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LuLaRoe founders: People who call us a pyramid scheme have ‘uneducated opinion’

Giving fraud a bad name: The Ponzi scheme

Charles Ponzi didn’t invent his eponymous pyramid scheme — but he lent star power to one of the oldest scams in the book. He also believed that his plan could have become a legitimate business.
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Charles Ponzi didn’t invent his eponymous pyramid scheme — but he lent star power to one of the oldest scams in the book. He also believed that his plan could have become a legitimate business.

About two weeks after the company was hit with multiple lawsuits, the founders of LuLaRoe, a popular online retailer of leggings, shirts and dresses, have fired back.

In an interview with CBS Wednesday morning, cofounders Mark and DeAnne Stidham said their company “was not built by tricking people into giving us their money.” The company’s business model relies on independent “consultants” who sell LuLaRoe products to consumers through online “pop-ups” on sites such as Facebook. To start as a retailer, consultants must buy about $5,000 worth of products.

A $1 billion lawsuit against the company alleges that the “multilevel marketing” business model is actually a pyramid scheme.

“What that is is an uneducated opinion. They haven’t looked at who we are because we sell product ... to a consumer, and it’s highly desirable product. That is not a pyramid scheme,” Mark Stidham told CBS.

DeAnne Stidham said consultants should not be told the work is easy, either.

“I think it’s easy. That’s me. For me, in my background, in my experience. I do not think it’s easy for everyone,” DeAnne Stidham told CBS.

Mark Stidham said that he thinks the complaints against LuLaRoe aren’t “entirely organic.” Rather, he thinks competitors may be behind the allegations.

“We have been incredibly disruptive in the marketplace,” he told CBS.

It’s not the only suit against the company. An Oct. 13 lawsuit brought by four consultants alleges that the company baited consultants to sign up and buy inventory by promising them 100 percent refunds on any inventory they needed to return. In September, the company altered that policy, said Haeggquist & Eck, the law firm representing the consultants.

Last year, online fashion magazine Racked profiled the company’s boom, claiming that LuLaRoe, founded by a Mormon mother of seven, appeals to communities like those in Idaho and Utah because of its focus on modest clothing such as maxi skirts.

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