Holiday Magic
Encyclopedia
Holiday Magic was a multi-level marketing
organization, founded in 1964, by William Penn Patrick
(1930–1973) in the United States
. Originally the organization distributed goods such as home-care products
and cosmetics
.
Company distributors were encouraged to recruit other distributors in a multilevel marketing structure, which was later characterized as a pyramid scheme
.
On May 16, 1974, a compromise settlement with approximately 31,000 class members, establishing a trust fund worth $2,600,381, was approved by the court. The organization was dissolved in 1974, subsequent to the death of Patrick
in 1973.
The company had been investigated by the Market Court of Sweden
, United States Securities and Exchange Commission
, the Federal Trade Commission
, and the State of California. Holiday Magic is cited as an example in graduate level coursework on criminal justice
and law journals.
, and noted that fruit-scented cosmetics were being sold. The company called Zolene was about to go out of business. Patrick bought all of the cosmetics supplies for $16,250, and founded Holiday Magic, Inc. After the purchase, Patrick began selling distributorships in his new company.
Patrick, a student of Alexander Everett
(founder of Mind Dynamics
), used Mind Dynamics techniques as well as the Silva Mind Control Method in the Holiday Magic organization.
In February 1973, Holiday Magic was sued by Avon Products
. In the lawsuit, Avon Products' claimed that "Holiday Magic employees distributed leaflets accusing Avon of goon squads, paying off The District attorney's office.."
In June 1973, the United States Securities and Exchange Commission
filed a lawsuit against Holiday Magic, charging Patrick
with "bilking some 80,000 people out of more than $250 million through his Holiday Magic cosmetics and soap empire."
The company was investigated by the Federal Trade Commission
, and in June 1973 the company was found guilty of deceptive trade practices. The FTC
found that Holiday Magic was in violation of section 5 of the Federal Trade Commission Act
, and section 2 (a) of the Clayton Antitrust Act
.
In 1973, Holiday Magic's proceedings were prohibited by the Market Court of Sweden
, and a fine of 2 million kronor
was imposed.
hearing before the Consumers of the Committee on Commerce that dealt with pyramid sales. 1974 hearings before the Congressional Oversight panel of the Federal Trade Commission described Holiday Magic as a "Multi-level marketer of cosmetics", that used an "unfair and deceptive pyramid distribution scheme". Holiday Magic was also labeled a "pyramid scheme" and a "multi-level distributorship" by the United States Bureau of Domestic Commerce, in their 1976 published book: Crimes Against Business: A Management Perspective.
The company was cited by the United States House of Representatives
in a 1975 hearing as an example of consumer fraud, again in 1977, and in 1991, in a hearing by the House Committee on Small Business. Katz's Everybody's Business: An Almanac also referred to Holiday Magic as a "pyramid sales organization". Turner described it as one of the first "pyramid marketing" companies in America. Clarke referred to the company as an "illegitimate" business. Tobias poked fun at the pyramid nature of the organization, in his book The Only Investment Guide You'll Ever Need, telling readers to be wary of "..Holiday Magic - where the big money to be made was not in selling cosmetics, but in selling franchises to sell franchises (to sell franchises).." Howe wrote in the San Francisco Chronicle
that Holiday Magic was "..one of the largest of all pyramid schemes.."
Holiday Magic is used as an example in graduate level criminal justice
coursework to analyze the nature of corporate scams. According to the Duke Law Journal: "Illegality permeated every facet of the promotion of the Holiday Magic marketing program." One of the Holiday Magic Inc. cases was also cited by The University of Chicago Law Review and the Columbia Law Review. The Office of the State Attorney General
in Maine
, United States
cites In re Holiday Magic, Inc., 84 F.T.C. 748 as an example of pyramid scheme
s. Faltinsky described Holiday Magic as "..the largest pyramid scam of all time.."
based on those principles. Holiday Magic distributors were invited, though not required, to attend the Leadership Dynamics Institute
self-improvement sessions at a cost of $1000 each. Those in the positions of Instructor General, Trainer General, and Senior General were required to take the training. Navarro described the training as having "overtones of strict military training techniques.
Ben Gay, a high-level instructor at Leadership Dynamics, was President of Holiday Magic in the United States. Though he claimed Leadership Dynamics was a separate company, "..in no way related to Holiday Magic, Inc.", Gene Church pointed out many inconsistencies in this statement, in his book The Pit: A Group Encounter Defiled
.
in 1970.
The Mind Dynamics course was cited as providing "a means of achieving personal success through the conscious use of the subconscious mind". Distributors for Holiday Magic, who took the course, have considered it as a Holiday Magic Business expense. ".
, in the case United States v. Nocera, et al. (unrelated to Holiday Magic). Larry Stephen Huff, another key individual in the company, served two years in a Federal Prison, for charges related to a Ponzi scam (unrelated to Holiday Magic).
Abe F. March held several executive positions for Holiday Magic and parent company U.S. Universal; Regional Vice President, Canada (1971–1972), Vice President, Greece (1972–1973) and Managing Director for Sta-Power, Germany (1973). He subsequently bought exclusive rights for Middle East distribution of Holiday Magic cosmetics and formed his own company, Beauty Magic, in Beirut, Lebanon. In 2006 he published a book (To Beirut and Back - An American in the Middle East) dealing, in part, with his experiences.
Legal cases
Multi-level marketing
Multi-level marketing is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation...
organization, founded in 1964, by William Penn Patrick
William Penn Patrick
William Penn Patrick was an American entrepreneur and businessman. He was the owner of Holiday Magic, Leadership Dynamics, and Mind Dynamics. Patrick was a proponent of the sour grapes philosophy, and has been widely quoted as stating: "Those who condemn wealth are those who have none and see no...
(1930–1973) in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. Originally the organization distributed goods such as home-care products
Home care
Home Care, , is health care or supportive care provided in the patient's home by healthcare professionals Home Care, (also referred to as domiciliary care or social care), is health care or supportive care provided in the patient's home by healthcare professionals Home Care, (also referred to as...
and cosmetics
Cosmetics
Cosmetics are substances used to enhance the appearance or odor of the human body. Cosmetics include skin-care creams, lotions, powders, perfumes, lipsticks, fingernail and toe nail polish, eye and facial makeup, towelettes, permanent waves, colored contact lenses, hair colors, hair sprays and...
.
Company distributors were encouraged to recruit other distributors in a multilevel marketing structure, which was later characterized as a pyramid scheme
Pyramid scheme
A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public...
.
On May 16, 1974, a compromise settlement with approximately 31,000 class members, establishing a trust fund worth $2,600,381, was approved by the court. The organization was dissolved in 1974, subsequent to the death of Patrick
William Penn Patrick
William Penn Patrick was an American entrepreneur and businessman. He was the owner of Holiday Magic, Leadership Dynamics, and Mind Dynamics. Patrick was a proponent of the sour grapes philosophy, and has been widely quoted as stating: "Those who condemn wealth are those who have none and see no...
in 1973.
The company had been investigated by the Market Court of Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
, United States Securities and Exchange Commission
United States Securities and Exchange Commission
The U.S. Securities and Exchange Commission is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States...
, the Federal Trade Commission
Federal Trade Commission
The Federal Trade Commission is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act...
, and the State of California. Holiday Magic is cited as an example in graduate level coursework on criminal justice
Criminal justice
Criminal Justice is the system of practices and institutions of governments directed at upholding social control, deterring and mitigating crime, or sanctioning those who violate laws with criminal penalties and rehabilitation efforts...
and law journals.
Origins
In 1964, after a bankruptcy and several business failures, Patrick (age 33) was walking by a garage in San Rafael, CaliforniaSan Rafael, California
San Rafael is a city and the county seat of Marin County, California, United States. The city is located in the North Bay region of the San Francisco Bay Area...
, and noted that fruit-scented cosmetics were being sold. The company called Zolene was about to go out of business. Patrick bought all of the cosmetics supplies for $16,250, and founded Holiday Magic, Inc. After the purchase, Patrick began selling distributorships in his new company.
Patrick, a student of Alexander Everett
Alexander Everett
Alexander Everett was a British self-improvement and personal development consultant. He was the founder of the company Mind Dynamics, and author of the motivational books The Genius Within You and Inward Bound...
(founder of Mind Dynamics
Mind Dynamics
Mind Dynamics was a seminar company, founded by Alexander Everett in Texas in 1968. Mind Dynamics later led to two other companies, est and Lifespring....
), used Mind Dynamics techniques as well as the Silva Mind Control Method in the Holiday Magic organization.
Legal Problems
The State of California filed suit against Holiday Magic, in December 1972.In February 1973, Holiday Magic was sued by Avon Products
Avon Products
Avon Products, Inc. is a US cosmetics, perfume and toy seller with markets in over 140 countries across the world and sales of $9.9 billion worldwide as of 2007.-Business Model:...
. In the lawsuit, Avon Products' claimed that "Holiday Magic employees distributed leaflets accusing Avon of goon squads, paying off The District attorney's office.."
In June 1973, the United States Securities and Exchange Commission
United States Securities and Exchange Commission
The U.S. Securities and Exchange Commission is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States...
filed a lawsuit against Holiday Magic, charging Patrick
William Penn Patrick
William Penn Patrick was an American entrepreneur and businessman. He was the owner of Holiday Magic, Leadership Dynamics, and Mind Dynamics. Patrick was a proponent of the sour grapes philosophy, and has been widely quoted as stating: "Those who condemn wealth are those who have none and see no...
with "bilking some 80,000 people out of more than $250 million through his Holiday Magic cosmetics and soap empire."
The company was investigated by the Federal Trade Commission
Federal Trade Commission
The Federal Trade Commission is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act...
, and in June 1973 the company was found guilty of deceptive trade practices. The FTC
Federal Trade Commission
The Federal Trade Commission is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act...
found that Holiday Magic was in violation of section 5 of the Federal Trade Commission Act
Federal Trade Commission Act
The Federal Trade Commission Act of 1914 started the Federal Trade Commission , a bipartisan body of five members appointed by the president of the United States for seven-year terms. This commission was authorized to issue “cease and desist” orders to large corporations to curb unfair trade...
, and section 2 (a) of the Clayton Antitrust Act
Clayton Antitrust Act
The Clayton Antitrust Act of 1914 , was enacted in the United States to add further substance to the U.S. antitrust law regime by seeking to prevent anticompetitive practices in their incipiency. That regime started with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices...
.
In 1973, Holiday Magic's proceedings were prohibited by the Market Court of Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
, and a fine of 2 million kronor
Swedish krona
The krona has been the currency of Sweden since 1873. Both the ISO code "SEK" and currency sign "kr" are in common use; the former precedes or follows the value, the latter usually follows it, but especially in the past, it sometimes preceded the value...
was imposed.
Pyramid scheme
The company was termed as part of the "big three" scams, in a 1974 United States SenateUnited States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
hearing before the Consumers of the Committee on Commerce that dealt with pyramid sales. 1974 hearings before the Congressional Oversight panel of the Federal Trade Commission described Holiday Magic as a "Multi-level marketer of cosmetics", that used an "unfair and deceptive pyramid distribution scheme". Holiday Magic was also labeled a "pyramid scheme" and a "multi-level distributorship" by the United States Bureau of Domestic Commerce, in their 1976 published book: Crimes Against Business: A Management Perspective.
The company was cited by the United States House of Representatives
United States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...
in a 1975 hearing as an example of consumer fraud, again in 1977, and in 1991, in a hearing by the House Committee on Small Business. Katz's Everybody's Business: An Almanac also referred to Holiday Magic as a "pyramid sales organization". Turner described it as one of the first "pyramid marketing" companies in America. Clarke referred to the company as an "illegitimate" business. Tobias poked fun at the pyramid nature of the organization, in his book The Only Investment Guide You'll Ever Need, telling readers to be wary of "..Holiday Magic - where the big money to be made was not in selling cosmetics, but in selling franchises to sell franchises (to sell franchises).." Howe wrote in the San Francisco Chronicle
San Francisco Chronicle
thumb|right|upright|The Chronicle Building following the [[1906 San Francisco earthquake|1906 earthquake]] and fireThe San Francisco Chronicle is a newspaper serving primarily the San Francisco Bay Area of the U.S. state of California, but distributed throughout Northern and Central California,...
that Holiday Magic was "..one of the largest of all pyramid schemes.."
Holiday Magic is used as an example in graduate level criminal justice
Criminal justice
Criminal Justice is the system of practices and institutions of governments directed at upholding social control, deterring and mitigating crime, or sanctioning those who violate laws with criminal penalties and rehabilitation efforts...
coursework to analyze the nature of corporate scams. According to the Duke Law Journal: "Illegality permeated every facet of the promotion of the Holiday Magic marketing program." One of the Holiday Magic Inc. cases was also cited by The University of Chicago Law Review and the Columbia Law Review. The Office of the State Attorney General
State Attorney General
The state attorney general in each of the 50 U.S. states and territories is the chief legal advisor to the state government and the state's chief law enforcement officer. In some states, the attorney general serves as the head of a state department of justice, with responsibilities similar to those...
in Maine
Maine
Maine is a state in the New England region of the northeastern United States, bordered by the Atlantic Ocean to the east and south, New Hampshire to the west, and the Canadian provinces of Quebec to the northwest and New Brunswick to the northeast. Maine is both the northernmost and easternmost...
, United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
cites In re Holiday Magic, Inc., 84 F.T.C. 748 as an example of pyramid scheme
Pyramid scheme
A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public...
s. Faltinsky described Holiday Magic as "..the largest pyramid scam of all time.."
Leadership Dynamics
In 1967, William Penn Patrick wrote a booklet, entitled Happiness and Success through Principle, and founded Leadership DynamicsLeadership Dynamics
Leadership Dynamics, also known as Leadership Dynamics Institute , was a private, for-profit company, owned by William Penn Patrick. The company focused on executive training, personal development and self-improvement...
based on those principles. Holiday Magic distributors were invited, though not required, to attend the Leadership Dynamics Institute
Leadership Dynamics
Leadership Dynamics, also known as Leadership Dynamics Institute , was a private, for-profit company, owned by William Penn Patrick. The company focused on executive training, personal development and self-improvement...
self-improvement sessions at a cost of $1000 each. Those in the positions of Instructor General, Trainer General, and Senior General were required to take the training. Navarro described the training as having "overtones of strict military training techniques.
Ben Gay, a high-level instructor at Leadership Dynamics, was President of Holiday Magic in the United States. Though he claimed Leadership Dynamics was a separate company, "..in no way related to Holiday Magic, Inc.", Gene Church pointed out many inconsistencies in this statement, in his book The Pit: A Group Encounter Defiled
The Pit: A Group Encounter Defiled
The Pit: A Group Encounter Defiled is a non-fiction book on Mind Dynamics, Leadership Dynamics, and Holiday Magic, written by Gene Church and Conrad D. Carnes. The book was published Outerbridge & Lazard, Inc., in 1972, and was republished in a paperback edition in 1973, by Pocket Books. The book...
.
Mind Dynamics
William Penn Patrick bought Mind DynamicsMind Dynamics
Mind Dynamics was a seminar company, founded by Alexander Everett in Texas in 1968. Mind Dynamics later led to two other companies, est and Lifespring....
in 1970.
The Mind Dynamics course was cited as providing "a means of achieving personal success through the conscious use of the subconscious mind". Distributors for Holiday Magic, who took the course, have considered it as a Holiday Magic Business expense. ".
Sales Dynamics
Sales Dynamics was another program of instruction for pay available to Holiday Magic Distributors to help them in their business activities.Ceased operations
In 1974, after almost 10 years in operation and tied to pyramid schemes and controversy, both Leadership Dynamics and Mind Dynamics ceased operations.Later information
CEO and President Roland R. Nocera pleaded guilty to securities fraudSecurities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
, in the case United States v. Nocera, et al. (unrelated to Holiday Magic). Larry Stephen Huff, another key individual in the company, served two years in a Federal Prison, for charges related to a Ponzi scam (unrelated to Holiday Magic).
Abe F. March held several executive positions for Holiday Magic and parent company U.S. Universal; Regional Vice President, Canada (1971–1972), Vice President, Greece (1972–1973) and Managing Director for Sta-Power, Germany (1973). He subsequently bought exclusive rights for Middle East distribution of Holiday Magic cosmetics and formed his own company, Beauty Magic, in Beirut, Lebanon. In 2006 he published a book (To Beirut and Back - An American in the Middle East) dealing, in part, with his experiences.
Further reading
Studies- Door to Door Selling, Pyramid Selling, Multilevel Marketing, Study Commissioned by European Commission, November 1999.
Legal cases
- 84 F.T.C. 748 - IN THE MATTER OF HOLIDAY MAGIC, INC., ET AL., ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT AND SEC. 2(a) OF THE CLAYTON ACT, Docket 8834. Complaint, Jan. 18, 1971, Decision, Oct. 15, 1974
- Holiday Magic Inc. et al. v. Robert W. Warren et al. (Free Speech issue - dismissed), Civ. A. No. 71-C-659. United States District Court, E. D. Wisconsin. April 3, 1973.
- Holiday Magic, Inc. v. Warren., 497 F.2d 687., C.A.Wis. 1974., May 20, 1974
- Marshall v. Holiday Magic, Inc., 550 F.2d 1173, 1176 (C.A.9 1977).
- In re HOLIDAY MAGIC SECURITIES AND ANTITRUST LITIGATION., James J. Ward, et al. v. Holiday Magic, Inc., et al., N.D. California, Civil Action No. C-74-1067-LHB., No. 124., July 6, 1977.