SEATTLE, AP — California-based multilevel marketing firm LuLaRoe is paying $4.75 million to settle allegations by the Washington state attorney general’s office that it operated as a pyramid scheme.
LuLaRoe sells leggings and other apparel to a network of independent retailers, who may recruit other retailers to sell the company’s products.
Attorney General Bob Ferguson sued the company and its executives two years ago, claiming they misled people about the profitability of being a LuLaRoe retailer. While two people at the top made millions from 2016 to 2019, thousands more ended up with debts and unsold products, which they couldn’t return due to the complex and deceptive refund policy. of the company, he said.
Ferguson said $4 million of the settlement will be distributed to approximately 3,000 Washington residents who have been recruited into the company. “Every Washington retailer who lost money under the LuLaRoe pyramid structure will receive restitution,” his office said in a press release.
The company denied any wrongdoing in a consent decree filed Monday night in King County Superior Court in Seattle, but the agreement prohibits LuLaRoe from operating a pyramid scheme and requires it to be more transparent with retailers. . Among other things, it must publish a tax return that details exactly how much retailers could earn.
Ferguson said LuLaRoe’s structure violates the state’s anti-pyramid law, which defines companies as pyramid schemes if they provide the opportunity to earn compensation primarily from recruiting, rather than retail sales.
LuLaRoe did not immediately respond to an email seeking comment on Monday.