Today we're finishing the LuLaRich documentary with Episode 4. Becca explains that in 2017 LLR changed the bonus structure to revolve around sales-to-customers (which LLR wasn't tracking, according to Mark, so was that all self-reported?) instead of sales-to-retailers. Bonus checks plummeted. While this certainly saved LLR money in the short-term, I suspect the motivation behind the change was to make the company seem less pyramid-schemey. I do wonder if a lawsuit was closing in at this point.
Another change around this time is the refund/buyback policy. LLR initially creates a forever 100% refund policy. Two things happen: (1) New people on the fence flood in because now there's no risk. Your investment is safe! (2) Older retailers flood out, seeing perhaps the writing on the wall after the stinky leggings saga. LLR pays out a million or so dollars in refunds, gets nervous, and yoinks the policy about 2 months in. They go back to the old refund policy with a bunch of new stipulations: original packaging, no seasonal, no elegant, and leaders' refunds are handled differently.
The "original packaging" stipulation is particularly insidious because you have to open the leggings to see that they're moldy and sun-damaged! A leader explains that her $15,000 inventory could not be returned. (A lot of retailers were encouraged to display clothes on racks, outside the plastic packaging.) The help line employee talks about how painful it was to field calls from people being ruined by LLR. Employees would cry in the bathroom. Those who do send in for refunds are left dangling, being told "that the accounting department doesn't have phones" and being given the run-around with money they need back.
Already I'm seeing a clear line in how cults treat ex-members: they become fair game to abuse and harm. A reputable supplier would treat leaving retailers better than this, to encourage future business if the retailer changes their mind. Now we get lawyers involved. Kelly has $20,000 worth of inventory to return but LLR isn't producing the money (seemingly because she missed the shipping deadline due to a miscarriage).
I strongly suspected that LLR was sending the returns back out as "new". Here is confirmation.
@DefectiveBecca. So as if it wasn't bad enough that the design team was being forced to crank out ugly prints, the deck was further being stacked against the retailers because unsellable returned merchandise was being shuffled in to new orders.
What is fascinating to me is that LLR could've gone back to older designs that had been popular and ordered re-prints! A new run, like when a book run sells out! But they were so convinced that fashion exclusivity and FOMO was the only way to sell. Lawsuits pile up and now we get to the copyright infringement. The designer explains that they were told to take art from Google and then "change [the art] at least 20%". I want to scream. That isn't- no. No.
That's not how copyright infringement works. That's not how intellectual property rights work. I can't just take Harry Potter, replace 20% of the text with my own words, and publish the result as my own! But the designers aren't even doing that much at this point and designs are just being ripped directly off the internet willy-nilly. I feel like the documentary is NOT forceful enough on this point. No company is "forced" to steal art. That's a choice that was made at top levels and filtered down. They could have bought the designs from the artists, or hired them for their creative vision. They choose to steal instead.
There's a Facebook group that @DefectiveBecca posted in the comments which hunts down LLR infringement. It's fascinating.
In each case of stolen art, the original looks so much better than the hastily ripped version. They could've licensed these images! (So much seems to be ripped off of Shutterstock! You can buy distribution rights RIGHT THERE ON THE SITE.) I'm sorry, but I just have to post some of these because I think it's important to understand just how much of this company was built on theft. This is NOT appropriate!
Multiple unicorn designs, just ruthlessly butchered.
There's just so many.
That last one is a tattoo of a triangle flanked by two roses. Tattoos are covered by copyright protection! In addition to the copyright lawsuits, and the refund lawsuits, suppliers begin to sue LLR. Their dyer/cloth provider claims that LLR placed orders they knew they couldn't pay for, if I understand correctly. MyDyer alleges that LLR was spinning off dozens of fake LLCs (limited liability companies) to hide/protect money from incoming lawsuits. "Seventeen LLCs were set up in December 2017 alone." I can think of no reason why LLR would need that many!
This part is interesting because the party line has been that LLR leadership just didn't know what they were doing, that the whole debacle is incompetence and not malice, that they just grew too big too fast. But *someone* knew how to shuffle money around in LLCs!! That's not something you're just born knowing how to do. Standing up an LLC is tricky and kinda complicated. I have one for my indie author business! I couldn't set up a second one on my own to save my life; I needed massive amounts of help to do the first one.
One of the retailers quietly resigned, didn't burn any bridges. LLR still owes her $100,000. Despite her gentle handling of the situation, other retailers were told not to talk to her. This is VERY common in cults. Shunning former members makes it harder for people to leave. If they leave, they lose all their friends and even family! Also, it means that people still in the cult can't hear from the leaver why they left and/or if their life is better now after leaving. One retailer was "terminated" as a retailer (she found out privately 4 hours *after* a company announcement that "someone" had been terminated, no specifics on who) and was left with a massive amount of merchandise she couldn't return.
Washington state files suit alleging that it is impossible to make money from LLR just by selling clothes, that you have to recruit others in order to profit: I.e., a pyramid scheme. This Washington state suit is presumably the source of the deposition footage that so thoroughly contrasts how open and forthcoming Mark and DeAnne are in interviews vs. how closed and obstructed they are under oath. It's a WILD contrast to see them blank-faced and saying they don't know anything, they don't know their own job titles, they don't know the Instagram hashtags, they don't know company bonus policies, they don't know their own nephew, the former event coordinator.
The son (?) being deposed with them comes off as that special sort of smirky Republican who thinks they don't have to take the law seriously. When asked what he did at the LLR events, he smugly replies "danced my butt off." I again am reminded so much of the cultish "bleeding the beast" mindset and the insistence that the government exists to be defrauded, mocked, and treated with irreverence to be used and ignored.
An attorney explains that a legitimate MLM company must have a refund/buyback policy, a 70% rule wherein retailers don't buy new stock until they've sold 70% of their old stock, and that sales are going to 10+ customers and not just other retailers. The MLM expert explains that successful prosecution is very difficult and rare, and that a lot of this is "political theater"; LLR is still in business.
Most of the individual suits seem to have gone to arbitration, which doesn't surprise me since the *monetary* damages haven't been much more than $100,000ish. Not surprising but disappointing. I think a more punitive punishment would've been better, to shut down LLR and send a message to other would-be MLMs. And there are so much more damages here than monetary. The emotional abuse, the careers ruined, the years lost, the houses and cars repossessed.
At least two of the retailers have divorced from their husbands. One lost everything and is on the verge of declaring bankruptcy, which is just really tragic. I feel for her. All the former retailers stress for the viewers that failure at an MLM is NOT the fault of the person. It's easy to tell that's an emotional raw spot. One of the interviewed retailers is still with LLR. She's found a system that works for her, apparently. She says she wants to stay with LLR forever, or at least until/if they go out of business.
Thus ends LuLaRich, not with a bang but with a whimper that the LLR company is still alive, still recruiting. The MLM expert laments that MLMs never really go out of business, they just morph and change their names and practices. Troubling. If we had UBI, it would be much harder to exploit vulnerable people into MLM schemes. Most of these women lost money because they needed to make money and didn't know this wasn't safe. They believed the lie that hard work would equal success. It didn't. It couldn't.
I won't denigrate these women as fools. They were ambitious, hard-working people who wanted to turn their blood, sweat, and tears into a better life for their families. They deserved to be protected from fraudsters and predators. And while I have you here: artists deserve better protections from having THEIR blood, sweat, and tears stolen by companies selling apparel.
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