In a photo she posted on Instagram of her 2017 cruise to the Caribbean, Katie Willis smiles at the camera, her hair perfectly braided and her teeth blindingly white. She and her husband sport matching straw fedoras and clutch drinks, while standing in front of a crystal-blue ocean, a massive cruise ship in the background. In another photo, she wears a kimono and sunglasses, standing in the middle of the ocean with her arms outstretched, as if she can’t quite believe she’s really there. A third simply shows her perfectly manicured toes resting on a window, the expanse of blue sea in front of her. “And this, my friends, is the LuLaRoe life,” reads the caption.
In reality, Willis now says, she was completely miserable the entire trip, which she had been invited on after being one of the top sellers for LuLaRoe in 2016.
“I sat in my room and cried probably four out of the seven nights just because it felt like everybody hated me, it was so cliquey, it was so cultlike, is the best way I can describe it,” she told me over the phone late last year.
In many ways, Willis was the ideal LuLaRoe consultant. She said she paid $10,000 to join the company in April 2016 with the hopes of hustling enough on nights and weekends to pay off around $120,000 in student loans from nursing school. In her prime, she estimates she had $80,000 in inventory and was doing approximately $12,000 to $18,000 in sales a month. After just eight months, she was able to quit her job as a NICU nurse to do LuLaRoe full time.
Willis was living the dream of a lot of millennial women, many of whom are in the never-ending grind of working, raising their families, and trying to pay their student debt simultaneously. More than 80,000 women believed they could do it too, and in just four short years, this army of women turned LuLaRoe from an informal side hustle by twin Mormon grandmothers into a company worth an estimated $2 billion.
But by the time Willis, a 36-year-old mother of two from Kenosha, Wisconsin, finally quit the multilevel marketing company, or MLM, in 2018, she said she had around $50,000 in credit card debt from her business. She had to cash out her 401(k) to pay it off. After approximately two years and countless hours of working for LuLaRoe, she said she never made a profit after the first year (and that year, she said traveling to LuLaRoe events and other expenses ate away at any profit she had made). When she wanted to quit, she still had around 3,000 pieces of LuLaRoe clothing in her home, stuffed into every spare nook and completely cannibalizing her dining room. She ended up selling her last 500 pieces for a dollar an item, just to get rid of them.
LuLaRoe was largely so successful because the dream of working from home, setting your own hours, and supporting your family by running your own business is so deeply baked into the company’s DNA. It was founded in 2013 by DeAnne Stidham, a California woman described by the company as a “struggling mother” who had the idea for the company after sewing a skirt for her daughter. Through pure grit and determination, LuLaRoe says on its website, DeAnne “launched LuLaRoe with a vision to help others succeed.” She named the company after her three oldest granddaughters and named items of LuLaRoe clothing after different members of her large, extended Mormon family. Five of her adult children and their spouses pitched in, and eventually joined their mother, working for the company in a quest to make LuLaRoe a success. And for a few years, it was — generating $2.3 billion at its height in 2017 — until it was rocked with very public turmoil.
LuLaRoe is now facing a $49 million lawsuit from its old supplier (LuLaRoe countersued the supplier for $1 billion) and a class-action lawsuit from angry customers alleging they were sold defective clothing they couldn’t return. Another $4.5 million lawsuit was filed in California in November 2019 on behalf of a group of consultants, who are alleging LuLaRoe is running an illegal pyramid scheme. The state of Washington is also suing the company for operating a pyramid scheme. Last fall, the company laid off all 167 workers in their Corona, California, warehouse and permanently closed it. And according to both the company’s former chief merchandising officer and its former supplier, DeAnne’s husband, Mark Stidham, has threatened “multiple times” to ransack the company’s coffers and flee to the Bahamas rather than admit wrongdoing in court. (Mark has denied this; he and DeAnne Stidham declined an interview with BuzzFeed News for this story, but a spokesperson for LuLaRoe provided BuzzFeed News with a detailed response to several of the allegations described in this piece.)
For all the wild claims about LuLaRoe that have floated around online as the company has spiraled — They took consultants to Mexico to get weight loss surgery and got kickbacks from the doctor! Merchandise arrived moldy! Mark called customers pigs! —what is lost are the stories of the families who say their savings were depleted after they bought into LuLaRoe’s dream. Including families and individuals who filed for bankruptcy after doing business as a LuLaRoe consultant. And DeAnne and Mark’s own family, which has been “completely fractured,” according to one family member, by their ruthless pursuit of success. LuLaRoe has painted itself as the ultimate family business, altruistically making the world an easier place for moms who want to have it all. But just like Katie’s Instagram photos, behind that glossy veneer lies a different story, which is a lot more complicated.
As LuLaRoe tells it on its website, DeAnne Startup Brady Stidham was born to be an entrepreneur. Members of the Church of Jesus Christ of Latter-day Saints take their genealogy very seriously, but DeAnne has a particular reason to be proud. Her father, Elbert Startup, was a great-grandson of Hyrum Smith, the older brother of the church’s founder and prophet Joseph Smith on his maternal side, making the Startups Mormon royalty. Elbert was also a direct descendant of the founder of the Startup Candy Company, the first factory in the US to make and sell the first filled candy bar. (The factory is still a family-run business in Utah.) He and his wife, Maurine Startup, had 11 children and raised them in and around Pasadena, California. DeAnne and her twin sister, Dianne, were the two youngest.
Elbert helped out in the family candy business and eventually ran a catering company, and Maurine opened a bridal shop — but the couple also had an interesting side hustle. In 1945, the couple founded the American Family and Femininity Institute, dedicated to teaching women that their place was in the home. In 1969 Maurine Startup published a book called The Secret Power of Femininity, which instructs women to, among other things, practice saying “I am just a helpless woman at the mercy of you big, strong men” to catch a guy. The couple turned this work into $300 “Femininity Forums,” sessions where they would teach women how to find a husband. Eventually, Maurine became the California chair of an organization dedicated to fighting the Equal Rights Amendment in the 1970s. (The campaign, led by conservative activist Phyllis Schlafly, was eventually successful — the ERA still has never been ratified by Congress.)
In a promotional video, DeAnne says she had a passion for clothing at a young age and dreamed of owning her own business. She studied fashion merchandising at Brigham Young University and worked as a consultant at a bridal dress shop. In July 1978, DeAnne married Kenneth Neff Brady of Salt Lake City in a double wedding ceremony with her twin, Dianne, who married Brady’s cousin. (The couple subsequently divorced and Brady died from ALS in 2009.) The couple had four biological children: Kenneth, Amelia, Nicole, and Jordan. In the early 1990s, the couple adopted three children from Romania: Alexandru, Michael, and Daniella. According to a 1991 Washington Post article, DeAnne adopted Alexandru as a toddler after visiting Romania during and after the reign of Nicolae Ceaușescu. She told the Post that Alexandru’s mother had asked her to take him because she could no longer care for him. According to the newspaper, four of DeAnne’s siblings also adopted children from Romania.
In the early 1990s, DeAnne started selling clothing she found at wholesalers. She often repeats an anecdote about how she first got into the business:
“Many years ago, when my children were much younger, I found a man that had set up a garment market at fairs and swap meets. He was selling overstock items from big name brands at a discount. I convinced him to provide me with some stock for in-home dress parties that I could throw for my friends and family. And I sold more than 300 pieces! Because he didn’t want to be in the business of selling dresses in homes, we came to an agreement where I could buy wholesale and that’s how I made the business work for my family for many years. I needed the freedom to be an independent, stay-at-home mom, and I created the path to make it happen.”
For the next 20 or so years, DeAnne held these “dress parties” in different homes in the Mormon enclaves of Utah, Nevada, Arizona, and California as a side hustle. As word-of-mouth among stay-at-home moms spread, and her business became more successful, she started calling herself “The Dress Lady.”
“Over 25 years ago, I started out doing ‘dress Party's/sales’ in ladies homes that would share with their friends that I was coming with over 1000 dresses so they could shop and take home their dresses at the sale,” DeAnne wrote on an early “Dress Party” website. “It became a huge craze and YES I am still doing Dress Parties during the Holiday and Easter seasons.”
In 1998, DeAnne married Mark Stidham, a divorced father from Corona, California, who worked in construction. His ex-wife, Susan Stidham, did not return calls for comment and Mark’s daughter, Morgan, would only say she had not spoken to her father or DeAnne in more than 15 years (although DeAnne and her children frequently comment on Morgan’s Instagram account).
The company that would become LuLaRoe was born on June 22, 2012, when DeAnne designed her first maxi skirt. As the company tells it, DeAnne had always wanted to expand her wholesale dress business into designing clothes of her own. She tried her hand at it by designing a maxi skirt for her daughter Nicole Thompson, and according to LuLaRoe, “orders started pouring in from friends.” After selling 300 skirts in three days, DeAnne said Mark told her they should turn her designs into a business.
However, that narrative leaves out another player in the maxi skirt business at the time: DeAnne’s twin sister, Dianne Ingram.
On that same day in 2012, DeAnne’s daughter Amelia Lyon shared a photo of herself on Instagram modeling three maxi skirts. She wrote that her mom and aunt had started a new “maxi skirt business called Fitted.” DeAnne’s own Instagram posts at the time say that “Fitted” was owned by both sisters, even writing on the business cards that “Fitted” was run by twins.
The sisters followed DeAnne’s original business model, traveling to different homes in Utah and California to sell their clothes to stay-at-home moms and their friends. One of those women was Annie Andersen of Provo, Utah, who lived next to DeAnne's niece. After attending a few parties hosted by friends, Annie signed up to host a few herself.
“DeAnne had so much energy and love for what she was doing,” Andersen told me. “It was impossible to not feel excited about what she was selling even if you weren't in the market for it. Dianne was the same way and truthfully I could hardly tell them apart at first. That being said, it was exhausting talking with DeAnne and trying to keep up with the million miles a minute she would talk to you at. I would find myself agreeing to something I didn’t even want to do all because she made it sound so good.”
Another early party host, Melissa Pennock of Lindon, Utah, said she received DeAnne’s number from a friend after hearing about her “jeans parties.” She said the jeans DeAnne would sell were good quality, cute, and cheap, and in exchange for hosting a party, she would get a free pair. Every time DeAnne was in her area, Melissa said, she would get a call from her asking her if she wanted to host.
“The thing about her is she’s just so dynamic,” Melissa said. “She has a ton of energy, she has a ton of spunk, and so I just feel like if anyone throws an obstacle at her she just comes back with a solution. … She just kind of has the successful personality and skills of a businesswoman combined with someone who had an eye for fashion.”
But despite DeAnne’s dynamic personality, Annie said she was shocked LuLaRoe ever became a success.
“Her parties always seemed a little chaotic and unorganized to me,” she said. “I only hosted them because I felt pressured by her to do so and also because of the free skirts I would get.”
Annie said that when DeAnne asked if she wanted to sign up for her new venture, LuLaRoe, she balked. For one, she was a new mom and the around $5,000 in startup costs were too expensive. Something also felt off to her about DeAnne.
“One of the many reasons I didn't want to join at the beginning was because DeAnne seemed unorganized and honestly a little unstable,” she said. “I was nervous to have to work with and trust someone like that.”
However, the twins’ alleged business dealings, and apparently even their relationship, fell apart. I reached out to multiple members of Dianne’s family, and Dianne herself: Most didn’t respond, or said they did not want to comment. Dianne’s daughter-in-law Whitney told me that “Lularoe completely fractured the family” but declined further comment. DeAnne has not spoken publicly about the state of her relationship with Dianne, but said in an October 2019 video that she had not been close to her twin “for a long time.” A spokesperson for LuLaRoe declined to comment on or verify the twin's partnership, which it called “unrelated to the business.”
On Jan. 25, 2013, Mark and DeAnne filed for an LLC for LuLaRoe, and by that August, LuLaRoe had opened its first “home office” in Corona staffed by DeAnne’s son Kenneth (VP of sales), her daughter Amelia (brand ambassador), Amelia’s husband, Justin Lyon (chief marketing officer), and DeAnne's son Jordan (head of leadership and culture development). Kenneth’s wife, Jill, serves as a spokesperson at official events. Jeff Thompson, Nicole’s husband, was the VP of finance before he and his wife launched their own MLM for kids clothes, DotDotSmile, in 2017. Mark’s son, Austin, works in the analytics department, and his wife, Lindsay, has sold clothes as a consultant, as has Michael’s wife, Ana. Many other relatives of DeAnne and Mark’s became consultants, and by the end of 2013 the company had around 100 consultants and was earning a few million dollars in revenue, according to court records. Meanwhile, in June 2013, Dianne filed an LLC for her own multilevel marketing business called Honey and Lace, now called Piphany. In 2019, LuLaRoe sued Piphany and several ex-consultants, claiming Piphany was essentially stealing their consultants. (In February 2019, LuLaRoe announced the two companies have come to a resolution mediated by their attorneys.)
By January 2014, DeAnne was all in, announcing on her “Dress Party” Facebook page she was shuttering her business to focus on LuLaRoe full time: “This business has taken off and you will love love love everything you see on our new website!!!”
That was an understatement. After LuLaRoe launched its signature “buttery soft” leggings in 2014, the company exploded. The brand’s core customer was moms, and it’s easy to understand why LuLaRoe appealed to them. The clothes were affordable (around $25 a pair) and comfortable, easy to pull on for school drop-offs and perfect for running after kids in the park or playing on the ground. They were modest (at a time when modest fashion was still pretty limited) but not dowdy, meaning moms could wear a LuLaRoe top or dress without worrying about accidentally flashing the playground. Also, the brand’s forgiving, stretchy fabric was a godsend for many young mothers who found themselves struggling to dress their bodies, which had changed after giving birth. Many early reviews of the clothes came from gushing fans saying that for the first time in a long time, they felt beautiful and confident. Add in the fact that the clothes could be purchased while scrolling through Facebook, providing a shopping outlet for women in more rural areas, and the Stidhams had found themselves a hit.
The lawsuit filed on behalf of 190 consultants in late 2019, Belinda Hibbard v. LulaRoe LLC, detailed what they allege was the ideal LuLaRoe consultant: “Defendants targeted women, stay at home mothers, spouses of active military members, and other groups who had working capacity and some access to credit or savings, but also, generally, a lack of formal business or finance training.”
In March 2015, there were 1,000 LuLaRoe consultants. By 2016, the company had more than 60,000 consultants and earning more than a billion dollars in revenue. According to former employee Patrick Winget’s declaration in a pending lawsuit against the company, Mark had gone from having bad credit and a house in foreclosure to, by 2015, buying a multimillion-dollar ranch in Wyoming and flying employees around on what he claimed was his personal jet. (The company, in court documents, disputes these claims.)
According to Derryl Trujillo, a former employee who had been hired in February 2016 for LuLaRoe’s retailer services email team in the company’s Corona warehouse, this massive growth along with ineptitude of their mostly family executive team created a disaster. Instead of scaling back though, he told me, the Stidhams kept “growing and growing” the company.
“It was like somebody stuffing their face too much at a Thanksgiving Day table, but they couldn’t stop eating,” Trujillo said.
Katie Willis decided to join LuLaRoe through a friend during its heyday in April 2016. She loved the leggings and thought that selling them would be a “fun side job” to free her family from the burden of her student debt.
Immediately, she was killing it. She rapidly moved up the ranks, and eventually had a team of 15 people under her, known in the company as “downlines.” She started putting inventory in her dining room, eventually converting it into a full-on boutique. But she lost friends because she was working 60 hours a week, desperate to make her business succeed.
“I was just in my house, seven days a week,” she said. “And I didn’t want to leave because I always had shipping to do or I always had pictures to take.”
According to Katie, working nonstop was part of the LuLaRoe culture, because your business was what you made it. To her, the implication was clear: If you couldn’t make your business work, you just weren’t trying hard enough. And there was no time for slacking off.
“If you did stop, your [Facebook] group just tanked,” Katie said. “If you stopped for 24 hours, your group, then you had to work that much harder to build it back up again.” The grind was also hard on her family. Her kids complained that she was always in her room or on the phone.
“It’s awesome you’re working from home now instead of going to work, but you’re never here because you’re always working,” they told her.
Still, Katie thought she was making a lot of money.
“I just didn’t realize that yes, I was bringing in all this money but I was also spending all this money on inventory,” she said.
According to Katie, that’s how LuLaRoe works. Consultants open their own virtual boutiques, usually in the form of a Facebook page or group. When Katie joined, the initial startup kit cost about $5,000 for the lowest tier, which included about 280 pieces. Consultants were often encouraged by their sponsor to buy more than the minimum. Katie, for example, invested around $10,000. The consultants purchased the clothes at wholesale prices, which were usually around half of retail. (A spokesperson for LuLaRoe said, “It would have been at an Independent Fashion Retailer’s discretion to select from a variety of inventory package options where prices varied.”)
But while consultants can place orders for styles and sizes of clothes, they never know which prints they will get until they open the box, and no two consultants get the same mix. Shoppers, therefore, will usually join multiple LuLaRoe groups on Facebook to try and find the piece they want because some styles or colors of clothes are popular or rare. (LuLaRoe fans call these “unicorns.”) Other designs, which have been endlessly mocked online, are ugly, unflattering, or just plain weird (like leggings featuring DeAnne in a Santa hat).
In this way, shopping for LuLaRoe is like a treasure hunt. When the company announces the launch of a new style, design, or color, LuLa fanatics comb through the groups to find the lucky consultant who can sell it to them. The company also does launches of collaboration with brands like Disney, creating limited-edition, highly coveted leggings and dresses. Katie said the hunt was intoxicating, and she probably bought 200 pairs of leggings before she became a consultant (she doesn’t think she ended up wearing more than half of them, saying, “It was more of a collection thing”).
“It was the whole, I gotta have this print. So you search these pages for these prints, it’s just like you’re sucked into the trap,” she added.
Because each shipment is a mixed bag, with some pieces highly valued by “unicorn hunters” that sell quickly, and others — because of their size, pattern, or color — that might be really hard to sell, consultants take a risk with each order.
“Which is how LuLaRoe is making money,” Katie said. “You sell 40% of the prints, you keep buying more inventory, but the sell-through just isn’t there. … But you’re still stuck with all the ugly stuff. You buy another box, you sell 10 out of the 30 pieces, you’re still left with 20, you go in and order more. It’s just a constant cycle.”
In addition to this cycle, many LuLaRoe sponsors, according to Katie and other consultants, encouraged their consultants to buy more clothes if their sales were dropping. After all, the more options in size and color, the more potential customers.
The consultants I spoke to said they did this because of the bonus checks and the hierarchy in LuLaRoe. Consultants started as an “independent fashion retailer” on a team, and could progress into tiers of leadership, from “sponsor” up to “mentor,” which would let them earn a bonus (5% of the wholesale value) on the sales of new retailers they signed up, and eventually on the sales of the people those people signed up. That’s why, Katie said, her “upline” — the sellers at higher levels on the team she was a part of — were constantly encouraging her to buy more clothing, even hosting giveaways for their team, for things like iPads, to encourage bigger orders. (A spokesperson for LuLaRoe declined to comment on this account and referred us to the Leadership Bonus Plan for details.)
The lawsuit filed by the state of Washington against LuLaRoe in 2018 claims “it was clear that the primary opportunity for compensation was not through sale of LuLaRoe apparel, but bonuses earned through recruiting.”
“LuLaRoe's marketing and sales activities, misleading income and lifestyle claims, emphasis on recruiting and inventory purchases over emphasis on sales to consumers outside the LuLaRoe organization, and inventory loading practices ensured that the primary business opportunity with LuLaRoe was through recruitment,” Attorney General Robert Ferguson and Assistant Attorney General Tiffany Lee wrote. (LuLaRoe did not respond to a request for comment by the time of publication.)
“If I would have a slow month, there was always ‘Well, did you order this many pieces? You know if you order this many pieces you’ll sell this much.’ And it was, ‘Well you only have five in each size. You should really have 10 so your customers have more of a variety to choose from,’” Katie said.
Still, she blames herself for continuing to spend more and more money, and takes full responsibility for her financial choices. But she said she was drawn in by the possibility that her mentors could be right, that she just needed to buy a little more or try a little harder.
“Looking back, I wonder if I missed signs,” she writes in an essay about her LuLaRoe experience, which she shared with me. “And I did. I don’t know if I was drunk on the Kool-Aid or if I was just oblivious to it all. Maybe a combination. But I now realize the red flags.”
At her peak, Katie says, she was selling so many items she once got a bonus check of $8,000. But despite this, she said she wasn’t actually making a profit from her business because she had to keep buying new inventory. To do so, she opened new credit card accounts. She would take her profit and bonus checks and pay off the cards, while simultaneously charging more and more inventory. Eventually, she estimated she had around 8,000 pieces in her house.
Katie writes that besides the financial draw, she was also pulled in by the culture of LuLaRoe. In October 2016, she was invited to attend a LuLaRoe leadership convention. She is shy and was terrified to attend the convention on her own, but did so anyway. When she arrived, she was awestruck by the “extravagant” pageantry and the celebrity consultants she got to meet. One top consultant at the convention was so popular that online “fans” were asking to take a photo with her. Katie’s popular mentor kept being trailed by other consultants who seemed to just want to be near her. Katie said the leadership conference was empowering and her association with the brand made her feel special.
“I was being independent. I had constantly depended on others for a long time, and here I was, doing something by myself,” she writes.
Katie was not the only LuLaRoe consultant who was wowed by the popular consultants. By 2016, many women had turned selling LuLaRoe into internet stardom, amassing thousands of Facebook group members and followers on Instagram. (One of the most prominent consultants is Meri Brown from Sister Wives, who is a LuLaroe “trainer.”) To many aspiring LuLaRoe boss babes, consultants like Kim Roylance, Brittany Hunter, and others were the influencers they looked up to. Some have been able to use their LuLaRoe fame to start their own brand of online boutiques after quitting as consultants.
But the queen bee of these LuLa influencers was still always DeAnne, who, as LuLaRoe grew, developed a large social media following and rabid fanbase (she now has about 90,000 followers on Instagram). DeAnne embraced her online stardom as a business mentor and guru, posting her LuLaRoe outfit of the day and family photos, calling out consultants by name when they had a big win, sharing screenshots of women claiming to have made thousands of dollars through LuLaRoe, and frequently chatting with her fans on Instagram stories.
“This is how it's done!!!!” she wrote on one Instagram photo, showing a consultant claiming in a Facebook message to have made $7,000 in 11 days. “Get back to basics all you amazing LuLaroe Fashion Consultants and book your live pop ups NOW!”
DeAnne’s Instagram posts in 2016 and 2017 also served to show how fabulous her new life had become. She traveled the country speaking at conferences full of adoring consultants, some moved to tears by meeting her. She posed with consultants next to huge pools in Phoenix, and at the Hotel del Coronado near San Diego. She shared idyllic family photos from their Wyoming ranch.
During the first of two 2017 LuLaRoe cruises in February, DeAnne posted a video of a huge pool filled with bikini-clad consultants. As they cheered, first DeAnne, then Mark, jumped into the pool fully clothed, before embracing for their fans. She tagged the photo, as she did most, #becauseofLuLaRoe.
According to the MyDyer lawsuit, LuLaRoe’s troubles began to brew in spring 2017. In a declaration by Patrick Winget, who was the chief merchandising officer of LuLaRoe from 2013 to 2018, submitted as part of the lawsuit, he said the company’s business “suddenly took a turn for the worst” in April 2017, when it abruptly decided to change the bonus structure for consultants. Now, instead of getting bonuses based on how much inventory their downlines were buying, consultants would be getting bonuses based on how many pieces their downlines were actually able to sell to customers. Winget says he was not informed of the change until after it had already occurred, and Mark told him it was implemented because the company was worried about breaking FTC rules about “channel stuffing.”
A spokesperson for LuLaRoe denied the bonus structure change was due to channel stuffing, saying it “is not a term that is applicable to LuLaRoe’s business and thus, an alleged concern about ‘channel stuffing’ was not a factor in making changes to LuLaRoe’s bonus program.”
But for consultants like Katie, this change meant her monthly bonus checks dropped by about 75%.
“Once the bonuses changed, they were $500 to $1,500, but hovered around probably $1,000 or less,” she said. Previously, she said, her bonuses had averaged $3,000.
According to Winget’s declaration, the bonus change “had an almost immediate negative impact on the company’s revenues,” and within three months LuLaRoe’s sales dropped approximately $250 million to around $100 million in August 2017. Consultants also began to leave the company en masse, from 50,000 in early 2017 to 35,000 in September 2018, according to Winget. (LuLaRoe disputes these claims.)
Katie said around this same time, the products were becoming harder to sell. Not only was the market saturated with LuLaRoe consultants, the quality of the clothes became hit or miss. Some of the leggings arrived with holes in them, some had a moldy or mildew smell. Sometimes she would open her box of inventory and realize some of the items were completely ruined. When she tried to report the damages to the company, she said she was given the runaround by customer service.
“A lot of the leggings I just ended up tossing,” she said.
Another former consultant, Karyn Hay of California, is a new mom who works full-time in mental health services. She said she felt horrible when a friend she’d encouraged to sign up for LuLaRoe told her she thought the clothes were making her kids sick.
“She was being sent moldy stuff,” Hay said. “And her upline was telling her... ‘You just need to sell it.’” Hay said she also received clothes with mold on them and just threw them away.
In March 2017, a group of customers filed a lawsuit against LuLaRoe, saying the leggings were ripping like “wet toilet paper.” That first lawsuit had a ripple effect, and from May to October 2017, five more class-action lawsuits were filed on behalf of customers across the country, claiming LuLaRoe was knowingly selling defective products to consultants, and then refusing to refund them. The six cases were eventually consolidated into one large class-action suit, Tanya Mack v. LLR, Inc. et al., which is scheduled for trial in October 2020 in California Central District Court.
In response to these claims, a spokesperson said, "LuLaRoe stands behind the quality and craftsmanship of our apparel.
“Several years ago, during the height of our explosive growth, some product remained on loading docks for a short period prior to processing, but it was always covered and protected. All LuLaRoe products undergo stringent inspection and quality controls throughout the manufacturing and distribution process.”
Around this same time in April 2017, LuLaRoe announced another big change to company policy. It offered all consultants 100% refunds for all their inventory if they quit, including a refund for shipping, in a bid to sign up even more consultants. Previously, consultants could get a 90% refund if they left the company, with no refund for shipping. According to Winget, he worried the policy would cause even more financial hardship for the company, but his concerns were not addressed. He says that eventually the company paid consultants around $120 million in returns. In September 2017, LuLaRoe ended the 100% buyback refund policy and reverted to the 90% refund policy.
Some retailers got lucky and submitted their refunds in that window. Annie Andersen, who had hosted an early dress party for DeAnne, had eventually been convinced to join LuLaRoe on a team with her neighbor, DeAnne’s niece. She sold LuLaRoe for eight months, but said she got out once the company offered the 100% buyback and paid off about $10,000 of debt.
“The reason I quit was because I wasn’t making a profit,” she said. “I was working hard but barely breaking even and that made my husband nervous. So when the opportunity came to get all our money back, we jumped at it.”
Others say they weren’t so lucky. For some consultants, according to one class action filed by former consultants in 2017, Stella Lemberg et al. v. LuLaRoe, the company refunded even less than 90% of the inventory sent back after the September policy change.
Other consultants, according to the lawsuit, had their refunds voided because LuLaRoe “self-determines that some items are nonrefundable, with no appeal process or other recourse for the consultants.” In addition, the company would allegedly keep the clothing the consultant returned, meaning consultants would be unable to resell the items at all.
“In many cases, consultants are unable to return clothes at all and/or receive no refund whatsoever from LuLaRoe,” the lawsuit claims.
LuLaRoe acknowledges that the 100% refund program (plus shipping) was temporary, but contends it was always meant to be that way. The company says it implemented the program to incentivize consultants who were quitting to send back all their inventory rather than sell it at wholesale, which hurt the overall business. After September 2017, the company said it reverted to allowing consultants who wanted to quit to return clothing “purchased directly from LuLaRoe for a 90% refund subject to certain terms and conditions.”
“LuLaRoe has honored its contractual commitments to exiting Independent Fashion Retailers and has paid tens of millions of dollars to exiting Independent Fashion Retailers under the refund program,” a spokesperson for LuLaRoe said.
In October and November of 2017, six more class-action lawsuits were filed, this time alleging LuLaRoe was running a “pyramid scheme” and “cheating consultants out of “thousands of dollars.”
As one former consultant claimed in a May 2017 lawsuit, Heinichen v. Lularoe: “[LuLaRoe] sells you [a] minimum $5000 worth of clothing and tell you ‘think like a retailer.’ When you submit these ‘as damages’ they are declined. When you file a complaint, ask corporate for help, or go to your ‘upline’ who is making 5% off everything you purchase, they boot you out of the team FB page, shun you, tell you you are just lazy and to feed your kids cereal so you can work the business.”
Mark Stidham told CBS This Morning in 2017 that anyone who believes LuLaRoe is a pyramid scheme has an “uneducated opinion.”
“They haven't looked at who we are because we sell product through to a consumer, and it's highly desirable product. That is not a pyramid scheme," he said at the time.
Trujillo, the former retailer services team member, said he spent his year-and-a-half tenure at LuLaRoe mostly being yelled at by angry consultants calling to complain about the myriad issues plaguing the company. In addition to the alleged bonus and buyback drama, Trujillo said consultants complained software wasn’t working properly, they were being overcharged for orders, and their inventory was being delayed. In addition, he said every major launch the company did, like the much-hyped Disney collab in 2016, was a disaster.
“You would clock in the morning at 7 and get yelled at the whole time,” he said.
Trujillo said the job was horrible for his and his teammates’ mental health. He said he gained 40 pounds while working there, and saw many coworkers have breakdowns. He blamed the company’s legal issues on taking on more consultants than they could handle.
“They grew too fast, [they were] entirely family run, and no one had any experience running a company that size,” he said.
Finally, one day in September 2017, Trujillo quit. He said while he blames the company’s problems on the Stidhams, his coworkers and the consultants were the ones who suffered.
“I saw plenty of nervous, mental health problems because of Mark and DeAnne and their family’s obsession with greed,” he said, adding, “Anybody who stands in the way of the Stidhams’ gravy train, it’s hell.”
A spokesperson for LuLaRoe said Trujillo’s account was “unfortunate to hear” and “inconsistent with the beliefs, values and culture of our organization.”
Katie had become fed up with LuLaRoe after attending the cruise for top sellers in February 2017. The cruise was a very big deal for consultants. In order to “cruise qualify,” as consultants put it, they needed to sell more than $12,000 in inventory per month for at least four months. Katie qualified for an all-expenses-paid seven-day trip to four Caribbean countries aboard the Carnival Splendor (consultants had to pay for their own travel there) full of LuLaRoe consultants and their spouses, and many of the top consultants would hype up the experience through photos and videos throughout the year. Katie said she was thrilled to be invited.
But on the cruise, she felt ostracized. Katie said she was gossiped about because she wasn’t wearing enough LuLaRoe, wasn’t going to enough training sessions during the cruise, and was drinking on the beach with her husband. She was rolling her eyes at other consultants, who she said treated Mark and DeAnne like they were “so cool.” She felt gaslit by promises that she would be getting great new inventory during LuLaRoe webinars, and then none would arrive in her boxes.
“I often compared it to a cycle of abuse,” she said. “Especially with the owners. The launch would go bad...they’d kind of place the blame on us, and we’d all be really, really mad and upset with them. And then Mark would come on [the webinar and] apologize and give this whole teary-eyed speech about how sorry he was, how he did it wrong. And everyone would be like, ‘Oh, that made me cry. It’s so good that they care so much about us.’ And then the next month he’d turn around and do the same thing.”
A company spokesperson said LuLaRoe was “saddened by this person's unfortunate experience” on the cruise, and that during events like the cruise and the webinars, it “strive[s] to provide a positive environment and community.”
“This is not typical and it is unfortunate to hear of this type of experience for anyone in our community, as it is inconsistent with the beliefs, values and culture of our organization,” the spokesperson reiterated.
Katie tried to stick to her existing inventory and pay off her debt to get out of the business. But then “a launch would happen and if you didn’t get the launches you wouldn’t sell anything for that month because that’s all people wanted ... but I didn’t have the cash to order the launch.”
She realized she was seriously in trouble when the company changed the bonus structure. She took a look at her finances and saw she was drowning in credit card debt that she could no longer pay off with bonus checks or retail sales.
“I went from kind of not making any money to like, OK, I’m not making any money at all,” she said.
In her essay, Katie writes that her mental and physical health began to suffer. She didn’t recognize herself anymore, and she was “ashamed of who I had become.”
“I stopped caring about what I looked like because I never left the house, and if I did, I wore leggings or sweatpants or one of their other oversized styles that made me not care about my body. I ate crap all the time because I never had time to eat a healthy meal. I was too busy selling or taking photos to work out or to care what I looked like. So then I became more depressed. Not only did I hate what I was doing, hate what I was selling, but I hated what I looked like, hated my body, and hated who I was becoming. I was so angry all of the time.”
When she finally decided to get out, it took Katie about seven or eight months to get rid of all her inventory. Eventually she started selling clothes for $1 to $3 apiece. Sometimes she would give away pieces she couldn’t sell. The whole time, she said she was wracked with guilt.
“I just felt that people were buying this stuff that was disgusting to me, knowing how horrible the company was, I just felt awful,” she said.
At the end of 2018, Katie decided to cash out her 401(k) to pay off her debt from LuLaRoe, about $50,000.
“It was such a lingering cloud, and hatred for myself of what I’d gotten myself into and how I had been so stupid, that I just wanted it all to go away,” she said.
Despite this, Katie is one of the lucky ones. The loss of her 401(k) hurt, but her husband has his own and has supported her both financially and emotionally. For those without safety nets, getting out of LuLaRoe could be much worse.
Karyn, the consultant in California, said her debt from LuLaRoe led her to bankruptcy. She was only able to sell around $1,100 worth of product, she said, nowhere close to the initial investment she’d made. She filed for bankruptcy when it was clear she had dug herself into a hole she couldn’t get out of.
In many ways, the issues LuLaRoe as a company has allegedly faced mirror those of the consultants. In August 2017, according to Winget’s declaration, LuLaRoe was having trouble paying its supplier since 2016, MyDyer aka Providence Industries, due to its declining revenue. Like thousands of its consultants, LuLaRoe was also stuck with a bunch of inventory it couldn’t sell after consultants stopped ordering as much. MyDyer and LuLaRoe came to an agreement to partly solve the problem, according to Winget. Under the deal, MyDyer destroyed more than $11 million worth of LuLaRoe inventory and absolved some of the debt. In court documents, Mark denied it was LuLaRoe’s choice to destroy the inventory, instead blaming MyDyer for the decision.
Winget said he believes “Mark Stidham made several policy decisions close together in time that drastically hurt LuLaRoe’s finances without fully analyzing the end consequences of his decisions.”
On Nov. 29, 2018, MyDyer filed a lawsuit in Riverside Superior Court alleging that LuLaRoe owed them more than $48 million in unpaid invoices, including to UPS (more than $1 million), a labeling company ($100,000), and a garment supplier ($3 million). Based on the lawsuits and their known creditors, MyDyer said they had reason to believe LuLaRoe was “insolvent.”
But MyDyer alleges in the suit that LuLaRoe was in serious financial trouble as early as the end of 2017. Despite this “precarious financial situation,” MyDyer says LuLaRoe continued to order tens of millions of dollars in inventory through 2018. Instead of paying MyDyer for their products, the company alleges, LuLaRoe “sold the products” they produced for them and “absconded with the proceeds.” MyDyer claims LuLaRoe had been using the profits to pay “for new products from other suppliers” as well as pad the pockets of the executives in the company.
Despite their company’s alleged financial turmoil, MyDyer claims the Stidhams are still living a lavish lifestyle. In addition to a home in Corona and the Wyoming ranch, Mark owns several luxury cars, according to Winget. One of Mark’s cars, a $2.1 million Swedish race car, broke the land speed record in November 2017. Winget also claims that Mark had flown him and other employees on a private plane that he claimed as his own. In March 2018, the lawsuit alleges, Mark told MyDyer reps that he was planning on buying another Wyoming ranch near his current one, in order to get exclusive access to a river. (The company, in court documents, disputes these claims.)
According to public records, the Stidhams' financial fortunes do seem to have improved dramatically since they founded LuLaRoe. Mark in particular has a rocky financial past. Both with and without DeAnne and his ex-wife Susan, Mark has been hit with federal or state tax liens in both Utah and California more than 15 times over the past 25 years. In 1992, California placed a tax lien for $109,582 on a construction company Mark owned. In 1995, two Utah companies he owned, Stidham Construction and Oso Investments, were hit with a federal tax lien by the IRS for owing more than $460,000 in back taxes. He also faced a UCC lien for Stidham Construction.
When the Stidhams bought their Corona home in February 2007, they used a nearly $200,000 loan from a relative to pay for it. In 2013, the couple closed a state tax lien against them for $21,257 that had been pending since 2008. DeAnne was sued by FIA Card Services in 2011 for failing to pay a $7,500 credit card bill. The Stidhams also got hit with a federal tax lien from the IRS in 2015 after failing to pay more than $102,000 in taxes (they closed it that same year). (A spokesperson for LuLaRoe declined to comment on Mark’s financial history.)
MyDyer claims the Stidhams created 17 “shell entities” between July and December 2017 that feature one or both of the Stidhams as an officer or manager and their address as the office. MyDyer alleges these entities were created in order to hide assets, like race cars, from creditors.
In a declaration in LuLaRoe’s countersuit against MyDyer, Mark denies the entities were fake, saying, “There is no nefarious or improper purpose as to why these entities were formed and they have no relation to the lawsuits filed against LuLaRoe.”
The lawsuit alleges that in September 2018, MyDyer asked Mark to pay up for the unpaid invoices. In court documents, according to MyDyer, Mark said: “Look guys, I am not going to pay you guys a fucking dime unless the judge orders me to pay it, and DeAnne and I will take our two or three hundred million dollars to the Bahamas and fuck everything.”
Mark also denies this allegation in his declaration.
In his declaration, Winget also says Mark had threatened to take the money and run while they were flying on his jet in 2018: “He told me he could ‘jump ship’ from LuLaRoe and that he would take hundreds of millions of dollars from LuLaRoe and move to Wyoming or the Bahamas with DeAnne.” Winget also says Mark frequently bragged about avoiding California taxes by moving to his Wyoming ranch, and he had threatened more than once to flee to either Wyoming or out of the country. Mark also denies this claim in his declaration, calling Winget “a disgruntled former LuLaRoe employee whom I terminated.”
“To be clear, my wife, DeAnne Brady and I do not have, and have never had, any intention or plans of absconding abroad with money,” Mark says. “To the contrary, we remain committed to the LuLaRoe business and continue to work daily on the business. Even more, in good conscience I would never do such a thing given the thousands of people — many of whom live and work in Riverside — that rely on LuLaRoe for their livelihood.”
The lawsuit is still working its way through the courts. On Nov. 15 of 2019, LuLaRoe countersued MyDyer for $1 billion, accusing the company of engaging in a “systemic, years-long scheme to defraud” LuLaRoe by “under-delivering and over-charging” LuLaRoe for products. A spokesperson for LuLaRoe claims that it paid MyDyer tens of millions of dollars for products that were ordered but never delivered, adding: “You should note that the company is suing MyDyer for substantially more money than MyDyer is suing LuLaRoe.”
That lawsuit states: “To date, MyDyer has refused to account for those products that it failed to deliver and has refused to return to LLR those monies paid to it for undelivered product.”
The MyDyer case and the ongoing class-action suit aren’t the only pending litigation against LuLaRoe. Another lawsuit filed by the Washington attorney general in early 2019, accusing LuLaRoe, the Stidhams, and DeAnne’s son Jordan of running an “unlawful pyramid scheme,” is scheduled for trial in October 2020.
In 2018, LuLaRoe argued that the class-action lawsuit should be thrown out because as part of their consultant agreement, the consultants had agreed to “mediate the alleged dispute prior to initiating litigation.” Since they did not do so, LuLaRoe argued the case should be dismissed. A judge agreed, moving the case to arbitration. However, there is no ruling as yet whether they were operating an illegal enterprise.
In November 2019, Arnold Law Firm attorney Josh Watson, who was a lawyer on one of the original consultant class actions, filed a new lawsuit in Sacramento Superior Court, Belinda Hibbard v. Lularoe LLC, on behalf of 190 consultants. He is arguing that since LuLaRoe is running an illegal operation, the contracts should be void. “My position is that the entire scheme is at its core unlawful,” he said.
In court records, LuLaRoe’s response to the lawsuits tends to have a pattern: They just hate us because we are successful. In response to the original consultant lawsuit, the company states that “the plaintiff putative class members leading the charge are hoping to shake down LLR for a take of LLR’s revenues generated through hard work and ingenuity.” It calls LuLaRoe a “wild success story.” That was also the Stidhams’ stance when they sat down with CBS This Morning in November 2017, one of the few interviews they have ever done. Mark went as far as to suggest the complaints were planted by their competitors in the clothing industry.
"I will tell you that we have been incredibly disruptive in the marketplace. And I don't think those are all entirely organic complaints," he said.
It’s unclear what LuLaRoe’s financial situation is now or how many active consultants they still have. A spokesperson for LuLaRoe said approximately 100,000 consultants have worked for the company, but would not say how many remain today. A timeline of LuLaRoe triumphs on its website has not been updated since 2017. Last October, LuLaRoe fired all 167 employees at its Corona warehouse, claiming it was moving all production to its distribution center in South Carolina. In November, it announced it was dropping its buy-in for new retailers to $499, a far cry from $5,000 most consultants were required to pay just a couple years ago.
Even so, a spokesperson for LuLaRoe said, “LuLaRoe is excited for this new year with all the amazing new efforts and products we will be launching. We remain loyal to our mission and cause and cannot wait to see what the future holds.”
On LuLaRoe’s internal messaging and social media accounts, the brand also appears to be operating as if everything is normal. DeAnne is still a frequent Instagrammer, posting her daily musings frequently to her stories. In November, she and Mark went on a new cruise to test it out in anticipation of hosting LuLaRoe top consultants in 2020.
In a recent story, DeAnne showed off her OOTD: a new kimono in the collection, which she said is called “Chloe,” along with matching pink and red pants and “Valentina” shirt.
“I want you to think about, how can you be creative in what you’re wearing every day?” she told her followers. “It’s awesome, this is the time for you to find all the amazing LuLaRoe retailers so you can get dressed in cute things every day.”
If there is a silver lining to the experiences of Katie, Karyn, and thousands of other former LuLaRoe consultants, it’s that they are not alone. Women from across the country have banded together in private Facebook groups and Reddit forums. One member uploads DeAnne’s Instagram stories and “home office” webinars so everyone in the group can watch. Another pays out of her own pocket to download the latest court filings in the MyDyer lawsuit from the court’s website, and then summarizes the updates for the group (people Venmo her money to cover the costs). Women share their stories and hundreds of supportive comments rush in.
Karyn said the groups have helped her deal with the overwhelming embarrassment and shame she feels about her LuLaRoe experience. “There’s a lot of good coming out of the online community,” she told me.
A lot of the former consultants feel sick with guilt, so much that it consumes them. They post about how they feel they have failed their friends, their families, and themselves: “The amount of guilt I have over the shit I used to sell makes me sick.” “I have learned my lesson and I'm ashamed.” “I felt sick last night working on my taxes. So. Much. Money. I am so embarrassed and ashamed I let myself be so blind.”
Karyn thinks LuLaRoe came into her life at a time when she was the perfect target, and that’s how many women got sucked in.
“I was in a vulnerable place because I wasn’t happy,” she said, explaining she had been frustrated with her career and was looking for a distraction. “There’s a lot of guilt.”
She wanted to have it all, and it blew up in her face. It is clear when talking to women like Katie and when reading Facebook posts in the group that they blame themselves for what happened. They believed in the dream, and they have to suffer the consequences of that optimism.
In her essay, Katie writes that she no longer recognizes herself after her time with LuLaRoe.
“Lularoe has completely destroyed me. It’s destroyed my confidence. It’s destroyed my friendships. It has destroyed me as a person — because I no longer like the person I have become. I no longer like the person that LLR and my sponsors and upline have ‘groomed’ me to be. I’m not her. Why did I ever become her?”
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