Leggings Company LuLaRoe Settles Pyramid Scheme Allegations –

LuLaRoe settles his lawsuit with the Washington Attorney General.


LuLaRoe, a California-based leggings company — perhaps better known as the multi-level marketing firm — has paid $4.75 million to settle the case of the Washington state attorney general, Bob Ferguson. allegations it worked like a pyramid scheme. LuLaRoe sells its wares through a network of independent retailers who are able to directly recruit others to sell the products.

Ferguson filed a lawsuit against the company and its executives, including co-founders Deanne and Mark Stidham, two years ago, claiming LuLaRoe’s business plan was misleading in that it returned work as an independent retailer selling leggings far more profitable than it really was. In reality, ICs earned next to nothing, while two executives at the top of the chain pocketed millions over the three-year period from 2016 to 2019. Many more who invested found themselves with significant debt and unsold inventory that was unredeemable due to what he called a “misleading refund policy”.

Photo by Aexandra Tran on Unsplash

Ferguson revealed that $4 million of the settlement will be distributed to approximately 3,000 state residents who were recruited under the guise of starting their own profitable businesses. “LuLaRoe tricked Washingtonians into signing up to his pyramid scheme with misleading claims and false promises,” Ferguson said. “As a result, thousands of people lost money and two people made millions through their scheme. Washingtonians deserve fairness and honesty, and accountability for those who break the rules.

He added: “While we thought we would eventually win the case – whether at trial or on a subsequent appeal – the expense would be enormous and the time senior management would have had to spend on litigation during the trial would have been a distraction from our business.

In a statement following the regulation, the AG’s office said, “Every Washington retailer who lost money under LuLaRoe’s pyramid structure will receive restitution.” And, Ferguson said, “LuLaRoe’s structure violated the state’s anti-pyramid law, which defines companies as pyramid schemes if they offer the opportunity to earn compensation primarily through recruitment, rather than sales.” by retail”.

In A Business Woman’s Tale, Katie Willis shares her journey as a LuLaRoe consultant. She paid $10,000 to join in April 2016, estimating she had around $80,000 in inventory when she was fully focused on the business and was making around $12,000 to $18,000 in sales. each month. However, just two years later, in 2018, Willis said she had about $50,000 in credit card debt with her company and was forced to cash in her 401(k) for the refund. She ended up with 3,000 pairs of LuLaRoe leggings in her house and had to sell her last 500 pieces for a dollar each just 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 requires the retailer to be more transparent about its business practices, including mandatory publication of a tax return detailing specifically how independent contractors could earn income. the money and the risks involved.

Sources:

LuLaRoe to pay $4.75 million to settle pyramid scheme lawsuit

LuLaRoe pays over $4 million to settle a lawsuit that alleged he ran a pyramid scheme

Millennial women have made billions from LuLaRoe. Then they paid the price.

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