LuLaRoe Pyramid Scheme Lawsuit

Another day, another lawsuit against LuLaRoe. The leggings MLM seems to be on the verge of collapse. A lawsuit filed in 2018 by Providence, a company that supplied LLR with goods first demanded $49 million. More recently, Providence says it is owed $63 million and it wants the court to seize $34 million in assets since owners Mark and DeAnne Stidham are a flight risk. And then the state of Washington sued LLR, alleging it is a pyramid scheme:

“LuLaRoe tricked consumers into buying into its pyramid scheme with deceptive claims of high profits and refunds for unsold merchandise,” Ferguson said in a news release. “Instead, many Washingtonians lost money and were left with piles of unsold merchandise and broken promises from LuLaRoe. It’s time to hold LuLaRoe accountable for its deception.”

The newest lawsuit has been filed by plaintiffs Tabitha Sperring, Paislie Marchant, and Sally Poston. The lawsuit sums up the scam (coincidentally or not in language that sounds an awful lot like things I’ve written):

Although putting in the effort, Plaintiffs, like other LuLaRoe consultants, failed because they were doomed from the start by the LuLaRoe plan that systematically rewarded recruiting consultants over retail sales of the product. This was a plan where LuLaRoe paid a significant portion of every dollar that Plaintiffs and other consultants paid for LuLaRoe products to others in the form of bonuses, regardless of the consultant’s actual retail sales. This was a plan where millions were paid to those few at the top (primarily Mark Stidham and Deanne Brady), at the expense of the many at the bottom. LuLaRoe was started by Mark Stidham and Deanne Brady (who essentially sit at the very top of the pyramid) in order to enrich themselves through a calculated endless chain scheme. Upon information and belief, Stidham and Brady have earned hundreds of millions of dollars in profit for themselves on the backs of women who were seeking a legitimate business opportunity where they could earn income while spending more time with their families.

Here is where it gets more interesting:

Income earned through the Leadership Bonus Plan significantly dwarfed retail profits for top consultants. At a Leadership Conference themed, “Be the Light” hosted at the Riverside Convention Center in California in January 2017, Defendant Brady asked Consultants to publicly state their last month’s total retail sales and bonus checks. Consultants, at Defendant Brady’s direction, announced the amounts of their monthly bonus checks, which ranged from $85,000 to $307,000. Compared to their monthly retail sales, which ranged from $12,000 to $25,000, it was clear that the primary opportunity for compensation was not through sale of LuLaRoe apparel, but bonuses earned through recruiting.

The lawsuit goes on to explain the typical MLM scam… get the downline to buy bunches of inventory so the upline gets commissions, regardless of whether the downline will actually be able to sell that inventory. Inventory purchases are encouraged as a participation activity, rather than something that represents retail sales. LuLaRoe promotes a “buy more, sell more” concept, which is done to encourage inventory loading.

And then there are the false income claims.  Print materials distributed by LLR say:

  • MAKE A FULL-TIME INCOME DOING PART TIME WORK. BECOME A LULAROE
    INDEPENDENT BUSINESS OWNER
  • WANT TO EARN FULL-TIME INCOME FOR PART-TIME WORK? ASK ME HOW?

Where have we heard these types of claims before?

You’ve heard of Mary Kay math? Well there’s LuLaRoe math too. Mark Stidham made claims at a recruiting event that you can do a party in 5 hours (including set-up, take down, and work ahead of time). 4 parties a week is 20 hours. You’ll sell about 100 pieces a week if you do the 4 parties every week. Take a couple of weeks off each year, and you’ve sold 5,000 pieces in a year. With an average profit of $12 to $15 per item, you’ve just made $60,000 to $75,000 a year working 20 hours a week.

No one tells you how you’re supposed to get that many parties to happen, though.

The lawsuit goes on and on. Read it and substitute Mary Kay for the company name and cosmetics for pieces of clothing. The scam is nearly identical.

 

15 Comments

    1. wasrings99

      The State if Washington is doing this partly because of the changes in LLR return policy. I think the AG was overwhelmed by the amount of complaints they received about it & that’s why. The fact that they are a pyramid scheme is just one piece of the AG’s case against them.

  1. Shay

    One thing that kills me about MLm’s Is they wanna have their cake and eat it too when it comes to hiring reps and [insert whatever name here] as independent contractors. In the real world, you can be hired by using your sIngle business LLC number but these MLM’s want you to use your social security number despite the HUGE inventory options. They tell you to open an LLC but god forbid you use your LLC # number to sign up with.

  2. Neverpink

    Not to mention Mark’s been quoted as saying he’s going to skip town with his wife Deanne and head to the Bahamas and “eff everything” (I’m paraphrasing). He’s really creepy during those recorded videos to their retailers – condescending, blaming them for poor sales (when the merchandise is garbage and nobody wants it anymore), and I’ve seen retailers call him “Dad” or “Father”! Absolutely cultish and creepy.

    Deanne has encouraged her top sellers to get weight loss surgery in Mexico, with kickbacks going to a relative of hers. She wants all her top sellers to be “size medium or small”. Deanne goes live daily on Instagram and spouts incomprehensible word salad at hungry retailers. It just blows my mind.

    It’s a real rabbit hole if you choose to dig around.

  3. Cam

    You people are insane. The business model is simple by the clothing at wholesale and he engaging enough to appeal to customers. You don’t have to build a team to make money. The fact that woman think they can buy the inventory at an initial investment of as little as $4300 just sell it dumb. You have to have a personality. Social media sales required you to do more than walk drops or live sales where you are as interesting as cardboard. You do need a personality and an ability to have customers invest in you personally. My wife does sell Lularoe. She has taken a $6000 inventory to $40000. She was worked big hours the first year but now works 80 hr per month to bring in $6-7k profit. She doesn’t have a team that she makes money from, I wish she would but she is satisfied with where income and effort. If this was a true MLM or scam she would need others under her to make money. Plus check the results of the claimed law suit that was thrown out due to misinformation and lack of facts.

    1. Victim blaming is an emotional control technique used by cults to shunt any responsibility for the fraud and used to shame victims. You’re in the cult too now.

      Reading comprehension. Improve yours.

      Did you miss the links to the latest lawsuit? You know, the one filed by the Attorney General for the State of Washington. I’m pretty sure he knows what he’s doing.

      Good luck when the pyramid collapses.

      1. Cam

        It is true that I am uneducated and especially weak at grammar. But my statement is true if this was a MLM scam you wouldn’t be able to earn good money without a team. Also the so called leader compensation is not based on inventory purchases it is based on team sales. So once again the lawsuit is not factually based.

        1. Lazy Gardens

          It WAS based on orders until a couple of attorney generals made legal noises. Then they abruptly changed it.

          The shrieking from the uplines, whose income was cut by 50-75% or more, was intense.

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