- A lawsuit alleges that the LuLaRoe founder and CEO Mark Stidham and several associates are hiding money and assets in a web of LLCs.
- Stidham and his associates have been connected to at least 33 LLCs set up since 2015, according to documents reviewed by Business Insider. Thirty-one of those LLCs are still active.
- The majority of these LLCs also list LuLaRoe's "hub" in Corona, California, as a principal office.
- In its lawsuit, the manufacturer Providence Industries claimed that several of these LLCs were linked to assets such as a world-record-breaking car worth over $2 million and a lush ranch in rural Wyoming.
- "We believe the claims in this case are completely without merit and will fight vigorously against them," a LuLaRoe representative told Business Insider in a statement.
LuLaRoe's manufacturer has filed a lawsuit against the legging empire, alleging that the company and its leaders are playing a shell game to avoid paying creditors.
Providence Industries, LuLaRoe's clothing supplier, is seeking $49 million in the lawsuit, which alleges that LuLaRoe's founders, Mark and DeAnne Stidham, along with their business associates and relatives, have transferred "substantial assets" to both themselves and their family members to support "lavish lifestyles" and avoid paying creditors.
The lawsuit identifies 17 limited liability companies, which Providence Industries claims are used to hide assets like "exotic race cars, airplanes, warehouses, residences, and raw land."
"We believe the claims in this case are completely without merit and will fight vigorously against them," a LuLaRoe representative told Business Insider in a statement. "Given this is pending litigation, we cannot comment on the specifics."
Mark Stidham submitted a sworn declaration to "address some of the patently false statements" in Providence Industries' filing, saying the limited liability companies mentioned in the lawsuit were real-estate and investment holding companies with "no nefarious or improper purpose."
Business Insider has reviewed documents linking LuLaRoe and its founders to 33 LLCs established in the past three years. Two of the LLCs based in Wyoming — Varldspela LLC, established on April 10, and Bradham Investment Holdings, established on September 18, 2017 — were dissolved on June 18.
Here's a look at the web of LLCs and luxurious assets surrounding LuLaRoe, its founders, and their associates:
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READ MORE: LuLaRoe supplier sues for $49 million and accuses the company's founders of hiding assets in 'shell' companies
Mark Stidham appears on the paperwork filed for some of these entities, but business associates and family members are mentioned in the majority of the LLCs.
Location is the factor that ties together this batch of companies.
Twenty-eight active LLCs — including LuLaRoe LLC, which was established five years ago — list the address of LuLaRoe's "hub" in Corona, California, as their principal address. A 2017 assessment record for the property says that its "land use" pertains to light manufacturing and that it encompasses 7.42 acres.
Two other LLCs claim to share a Wyoming address with the Bronze Buffalo Club LLC, an "exclusive club" with business ties to Mark Stidham. Another LLC, of which Stidham is CEO, lists a residential property in Corona as its principal office. And one LLC's principal address is listed as that of a corporate-services company in Delaware.
Several of the LLCs attached to LuLaRoe and the Stidhams are linked to the business itself, according to documents reviewed by Business Insider.
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James Vogt, a San Diego State University lecturer and certified fraud examiner, told Business Insider that LLCs frequently serve a "very legitimate purpose" for businesses and people.
And Kate Andresen, a lawyer specializing in intellectual property at Nilan Johnson Lewis, told Business Insider that businesses with a franchise-based model or corporations dealing with different levels of risk across functions also tend to rely on LLCs to create a "complex business structure."
And several of the earlier LLCs linked to LuLaRoe and the Stidhams appear to serve a clear business-related purpose.
LuLaRoe was set up as an LLC in California in 2013. The organization was then incorporated as LLR in Wyoming in 2015, under the names of the Stidhams and LuLaRoe's chief financial officer, Noall Knighton.
As far as the company's intellectual property, Lennon Leasing LLC — a Wyoming limited liability company formed on September 23, 2015, under Mark Stidham's name — holds the trademark on LuLaRoe's logos.
And 2000 Carolina Pines Dr. LLC reflects the address of the company's 470,000-square-foot distribution center in Blythewood, South Carolina. The State reported that the company bought the property for $16 million in April 2017.
LuLaRoe, the Stidhams, and their associates are linked to 19 LLCs set up in December 2017 alone, according to a review of documents by Business Insider.
Providence Industries alleged in its lawsuit that 17 LLCs linked to LuLaRoe and its founders were established in December 2017 alone. According to documents reviewed by Business Insider, a total of 19 active LLCs with links to LuLaRoe were established in that month.
Providence Industries claims in its lawsuit that many of these limited liability companies were established to help LuLaRoe and the Stidhams hide money and assets from creditors. The lawsuit also says Providence Industries learned that its client was in "a precarious financial situation" toward the end of 2017.
And those LLCs appeared to have been established at a particularly rapid-fire pace. Four were established on December 8, 2017, while three were established three days later, on December 11, according to documents reviewed by Business Insider. Six were established on December 14.
Among that December crop of limited liability companies, two entities were set up in Wyoming, while the rest were created in California.
Experts told Business Insider that establishing numerous LLCs in one month could be a time-consuming process and might be a red flag.
"When you start forming even a single limited liability company, it takes time to put all the materials together," Andresen told Business Insider. "It takes the effort of actually getting the filings put in place, and it costs money because there are filing fees associated with that."
Vogt said he'd also seen people use LLCs to hide or move around assets in situations like bankruptcy cases or contentious divorces. He said he couldn't weigh in on the specific allegations Providence Industries made against LuLaRoe, the Stidhams, and their associates. But he did say that the number of LLCs in this case, as well as the timing of the filings, could come across as "suspect" and could serve as a "red flag."
"It's certainly not an indictment," he said. "But if I was involved, I would definitely want to investigate further."
See the rest of the story at Business Insider