The original complaint alleges that during the class period, Pre-Paid continually announced favorable earnings and growth in the number of 'associates' who sold its policies, when, in fact, many of its associates were no longer generating new business and were not repaying advances from the company and the company's earnings were manipulated and overstated by improperly capitalizing commission expenses and failing to write off uncollectible advances. As a result, Pre-Paid's stock traded at inflated levels during the class period, increasing to as high as $48.75 per share. On 01/17/2001, the Wall Street Journal published a story on Pre-Paid's accounting scheme. Upon these disclosures, Pre-Paid stock dropped to $20.00 per share.

By Order dated May 15, 2001, the Court (i) consolidated several actions under the above caption; (ii) appointed Lead Plaintiffs for the Class; and (iii) appointed Co-Lead Counsel for the Class.

On June 14, 2001, a Consolidated Amended Complaint (the “Complaint”) was filed. The Complaint asserted violations of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder against Pre- Paid, certain of its officers and directors, and for the first time also named Deloitte. Plaintiffs alleged that Pre-Paid, and certain of its officers and directors (collectively, the “Pre-Paid Defendants”), materially misstated Pre-Paid’s 1998, 1999, and 2000 financial statements. As against Deloitte, the Complaint alleged that Deloitte falsely represented during the Class Period that Pre-Paid’s 1998, 1999, and 2000 financial statements fairly presented Pre-Paid’s financial condition and results of operations in accordance with GAAP and allegedly falsely represented that it had audited those financial statements in accordance with GAAS. The Complaint claimed that the alleged misrepresentations and omissions caused the price of Pre-Paid stock to be artificially inflated during the Class Period, to the alleged injury and damage of the plaintiffs.

Deloitte moved to dismiss the Complaint, arguing, among other things, that Plaintiffs had not and could not plead that Deloitte acted with scienter and that the claims were barred by the statute of limitations. The Pre-Paid Defendants filed a motion to dismiss the Complaint also arguing, among other things, that scienter had not been adequately pled. By Orders dated March 5, 2002 and March 25, 2002, the Court agreed with Deloitte and the Pre-Paid Defendants and dismissed the District Court Action with prejudice.

Plaintiffs filed Notices of Appeal to the Tenth Circuit on April 2, 2002, April 23, 2002, and June 5, 2002.

The Parties have engaged in an extensive arms’-length mediation process utilizing the mandatory mediation program of the Tenth Circuit. Through that process and over the period of six months, the Parties negotiated an agreement in principle for the Parties to settle the Action with Deloitte, subject to the approval of the Court. The Action with respect to the Pre-Paid Defendants has not been settled and is currently still the subject of an appeal to the Tenth Circuit.

On December 10, 2004, the Court approved the $925,000 settlement with defendant Deloitte & Touche.

On September 18, 2006, the court entered the Mandate from the U.S. Court of Appeals for the Tenth Circuit. According to the Mandate, the judgment from the District Court granting the Pre-Paid Defendants’ motion to dismiss the action without leave to amend is affirmed. The Pre-Paid Defendants are the Pre-Paid Legal Sevices, Inc. and the five individual officer and director defendants.