Magic Castle at Center of Family Fight Over Profits

This story first appeared in the April 24 issue of The Hollywood Reporter magazine.

The 83-year-old founder of Hollywood's Magic Castle and his niece, the current president of the Academy of Magical Arts that runs the storied membership club, have become embroiled in a battle over the bewitching profits at what once was a struggling nonprofit organization. A mediation is set for April 15 in an attempt to avoid a public trial that could tarnish the aura of an industry hangout that nurtured David Copperfield and has entranced stars from Cary Grant and Tippi Hedren to Conan O'Brien, Johnny Depp and Ryan Gosling.

"Nobody wants this thing to end badly," says one magician member, who notes that fellow professionals have been observing the skirmish anxiously. "It's a dispute over money, but it's a dispute among family."

Milt Larsen (center) joined then-board member Harris and a group of Magic Castle supporters in 2008 at the unveiling of Harry Houdini’s renovated star on the Hollywood Walk of Fame. The Magic Castle now is embroiled in a money dispute.

At issue is the 5.5 percent royalty from annual food and beverage sales that Milt Larsen, who conjured the club in 1963 with his late brother Bill — father of Erika Larsen, 47, now in charge — receives in exchange for having created the Magic Castle's intellectual property after leasing and restoring the Victorian mansion on Franklin Avenue. (Milt had overseen the ornate remodeling, replete with secret passages, and Bill had organized the AMA to operate it.)

The royalty wasn't much until recent years, when revenue increased sharply under the stewardship of a business-minded board of directors — overseen from 2011 to 2014 by Neil Patrick Harris. Despite a 2011 fire that required extensive remodeling, the Magic Castle increased business by aggressively recruiting better performers, adding shows and providing new apartments for visiting magicians. "People are back," attests manager-producer Peter Principato, a member for the past nine years, "particularly within the industry and particularly within the past two years." In January, for the first time in decades, the AMA stopped accepting new members (there are more than 5,000) who aren't professional magicians or at least proven hobbyists.

According to member newsletters obtained by THR, food and beverage revenue grew from $5.1 million in 2011 to $8.1 million in 2013, allowing Larsen's most recent annual haul to exceed $400,000. This is too much for the AMA, which, according to a pointed missive in its March member newsletter by treasurer Maurice Newman, pays $700,000 in rent alone, leaving the organization — even after bringing in $1.7 million in dues — squeezed in dispensing fees to magicians and burdened in its long-term plan to buy the mansion for itself.

Milt Larsen has taken to Tumblr during recent months to explain why he has been unfairly "painted as 'the bad guy' " and to defend his entitlement to the money. He is particularly irked by recent AMA moves to erase traces of the Magic Castle's name from the grounds. "After spending a half-century creating a world-famous facility and trademark, I can't tell you how much I am saddened by the fact that the Magic Castle name is not to be found anywhere in the club," he wrote March 3. "The AMA acts as if the Magic Castle no longer exists."

Erika Larsen tells THR she hopes for "a quick and mutually beneficial resolution" of the conflict. Her uncle declined comment, but his attorney, Robert Schwartz, says, "Milt has lived up to his end of the Magic Castle bargain for over 50 years, and it's reasonable for him to expect the academy to live up to theirs."

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