Suite Dreams Keep Pre-Paid Critics Awake

Still, Russell downplayed the arrangement. He said that plenty of public companies -- including his hometown Williams (WMB Quote) -- spend money on fancy corporate apartments. But he did concede that Pre-Paid faces a possible backlash if it simply gives, rather than leases, the fancy digs to its CEO.

"Shareholders may not regard this as 'suite' dreams," Russell joked.

Currently, Stonecipher lives on a sprawling ranch that -- while valuable -- is located in one of the poorest counties in Oklahoma. He commutes roughly 40 miles to Ada and maintains his own private aircraft for longer trips. In the past, Stonecipher has been accused by the Internal Revenue Service of dodging tax payments on both his ranch and his airplane. Cohan is now wondering whether Stonecipher will soon raise eyebrows at the IRS again.

Specifically, Cohan questioned whether Pre-Paid plans to count Stonecipher's new living quarters as a business expense that can be deducted from the company's taxes.

"If they think they can somehow bury those expenses, maybe they're living too far from reality," Cohan said. "But they do seem to think that they operate with a different set of rules than the rest of the world."

Pre-Paid has already paid a high price for breaking some of those rules in the past. The company has been forced to change its accounting -- and slash its reported profits -- more than once. And it remains under investigation for possible insider trading violations that took place nearly a year ago.

Just last month, SEC Insight indicated that the current SEC probe may finally be heating up.

"As recently as Oct. 14th, we issued a renewed warning that the SEC had used a law enforcement-related exemption to block our access to [documents] here," the firm reminded on Monday. "This was new, as we had gotten a lot of docs before."

The SEC is questioning trades in Pre-Paid shares -- including a big insider sale by operating chief Randy Harp -- that preceded news of a dismal fourth quarter last year. The stock, which plummeted on the quarterly update, has spent an entire year recovering from that hit. Even after climbing 20 cents to $26.60 on Monday, it remains about $4 shy of the high it set last year.