LuLaRoe will soon be facing legal action from the state of Washington after its attorney general called the women’s clothing company an “illegal pyramid scheme.”
Bob Ferguson announced Friday a plan to file a lawsuit against the multi-level marketing company, saying it misled consultants with deceptive claims about its operating policies, KXLY reported. The attorney general’s office claimed that consultants were pushed to recruit new consultants rather than selling the company’s clothing, which included misleading claims about how much money they could make each month.
Ferguson’s office detailed other allegations of misleading practices, including consultants who were told they could make $60,000 to $75,000 per year while working as little as 20 hours a week. But the majority of Washington residents who sold LuLaRoe products said they made less than $10,000 in profits, his office said, and close to one-third said they lost money while trying to sell LuLaRoe products.
Those who tried to back out were met with even more challenges, the report noted.
“The company also promised 90 and 100 percent refunds for consultants who wished to stop selling LuLaRoe products. Consultants were told they could return items they had purchased in the last year, but some never received their refunds,” the report claimed. “One woman returned $3,500 worth of items, and still had not received her refund six months later.”
The impending lawsuit from the state of Washington is not the only legal trouble to hit LuLaRoe in recent weeks. As Business Insider reported in December, the company was also facing a $49 million lawsuit from its chief clothing supplier, Providence Industries, claiming that LuLaRoe had been avoiding paying its bills for seven months.
The supplier also claimed that LuLaRoe was actually insolvent and that its founders — Mark and DeAnne Stidham — were using shell companies to hide their assets so they could live extravagantly while the company itself was unable to pay its bills.
The lawsuit claimed that when Mark Stidham was confronted with the overdue bills, he responded by telling the company the following.
“Look guys, I am not going to pay you guys a f***ing dime unless a judge orders me to pay it, and DeAnne and I will take our two to three hundred million dollars to the Bahamas, and f*** everything.”
In Washington, Attorney General Bob Ferguson has asked any state residents who experiences difficulties while working as consultants for LuLaRoe to contact his office’s Consumer Resource Center at 1-800-551-4636, or by filing a complaint online.