Original jurisdiction in case of Commonwealth of Pennsylvania, Acting by Attorney General Israel Packel, v. James Tolleson and Rodney Tolleson.
George S. Test, Deputy Attorney General, for plaintiff.
James H. Joseph, with him Donald S. Hershman and Baskin, Boreman, Wilner, Sachs, Gondelman & Craig, for defendants.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Kramer.
This matter comes within the original jurisdiction of this Court. It was commenced by the filing of a complaint in equity on February 23, 1973 by the Commonwealth
of Pennsylvania (Commonwealth) acting by its Attorney General, seeking injunctive relief under Section 4 of the Unfair Trade Practices and Consumer Protection Law, Act of December 17, 1968, P.L. 1224, 73 P.S. § 201-4 (hereinafter referred to as the Act). The named defendants in the action were James Tolleson and Rodney Tolleson (hereinafter referred to collectively as Tollesons and individually by their given and surnames). The complaint alleged that the Tollesons were the owners, operators, agents, officers, or representatives of at least ten corporations or organizations through which the Tollesons were allegedly violating the Act. Arguments were held on the Commonwealth's motion for a special injunction on February 23, 1973, before this writer sitting as chancellor, and the Court on that same date issued a special injunction prohibiting the Tollesons from "conducting any solicitations, promotional activities, sales of services, or any of the activities alleged to be carried on in the allegations of the Complaint filed herein in the Commonwealth of Pennsylvania." As stated in that order, after argument by counsel for the Commonwealth and the Tollesons, the special injunction was issued on the basis that it appeared the Tollesons "may be attempting to circumvent prior orders of courts through the establishment of various corporations, companies or organizations" and "that immediate and irreparable injury will be sustained by the public before notice and formal hearing may be held to determine whether a Preliminary Injunction will issue." This special injunction was issued under the provisions of Pa. R.C.P. No. 1531. A hearing was set for February 26, 1973. By virtue of a joint petition filed by the parties, the Court continued the hearing and the efficacy of the special injunction to March 1, 1973. On March 1, 1973, the parties again jointly requested a continuance for the purpose of providing an opportunity for conference on possible settlement,
and the Court, by order of that date, granted the joint request. On March 14, 1973, the parties presented to the Court a stipulation seeking this Court's approval of a proposed order consented to by the parties. On March 15, 1973, this Court signed a consent order which generally provided that the Tollesons would refrain from certain enumerated acts in connection with their various businesses and would perform certain enumerated acts in carrying out said businesses. The effect of this consent order was to supersede the prior special injunction. For all practical purposes, the consent order was a preliminary injunction order. Hearings commenced on May 16, 1973 and after several continuances, one of which was to permit the Tollesons to prepare their defense at the conclusion of the Commonwealth's case, the hearings were concluded late in the fall of 1973. Proposed findings of fact and conclusions of law have been filed by both parties and the matters is now ripe for final determination.
As will be seen from the findings of fact, this is a very complicated case, made even more complicated by additional pleadings filed by the Commonwealth via petitions for civil penalties for alleged violations of the consent order. As a guide to the reader, it will be helpful to note at this point that petitions for civil penalties were filed on March 19, 1973; March 21, 1973; April 13, 1973; and July 19, 1973. At the request of and under agreement of the parties, the Court permitted testimony and evidence to be entered during the course of these hearings as a consolidated matter. The petition for civil penalties dated July 19, 1973 was heard specifically at hearings commencing on October 29, 1973; but with that exception, all the other civil penalties were included in the record as a consolidated matter. As if that were not enough, the matter was further complicated by the filing of a petition for civil penalties on April 6, 1973 in a different case docketed at No. 1106
Commonwealth Docket 1972, and at the request of the parties, testimony and evidence in that matter were received at the hearings and are included in the consolidated record. An attempt was made to prepare one opinion covering all of these matters, but that was deemed by the writer to be confusing. Therefore, this opinion will be restricted solely to the injunction proceeding and separate opinions will be filed simultaneously herewith on the petitions for civil penalties. It was necessary, however, to include many findings of fact and some discussion in this opinion which will be referred to in the other opinions by reference. It should be noted that there is an additional petition for civil penalties filed by the Commonwealth on September 7, 1973 for which no testimony or evidence has been received and therefore, that petition will not be considered in any of these opinions.
In order to help the reader understand this opinion, this introduction will explain who the Tollesons are and what they have done to bring about this lawsuit. James Tolleson is an individual in his early thirties who was born and reared in Alabama. James Tolleson eventually entered into the business of buying, reconditioning and selling used automobiles in the State of Ohio. James Tolleson's younger brother, Rodney, followed James and entered the same business. In May of 1969, James Tolleson was invited into a business opportunity operated by Glenn W. Turner known as Koscot Interplanetary, Inc. (Koscot). James Tolleson purchased a $5,000 Koscot cosmetics distributorship. He also became a member of Turner's "Dare To Be Great" organization, and was trained in Turner's sales and motivation courses, which provided the format for the Tollesons' future operations. After the State of Ohio moved to enjoin the Koscot marketing program because it was
alleged to be an illegal multi-level referral sales plan, Koscot changed its marketing system and thereafter for about one year, James Tolleson sold Koscot distributorships until the quota of the distributorships for the state was filled. It was at about this time that the Tollesons' automobile business was sold and Rodney Tolleson began to work with his brother as a close confidant and as a participant in the various Tolleson enterprises. On July 1, 1969, while the Tollesons were still in Ohio, Koscot had entered into an assurance of voluntary compliance with the Commonwealth covering Koscot's operations in Pennsylvania. As it developed, because of violations of that agreement, the Court of Common Pleas of Erie County issued a broad injunction against Koscot and all of its representatives and officials operating in Pennsylvania, from which no appeal was taken. Thereafter, in July of 1971, James Tolleson entered the Commonwealth of Pennsylvania as the exclusive Koscot agent in Pennsylvania. The record is clear that James Tolleson was aware of the Erie County injunction. The Tollesons embarked upon a scheme to circumvent (or comply with, depending upon your point of view) the Erie County injunction by using salesmen to sell distributorships instead of using the outright referral sales program which had been enjoined. A petition for civil penalties was filed against the Tollesons and an unincorporated unregistered organization called "American Be Independent," and the Erie County Common Pleas Court issued an order levying civil penalties. That order was appealed to this Court in yet another case at No. 189 Commonwealth Docket 1973, and an opinion in that case will also be filed simultaneously herewith.
In any event, on October 6, 1972, the Erie County Common Pleas Court ordered Koscot and the Tollesons to "cease and desist from any and all activity in the Commonwealth of Pennsylvania with the exception only,
that persons who have purchased distributorships in Koscot Interplanetary, Inc. may continue to sell the Koscot product at retail and Koscot Interplanetary, Inc. may continue to supply such product to its distributors." Immediately thereafter, on approximately November 1, 1972, the Tollesons began marketing memberships in an organization called "Century 2000" which was a travel club unconnected with Glenn Turner. As a result of the Tollesons' activity in Century 2000, the Commonwealth obtained a consent order dated November 10, 1972 (at 1106 C.D. 1972), which in effect was a permanent injunction. Alleged violations of that order brought about the petition for civil penalties in the case at No. 1106 Commonwealth Docket 1972 mentioned hereinbefore which will be covered by a separate opinion. The details of the Century 2000 operation, including the Tollesons' part therein, will be described in detail in the findings of fact. For reasons which are explained in the findings of fact, in February 1973 the Tollesons divorced themselves from the Century 2000 operation and formed a new organization called Exciting Life. The complaint in this case was filed on February 23, 1973, following the Tollesons' break with Century 2000 and the inception of their new operation.
Tollesons' Method of Operation
A careful review of all of the exhibits in this case reveals that the methods of operation used by the Tollesons in this Commonwealth have been consistently very similar to the methods of operation established by their mentor, Glenn W. Turner. Although some changes were made in the product from time to time in order to circumvent the latest in a series of court orders, the sales format has remained the same. Whether the purpose was to sell cosmetics, distributorships, franchises, travel or motivation, the approach to the public has been about the same. Citizens are initially contacted by the
Tollesons, their companies or their agents through a very colorful letter. Although the letters have changed slightly in content, the message has remained the same. The letters are all sent by James Tolleson and contain a picture of James Tolleson and his family. The letters are colorfully patriotic. They directly appeal to the desire of the people to be financially independent and allude to opportunities to earn large sums of money. The letters are intentionally vague and no details whatsoever concerning a specific company or a specific product are disclosed. The letters refer to "fantastic" or "unbelievable" business opportunities, but contain no information concerning the opportunities. The recipient is urged in the letter to complete a reply card. Upon receipt by the Tolleson organizations of the card, the "prospect" is invited to attend a Get-Acquainted meeting. The Tollesons also utilize a process known as "head hunting" whereby agents or employes develop prospects without the use of the letter. Between ten and sixty persons attend the Get-Acquainted meeting, which is sometimes referred to as a "Golden Opportunity" meeting. Get-Acquainted meetings last about two hours and follow a uniform format from a script prepared by persons in the Tolleson organizations. The Tollesons may or may not attend such meetings, but the audience is usually composed of about fifty percent Tolleson personnel. The meetings are run in a fast manner with contrived applause, laughter, shouting and singing, all led by the Tolleson personnel in the audience. The prospects are shown motivation movies. By way of cleverly designed innuendo, they are led to believe that if they join the organization, they can earn anywhere from $25,000 to $50,000 per year. At this Get-Acquainted meeting, both the name of the organization and the business involved remain undisclosed. Thereafter, if the prospect is still interested, he is invited to a weekend meeting which normally is held in some distant
area, i.e., the Bahamas or Florida. The price of the trip to these meetings is apparently low and the prospect of an inexpensive trip or cheap vacation is used to induce attendance. After several meetings during the weekend at which the prospects are once again exposed to contrived applause, laughter, singing and excitement, the prospects are pressured into signing contracts and paying money for their memberships.
Most of the Commonwealth's witnesses described all of these meetings as being carnival-like or similar to revival meetings. All of these witnesses described peer pressure, embarrassment and great expectations, all of which caused many people to pay money to join something which was never fully explained to them. The record quite clearly indicates that information was intentionally withheld from the prospects. There were on many occasions intentional denials that the Tollesons had ever had any connection with Glenn Turner. The evidence clearly establishes that none of the prospects were ever advised on where their money went or for what it was used. As a matter of fact, the record makes clear that only the Tollesons were aware that the monies, which the prospect intended to be paid into the organization they were joining, were in fact diverted to other Tolleson organizations. Even the trusted lieutenants and officers of some of the Tolleson organizations did not know of the existence of other corporations with the same or similar names, or how they fit into the Tolleson corporate structure. With the exception of the Koscot operation, the Tollesons were not directly connected with Glenn W. Turner in the business operations involved in the cases covered by this opinion, but the flavor of a Turner operation permeates everything the Tollesons have done.
The chancellor was provided the opportunity at the hearings in these matters to observe and hear the various witnesses. At the request of counsel for the parties,
all the witnesses for both the plaintiff and the defendants were sequestered for all the hearings before the chancellor except for the two Tolleson brothers who were present at all times for all hearings. Throughout the hearings the testimony of the sequestered Commonwealth witnesses was generally consistent, while the testimony of the sequestered Tolleson witnesses was often inconsistent. The testimony of the Tolleson brothers was both inconsistent and evasive. The hearings in this case were long and complicated. They involved not only the complex corporate structure and businesses of the defendants, but also the emotions and personal interests of all persons concerned. It is not at all surprising that there were conflicts in the testimony. The chancellor has utilized the entire record together with his observations of these witnesses (including their demeanor and sincerity) in order to carry out his duty of resolving the conflicts and differences in the testimony. Although, admittedly, it is sometimes difficult to discern which of the conflicting witnesses has told the truth and which has distorted the truth, the task of the factfinder is to use his sound and impartial discretion to resolve the conflicting matters. The following findings of fact are the result of that process.
Identification of Parties and Entities Involved
1. Plaintiff is the Commonwealth of Pennsylvania acting by its Attorney General.
2. Defendant James E. Tolleson is an adult individual residing at Altamonte Springs, Florida.
3. Defendant Rodney W. Tolleson is an adult individual residing at Altamonte Springs, Florida. At some time between June 28, 1973 and September 18, 1973, Rodney W. Tolleson changed his residence from Pennsylvania to Florida.
[ 14 Pa. Commw. Page 834]
. The Tollesons have conducted or are conducting businesses within the Commonwealth of Pennsylvania through the following business entities, the operations of which they control, but for which James E. Tolleson is the owner and chief corporate officer.*fn1
(a) Exciting Life, Inc. is a Florida not-for-profit corporation (organized on April 13, 1973) (hereinafter referred to as "Exciting Life-Florida"). Exciting Life-Florida is sometimes known as and referred to as Exciting Life Travel and Success Club and was not registered in Pennsylvania.
(b) Exciting Life, Inc. is a Delaware corporation (organized on June 25, 1973) (hereinafter referred to as "Exciting Life-Delaware").
(c) Exciting Life Enterprises, Inc. is a Delaware corporation (organized on May 25, 1973). The term "Exciting Life" was used loosely by the Tollesons and their agents without any explanation on the distinction between the various organizations bearing the name. Even high-ranking officials in the Tolleson organizations did not know of the existence of different companies bearing the same or similar name.
(d) American Opportunities Unlimited, Inc., a Delaware corporation (organized on November 30, 1972) was utilized from about November 1, 1972.
(e) Empire Enterprises, Inc. is an Ohio corporation (organized on November 9, 1970).
(f) Think and Grow Rich, Inc. is a Delaware corporation (organized on June 11, 1973). It is also referred to in the record as being a Florida corporation. It was utilized prior to incorporation.
(g) Golden Opportunities Finders Unlimited, Inc. is a Delaware corporation (organized on November 30, 1972).
(h) Adventures in Salesmanship, Inc. is a Delaware corporation (organized on November 30, 1972).
(i) All American Success, Inc. is a Delaware corporation (organized on November 15, 1972).
(j) American Be Independent, Inc. is a Delaware corporation (organized on November 15, 1972). American Be Independent was also used at times as a trade style without being registered anywhere.
(k) Eagle Aviation, Inc. was a name used but apparently inactive at the time of trial.
(l) JET Travel Services, Inc. is a Delaware corporation (organized on May 3, 1973). JET Travel Services, Inc. was also the name of Exciting Life Enterprises, Inc. prior to June 30, 1973 when the name was changed to Exciting Life Enterprises, Inc. as a part of a reorganization involving that corporation and No-Glug Jug Corporation (now JET Travel Services, Inc.).
(m) No-Glug Jug Corporation was the name of JET Travel Services, Inc. prior to a reorganization on June 30, 1973 involving that corporation and Exciting Life Enterprises, Inc. (formerly JET Travel Services, Inc.).
5. Each of the above-listed corporations has failed to register with the Secretary of State for the Commonwealth of Pennsylvania as either a foreign corporation doing business in the Commonwealth or as a fictitious name. None of the above-listed corporations have registered with the Secretary in any manner whatsoever. With the exception of Empire Enterprises, Inc., the Tollesons used the corporate or fictitious names before any incorporation; and as already noted herein, the fact of incorporation of them was not made a part of the record, but rather was alluded to in the Tollesons' proposed findings of fact.
6. Koscot Interplanetary, Inc. (Koscot) is apparently a Florida corporation owned, or controlled by Glenn W. Turner, doing business in Pennsylvania. From July 1971 to November 1, 1972, James E. Tolleson
was the exclusive and controlling agent in Pennsylvania for Koscot. Rodney W. Tolleson was sales manager (in addition to other titles) for Koscot for the same period.
7. On June 30, 1973, No-Glug Jug Corporation (now JET Travel Services, Inc.) acquired all of the outstanding capital stock of JET Travel Services, Inc. (now Exciting Life Enterprises, Inc.) in a transaction whereby James E. Tolleson became the legal, beneficial, or controlling owner of 1,600,000 shares of the capital stock ($0.01 par value per share) of No-Glug Jug Corporation (now JET Travel Services, Inc.) which gave him control of that corporation. As a part of that transaction, No-Glug Jug Corporation was renamed JET Travel Services, Inc. and the former JET Travel Services, Inc. was renamed Exciting Life Enterprises, Inc. In June of 1973, coincidental with its acquisition by No-Glug Jug Corporation (now JET Travel Services, Inc.), Exciting Life Enterprises, Inc. (formerly JET Travel Services, Inc.) acquired all of the outstanding capital stock of Think and Grow Rich, Inc., All American Success, Inc. and Exciting Life-Delaware (the record is not clear whether Delaware or Florida) from James E. Tolleson.
8. Since June 29, 1973, JET Travel Services, Inc. (formerly No-Glug Jug Corporation) has been a holding company whose shares of capital stock are allegedly traded over-the-counter and reported daily in the pink sheets by the National Quotation Bureau.*fn2
9. Since June 29, 1973, the sole asset of JET Travel Services, Inc. (formerly No-Glug Jug Corporation) has been all of the outstanding shares of capital stock of Exciting Life Enterprises, Inc. (formerly JET Travel Services, Inc.).
10. Since June 29, 1973, the assets of Exciting Life Enterprises, Inc. (formerly JET Travel Services, Inc.)
have consisted solely of all of the outstanding shares of capital stock of Exciting Life-Delaware, All American Success, Inc. and Think and Grow Rich, Inc.
11. Since June 29, 1973, American Opportunities Unlimited, Inc., Adventures in Salesmanship, Inc. and Golden Opportunities Finders Unlimited, Inc. have been wholly-owned subsidiaries of Empire Enterprises, Inc.
12. Prior to incorporation of American Be Independent, Inc., the name or style "American Be Independent" was used by the Tolleson brothers as a trade name in association with the Koscot sales incentive programs.
13. The term "Golden Eagles" has been used as an unregistered trade name in connection with the Tollesons' operations.
14. James E. Tolleson is the Chairman of the Board of Directors of Exciting Life-Florida, Exciting Life-Delaware, American Opportunities Unlimited, Inc., Empire Enterprises, Inc., Think and Grow Rich, Inc., All American Success, Inc., Adventures in Salesmanship, Inc., American Be Independent, Inc., Golden Opportunities Finders Unlimited, Inc., JET Travel Services, Inc. (formerly No-Glug Jug Corporation) and Exciting Life Enterprises, Inc. (formerly JET Travel Services, Inc.) Rodney W. Tolleson is the National Sales Director of Exciting Life-Delaware, the President of American Opportunities Unlimited, Inc., Vice President of American Be Independent, Inc. and Vice President of Empire Enterprises, Inc.
15. By virtue of his position of Chairman of the Board of Directors, and his legal and beneficial ownership of the majority of the outstanding capital shares of JET Travel Services, Inc. (formerly No-Glug Jug Corporation), James E. Tolleson controls and directs the activities of JET Travel Services, Inc. (formerly No-Glug Jug Corporation), Exciting Life Enterprises, Inc. (formerly JET Travel Services, Inc.), All American
Success, Inc., Think and Grow Rich, Inc. and Exciting Life-Delaware.
16. By virtue of his position as Chairman of the Board of Directors and his legal and beneficial ownership of all of the outstanding capital stock of Empire Enterprises, Inc., James E. Tolleson controls and directs the activities of Empire Enterprises, Inc., American Opportunities Unlimited, Inc., Golden Opportunities Finders Unlimited, Inc., Adventures in Salesmanship, Inc. and American Be Independent, Inc.
17. Since their organization, Exciting Life-Florida, Exciting Life-Delaware, Exciting Life Enterprises, Inc., Think and Grow Rich, Inc., American Opportunities Unlimited, Inc., All American Success, Inc. and American Be Independent, Inc. have maintained their offices and principal places of business at 701 East Semoran Boulevard, Altamonte Springs, Florida.
18. Since November 1, 1972, Empire Enterprises, Inc. has maintained its office and principal place of business at 701 East Semoran Boulevard, Altamonte Springs, Florida. For some period of time prior, it maintained its office and principal place of business at 3404 Hamilton Boulevard, Allentown, Pennsylvania, and prior to that at some undisclosed address in Ohio.
19. From its inception until July of 1973, Golden Opportunities Finders Unlimited, Inc. maintained its office and principal place of business at REA Aviation Building, A-B-E Airport, Airport Road, Allentown, Pennsylvania.
20. Yet another corporation involved is Century 2000, Inc. It is a Florida not-for-profit corporation certified by the Federal Aviation Administration as an air travel club. It was not controlled by either Tolleson, as will be mentioned hereinafter. The Tollesons and their agents, at various and convenient times, stated that James E. Tolleson owned 51%, or otherwise controlled Century 2000, Inc.
[ 14 Pa. Commw. Page 8821]
. Masco Industries, Inc. is either a Florida or Delaware corporation. It was owned and controlled by Jack Plumly and James Shaw. Masco Industries, Inc. leased aircraft to Century 2000, Inc.
22. Century 2000, Inc. was controlled by Jack Plumly, James Shaw and Stonewall Felton. James E. Tolleson never owned controlling interest in either Masco Industries, Inc. or Century 2000, Inc., nor did he control or direct their activities.
23. Century 2000, Inc. and Masco Industries, Inc. maintained combined offices in Miami, Florida.
24. Insofar as this record discloses, Glenn W. Turner has no connection with Exciting Life-Florida, Exciting Life-Delaware, American Opportunities Unlimited, Inc., Empire Enterprises, Inc., Think and Grow Rich, Inc., All American Success, Inc., Adventures in Salesmanship, Inc., Golden Opportunities Finders Unlimited, Inc., JET Travel Services, Inc. (formerly No-Glug Jug Corporation), Exciting Life Enterprises, Inc. (formerly JET Travel Services, Inc.) or Century 2000, Inc.
25. In May of 1969, James E. Tolleson purchased a distributorship offered by Koscot Interplanetary, Inc. in the State of Ohio. Prior to his purchase of a Koscot distributorship, James E. Tolleson had not engaged in the business of offering franchises or distributorships for sale.
26. Shortly after James E. Tolleson purchased his Koscot distributorship, the marketing program of that company (whereby distributors and subdistributors earned fees or commissions for sponsoring and selling other distributorships and subdistributorships) was changed and distributorships were ostensibly offered on a direct or single-level basis. New distributors in the State of Ohio could no longer earn fees or commissions
by sponsoring other new Koscot distributors. Thereafter James E. Tolleson sold Koscot distributorships on a direct or single-level basis in the State of Ohio until June or July of 1970 when Koscot reached its quota of distributors in Ohio.
27. James E. Tolleson requested that Koscot permit him to sell 1,500 unsold distributorships in the State of California by establishing a sales company to direct-market such distributorships, whereupon Koscot replied that in order to sell the distributorships in California, James E. Tolleson would have to prove his ability by first selling 500 unsold distributorships in the Commonwealth of Pennsylvania.
28. James E. Tolleson obtained from Koscot the exclusive rights to sell the 500 unsold distributorships on a commission basis in the Commonwealth of Pennsylvania, sometime in July of 1971.
29. James E. Tolleson had utilized Empire Enterprises, Inc., which he organized in the State of Ohio, as a corporate device in the conduct of his Koscot business.
30. James E. Tolleson found that most of the existing Koscot distributorships in the Commonwealth of Pennsylvania had been sold in Western Pennsylvania, and therefore he established an office in Allentown, Pennsylvania to broker the remaining Koscot distributorships.
31. James E. Tolleson used the unregistered name or term "Golden Eagles" in reference to his Ohio sales organization, and carried that term into the Commonwealth of Pennsylvania.
32. "Golden Eagles" was used as a trade style or public relations gimmick intended to appeal to one's patriotic senses. Later a large Golden Eagle pin or clasp was developed. It was intended and represented by the Tollesons to be an outward manifestation or
honor badge for sales persons who earned more than $100,000 per year in the Tolleson organizations.
33. James E. Tolleson used the name or style of "American Be Independent" for his Koscot sales organization in the Commonwealth of Pennsylvania. "American Be Independent" was never registered in Pennsylvania.
34. James E. Tolleson used a direct mail letter (in addition to other methods) to solicit Pennsylvania residents to purchase Koscot distributorships. The letter was designed to encourage replies from interested persons with certain qualifications and to discourage replies from uninterested and unqualified persons.
35. The largest number of commissioned salesmen employed by James E. Tolleson or Empire Enterprises, Inc. in the Koscot operation prior to the proceedings in Erie County on November 9, 1972, was forty to fifty, under whom 260 to 270 distributorships were sold. With minor fluctuations, the number of salesmen working for James E. Tolleson and/or Empire Enterprises, Inc. increased from six to forty or fifty.
36. A substantial number of the commissioned salesmen employed by James E. Tolleson and/or Empire Enterprises, Inc. to sell Koscot distributorships in the Commonwealth of Pennsylvania were themselves Koscot distributors, although not all were.
37. The salesmen commissioned by James E. Tolleson and/or Empire Enterprises, Inc. to sell Koscot Interplanetary, Inc. distributorships were called "State Developers" and received their position and title by appointment of either James E. Tolleson or Rodney W. Tolleson.
38. At the time Koscot was permanently enjoined from the sale of distributorships in the Commonwealth of Pennsylvania, James E. Tolleson or Empire Enterprises,
Inc. had an investment in Century 2000. Century 2000 had existed as an air travel club for seven years preceding the Koscot injunction.
39. Century 2000 was not created by James E. Tolleson but was used by him to avoid the imperatives of the Erie County Court of Common Pleas with respect to the sale of Koscot distributorships. The Tolleson sales system remained the same but the product was changed from cosmetics to travel club memberships.
40. Prior to the Erie County injunction, James E. Tolleson, individually or through Empire Enterprises, Inc., had advanced about $30,000 to Century 2000 and had used Century 2000 aircraft to transport prospective purchasers of Koscot distributorships to Orlando, Florida.
41. At various times, James E. Tolleson and several of his agents, servants, employes or representatives, represented to prospective purchasers that he owned the controlling interest in, or otherwise controlled, Century 2000. In fact, James E. Tolleson did not own or control Century 2000.
42. Prior to the Erie County injunction, the Tollesons had considered marketing Century 2000 memberships. As early as August of 1972, James E. Tolleson had considered using some of his sales representatives to sell Century 2000 memberships.
43. On or about November 1, 1972, thirty or forty State Developers of the Tolleson operations commenced the sale of Executive Memberships in Century 2000; these State Developers used to sell Executive Memberships in Century 2000 were the same State Developers who sold Koscot distributorships in the Commonwealth of Pennsylvania.
44. The then recent purchasers of Koscot distributorships in the Commonwealth of Pennsylvania were not offered the opportunity to transfer their distributorships to Century 2000 Executive Memberships.
[ 14 Pa. Commw. Page 9245]
. In the Consent Permanent Injunction of November 10, 1972, the Tollesons agreed to make many changes in their Century 2000 sales program. Many of the changes agreed to in the Consent Injunction were not in fact made, and approximately three months after the Consent Injunction the Tollesons broke with Century 2000 and formed their own travel club (Exciting Life Travel and Success Club). The sales program of Exciting Life remained basically the same as the Century 2000 sales program.
46. In the Consent Injunction of November 10, 1972, the Tollesons agreed to limit Century 2000 Executive Memberships to 20 in a trading district of 500,000 population, and to allow each Executive Member to sell a maximum of 500 Regular Memberships. Some prospective Members were told by the Tollesons or their agents to utilize addresses outside the trading district (or sales area) where the prospect resided.
47. At or about the time James E. Tolleson commenced the sale of Executive Memberships in Century 2000, both American Be Independent, Inc. and American Opportunities Unlimited, Inc. were incorporated, and both became subsidiaries of Empire Enterprises, Inc., which became a holding company. Thereafter, State Developers were employed and commissioned by American Opportunities Unlimited, Inc. and did not broker Koscot distributorships.
48. In December of 1972, Empire Enterprises, Inc. acquired the international marketing rights to the works of Dr. Napoleon Hill (except books) which were assigned to Think and Grow Rich, Inc., which had been incorporated for the purpose of selling self-improvement courses and materials.
49. Think and Grow Rich, Inc. never offered business opportunities to residents of the Commonwealth of Pennsylvania, but it did provide Napoleon Hill materials for the use of Executive Members of Century
[ 14 Pa. Commw. Page 932000]
and State Developers employed by American Opportunities Unlimited, Inc.
50. Beginning in November of 1972, Executive Members of Century 2000, and State Developers employed by American Opportunities Unlimited, Inc., were trained by All American Success, Inc. which had been incorporated for that purpose.
51. Prior to November of 1972, training of State Developers and Koscot distributors was performed by a division of Empire Enterprises, Inc. That division was later incorporated as All American Success, Inc. As already noted, none of these corporations were ever registered to do business in Pennsylvania.
52. Century 2000, Inc. offered two classes of memberships in the Commonwealth of Pennsylvania: (a) Regular Memberships (sometimes called Traveling Memberships) and (b) Executive Memberships. Regular Memberships were offered in the Commonwealth of Pennsylvania for the price of $200. Executive Memberships were at first offered in the Commonwealth of Pennsylvania for the price of $5,000 but the price was later raised to $5,500.
53. Executive Memberships were referred to as the "business" and Regular Memberships were referred to as the "product."
54. The purchaser of a $200 Regular Membership received Century 2000 trip schedules and the opportunity to participate in travel programs at Century 2000 club rates.
55. The purchaser of an Executive Membership in Century 2000 received: (a) a Regular Membership in Century 2000; (b) the right to sell or enroll 500 Regular Members in Century 2000 at a commission of fifty (50%) percent; (c) training at both a Regional and a National Training School; (d) a "Winner's Success Kit" provided by Think and Grow Rich, Inc.; (e) the right to receive training for every Membership Recruiter
which may be employed by the Executive Member on a commission basis to assist him in the sale of Regular Memberships.
56. Century 2000, Inc. apparently had an arrangement with American Opportunities Unlimited, Inc. whereby American Opportunities Unlimited, Inc. was granted the exclusive right to sell Century 2000 Executive Memberships in the Commonwealth. The apparent purpose of American Opportunities Unlimited, Inc. was to broker business opportunities. Although the purchasers were joining Century 2000 (not owned by James Tolleson), their money was paid to American Opportunities, which had no agreement with Century 2000. On at least one occasion, the money was paid to a State Developer.
57. Solicitations to purchase Executive Memberships in Century 2000 were made by State Developers of the James E. Tolleson operations who were paid a commission for their efforts in selling such franchises. Neither the qualifications of nor the manner of appointment of a State Developer was ever explained on the record.
58. The defendants allege that Regular Members in Century 2000 did not, directly or indirectly, purchase any right to solicit offers to purchase Executive or Regular Memberships or to otherwise receive fees, commissions or other compensation, directly or indirectly, for soliciting such offers. However, Regular Members were, in fact, offered jobs as Membership Recruiters. The commissions available to Membership Recruiters were used to induce prospects to buy Regular Memberships.
59. In the belief that James E. Tolleson, through his Century 2000 operators, was seeking to avoid the imperatives of the Erie County Court of Common Pleas relating to the sale of Koscot distributorships, the then Attorney General of the Commonwealth of Pennsylvania commenced an injunction proceeding against James
E. Tolleson and Rodney W. Tolleson in Commonwealth Court in November of 1972. This suit resulted in the Consent Injunction of November 10, 1972, in which the Tollesons agreed and were directed to make ...