LuLaRoe is facing mounting debt, layoffs, and an exodus of top sellers, and sources say the $2.3 billion legging empire could be imploding, however founder Mark Stidham has fired back.
A former top Retailer for LuLaRoe has come out swinging in a declaration filed supporting a lawsuit against the company. Tiffany Ivanovsky alleges that LuLaRoe owes her thousands of dollars, changed policies with little to no notice, and fired her for no reason in August 2018.
Ivanovsky’s statement is in support of Providence Industries’ lawsuit alleging LLR owes them close to $49 million for goods and services.
In the declaration filed in early December, Ivanovsky said that she began working with LuLaRoe in May 2016. She says she quickly moved up the ranks and had incredible success with the company.
Ivanovsky said that in only her second month selling the products she sold the single highest amount of clothing in LLR history. After her massive second month, Ivanovsky said she maintained top 10 status for sales in the company for the next ten months.
As a result of her sales success, Ivanovsky says she had around 1,000 retailers working beneath her. LLR promoted her to become a coach for the company.
Through her coaching work, Ivanovsky says she had the opportunity to coach more than 10,000 retailers on selling the clothing. According to her statement, LLR told her that the company would reimburse her and her husband, Paul, for any travel expenses they incurred to facilitate the coaching.
As Ivanovsky and her husband traveled the U.S. coaching new retailers, she says she spent nearly $20,000.00 on travel and expenses. Despite the promise to pay for the costs by LLR, Ivanovsky says the company has never reimbursed her.
Around September 2017, Ivanovsky says things started to change within the company drastically. LLR implemented a 100% buy-back program to retailers.
As thousands of retailers left the company, Ivanovsky alleges LLR repackaged the returns and resold the items to her retailers.
Ivanovsky says she started receiving complaints from retailers that items arrived at their homes with tags missing, punch marks on tickets, and damage to clothing done by other retailers. When her retailers could no longer count on getting inventory from LLR, she said they turned to one another.
By mid-fall 2017, Ivanovsky said many of her retailers bought or exchanged clothes from each other rather than going directly to LLR. She complains that the quality of the products during this time was diminished and dozens of her retailers left the company.
At the same time the buyback fiasco happened, she said the company shifted how retailers received bonuses. Before July 2017, retailers received bonuses based off of wholesale purchases. In July, the company, under threat of a pyramid scheme lawsuit, stopped bonuses based on this practice.
Before the company made the bonus structure change, Ivanovsky said she and her husband pulled in massive monthly bonus checks. Her average month before July 2017 averaged $30,000 – $40,000 per month.
When LLR changed the bonus structure, she said the company only paid them bonuses based on what they sold to customers. Unfortunately, the market was so saturated that both she and her retailers found it difficult to move any of the inventory.
As retailers’ bonuses and sales dried up, her team shrank in dramatic proportions. In addition to retailers leaving, Ivanovsky alleges LLR started removing retailers from her downline to build new teams.
In the middle of the chaos of having a significantly reduced income and issues with retailers, Ivanovsky said she went to a convention in July 2018 hosted by LLR.
Ivanovsky said she was shocked by a comment LLR founder DeAnne made to the group of retailers during the event. During the speech, DeAnne complained to the retailers that she didn’t get to build the home of her dreams. Instead, Deanne said she had to use that money to pay for the new denim line that LLR was launching.
Following the statements by DeAnne to the group, Ivanovsky said dozens of retailers approached her concerned about LLR’s finances. Ivanovsky alleges that retailers feared that LLR was about to go bankrupt and close their door. Ivanovsky tried to calm their fears but said she was unsuccessful.
Only a month after the conference, Ivanovsky said that Mark Stidham, founder of LLR, called her out of the blue and terminated her from the company. She insists Mark accused her of using LLR to start her own multi-level-marketing company. Mark accused her of poaching retailers at the convention.
Ivanovsky said her husband Paul told Mark that she was only trying to help the retailers remain calm following numerous concerns that came to light at the convention. Paul was able to convince Mark to reinstate Ivanovsky as a retailer. To date, Ivanovsky says she nor her husband have started a multi-level marketing company.
However, within a week of her reinstatement, Ivanovsky says Mark removed her from the system for no reason. Ivanovsky said that she has not worked for LLR since that time.
Following her termination, Ivanovsky started to realize numerous issues within the company. She said the Stidham’s had no financial oversight and mostly relatives ran the company.
Additionally, Ivanovsky alleges retailers provided receipts showing inventory purchases were not made to LLR headquarters but instead to the private home owned by the Stidhams.
Ivanovsky said that to date she has never received any reimbursement for her time working as a coach. Nor has she received her July bonus checks due to her by LLR.
If Ivanovsky’s statements are correct, the allegations do not paint a favorable picture of Deanne and Mark Stidham. Other declarations made by Patrick Winget and Providence Industries also allege the Stidhams using LLR money to fund their lavish lifestyle.
As the court case moves through the court and more documents are filed, the more information exposed to the inner workings of a company detail the massive fraud committed by LLR and the Stidhams.
According to a recent article in Business Insider:
LuLaRoe CEO Mark Stidham has fired back at a supplier’s $49 million lawsuit against the multilevel marketing company, saying some of the suit’s supporting testimonies are “patently false” and “nonsense.”
The supplier, Providence Industries, said in the suit that LuLaRoe had failed to pay its bills for seven months and accused the company’s founders, Mark and DeAnne Stidham, of hiding assets in “shell” companies to fund their “lavish lifestyle.”
During a hearing in California state court on Wednesday, Providence Industries demanded the immediate seizure of nearly $34 million in assets from LuLaRoe, claiming that Mark Stidham was a flight risk while citing an accusation he had threatened to “jump ship” with the company’s riches.
Executives from Providence Industries and LuLaRoe’s former chief designer, Patrick Winget, filed sworn statements in support of some of the lawsuit’s claims.
In response, Stidham said he had no plans to flee with the company’s money, according to a copy of Stidham’s testimony that was filed in court on Wednesday.
“To be clear, I do not have, and have never had, any intention or plans of absconding abroad with money,” he said. “To the contrary, I remain committed to the LuLaRoe business and continue to work daily on the business.”
Stidham went on to identify four LuLaRoe properties, including three warehouses and a commercial office space, and said the company was current on its rents for all of those properties.
“The suggestion that I would abscond with hundreds of millions of dollars from LuLaRoe and escape to the Bahamas – or anywhere else for that matter – is absurd,” he said, and “testimony to that effect is reckless, misleading, and insulting.”
In relation to the lawsuit’s claim that Stidham had created 17 “shell” companies between July and December 2017 to hide assets, he said, “this is nonsense.”
Stidham said the companies “consist of real estate and investment holding companies, some of which were created for real estate-planning purposes.”
“There is no nefarious or improper purpose as to why these entities were formed.”
Stidham also addressed a sworn statement by Winget, who was LuLaRoe’s chief designer from 2013 until September 2018.
Winget had claimed that Stidham made several threats to flee with the company’s money.
Stidham denied making such statements to Winget and referred to him as a “disgruntled former LuLaRoe employee whom I terminated earlier this year.”
LuLaRoe representatives told Business Insider in October in an emailed statement that Winget had “decided to step down from his role, and pursue other opportunities.”
“Patrick has added strong expertise in production and design at LuLaRoe,” the statement said. “While we will miss his passion for fashion, we are excited for him and will continue to cheer him on.”
Another hearing on the case is scheduled for Friday morning.
Get more information, facts and figures about LuLaRoe, click here for the LuLaRoe overview.