The Leggings Firm LuLaRoe closes allegations of the pyramid scheme
LuLaRoe closes lawsuit with Washington’s attorney general.
LuLaRoe, a California-based leggings company – perhaps better known as a multilevel marketing company – has paid out $ 4.75 million to settle Washington Attorney General Bob Ferguson’s allegations of being a pyramid scheme. LuLaRoe sells its goods through a network of independent retailers who are able to direct others to sell the products.
Ferguson filed a lawsuit two years ago against the company and its executives, including co-founders Deanne and Mark Stidham. He claimed LuLaRoe’s business plan was misleading into the fact that working as an independent retailer selling leggings appears much more profitable. In reality, the ICs did next to nothing while two executives at the top of the chain pocketed millions in the three years from 2016 to 2019. Many others who invested had significant debt and unsold inventory that couldn’t be returned because of what he returned called a “misleading refund policy”.
Photo by Aexandra Tran on Unsplash
Ferguson announced that $ 4 million of the settlement will be distributed to an estimated 3,000 state residents who were hired under the guise of starting their own profitable business. “LuLaRoe tricked Washingtoners into buying into its pyramid scheme with misleading claims and false promises,” Ferguson said. “As a result, thousands have lost money and two people have made millions on their program. Washingtoners deserve fairness, honesty, and accountability for those who disobey the rules. “
He added, “Although we believed we would eventually win the case – whether in trial or on a subsequent appeal – the cost would be enormous and the time management would have spent on litigation during the process was one Distraction from our business. “
In a statement following the settlement, the AG’s office stated, “Any Washington retailer that has lost money under the pyramid structure of LuLaRoe will receive a refund.” And Ferguson said, “LuLaRoe’s structure is in violation of the state’s anti-pyramid schemes law, which defines companies as pyramid schemes if they allow for compensation primarily through recruitment rather than retail sales.”
On a businesswoman’s account, Katie Willis shares her journey as a LuLaRoe consultant. She paid $ 10,000 to join in April 2016 and estimated that she had around $ 80,000 in inventory when she was fully focused on the company and had sales of $ 12,000-18,000 every month. Just two years later, in 2018, Willis said she had about $ 50,000 in credit card debt from her company and had been forced to withdraw her 401 (k) to pay it off. She had 3,000 pairs of LuLaRoe leggings in her house and had to sell her last 500 pieces for a dollar each to get rid of them.
The company denied any wrongdoing in a consent decree. However, the settlement prohibits LuLaRoe from operating a pyramid scheme in the future and calls on the retailer to be more transparent about its business practices, including the mandatory publication of an income statement detailing how independent contractors can make money and the risks involved are connected.
LuLaRoe pays $ 4.75 million to settle the pyramid system dispute
LuLaRoe is paying more than $ 4 million to resolve a lawsuit alleging it implemented a pyramid scheme
Millennial Women Made LuLaRoe Billions. Then they paid the price.