The Pre-Paid Legal Compensation Plan

Do you think your multi-level marketing company makes it hard for participants to earn a living? Well you haven't seen Pre-Paid Legal! It's next to impossible for an associate to earn a real living selling their "plans" to unsuspecting customers. Here are the numbers...

Below is a screenshot of the Pre-Paid Legal website as of April 8, 2008. The plan for selling memberships is simple. If you sell a membership that costs the customer $26 a month, they say you can be paid $50 to $182.5 for that membership. (Althoug the chart shows $25 is actually paid out to the lowest level associates, where most of the PPL reps sit.)

The money paid out is an advance against future commissions. So you might receive $50, but that is all you will get for that membership for the whole year.

But here's the catch that they don't tell you: 50% of people who buy PPL memberships cancel them within the first year. Chances are, you'll have to pay back some of that advance. How lucrative is that?

This document gives more information about the commission structure, but still you see that unless you recruit, you're going to be stuck at $25 per plan you sell. And that's your payout for the entire year on that plan (while you cross your fingers and hope the person doesn't cancel!).

Is It Just a Glorified Pyramid Scheme?

Pre-Paid Legal Services, a $359 million multi-level marketer of legal expense plans based in Ada, loves a good story.

Pre-Paid's founding legend is such a whopper. In 1969, company founder Harland Stonecipher was involved in a car accident. The other driver survived the crash. But, according to Stonecipher's memoir, "I faced thousands of dollars in legal costs stemming from an accident in which I was blameless."

Stonecipher's version is incomplete. Business Week Online interviewed his attorney at the time and reviewed copies of the suits. The attorney said that Stonecipher sued first for roughly $125,000. The other driver later sued Stonecipher for less. He ultimately settled for $3,000.

According to the attorney, Stonecipher's version "made a lot better story if he was sued first."

As its employees, customers, and shareholders have seen, Pre-Paid's entire operation is based on such "better stories."

Sales recruitment

Pre-Paid's operation depends on recruitment of new "associates" who sell Pre-Paid policies and recruit other associates.

Pre-Paid's associate recruitment relies on telling better stories. At Pre-Paid sales conventions, thousands of associates and recruits listen to passionate speeches. The parking lots are full of Humvees, Mercedes, and Maseratis.

Len Clements, a multilevel marketing expert, offers an eyewitness account of 2000's Pre-Paid recruitment meeting. According to TheStreet.com, Clements listened to Tommy Vu, the 1980s infomercial star widely sued by disgruntled students of his $15,000 real-estate sales "boot camp."

"Tom Vu takes out a five-dollar bill and wraps it around the microphone stand," recalled Clements, "Then he asks the audience, �If I said you could take this $5 for $1 of your own, what would you say?'

But Pre-Paid's recruitment conventions exclude story-damaging details. According to Robert FitzPatrick, president of Pyramid Scheme Alert, these include:

The average Pre-Paid associate takes home under $3 weekly;

Many of Pre-Paid's 341,000 associates never recoup the $249 they pay to access the Pre-Paid "opportunity;"

Half its associates leave and half its customers terminate their policies annually; and

Pre-Paid prepays a year of sales commissions but forces associates to pay them back with interest if they don't meet their sales targets.

Stonecipher declined to comment on the number of levels in Pre-Paid's marketing structure, each level's number of people, its turnover, its average associates' earnings, or the percentage of associates who earn over $30,000. Such details might not make a good story.

Customer closing

Pre-Paid also omits pesky facts from its customer sales pitches. According to an Alabama lawsuit, associates are instructed to tell prospective customers that Pre-Paid's coverage offers unlimited legal access and coverage. In an issue of Pre-Paid's in-house magazine, Connection, David Savula, a leading Pre-Paid associate recruiter, wrote: "Does our product cover everything? Yes. So if somebody asks does it cover this or does it cover that, we're going to say, �Yes.'"

Contrary to Savula's claim, Pre-Paid's written policies limit coverage. Cases involving bankruptcy, alcohol, drugs, preexisting conditions, divorce, annulment, child custody, and many others are covered in a limited way.

Will-writing and contract reviews are among the few services covered for free by the Pre-Paid policies.

Its Alabama attorney defends the gap between associate's words and Pre-Paid's contracts by noting that it cannot be held responsible for the verbal assurances of its non-employee associates.

Stonecipher did not describe the policies as offering unlimited coverage. He pointed out that there are different levels of policies and that they cover different services.

Shareholder scams

The Securities and Exchange Commission (SEC) has twice forced Pre-Paid to restate its financials. In 1994, Pre-Paid wanted to do a public stock offering, however the SEC said no unless Pre-Paid expensed its customer acquisition costs instead of amortizing them. Pre-Paid fought the change but ultimately capitulated - devastating its balance sheet. Stockholders' equity fell 90% to $2.4 million; assets declined 69% to $11.1 million; and 1993 net income of $306,000 became a net loss of $613,000.

In 2001, the SEC again forced Pre-Paid to restate its results. Pre-Paid went from treating sales agents' commissions as an asset which it amortized, to expensing them immediately. Pre-Paid slashed its 2000 per-share earnings 42% to 81 cents and its 1999 results 66% to 57 cents.

Stonecipher said that Pre-Paid should treat the commissions as an asset the way life insurance companies do, however, the SEC did not agree.

Pre-Paid's disclosure of and protection against lawsuits are flimsy. Its recent quarterly report details numerous lawsuits filed against Pre-Paid. Stonecipher declined to estimate the suits' total damages. But Pre-Paid's SEC filing estimates that just two assess $415 million in damages. Yet Pre-Paid has reserved a mere $3.3 million against all these lawsuits.

Many believe Pre-Paid's stock is due to fall. Pre-Paid's short interest is higher than all but three NYSE stocks. With 8 million Pre-Paid shares sold short and a 186,000 share average daily trading volume, it would take 44 days to cover this short position.

But Pre-Paid is in a Mexican standoff with these short sellers. According to a hedge fund manager with a large Pre-Paid short position, "either you're a cult believer in Pre-Paid - because much of the stock is held by people who are associated with the company - or you're short. And there's very little in between. The sales associates are only buying - never selling - and the company has its big buyback program [Pre-Paid has spent $145 million since April 1999 buying 6.5 million shares]. Meanwhile, the shorts can't short the stock anymore. So the stock's just going to sit there until there's a major event."

Stonecipher's comment on why the short interest in Pre-Paid is so high: "Ask the shorts."

In 2002, Pre-Paid took on a $30 million credit line to finance a $30 million headquarters edifice and to buy back more stock. To avoid default, Pre-Paid must retain over 50% of its customers with policies in force for under a year. In 2002, that rate was a meager 51.8%. Pre-Paid must keep the ratio of Total Liabilities to Tangible Net Worth below 375 percent. But Pre-Paid's stock repurchase program lowered its net worth, so its bank loosened the ratio from the original 250 percent to avoid a default.

Stonecipher did not comment on the loosening of this covenant but claimed that Pre-Paid is in no danger of violating any of them and that the bank with which it has the credit line had visited Pre-Paid recently to lend it more money.

Prepaidlegal first quarter 2008 results

Prepaid Legal Services, Inc., a publicly traded company, reported first quarter 2008 results recently. Not sure if this is just a sign of the times, due to our nationwide economic downturn, or if something within the company or the product line is to blame.
Here’s the story, taken from PR newswire:
“Pre-Paid Legal Services Announces 2008 1st Quarter Membership and Recruiting
Results.
ADA, Okla., April 1, 2008 /PRNewswire-FirstCall/ — Pre-Paid Legal
Services, Inc. (NYSE: PPD), reported new memberships produced and new sales
associates enrolled for the 2008 first quarter. During the 1st quarter of
2008, new sales associates enrolled decreased 16.9% compared to the first
quarter of 2007. Memberships produced decreased by 13.2% while new membership
fees written decreased by 10.6% and our active membership base increased 1.0%
compared to the comparable period of the previous year.
On a sequential quarterly basis, new associates enrolled decreased 28.4%;
new memberships produced decreased 6.6%, new membership fees written decreased
6.6% and the active membership base decreased by 8,843 memberships.”
For more information on Prepaid Legal, visit the corporate website

Red Flags of Fraud at Pre-Paid Legal

Today Fraud Discovery Institute and Barry Minkow released their Top Ten Red Flags for Fraud at Pre-Paid Legal Services Inc. (NYSE:PPD). The company is clearly on a decline, with recruitment numbers suffering and overall memberships.

Here are some of the more interesting points in the FDI report:

*The company admits that recruiting is the lifeblood of Pre-Paid Legal, with COO Randy Harp saying: “And as goes recruiting, so goes membership sales.” Well recruiting is down 25% in the first 6 months of 2008, and down 31% in the second quarter alone.
*In spite of a huge drop in cash generated from operations in 2008, management went on a stock buyback spree. They even borrowed $10 million to do it! The company spent $27.7 million to repurchase shares in the first half of 2008.
*Memberships are down 8% compared to one year ago, yet the company is trumpeting increased revenues, due solely to higher average membership fees.
*Associates were paid $3 million less in the second quarter of 2008 than the same quarter last year, another testament to the decline of the Pre-Paid Legal business.
*Pre-Paid Legal advertises “one of a kind” services which give “access to valuable benefits that cover the most common legal needs that you will encounter” and “level the playing field” in the legal system. Yet the product is materially flawed, as demonstrated by the terrible retention rates. About 50% of new customers cancel their legal plans within the first year. Before the end of the third year, more than 75% of customers have canceled their plans.
*Pre-Paid Legal ripped off a Washington Times columnist, .
*The associates aren’t selling many memberships! Only about 20% of the Pre-Paid Legal associates sell one or more memberships to outside customers.
*Similarities to YourTravelBiz.com (YTB), a company recently sued by the California Attorney General , could mean trouble for Pre-Paid Legal. Multi-level marketing companies that purport to sell products to retail customers have long carried on a charade that included pretending that their distributors were actually selling products to third-party customers. Since no one could prove otherwise, the charade was plausible. With a service-based business like YTB or Pre-Paid Legal, however, it’s much harder to pretend that sales are being made. The numbers are in black and white, and the numbers proved that YTB agents did very little selling of services, in favor of massive recruiting that led to the Attorney General calling it a “gigantic pyramid scheme.”

TraVerus Travel Network Opportunity

Welcome to TraVerus Travel Network

TraVerus enables you to run a successful travel business right from the comfort of your home. Whether you are a stay at home mom, a retiree, or one of the millions of full time, hard working, yet underpaid and under-appreciated employees out there—we want to help you become financially independent by working in the 7 trillion dollar travel industry.
What Makes Traverus Different!!!

There are three ways you can get involved with TraVerus Travel Network:

Become an Associate
(Associate fee of $20 and a $40 annual renewal)

Once you become an Active Associate – by joining our program and paying an Annual fee – you will receive the following benefits:

• As an Associate of TraVerus you are able to earn commissions on your personal sales.
• Associates are able to have a personalized TraVerus website for an additional $19.95 per month.

Commission Earned by Associates Sale of TraVerus Consultant and Agent Packages:

On each "Referring Travel Consultant Package":
You earn – $50.00

On each "Certified Travel Agent Package":
You earn – $70.00

Once an Associate, you may upgrade your status at anytime to either a Referring Travel Consultant or Certified Travel Agent and take advantage of TraVerus's Commission Program by

• Purchasing the "Referring Travel Consultant Package" for $199.95, which includes the $119.95 RTC Signup fee, $20 annual Associate fee, and $59.95 1st month Website fee

- or -

• Purchasing the "Certified Travel Agent Package" for $399.90, which includes the
  $319.95 CTA Signup fee, $20 annual Associate Fee, and $59.95 1st month Website
  fee.

Become a Referring Travel Consultant
($119.95 one time sign up fee + $20 Associate fee + $59.95 monthly service fee = $199.95)

When you join TraVerus by purchasing the "Referring Travel Consultant Package," you are eligible to receive the following benefits:

Turnkey Personalized Web Sites –

• Travel Portal: Earn 65% of the Commissionable Agency Commission on vacation
  packages or cruises that are booked through your Traverus Travel Booking Engine.
• Business Overview Site : Cutting Edge technology allows you to simply send people to your site so they can evaluate, purchase and enroll. Immediately they're in business.

Referring Travel Consultant Basic Training –

• While enjoying huge savings on travel, you will also be able to complete basic levels of Travel Agent Training.
• While enjoying huge savings on travel, you will also be able to complete basic levels of Travel Agent Training. --->
• 20% Commissions For Travel Referred to Company to be booked by a Certified Travel Agent.
• Ability to earn on our lucrative compensation plan by selling agent packages.
• Enjoy deeply discounted Member Trips and condo stays.

When you initially join as a Referring Travel Consultant of Traverus Travel, you may upgrade your status to Certified Travel Agent by doing one of the following:

• Paying an additional $250.00 to Purchase the "Certified Travel Agent Package," (advanced agent training and testing included in the price, and, you must take the training and complete the advanced Agent test)or…
• Make two personal sales in your first 10 days and upgrade to the CTA package for $100.00, (advanced agent training and testing included in the price, and, you must take the training and complete the advanced Agent test).or…
• Make 7 sales in your first 30 days you are eligible for the CTA Package and Certification training free. (you must take the training and complete the advanced Agent test).

*CTA's must also study and pass the Traverus Travel Certified Agent Test.

Become a Certified Travel Agent
($319.95 one time sign up charge + $20 Associate fee + 59.95 monthly service fee = $399.90)

When you join TraVerus by purchasing the "Certified Travel Agent Package " you are eligible to receive the following benefits in addition to those offered in the "Referring Travel Consultant Package":

• 75% Commissions of the eligible Agency Commission for travel you book. (You book direct with the suppliers and totally handle the booking). Earn 75% of eligible Agency Commission on vacation packages or cruise bookings that are booked through the Traverus Travel Booking Engine.
• Plus as a Certified Travel Agent that has passed the advanced agent training program you are eligible to earn a 10% over ride on the travel commission that your personally enrolled agents earn and a 5% over ride on their personally enrolled agents. (your second level)
• CTA's earn 50% Commission of Bookings From Referring Travel Consultants – (work total booking from a referral consultant.)
• Member Trips - TraVerus member trips are your answers to creating a new lifestyle for you, your family, your friends, and anybody else you know. With your member trips, you can take that trip you've been dreaming about, anywhere in the world... Monthly! TraVerus brokers trips around the world at wholesale prices.
• FAM Trips – Only for Qualified Certified Travel Agents Short for Familiarization Trips, "FAM Trips," are specially discounted travel destinations and packages that are available to Certified Travel Agents only. (booking travel)
• Ability to earn on our lucrative compensation plan by enrolling new Traverus Agents.
• Enjoy deeply discounted Member Trips and condo stays.
• Enjoy traveling at agent rates.

With our turnkey business, you can have your own "Online Travel Business" offering real products and services you can be proud of. When you are a CTA, you open a whole new world of profitabiliy to your business as you can become a specialist in as many areas of travel as you like. Our travel training is world class, online and ongoing. Combine the travel commissions with the unlimited income potential from referring other agents, and you have the most powerful home based business in existence!

There is NO other Compensation Plan that we know of that pays this well! Whether you're full-time, part-
time, or sitting back referring a handful of people that purchase Traverus Travel products and services. This program can pay off BIG!

Personal Sales

Personal Sales
As a Referring Travel Consultant or a Certified Travel Agent, you may now earn Personal Sales Commissions on sales that YOU generate.

• If you are an RTC and Shawn purchases the Certified Travel Agent Package you get $70.00
• If you are a CTA and Shawn purchases the Certified Travel Agent Package you get $80.00
• If you are an Executive and Shawn purchases the Certified Travel Agent Package you get $100.00

There is No Limit on the number of Agent Packages that qualify for this Personal Sales Commission.

Personal Sales Enroller Bonus – You earn 50% Match of all Personal sales commissions earned by your personally enrolled Agents.

When you become an RTC or CTA, you may earn Personal Sales Commissions and other Bonus Commissions from the Traverus Travel Agent Commission Program, which is explained in the next few sections!

Coded Bonus

Coded Bonus

Qualified Agents are paid "Coded Bonus" commissions on all personally generated sales after your first 2 sales – with no limits. So, beginning with your third personal sale, you will be eligible to earn both the "Personal Sales" commissions AND "Coded Bonus" commissions.

Not only will you be "coded" to these sales, but you will be "coded" to their first 2 sales and the first 2 sales of their first 2 and so on.

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100% Matching Coded Bonus

150% Matching Coded Bonus

Matching Residual

Executive Coded Bonus

Executive Coded Business Builder Program
If you are a Qualified Traverus Executive, starting with your seventh personally enrolled Agent and continuing with unlimited width you are eligible to receive a "Business Builder Leadership Bonus." The bonus is paid starting with your seventh person, personally enrolled, then paid on that persons first six personal enrollments, then that persons first six enrollments etc., to infinity. This "Executive Coded Business Builder Program," is paid one time only when a new Agent is enrolled in your organization as outlined above. The amount of the "Executive Coded Business Builder Program" is $5 dollars to Executives, $7 dollars to Regional Executives, $10 to National Executives, $12 to International Executives and $15 to Presidential Executives.

Executive Matching Coded Business Builder Program
When you develop Executives within your organization that are qualified for the "Executive Coded Business Builder Program," there is an "Executive Matching Coded Business Builder Program," that is paid to the first qualified upline National or above. The amount of the "Matching Payment" is equal to the "Bonus" earned. As with the "Business Builder Leadership Bonus," the Matching payment is paid one time only when a new Agent is enrolled in your organization.

3x9 Matrix Residual Bonus

3x9 Matrix Residual Bonus (Agents Only)
Starting the month following a Sale, commissions for the "Matrix Residual Bonus" can be earned. (If you make a sale in April of 2008, that person will immediately be placed in your matrix; you will not be paid on that new sale, in the matrix until the following month. In this example, May of 2008. You will be paid on June 15th for your May matrix.) The Power Matrix design is a 3x9 Forced Matrix. That means when qualified, it pays 3 levels wide by 9 levels deep. In a 3x9 matrix, each level triples in size starting with 3 on your first level (second level equals 9, third level equals 27, and so on).

To be "qualified," you must have a minimum of one active, personally enrolled agent. If for any reason you do not meet the minimum requirement for qualification at the end of any given month, you will not be paid.

When you follow our proven education and marketing systems, once your matrix commissions are enough to pay for your monthly subscription fee, we will automatically deduct it from your TraVerus Commission Program check, so you will never pay "Out-of-Pocket" – That's Incredible!

RTC/CTA & Platinum Travel Club Matrix Qualification Levels
When you become an active Agent that personally generates one "Travel Agent Package" Sale, you are eligible to earn "Matrix Residual Bonus" commissions. If you personally generate one sale you are eligible to earn commissions through four levels of the Matrix. At three personal Sales you earn five levels, five personal sales you earn six levels. At seven personal sales you earn seven levels. Once you have made seven personal sales you are eligible to participate in the "Traverus Platinum Travel Club.," and also participate in the Executive promotional programs. In the event an Agent would like to progress deeper into the Traverus Travel Network compensation plan they must enroll in and maintain their participation in the "Platinum Travel Club".

To be a member of the "Platinum Travel Club", you must sell a minimum of one Platinum Travel Club membership monthly. (Which may be your own membership.) The monthly recurring cost of the "Platinum Travel Club" is $99.95. When you achieve the organizational depth (requirements shown below) you become eligible to earn commission on level eight and level nine. You must have the minimum number of active Agents on the last calendar day of each month to earn income from that respective level in your matrix.

Considering the fact that each level triples in size – this can be a tremendous amount of "Residual Income".

Very simply, in a 3x9 forced matrix, a maximum of three sales fit on your front line, and all other sales made by you or those above you are forced down to your second level and beyond – called "spillover." When those below you make sales, they too can only have three on their front line, so all others "spillover" to the next level. In the event that an Agent in your matrix is Terminated or Cancelled your matrix will dynamically compress bringing people from directly below the affected position up higher in your pay line. In the event that an Agent is suspended for more than 60 days then that Agent will also be purged from the system and the matrix will compress once again.



Travel Portal


Seneca Johnson
832-640-0286