In October 2009, Andrew Amphlett, a recent MBA grad, and a financial analyst at Southern Cross LLC, was request to arrange an evaluation of Pre-Paid Legal Service's financial presentation along with its accounting methods. Pre-Paid Legal Services employed associates to market its plans that are legal to consumers who paid about $21 per month for access to the network of independent legal companies who supplied legal services for a fee that is fixed. In effect, Pre-Paid Legal Services was a multilevel marketing organization, or what is often perjoratively called a "pyramid scheme." Southern Cross intended to reflect adding the business to its shorts portfolio and subsequently the Cost Target Research confirmed a price objective of $36 per share and maintained a hold rating. The shorts fund contained companies that Southern Cross believed were headed for considerable stock price declines based on fundamental analysis. By October 2009, Pre-Paid Legal's stock price was trading at $43 per share, significantly higher than the recently established target cost of $36 per share of Price Target Research.
Southern Cross's portfolio manager had asked Amphlett to pay careful attention to the business accounting methods, and particularly to its policy of capitalizing and amortizing indirect outlays, rather than expensing them immediately. At the request of the SEC, it restated its financial statements in 2002, its independent accounting firm, and Deloitte & Touche, stepped down from the account. In October 2009, the Division of Enforcement of the Securities and Exchange Commission (SEC) requested information from Pre-Paid Legal Services about its fiscal, business, and accounting policies.
In the month of October 2009, the Division of Enforcement of Securities and Exchange Commission (SEC) demanded data from the Pre-Paid Legal Services relating to its monetary, commerce, and accounting policies.
PUBLICATION DATE: April 11, 2013 PRODUCT #: TB0329-HCB-ENG
This is just an excerpt. This case is about LEADERSHIP & MANAGING PEOPLE
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