To contact plaintiffs' counsel, contact Wendy R. Fleishman, Lieff, Cabraser, Heimann & Bernstein, LLP, 780 Third Avenue, 48th Floor, New York, New York, 10017; telephone: 212/355-9500; email:

The focus of the complaint is Pre-Paid Legal Service, Inc.'s sale of the ability to join an allegedly unlawful pyramid scheme, the members of which sell "legal insurance plans" ("memberships") and the chance to sell the memberships throughout the United States. Plaintiffs allege that the purchase of the "opportunity" is an investment contract security, and that this security is fraudulently marketed to the purchasers. Plaintiffs allege that defendants marketed the opportunity through a uniform scripted oral presentation in which sales agents (who were not registered as broker-dealers under applicable federal or Oklahoma law) represented to potential purchasers that they would earn more money and make more sales than they actually could or did. Specifically, defendants represented that the sale of a membership was an easy sale to a desirous audience and that the retention rate by consumers was higher than it was. Plaintiffs allege that Pre-Paid Legal Services, Inc. operates an unlawful pyramid sales scheme, in that the participants pay money and receive the right to sell products and the right to earn rewards for recruiting and training other participants.

Pre-Paid Legal Services, Inc. did not register the investment contract securities at issue with the Securities and Exchange Commission.

The complaint charges Pre-Paid Legal Services, Inc. and certain of its officers with violations of the Securities Act of 1933, the Securities Exchange Act of 1934, certain Oklahoma statutes, and various common-law claims.

Plaintiffs seek to recover damages on behalf of the Class and to obtain other equitable and injunctive relief. The plaintiffs are represented by Lieff, Cabraser, Heimann & Bernstein, LLP and Dunn, Swan & Cunningham, P.C., who have experience in prosecuting investor class actions and extensive experience in actions involving financial fraud. To learn more about Lieff Cabraser, please visit us on the Internet.

CONTACT: Lieff, Cabraser, Heimann & Bernstein, LLP, New York Wendy R. Fleishman, Esq., 212/355-9500 wfleishman@lchb.com.

This page last updated on 10/11/2004