It's not easy to hide a multimillion-dollar residence in the rural Oklahoma town that

Pre-Paid Legal Services

(PPD)

calls home.

But Pre-Paid's many critics are convinced that's just what Pre-Paid is trying to do. They say the entire top floor of Pre-Paid's new corporate headquarters, hailed as "Ada's first skyscraper," is actually a lavish palace for the company's overindulged CEO.

To bolster their claims, they point to a new report issued by SEC Insight. The corporate disclosure Web site cites public documents to support a conclusion that CEO Harland Stonecipher will soon occupy the penthouse suite in Pre-Paid's new $30 million home. The comments come on the heels of a similar report

published last month in

TheStreet.com

.

"In a maneuver highly suggestive of corporate executives using public company coffers as a private piggy bank, we acquired plans that show Pre-Paid Legal's new corporate headquarters building includes a penthouse comprised of almost 5,000 square feet of residential space," wrote SEC Insight, an independent firm that's not affiliated with the

Securities and Exchange Commission

. "This may just be one mighty fine corporate perk. ... If so, it would be out of sync with the sensibilities of a post-Enron-Tyco world."

Pre-Paid has borrowed roughly $20 million -- sacrificing its debt-free status in the process -- to construct the new six-story building. Based on publicly available figures, the company is paying about four times the going rate for new construction in the Ada market. And it is footing the bill at a time when its core business, selling legal policies through so-called multilevel marketers, is struggling to grow.

"Perhaps they're getting into the new business of executive housing, since they've found that the business of selling worthless legal policies is not that lucrative any more," speculated Peter Cohan, a Massachusetts investment strategist with no position in Pre-Paid's stock. "If that's the case, they should disclose that."

But Pre-Paid has said nothing about the residential nature of its new top floor.

SEC Insight noted that the floor -- featuring a three-bedroom primary residence and a one-bedroom guest suite -- has been zoned as residential property. But it said that Pre-Paid itself has failed to discuss the purpose of that arrangement.

"We found no disclosures in Pre-Paid's May 2003 proxy indicating that the company provides compensation for residential space to any executives or board members of PPD (but the new building is only being occupied now)," SEC Insight states. "We'll be especially curious to see what next year's proxy says."

Cohan, for one, is suspicious. He's seen the shares of other companies -- such as

Enron

and

Tyco

(TYC)

-- plunge after huge sums of money were thrown at pet projects. And he's now wary that Pre-Paid could be poised for a similar fall.

"Especially considering the drop-off in their basic business, you have to wonder whether this is really the best time to be spending lots of money on a plush corporate headquarters," he said. "If I were a shareholder, I would view this as a very bright red flag."

As a matter of policy, Pre-Paid refuses to comment for stories by

TheStreet.com

because it believes the coverage is biased. But Tulsa money manager Fredric E. Russell stepped in with some defense of the company. He pointed out that critics are merely speculating about who will occupy the top-floor executive suite and -- more important -- who will pick up the tab.

But SEC Insight has already tackled the first of those two questions.

"Plans give suggestion that the company's executive suite will be on the fifth floor," the firm wrote. "Notably, the largest office (Mr. Stonecipher's?) also appears to be close to an easy access point for going up to the sixth-floor residence."

Still, Russell downplayed the arrangement. He said that plenty of public companies -- including his hometown

Williams

(WMB) - Get Report

-- 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.