Former LuLaRoe consultants are suing the company alleging the company stole millions if not billions of dollars from them through an illegal pyramid scheme. The class-action lawsuit filed in California is demanding the company pay back the consultants and bar LuLaRoe from operating and promoting the pyramid scheme.
In a Federal Court in March, attornies for a group of consultants provided the sordid details in the class-action filing.
According to the suit, LuLaRoe is a fraudulent pyramid scheme that preys on stay-at-home mothers. The company promotes the business as a way for mothers to make extra income for their families. LuLaRoe recruits women to join the company and promises that they will be able to sell their clothing.
Despite the claims made by the company to recruits, the suit alleges the company ran an illegal pyramid scheme from 2013-mid-2017. Additionally, they allege that LuLaRoe knew the company was an illegal pyramid scheme while they recruited women to join the company.
From the company’s inception until at least mid-2017, LuLaRoe paid the majority of their commissions and bonuses on the recruitment of new members. New members purchased start-up packages ranging from $5,000 to $9,000.00.
Members were given massive bonuses for bringing in new consultants to the pyramid. In fact, the rewards and commissions far exceeded the money consultants made in retail sales.
In order to gain new recruits, the company misled the women about the amount of money they could make by providing inaccurate financial statements. The suit alleges LuLaRoe told consultants to buy more clothing each month. They promised that by “buying more” that the consultant would “sell more.”
LuLaRoe enticed consultants to buy more by promising a 100% refund and buyback program. Also, the plaintiffs claim that LuLaRoe omitted that the quality of their clothing declined and that the market was saturated. At the height of LuLaRoe, more than 80,000 women worked as consultants.
At sales conferences, Deanne Stidham, the owner of the company, had sales leaders disclose their income publically. The women shared that they averaged $85,000 to $307,000 in bonuses for recruiting new members. However, their retail sales dwarfed the bonuses. The women said their retail sales ranged from $12,500 to $37,000 a month.
LuLaRoe did not pay bonuses or commission to members based upon their retail sales. Instead, the company lavished huge incentives to members to recruit new consultants into the pyramid. With onboarding costs ranging from $5,000-$9,000, there was a lot of money to be made in recruiting.
Despite the fact that most women struggled to sell their products, the company required that consultants purchase inventory every month. As a result, consultants ended up having garages and storage units full of clothing that they could not sell. However, the people at the top of the pyramid made millions off the losses of those at the bottom.
The suit points out that Washington State Attorney General is currently suing LuLaRoe for the same illegal structure.
Next, the plaintiffs allege that the company used sales calls to lie to consultants. In “opportunity calls.” DeAnne misled women about the amount of money they could make. She promised women could make a full-time income by only working part-time. Additionally, she insisted consultants could make $50,000 a month.DeAnne encouraged the woman to flaunt their sales and income to recruit others into the scheme. She consistently told women to “buy more” so they could “sell more.” However, she failed to disclose to the women that they would not be able to sell the clothing due to market saturation.
As a result of the lies, thousands of consultants lost vast sums of money. The plaintiffs in the case lost tens of thousands of dollars. Many found themselves in massive credit-card debt. Others faced foreclosure and bankruptcy due to their involvement in the company.
Attornies for the plaintiffs are asking for damages of “millions if not billions” of dollars. Additionally, they are asking the court to bar the company from promoting and recruiting anyone into the scheme. The suit also seeks money for restitution and exemplary damages.
The new class-action lawsuit is not the first of its kind against LuLaRoe. In 2017, a similar class-action suit sued the company for billions of dollars. That suit is currently in mediation. LuLaRoe is facing a lawsuit in Washington state brought by the attorney general. Then LLR is still battling a former supplier in a nearly $50 million suit for failing to pay for products.
Despite the legal wranglings, LLR carries on with business as usual. The company continues to recruit new members and rolls out new lines of clothing. Mark and DeAnne Stidham appear unphased that their lavish lifestyle has been built by ripping others off.
With more than a handful of civil cases against the company, there are still no criminal filings against LLR for fraud.
As the company continues to sink, many consultants dream of the day that DeAnne and Mark are escorted from their home in handcuffs. Until then, we will have to watch how the cases play out in court.
*Katie Joy is a columnist and hosts Without A Crystal Ball on Patheos Non-Religious Channel. She writes articles on parenting, disability advocacy, debunking pseudoscience, atheism, and crimes against women and children.
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