Last month we told you about all the complaints against fashion company LuLaRoe.
Sales consultants claiming the company cost them thousands, sending some into debt. Well, those complaints have turned into a class action lawsuit. And not just any class action lawsuit. A billion dollar lawsuit that accuses the company of not only operating a Pyramid Scheme but of violating the Racketeering Influenced and Corrupt Organization Act or Rico...something that is often used to prosecute organized crime.
“If I kept going the way I was going and did not recruit people that I would be making probably fifty cents an hour if that."
That complaint by former LuLaRoe sales consultant Cheryl Hayton, isn’t new.
We found women around the country claiming they lost thousands of dollars as LuLaRoe consultants.
"You're being forced to take advantage of your customers and force them then to buy things that they don’t want just so you can make back a little bit of money," said Tiffany Scheffer, who is also a former sales consultant.
They’re plaintiffs in a billion dollar class action lawsuit against the company alleging racketeering and operating a pyramid scheme.
"The difference between a multi-level marketing company and a pyramid scheme is really that, that notion that in a pyramid scheme people are making money by getting other people to buy inventory regardless of whether or not they actually to sell it," said attorney Joshua Watson, who filed the suit on their behalf.
LuLaRoe was created by a husband and wife team who, according to the lawsuit, turned it into a billion dollar business with eighty thousand independent consultants selling their eclectic clothing.
"Everybody in that chain has these pressures. They gotta buy. They gotta get other people to buy. They’ve already laid out their own personal capital. Their savings on the line. It’s just this intense pressure cooker to get all these people to send their money up the chain," said attorney Watson.
To get in that chain, many women say you had to purchase thousands of dollars in inventory and marketing materials. And if you couldn't afford it, the company allegedly encouraged them to borrow money, get loans, take out credit cards, even asked to sell their breast milk.
"It creates this sort of predatory environment," said Attorney Watson.
While Cheryl and Tiffany are only out money, it was stories like these, that led them to file a lawsuit.
"I want all of the women who feel like they were robbed - of their time, their money, their dignity - I want them to feel like it's not their fault," said Tiffany.
LuLaRoe sent us the following statement by email:
LuLaRoe has grown exponentially over the last four years. Our success has made us the target of orchestrated competitive attacks and predatory litigation. We take all litigation – regardless of its lack of merit – seriously. We have not been served with the recent complaints, but from what we have seen in media reports, the allegations are baseless, factually inaccurate and misinformed. We will vigorously defend against them and are confident we will prevail.
LuLaRoe’s focus is to support the more than 80,000 Independent Fashion Retailers who make retail sales to consumers. Our Leadership Bonus Plan only includes incentives that reward retail sales to consumers. As a result of our business model, Independent Fashion Retailers have sold more than $2 billion of LuLaRoe apparel directly to consumers from January to October 2017, far more than double the same period in 2016. These sales have put hundreds of millions of dollars in the pockets of Independent Fashion Retailers across America who are building their own small businesses.
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