Pre-Paid Legal's Colorful Workforce

Pre-Paid Legal Services(PPD Quote) says it just wrapped up its best recruiting quarter ever, signing on 45,962 new salespeople -- a 71% increase from last year. But new research by TheStreet.com suggests that the company is heavily reliant on a few rainmakers who use controversial hard-sell tactics that several state regulators are scrutinizing.

Pre-Paid, which declined to comment on the specifics of this article, relies on a system of grass-roots customer recruitment and intense recruitment of new recruiters to keep its revenue growing. The problem with that, says Len Clements, a prominent watchdog of the so-called multilevel marketing industry, was apparent at a Pre-Paid recruitment meeting he attended in December 2000.

Clements found himself in a room with 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, who has no financial stake in the company's stock. "Then he asks the audience, 'If I said you could take this $5 for $1 of your own, what would you say?' ...