silverstar (silverstarry) wrote in ohnotheydidnt,
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ohnotheydidnt

LuLaRich



 



Remember when all the #bossbabes on FaceBook were trying to get you to buy brightly colored leggings and come to their FaceBook live parties while telling you that joining their downline did not mean it was a pyramid scheme? At the height of their popularity in 2016, LuLaRoe reported almost $2 billion in total sales (thanks in no small part to the $5000 required for each new independent consultant to buy a starter package of clothes to sell). Women who wanted to join were told they could raise the $5000 by selling their breast milk, getting an interest free credit card, or borrowing the money from a relative.

Not at all shockingly, LuLaRoe was unable to sustain their MLM dominance, partly due to the noticeably shoddier fabric and large batches of moldy leggings being sent to their "retailers" (that's LuLaRoe speak for their independent consultants who bought leggings for $15 and resold them to their friends for $25).

Get some popcorn because there is a lot of craziness under the cut!


Some highlights/head scratchers:

The Mormon founders, Mark Stidham and Deanne Brady, hired many of their 14 children (and their spouses) to fulfill leadership roles at the company's headquarters (when they got married, she already had 7 kids, he had 4 kids, and they adopted 3 more). Their 23 year old son Austin was in charge of putting together a compensation package because "he was good at Excel."

They booked Mario Lopez for one of their first events because he was so cheap. All of the consultants in attendance got to take pictures with him. At a later event, they rented out Angel Stadium and hired Katy Perry to perform.

The customer service database was a giant Google doc that any of the employees could edit.

At LuLaRoe conventions and cruises, Mark would quote the Book of Mormon and compare himself to the Latter-Day Saints founder Joseph Smith.

In 1972, Deanne's parents wrote a book called "The Secret Power of Femininity: The Art of Attracting, Winning, and Keeping the Right Man for You," which included advice like "You must drop every suggestion in speech, apparel and manner that you are able to kill your own snakes or to take care of your own affairs or to spurn the guidance and care of man. The air of being able to kill their own snakes is just what destroys the charm of so many school teachers and competent business, career and professional women.” Another tidbit from the book: "Stand before a mirror in the privacy of your room and say to yourself, ‘I am just a helpless woman at the mercy of you big, strong men.’...Try a pretty pout, stick out your lower lip as much as to say, ‘I thought you liked me.’ Or stamp your feet daintily, saucily, and shake your curls as much as to say, ‘I am furious, but what can a little girl like me do with a big, strong man like you?’” According to The New York Times, Deanne's parents also ran something called the Femininity Forum where they charged girls $300 to learn how to behave in order to land a husband. Deanne used material from her parents' book in trainings.

LuLaRoe consultants were told that their ultimate goal was to “retire their husbands” (translation: make enough money to let their husbands quit their jobs). Before joining the top sales level, consultants and their spouses were interviewed and the husbands were pressured to quit their jobs so that their entire family income would depend on LuLaRoe. Despite the female empowerment message espoused by the company, the reality was that women would “be empowered at first, and then the husband was supposed to take over and the roles were supposed to be changed.” A woman who was a top earner for the company (she received commission checks of $20k-$40k PER MONTH for the existence of her downline) said that after she brought her husband into the business, Deanne began referring to her as "Paul's wife" (rather than by her actual name).

Deanne lost 72 pounds after having gastric sleeve surgery. She then began encouraging the other retailers to lose weight and have the same surgery. They had a group text named "Tijuana LuLaRoe Skinny's [sic]" for all the women who went to Deanne's doctor in Mexico to have gastric sleeve surgery. Deanne's sister was making weekly trips to escort these women to Deanne's doctor in Tijuana. One retailer said that after she refused to go to Deanne's doctor to get the surgery, her relationship with Deanne took a turn.

Deanne told the retailers to let their assistants and nannies "do the other things that aren't bringing in money for you" so that they could focus on work, which conflicted with the company's whole spiel that selling LuLaRoe was good for stay at home moms and allowed them to spend more time with their families.

When retailers began receiving wet, moldy, or stinky leggings, LuLaRoe blamed UPS and told them to try putting the leggings in the freezer or to sell them at half price. The problem became so prevalent that the dropdown menu on LuLaRoe's customer service page had a separate option for "stinky leggings."

Retailers were told to post on social media daily and to include the hashtag "becauseoflularoe" in order to credit the company with anything good in their lives, from buying a Louis Vuitton bag or going on vacation to having breakfast with their kids or buying a new car. One retailer posted a picture of herself in front of her house and said that Deanne got upset because she did not include the hashtag.

Like many MLMs, LuLaRoe targeted stay at home moms. They used the old bootstrap mentality to convince these women that their earning potential was limitless and directly related to how much effort they were willing to put into it. Retailers who were unable to make tons of money were told that they weren't dedicated enough or that they weren't putting forth enough time/money/effort (rather than the fact that the market was becoming oversaturated with their shoddy products or that people do not need a thousand pairs of leggings). When ordering products, they could choose specific articles of clothing (leggings, shirts, etc) but they could not choose the patterns. The boxes were a jumble of whatever prints got dumped in, which meant that sometimes retailers got stuck with unpopular prints they couldn't sell. Mark and Deanne said instead of complaining about getting fugly leggings that no one wanted to buy, they should see it as an opportunity.

In 2016, the top 0.01% of LuLaRoe retailers made over $150K a month in bonuses. 70% of the retailers made $0. The MLM expert interviewed for this documentary said that the people who make a lot of money in pyramid schemes are the ones who joined early. Recruiting and building your downline is the major income source, not the product sales. One consultant said that in her time with LuLaRoe, she spent about $76k on product and she made about $83k so her net profit was less than $10k. But she was making huge amounts of commission every month due to her downline. In 2017, LuLaRoe changed the structure of their bonus checks/commissions to being more sales-based. One retailer said that as a result, she went from receiving $6000 in bonuses per month to $800 per month.

At the same time, LuLaRoe implemented a new 100% buyback policy in April 2017, which meant that retailers could return any unsold merchandise for a full refund which resulted in two things happening: (1) people who were on the fence about becoming retailers jumped in because they felt there was no risk (2) there was a mass exodus of retailers who wanted to just get the hell out. LuLaRoe said that this 100% buyback policy had no expiration date and would exist indefinitely. They allegedly refunded over $100 million due to this buyback policy, but many retailers said that they never received their refunds. In July 2017, LuLaRoe announced that they were no longer offering the buyback program. In addition, they stipulated that anyone who had a downline would not receive any refunds until their bonuses had been removed. The buyback policy existed from April 25 - July 31.

In October 2017, a class action lawsuit was filed against LuLaRoe by a former retailer for breach of contract due to the discontinued buyback program (her case was settled in private arbitration). Over 50 lawsuits have been filed against the company in total.

The artwork used on multiple leggings had been stolen from artists. The artwork department at LuLaRoe had been told that they could use images they found on google and just change the images 20% to avoid being sued. The head of the art department said that they were expected to produce up to 100 new patterns per day. Multiple artists filed lawsuits against LuLaRoe for stealing their art.

Another lawsuit filed by clothing manufacturer MyDyer claimed that LuLaRoe owed them $49 million. Mark and the MyDyer CEO Daniel Kang were friends and part of a group called the Ghost Squadron for rich guys who own Swedish luxury cars called Koenigseggs. The MyDyer lawsuit accused Mark and LuLaRoe of hiding money in LLCs because they they were going to be sued. LuLaRoe had dozens of LLCs. They set up 17 LLCs in just one month (December 2017). LuLaRoe countersued and said that MyDyer owed them money.

For LuLaRoe's 2018 summer convention, they hired Kelly Clarkson to perform (instead of using the money to issue refunds that still hadn't been paid to retailers who sumitted their requests the year before).

In January 2019, the state of Washington filed a civil lawsuit against the company for operating as an illegal pyramid scheme. One major difference between a pyramid scheme (illegal) and an MLM (legal) is that in an MLM, the majority of income is derived from product sales (keep this in mind for later). Other requirements for a legal MLM: there must be a buyback policy, people should only be buying additional inventory after they have sold 70% of their existing inventory, and sales should be going to at least ten different customers (not just other reps/distributors). Other companies currently running legal MLMs: Avon, Mary Kay, Amway, Herbalife, Beachbody, Arbonne, Young Living, Younique.

Multiple members of the family were deposed (and the documentary includes footage!). They all played dumb, but so dumb as to be unbelievable. When asked what the address of the company was (a six story building where LuLaRoe was headquartered), Deanne said she didn't know. When her son Kenny, who was the VP of sales, was asked about the buyback program, he said he didn't recall. When Deanne's son Jordan, the head of leadership and culture, was asked what his understanding of a pyramid scheme was, he said, "I don't remember what my understanding of a pyramid scheme was at that time." Cut to a training webinar of Jordan telling LuLaRoe retailers, "We need to get away from being a pyramid scheme." Mark's present day response: "You have to put those comments in context. Most of us are not always precise with language."

During the deposition, Deanne was shown a video from a LuLaRoe conference where one retailer said that her last LLR check was $307k, $18k of which was what she sold in product. At a 2016 event, she and Mark presented another couple with a $1.4 million novelty check. When confronted with this fact, Deanne's response: "No, I don't think we did." Cut to a picture of Mark, Deanne, and a husband/wife team holding a check made out for $1,435,701.18. The memo line read, "LuLaRoe's 1st Million In Leadership Bonuses."

The Washington investigation said that two of the top retailers at the highest level each made over $2 million in bonuses between 2016 and 2019. In 2021, LLR settled the case with Washington state for $4.75 million. LLR still denies any wrong doing and claims that they made a business decision to stop the litigation by settling. They also had to agree to change their refund policy. The company still exists and the buy-in package is now ~only~ $499.

Since 2016, over 100 LLR retailers have filed for bankruptcy. One retailer said she had about $100k in product that she couldn't return when she left.

When a retailer named Courtney quit, other retailers were told that if they spoke to her or associated with her, they would be terminated as retailers.

When Sam Schultz, Deanne's nephew who served as LuLaRoe's events director, resigned, LuLaRoe's lawyers sent him a letter saying that after he left, they found multiple violations of company policy that would have caused him to be fired if they had known beforehand. The rumors were that he was having relationships with multiple retailers, which he said is not true. He then contacted Courtney and other retailers who had left LuLaRoe. He said he was investing in a marijuana farm and said he needed additional investors. He told one woman that if she invested $7k, she would get $14k back in two days. He said the pot farm was being run by a Polynesian gang in Oregon. He later said that he was taken in by a Ponzi scheme and that he found out the pot farm didn't even exist. He asked Courtney to invest $30k in a Wyclef concert that he was organizing and that she would receive $90k afterward. He sent her a picture of stacks of cash to convince her that she would receive her investment plus more. She did a reverse google image search and saw that it was just a random picture of money that he had stolen from the internet.

Review for the documentary:


Trailer for the documentary:




Sources: my Amazon account and 1 2 3 4

ONTD, did you ever buy LuLaRoe leggings?
Tags: amazon, eat the rich, fashion, film - documentary, legal / lawsuit, television
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