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LegalShield
Formerly
  • Sportsman's Motor Club (1972–1976)
  • Pre-Paid Legal Services, Inc. (1976–2011)
Company typePrivate
IndustryLegal services
Founded1972; 52 years ago (1972)
FounderHarland Stonecipher
Headquarters
Ada, Oklahoma
,
U.S.
Areas served
  • United States
  • Canada
Key people
Products
Services
  • Legal services
  • identity theft monitoring and restoration
Revenueest. $400 million[1] (2014)
OwnerMidOcean Partners
Stone Point Capital[4]
Further Global[5][6][7]
Number of employees
700[8] (2014)
Websitelegalshield.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 by Harland Stonecipher in Ada, Oklahoma,[13] on August 8, 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 for $650 million and subsequently changed its name to LegalShield.

Services

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LegalShield

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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. The company's membership plans are sold as employee benefits, through its multi-level marketing division, and direct to consumers.[9] LegalShield's family plans typically cover unlimited phone consultations with its network of independent provider firms, some calls or letters, review of personal legal documents, and creation or updates to wills.[14] LegalShield also provides some representation during Internal Revenue Service audits[15] and for civil cases, motor vehicle conflicts, and more. For services not covered by the plan, members receive a reduced rate at the provider firm.[14][16]

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In late 1999 the company rolled out a new product, a "Legal Shield" card that offered 24-hour access to legal representation at an additional cost of $1 per month to members of Pre-Paid’s family plan. The company developed the product in response to growing reports of police profiling during the summer of 1999.[17][18][19] By September 2000, more than 100,000 customers had purchased the card.[20] The card was meant to reduce harassment against "minorities and other motorists" during traffic stops and other interactions with police. It sold particularly well among people of color.[21] By 2014, the card was included in all LegalShield policies.[22]

IDShield

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The company also markets IDShield, a privacy and reputation management service that also provides identity theft monitoring and restoration.[23][24] The service connects customers with a licensed private investigator who interacts with creditors, financial institutions, and law enforcement on behalf of the customer. IDShield also offers a mobile app for communicating with the investigator and receiving status updates.[25][26]

In December 2021, U.S. News & World Report gave IDShield a rating of four out of five stars. The publication praised the service’s private investigator offering and family plans but noted that IDShield does not provide credit simulation to play out the impacts of different financial scenarios.[26]

History

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Exterior of the company's headquarters in Ada, Oklahoma (2012)

Sportsman's Motor Club

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LegalShield started as Sportsman's Motor Club in 1972.[8][27] Harland Stonecipher (1938–2014) was the company's founding president and chief executive officer (CEO).[28][29] 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.[22] 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.[22][13]

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The club changed its name and incorporated as Pre-Paid Legal Services, Inc. in 1976,[30] becoming the first company in the United States to provide pre-paid legal plans for individuals.[22] 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.[22] The company began using multilevel marketing to grow sales in 1983, partnering with a company called TVC Marketing Associates. Within a few years, sales doubled from $4 million to $8 million, and Pre-Paid Legal acquired TVC in 1985.[31] Between 1982 and 1986, the company grew rapidly, doubling its business every year with sales ultimately increasing from $2.5 million to $42.2 million.[32] By 1987, Pre-Paid was the biggest provider of individual enrollment legal insurance in the United States, covering nearly 500,000 subscribers in 22 states.[33][34] During this time, much of the company’s efforts focused on "preventive law" – providing clients with legal counsel to help prevent a matter from needing to go to court in the future.[34][35]

Pre-Paid Legal went public in 1984.[36] Pre-Paid was first listed on the NASDAQ, then moved to the American Stock Exchange in 1986,[37][38] followed by the New York Stock Exchange in 1999, where it was listed as "PPD".[29][39][40] From 1996 to 1999, the company's sales increased by almost 500%, to $155 million.[35] From 1996 to 2001, the company quadrupled its customer base to 1.2 million people and repurchased $90 million of company stock without taking on debt.[41] In 1998 Pre-Paid acquired The People's Network, a marketing company based in Dallas.[42][43] That same year, Equities magazine ranked Pre-Paid Legal as the #1 fastest-growing AMEX company in America.[44] 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.[45][14]

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.[46]

In 2003, the company moved into a new corporate headquarters in Ada, Oklahoma.[14] In November 2006, Pre-Paid announced plans to spend $27.4 million to repurchase shares owned by executives.[39] Stonecipher stepped down as president and CEO in 2010. Randy Harp and Mark Brown became co-CEOs, while Harp also became company president. Stonecipher continued to be the chairman of the company’s board.[14]

LegalShield

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In January 2011, Pre-Paid Legal agreed to merge with entities formed by MidOcean Partners, a New York private equity firm that describes itself as "focused on the middle market".[47] The deal closed on June 30, 2011, and the company once again became privately held.[48] In July 2011, Rip Mason began serving as LegalShield's CEO. On September 10, 2011, the company announced that it would change its name to LegalShield as part of an overall re-branding initiative.[49]

In July 2014, Jeff Bell replaced Mason as CEO, and Mason became chairman of the board.[50]

Stone Point Capital, another private equity firm, purchased a majority stake in LegalShield from MidOcean Partners in 2018.[51] 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][52] The venture was a failure, and was discontinued in February 2021.[53]

In 2020, the company began releasing market research insights. The LegalShield Law Index shares the company’s own analysis of indicators of the financial health of American households and small business. The company’s Housing Activity Index is part of the Law Index; the Real Estate Index is a similar but separate offering.[54][55] Another research product, the Economic Stress Index, gauges consumers' most pressing financial and legal concerns.[56]

IDShield

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In 2003, PPLSI introduced its Identity Theft Shield product (later rebranded as IDShield), initially provided in partnership with Kroll Inc.[14] By January 2022, IDShield had more than one million members.[26]

Controversies

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In 2001, a Wyoming attorney general press release 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.[57][58] 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.[28] 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).[59] 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.[60] Throughout the process of updating its financial results per the SEC's direction, the company maintained that it stood by its accounting practices.[61]

In 2004, approximately 250 plaintiffs filed about 30 lawsuits in Alabama against Pre-Paid, all of which were dismissed or settled by 2006.[39] 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[28] and required them, in November 2005, to pay $9.9 million in punitive damages.[62] TheStreet.com reported that Pre-Paid faced additional lawsuits filed by 400 Mississippi plaintiffs which were ultimately settled.[39] 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.[62] The company and the U.S. Chamber of Commerce, which had Stonecipher on its board of directors,[29] called the lawsuits "frivolous" and "abusive".[63]

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.[28] Two weeks later, Pre-Paid filed 2004 financial statements approved by its auditor, Grant Thornton.[64] 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.[39]

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.[citation needed] Pre-Paid changed its marketing materials in 2009 after regulators found the company's claims about ADRS misleading.[65] 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.

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.[66]

References

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  1. ^ a b Silcox, Beth Douglass (March 2, 2015). "Company Spotlight Equal Access, Equal Adaptability: LegalShield's Moral Imperative to Grow". Direct Selling News. Plano, Texas: VideoPlus. ISSN 1554-6470. Retrieved March 8, 2017.
  2. ^ "Company Information: Leadership". LegalShield. Archived from the original on February 11, 2017. Retrieved March 8, 2017.
  3. ^ "LegalShield Executive Team". LegalShield USA. Retrieved 8 July 2021.
  4. ^ Udland, Tyler (27 February 2018). "Stone Point to Buy Majority Stake in LegalShield From MidOcean Partners". S&P Global. Retrieved 28 May 2021.
  5. ^ Udland, Tyler (10 September 2020). "LegalShield accelerates deadline for $135M add-on TLB to Sept. 11". S&P Global. Retrieved 28 May 2021.
  6. ^ "Further Global Capital Management and Stone Point Capital Acquires LegalShield". Mergr. Retrieved 28 May 2021.
  7. ^ "Companies". Further Global Capital Management. Retrieved 28 May 2021.
  8. ^ a b Burkes, Paula (September 7, 2014). "Executive Q&A: LegalShield chief comes home to Oklahoma roots". The Oklahoman. Oklahoma City: The Oklahoman Media Company. Retrieved February 24, 2017.
  9. ^ a b Weiss, Debra Cassens (7 April 2016). "Insurer offers legal insurance directly to consumers for $16.25 a month". ABA Journal. Retrieved 24 June 2020.
  10. ^ a b Rose, Neil (29 November 2018). "Slater & Gordon backs app offering legal advice for £24 a month". Legal Futures. Retrieved 24 June 2020.
  11. ^ Rose, Neil (20 May 2021). "Exclusive: Pioneering legal services advice app shut down". Legal Futures. Retrieved 29 May 2021.
  12. ^ "LegalShield Income Disclosure".
  13. ^ a b Swanson, Eric (November 11, 2014). "LegalShield founder and community booster Harland Stonecipher dies at 76". Ada Evening News. Retrieved March 9, 2017.
  14. ^ a b c d e f Grant, Tina, ed. (2011). "Pre-Paid Legal Services, Inc.". International Directory of Company Histories. Vol. 120. Detroit, MI: St. James Press.
  15. ^ Miller, Linda (26 June 1983). "Pre-Paid Legal Adds IRS Audit Insurance". The Daily Oklahoman. p. 27.
  16. ^ Brooks, George (July 1994). "Pre-Paid Legal: A Lesson from a Little Old Lady". Equities. 42 (7): 21.
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  19. ^ Harris, David A. (2003). Profiles in Injustice: Why Racial Profiling Cannot Work. New York: New Press. p. 116. ISBN 9781565848184. Retrieved 23 February 2022.
  20. ^ Aguirre, Adalberto (2003). Racial and Ethnic Diversity in America. Santa Barbara, CA: ABC-CLIO. p. 59. ISBN 9781576079836. Retrieved 23 February 2022.
  21. ^ Haynes, V. Dion (10 September 2000). "Firm Peddles Insurance Against Police Bias". Chicago Tribune.
  22. ^ a b c d e Martin, Douglas (November 20, 2014). "Harland Stonecipher, Insurance Pioneer, Dies at 76". The New York Times. Retrieved March 7, 2017.
  23. ^ Nadel, Brian (19 May 2020). "IDShield identity theft protection review". Tom's Guide. Retrieved 25 July 2020.
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  25. ^ "IDShield recognized by advisory firm". The Journal Record. 14 February 2018. Retrieved 23 February 2022.
  26. ^ a b c Hampshire, Kristen (18 January 2022). "IDShield Review and Prices". U.S. News & World Report. Retrieved 23 February 2022.
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  28. ^ a b c d Davis, Melissa (February 22, 2005). "Pre-Paid Weathers Guilty Verdict". TheStreet.com. Retrieved March 6, 2017.
  29. ^ a b c "U.S Chamber Reappoints Harland Stonecipher, CEO of Pre-Paid Legal Services, to Board of Directors". United States Chamber of Commerce. June 27, 2005. Archived from the original on December 2, 2006. Retrieved March 7, 2017.
  30. ^ "Form 10K Pre-Paid Legal Services, Inc". United States Securities Exchange Commission. December 31, 2010. Retrieved June 26, 2017.
  31. ^ Thompson, Roger (November 1987). "Ready, Fire, Aim". Nation's Business. p. 77.
  32. ^ Brooks, George (July 1994). "Pre-Paid Legal: A Lesson from a Little Old Lady". Equities. Vol. 42, no. 7. p. 21.
  33. ^ Reid, Jeanne (April 1987). "-- Prepaid Legal Services: They Offer Advice without Criminally High Prices". Money. Vol. 16, no. 4. p. 43.
  34. ^ a b Urbanski, Al (August 1987). "Lawyers go mass market". Sales & Marketing Management.
  35. ^ a b Bjornstad, Randi (23 June 1999). "Legal Insurance Business Gains Momentum in U.S.". The Register Guard.
  36. ^ Gene Lehmann (August 23, 2011). "New firm to rebrand Pre-Paid Legal in Ada". The Ada News. Retrieved 26 June 2017.
  37. ^ The Big Book of Home Business Company Directory. Ouvrage Collectif. June 21, 2016. p. 48. ISBN 9786050462043. Retrieved March 9, 2017.
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  39. ^ a b c d e Duhigg, Charles (November 13, 2006). "Why Short Sellers Want to Crash the Tupperware Party". The New York Times. Retrieved March 7, 2017.
  40. ^ "Hardland Stonecipher". The Oklahoman. November 12, 2014. Retrieved March 9, 2017.
  41. ^ "Oklahoma-Based Pre-Paid Legal Services Boasts of Strengths". The Daily Oklahoman. 22 March 2002.
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  45. ^ Price, Marie (2 July 2009). "Okla.-based Pre-Paid Legal Services celebrates 10 years in Canada". The Journal Record.
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  48. ^ Winslow, Laurie (February 1, 2011). "Pre-Paid to Merge with MidOcean". Tulsa World..
  49. ^ "Pre-Paid Legal Services Becomes LegalShield". Pre-Paid Legal Services. Retrieved September 22, 2011.
  50. ^ PR Newswire. "LegalShield Names Jeff Bell as Chief Executive Officer". www.reuters.com. Reuters. Archived from the original on 7 September 2014. Retrieved 7 September 2014.
  51. ^ "Stone Point to Buy Majority Stake in LegalShield From MidOcean Partners". The Wall Street Journal. 27 February 2018. Retrieved 5 July 2020.
  52. ^ Oliver, Gill (16 September 2019). "'Lawyer in your pocket' app service ramps up mission to disrupt UK legal sector". TechTribe Oxford. Retrieved 24 June 2020.
  53. ^ "Archived copy". Archived from the original on 2021-05-18. Retrieved 2021-11-15.{{cite web}}: CS1 maint: archived copy as title (link)
  54. ^ "Index: Faster recovery seen for homebuilding industry". The Journal Record. 11 June 2020. Retrieved 23 February 2022.
  55. ^ "Strong home sales, construction anticipated to fuel expansion". The Journal Record. 15 January 2021. Retrieved 23 February 2022.
  56. ^ Smart, Tim (22 October 2021). "Americans Sour on Biden, Economy". U.S. News & World Report. Retrieved 23 February 2022.
  57. ^ "Newell letter" (PDF). Archived from the original (PDF) on 2002-10-15. Retrieved October 23, 2009.
  58. ^ "Pre-Paid settles Wyoming case". The Oklahoman. 3 December 2001. Retrieved 27 August 2020.
  59. ^ Morgenson, Gretchen (April 18, 2003). "Exchange to Warn Investors on Companies". The New York Times. Retrieved March 7, 2017.
  60. ^ Fletcher, Amy (September 15, 2002). "Prepaid legal is a cheaper way to get lawyer's services". Denver Business. Retrieved March 9, 2017.
  61. ^ Winslow, Laurie (26 May 2001). "Ada, Okla.-Based Legal Service Plan Developer's CEO Outlines Reporting Plan". Tulsa World.
  62. ^ a b Davis, Melissa. "Verdict Hammers Pre-Paid". TheStreet.com. Retrieved March 7, 2017.
  63. ^ "Chamber Joins Miss. Case against Frivolous Lawsuits[;] Pre-Paid Legal Services Targeted Improperly". United States Chamber of Commerce. November 24, 2004. Archived from the original on August 16, 2012. Retrieved March 7, 2017.
  64. ^ Davis, Melissa (4 March 2005). "Pre-Paid Gets Clean Bill From Auditor". The Street. Retrieved 28 August 2020.
  65. ^ Mecoy, Don (July 27, 2010). "FTC ends investigation of Pre-Paid Legal". The Oklahoman. Retrieved March 7, 2017.
  66. ^ Bernick Jr., Bob (October 30, 2008). "Shurtleff's Fundraising Trounces Hill's | Deseret News (Salt Lake City) Newspaper | Find Articles at BNET". FindArticles.com. Archived from the original on October 31, 2009. Retrieved October 23, 2009.
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