PADI, from $200K to $700,000K in 32 Years

In 1983, PADI was a nonprofit California corporation, whose directors were John Cronin and Craig Carlson (they founded it in Chicago in 1966), and Ralph Erickson. PADI instructors were the members and allegedly had voting rights in what was the instructional and certifying Professional Association of Diving Instructors.

However, the three had also created another PADI -- International PADI -- as a for-profit-organization, and this was the marketing-oriented PADI that was about to catch a wave in the expanding international market. Cronin, Carlson, and Erickson were the majority board members of International PADI as well, joined by Al Ormsby and Gary Prevnost.

In 1983, Cronin, Carlson and Erickson sold PADI to International PADI for $200,000, and that led to several instructors filing a major lawsuit on the grounds that as PADI members, they had not been allowed to vote, and, in fact, PADI had not even been holding elections for board membership, as their bylaws required.

It was a complicated lawsuit, charging PADI with becoming a commercial venture by shortening courses, lowering training standards, and not living up to its own objectives. But, the suit also charged self-dealing, arguing that by selling PADI, which the three PADI board members -- Cronin, Carlson and Erickson -- controlled, they stood to profit illegally and that the move was designed to enrich them at the expense of the nonprofit organization. The instructors argued the move was against PADI bylaws, and in violation of state and federal law. It was a strong argument.

But, Cronin and Company lawyered up, opened its checkbook, and went to work, papering the instructors and their overwhelmed and underfunded legal team. The litigants had shallow pockets, eventually ran out of money, and their suit petered out.

Since then, PADI has been sold many times, and a lot of people, including the original founders, have made a lot of money. In late March, it sold once again, this time for $700 million to Mandarin Holdings, a group composed mainly of wealthy Chinese families and endowments. Matt Jarezemsky, writing in the Wall Street Journal, says they purchased PADI from Providence Equity Partners, which had purchased it just two years ago, helped it expand in China, and has now tripled its investment.