It is ironic.
Prepaid Legal was a network marketing company, which means that distributor of their services can build a downline and earn income off their distribution channel.
In 2001, the Wyoming Attorney General issued a press release announcing "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 paid $4,000 in lieu of civil penalties, reimbursed the state for $1,000 in costs, and refunded $2,000 to participants who claimed to have been misled. In July the same year, the company was forced by the U.S. Securities and Exchange Commission (SEC) to stop counting the commissions they paid out to sales associates as assets, instead of expenses, the same way other types of insurance companies do, though they did not release their updated, halved, 2000 earnings figures until February 2002.
Pre-Paid Legal has faced ongoing troubles in Missouri. After the company settled complaints in 2001, a number of similar suits arose. The company won in a jury trial against two plaintiffs, but after losing others, including one in which a former customer was awarded $9.9 million settled with more than 400 others. The company, and the U.S. Chamber of Commerce of which Pre-Paid Legal CEO Harland Stonecipher is a director, have described the lawsuits against the company as "frivolous" and "abusive".
Pre-Paid Legal reported to the SEC that less than 25% of its sales representatives sold more than one insurance plan in 2005, but avoids reporting such information to prospective sales representatives.
In October 2009, Tulsa World reported that Pre-Paid Legal had been subpoenaed by the SEC for various documents including those pertaining to a stock repurchase program that Pre-Paid started in April 1999. (And in 2006, the company said it would repurchase $27.4 million of shares owned by executives.) The SEC reported that thus far that its demand for documents is a "fact finding" mission.
On November 19, 2009, Pre-Paid Legal announced that it received a complaint from the Federal Trade Commission (FTC). The proposed draft complaint alleged that Pre-Paid's "ADRS program and related materials violate Section 5(a) of the FTC Act regarding asserted misleading representations, express or implied." On July 27, 2010 the FTC ended its three year investigation of Pre-Paid Legal Services, Inc. without any action.
Ironically, Ackman was familiar with Pre-Paid Legal's MLM model, having owned a significant investment in them (Pre-Paid Legal) on the long side.
Are there any Ackman supporters that can explain his prior large LONG investment in MLM Pre-Paid Legal other than he was once again pumping an investment for his own gain? It seems very telling that Ackman's true conviction is only about which side he can currently pump for his own personal gain. The SEC and FTC are well aware of his motives behind his prior investments, unlike many Ackman worshippers today. Ackman is certainly not so altruistic, or can any supporters of Ackman explain his prior large long investment in Pre-Paid Legal? It apparently doesn't matter what side of a MLM investment he is on, so long as it makes him money.
What does it tell about Ackman..he is just a typical wall street pump and dump guy only to benefit him and his investors at the expense of companies and it's employees. I have a feeling we have case for illegal bear raid.