{"id":18647,"date":"2019-03-14T06:00:27","date_gmt":"2019-03-14T11:00:27","guid":{"rendered":"http:\/\/www.sequenceinc.com\/fraudfiles\/?p=18647"},"modified":"2019-03-15T06:53:17","modified_gmt":"2019-03-15T11:53:17","slug":"lularoe-pyramid-scheme-lawsuit","status":"publish","type":"post","link":"https:\/\/www.sequenceinc.com\/fraudfiles\/lularoe-pyramid-scheme-lawsuit\/","title":{"rendered":"LuLaRoe Pyramid Scheme Lawsuit"},"content":{"rendered":"

\"\"<\/a>And there is\u00a0 another lawsuit against LuLaRoe<\/a>. The\u00a0 MLM\u00a0 that sells leggings of questionable taste appears 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<\/a> and it wants the court to seize $34 million in assets<\/a> since owners Mark and DeAnne Stidham are a flight risk. And then the state of Washington sued LLR<\/a>, alleging it is a pyramid scheme:<\/p>\n

\u201cLuLaRoe tricked consumers into buying into its pyramid scheme with deceptive claims of high profits and refunds for unsold merchandise,\u201d Ferguson said in a news release. \u201cInstead, many Washingtonians lost money and were left with piles of unsold merchandise and broken promises from LuLaRoe. It\u2019s time to hold LuLaRoe accountable for its deception.\u201d<\/p><\/blockquote>\n

The newest lawsuit was filed this month 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\u2019ve written here):<\/span><\/p>\n

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\u2019s 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.<\/p><\/blockquote>\n

Here is where it gets more interesting:<\/p>\n

Income earned through the Leadership Bonus Plan significantly dwarfed retail profits for top consultants. At a Leadership Conference themed, \u201cBe the Light\u201d hosted at the Riverside Convention Center in California in January 2017, Defendant Brady asked Consultants to publicly state their last month\u2019s total retail sales and bonus checks. Consultants, at Defendant Brady\u2019s 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.<\/p><\/blockquote>\n

They’re laying out the case that people are really paid for recruiting, rather than being paid for selling the products. That’s a key element in defining something as a pyramid scheme<\/p>\n

The lawsuit goes on to explain the typical MLM scam\u2026 get the downline to buy a whole bunch 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 \u201cbuy more, sell more\u201d concept, which is done to encourage inventory loading.<\/p>\n

And then there are the false income claims.\u00a0 Print materials distributed by LLR say:<\/p>\n