I Bought the Law
Why Pre-Paid Legal Services Wants You
"How many people here have a car note or a bill you want to get paid?" he asks, and a sea of hands shoots up. "And how many of you have ever been mistreated?" Virtually everyone in the crowd, composed entirely of Africans-Americans like himself, has been done wrong.
All the more reason to join Pre-Paid Legal Services (PPL), Worthy says. As a regional executive director for the Oklahoma-based company, Worthy is offering would-be believers his weekly shtick about how a mere $26 a month gives PPL members access to a host of basic legal services. And the pitch seems to resonate with tonight's crowd. Many at the meeting--solidly working- and middle-class folks gainfully employed as nurses, teachers, mechanics--have been ticketed for red lights they swear they didn't run, and almost all heads nod at having signed contracts for cars or houses without examining the fine print.
For these reasons, many here tonight will join the ranks of PPL's 45,000-plus members in the Baltimore-Washington region. And in so doing they'll help solidify Baltimore's recently earned status as the second-fastest-growing market for PPL in the country.
Fueling PPL's growth in cities such as Baltimore is a two-pronged strategy that successfully targets African-American subscribers by offering protection against everything from traffic violations to racial profiling and by luring many to the company's sales force with the the promise of big money.
Often billed as the HMOs of legal services because they provide limited coverage at a flat rate, prepaid legal plans have been around since the 1970s. During the past decade such services have grown, with major insurers such as Aetna and legal-oriented dot-coms offering general legal services at reduced fees or as part of an employee benefits package. But PPL was the industry's pioneer, and remains its giant.
PPL was founded in 1972 by Harland Stonecipher, an Oklahoma attorney who studied prepaid legal plans in Europe in the 1960s and brought the idea home. Since then it has grown into a company that enjoys regular profiles in business magazines such as Forbes and Fortune, and in 1998 the firm boasted the fastest-growing stock on the American Stock Exchange, according to Equities Magazine. Its most recent annual report, filed in April with the U.S. Securities and Exchange Commission (SEC), touted $240 million in gross sales and a roster of more than 1 million members, about half of whom peddle the legal insurance for the company as well.
The coverage appeals to the sensibilities--and budgets--of middle-class people who need basic legal services but balk at $200-an-hour attorney fees. "An average member is your neighbor, the person down the street who has a problem with contracts, debt collectors, car repairs," says Jeff Lippman, a partner with Pikesville-based Weinstock, Friedman and Friedman, the law firm PPL contracts with to provide counsel to Maryland customers. In most cases, Lippman says, clients' concerns can be addressed over the phone rather than with a costly day in court. On a typical Monday, for instance, he and about 30 other attorneys at the firm field some 1,000 calls from PPL members.
"It's beneficial in that you can consult an attorney on minor misdemeanors you might be involved in such as shoplifting or speeding, and you get a qualified lawyer," says Jim Astrachan, public-relations chairperson for the Baltimore City Bar Association. "I think it's a very good product where it's aimed, and that is at the middle class."
But it is the sales opportunity that really draws people in. PPL works like an Amway-style pyramid (folks like Worthy prefer to call it economic empowerment): People at the top of the heap get commissions off others' sales; those just joining the company scurry to recruit others to climb the sales ladder and increase their profits. For a $249 fee you can begin your own "franchise," starting out earning $50 for each membership you sell, $32.50 for each membership inked by someone on your sales team, and so on--and earning higher fees as you sign up more members.
Drilling for more people was a task PPL, with close to 500,000 sales associates, seemed to excel at--until recently. From late 2000 into the spring of this year, the company was slapped with a string of class-action lawsuits by shareholder groups charging it with shifty accounting practices that inflated its profit figures. (It counted its sales associates' advanced commissions on sales as current income.) PPL's stock price tumbled as a result--from $48 to $10 a share between February and April of this year--and the settlement of one of the lawsuits cost the company $1.5 million. PPL is also the subject of an ongoing SEC investigation.
In the wake of all the litigation and scrutiny, PPL has changed its accounting methods, but it hasn't changed its quest for ever-broader markets for its products. And along with promoting itself as a potential financial windfall in largely black cities such as Baltimore, PPL has found a niche by addressing legal hot buttons such as racial profiling.
In 1999, following a campaign by PBS talk-show host Tony Brown to heighten awareness of police brutality in the aftermath of the attack on Haitian immigrant Abner Louima in New York, PPL's Stonecipher hooked up with Brown to hatch the company's "Legal Shield" card. "If Abner Louima, as they were taking him to that bathroom, had had a Legal Shield card, I don't believe it ever would have happened," Stonecipher told the New York Daily News in March 2000.
The card--the cost of which is included in the $26 monthly fee--supposedly affords added protection by advising police officers that members know how to exercise their legal rights, and by providing an 800 phone number with 24-hour access to an attorney. The assumption is that potentially abusive officers will think twice before acting. That assumption has attracted more than 100,000 customers, mostly in New York, to sign up for Legal Shield, but some critics question the premise, saying such a service won't deter police brutality.
"The issue of police brutality is not going to be resolved in showing an officer a card," says David Walsh-Little, managing attorney at St. Ambrose Legal Services, a grass-roots agency that handles home-ownership issues. "The minority of officers who would beat up someone [are] not going to be deterred by a card. Plus, that's assuming you've got access to a phone, assuming that you're not in custody."
Stonecipher's public comments notwithstanding, PPL officials deny that Legal Shield is intended to prevent police brutality, or that the company is specifically targeting the African-American market with the service. But they're not so reticent about touting the company as a vehicle for striking it rich. Lippman says Weinstock, Friedman and Friedman gets a set dollar amount for each member in Maryland "that comes in the form of a monthly check--and that's the biggest single check that we get." Worthy, 33, says he pulled down "just under six figures" last year. And suddenly it's not so hard to see why, week after week, people fill the chairs at the Pikesville Hilton. For at least 90 minutes, and maybe longer, they believe this could be a land of opportunity.
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