It’s drama straight out of a reality TV show.
The multilevel marketing company LuLaRoe is being sued for $49 million by its supplier, Providence Industries. The clothing supply company has claimed that LuLaRoe has not paid them in seven months. The lawsuit also claims that the women’s clothing company CEO’s are hiding assets in shell companies to fund their lifestyles. The 17 limited liability companies are being used to purchase things like lavish cars, properties and planes, while not a dime of the money has gone toward paying off their supplier, Providence Industries.
Inside The Lawsuit
The lawsuit sparked after the CEO of LuLaRoe, Mark Stidham, allegedly said on September 7, “Look guys, I am not going to pay you guys a f****ing dime unless a judge orders me to pay it, and DeAnne and I will take our two to three hundred million dollars to the Bahamas, and f*** everything.” There are additional claims that the company owes millions in debts to companies like UPS and other manufacturing companies. LuLaRoe has denied the allegations and says that it will fight the lawsuit.
As it stands, LuLaRoe wasn’t doing well before the lawsuit came into fruition. The company is currently facing mass layoffs, and some of its top sellers have jumped ship in recent months, causing a major decline in sales. Some sellers with the company have even claimed that they’ve been waiting exorbitant amounts of time to receive their checks from the company. The multilevel marketing company works when sellers purchase the LuLaRoe products at a wholesale price, then sell it themselves at a higher rate.
Providence Industries requested immediate seizure of nearly $34 million in assets.The company claims that LuLaRoe CEO Mark Stidham is a flight risk, and wants their assets seized to protect themselves from further damages. Providence Industries has claimed that Stidham threatened to flee with the money that he owed, while Stidham vehemently denies the claims. A California judge has denied the request.
A Dying Company
LuLaRoe’s head designer, Patrick Winget, stepped down from his position with the company back in September over the allegations. Winget even made a sworn statement that Stidham threatened to flee with the company’s riches. In the statement obtained by Business Insider, Winget claims that Stidham said directly to him that he had goals to abandon the company and take all of its riches with him.
The president of Providence Industries, Joseph Choi, also made a sworn statement saying that Stidham made similar threats to him. LuLaRoe also, allegedly, made contact with a liquidation company to cash out on $46 million in product. The lawsuit includes email correspondence between LuLaRoe and the liquidation company.
Things aren’t looking good for the multilevel marketing women’s clothing company, but don’t those things always end up badly anyway?
Julia Sachs is a staff writer at Grit Daily. She covers tech, entrepreneurship and entertainment news and is based in Park City, Utah.