Excerpts from Church of Scientology IRS 1023 Tax Exempt
Application
Editor's Notes:
This document is in three main parts, all of which consist of
pages taken from the Church of Scientology's Form 1023 Application to
the Internal Revenue Service for tax-exempt status, in connection with
the settlement of its ongoing litigation with the IRS in 1993. That
entire document is hundreds of pages long. The pages contained in this
document concern litigation by and against the Church of Scientology and
its affiliated organizations, as recounted by the Church of
Scientology..
Note that those portions of the document which constitute the questions
being asked by the IRS are in boldface in the original document, and they
are shown in boldface here.
"Part One" of this document consists of pages 10-13 to 10-22.
The IRS apparently requested a list of cases in which the organization had been involved. This
appears to be the first submission, which is a list of cases, most of which are merely
categorized without significant commentary, with certain significant exceptions. It starts
in the middle of a sentence of what appears to be some COS commentary.
"Part Two" is the applicant's response to Question 10
on the application, and consists of pages numbered 10-1 to 10-36.
Question 10 is characterized in the applicant's answer as "relating
exclusively to public policy questions, focusing on civil litigation
involving the Church." It appears to be the second submission, prepared after
the first submission (i.e., "Part One" above) was found insufficient.
"Part Three" of this document consists of two pages, 1-3 and 1-4, which
refer to a number of scientology-related organizations, with information supplied in response to
an IRS request.
------------"PART ONE" IRS 1023 DOCUMENT-------------
It also appeared that a settlement with the IRS would be possible, but
after years of good faith efforts and cooperation by the Church in its
efforts to settle with the IRS, agents in the Los Angeles IRS criminal
Investigation Division and hardliners against Scientology in the
National Office, such as Marcus Owens, sabotaged those efforts causing
the negotiations to break down, as is covered in more detail later.
The following is the list of the Flynn-related suits that were either
dismissed or settled: Gerald Armstrong v.- Church of Scientology of
California, et al., (cross-complaint), No. C 420 153, Superior Court of
the State of California for the County of Los Angeles; Jose Baptista v.
Church of Scientology Mission of Cambridge, No. Civ. 81010, Superior
Court of the Commonwealth of Massachusetts; Mark D. Barron v. Church of
Scientology of Boston, No. 5110, Superior Court, Commonwealth of
Massachusetts; Donald Bear v. Church of Scientology of New York. et al.,
No. 81 Civ. 6864 (MJL), United States District Court Southern District
of New York; Peggy Bear v. Church of Scientology of New York et al.; No.
81 Civ. 4688 (MJL) United States District Court Southern District of New
York; Phillip Bride v. Church of Scientology of Portland. Church Of
Scientology Mission of Davis. et al., No. A 8003-01189, Circuit Court of
the State of Oregon, Multnomah County; Eileen Brown for Kevin Brown v.
Delphian Fdn., et al. No. 81-435 (FBL); United States District Court of
New Jersey transferred to the U.S. District Court for the District of
Oregon on July 28, 1981; Toni a C. Burden v. Church of Scientology of
California. et al., No. 80-501-Civ-T-K, U.S. District Court for Middle
District of Florida, Tampa Division. Gabriel and Margaret Cazares v.
Church of Scientology, No. 82-886-Civ-T-15 United States District Court
Middle District of Florida, Tampa Division; Gabriel and Margaret Cazares
v. Church of Scientology of California et al. 81-3472-CA-OI, Circuit
Court Seventh Judicial Circuit Volusia County; John G. Clark. Jr. v. L.
Ron Hubbard No. 85-356-MCN, United States District Court for the
District of Massachusetts; Bent Corydon and Mary Corydon. Mark Lutovsky,
Phil Black. Mark Chacon, Church of Sciologos v. Church of Scientology
Mission of Riverside. et al., No. 154129, Superior Court of the State of
California County of Riverside; Paulette Cooper v. Church of Scientology
of Boston. Inc.. et al., No. 81 681 MC United States District Court,
District of Massachusetts; Michael J. Flynn. Lucy Garritano, Steven
Garritano, James Gervais and Peter Graves v. Church of Scientology of
Boston. Inc., (counter-claim), No. 40906 Superior Court Commonwealth of
Massachusetts; Michael J.
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Flynn v. Church of Scientology of California. et al., No. 54258,
Superior Court Commonwealth of Massachusetts; Michael J. Flynn v.
Church of Scientology International. et al., CV 85-4853, United States
District Court, Central District of California; Michael J. Flynn v. L.
Ron Hubbard. Mary Sue Hubbard, Church of Scientology of California, No.
83-2642-C, United States District Court for the District of
Massachusetts; Carol A. and Paul Garrity v. Church of Scientology of
California. Mary Sue Hubbard. and L. Ron Hubbard, CV 81-3260 RMT (JRX),
United States District Court Central District of California; Hansen,
Marjorie J. v. Church of Scientology of Boston. Church of Scientology of
California, No. 47074, Superior Court Commonwealth of Massachusetts;
Betsy Harper v. Lafayette Ronald Hubbard, No. 65262, Superior Court
Commonwealth of Massachusetts; Ernest and Mary Adell Hartwell v. Church
of Scientology of California et al., No. 196800, Eighth Judicial
District Court of the State of Nevada in and for County of Clark; Thomas
Jefferson v. Church of Scientology of California. L. Ron Hubbard and
Mary Sue Hubbard, CV-81-3261, United States District Court Central
District of California; Deborah Ann Keck v. Church of Scientology of
California. et al., CV-81-6060 R, United States District Court for the
Central District of California; Dana Lockwood v. Church of Scientology
of California. L. Ron Hubbard and Mary Sue Hubbard, CV-81-4109 CBM,
United States District Court Central District of California; Nancy and
John McLean. v. Church of Scientology of California. et al., No. 81-174-
Civ-T-K United States District Court Middle District of Florida Tampa
Division; Steven R. Pacca v. Church of Scientology of New York,_et al.,
No. 12076-81, Supreme Court New York County; Jane Lee and Richard
Peterson v. Church of Scientology of California. L. Ron Hubbard. Mary
Sue Hubbard, CV 81-3259 CBM (KX), United States District Court Central
District of California; Patrick R. Rosenkjar v. Church of Scientology of
California. L. Ron Hubbard. and Mary Sue Hubbard, No. 81-1350, United
States District Court for the District of Columbia; Martin Samuels, v.
L. Ron Hubbard, A8311-07227, In the Circuit of the State of Oregon for
the County of Multnomah; Howard D. Schomer v. L. Ron Hubbard. et al.,
No. CV 84-8335, U.S. District Court, Central District of California;
Michael W. Smith v. Church of Scientology of Boston. Inc. and Church of
of California, No. 47236, Superior Court for the State of
Massachusetts; Manfred Stansfield, Valerie Stansfield. Franklin Freedman
et al. v.
Norman Starkey. et al., No. CA 001 012, Superior Court for the County of
Los Angeles; Lawrence Stiffler v. Church of Scientology of Boston and
Roger Sylvester, No. 44706, Superior Court Commonwealth of
Massachusetts; Gabor Szabo v. Church of Scientology of California and
Vanguard
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Artists International, No. C 312 329, Superior Court of California,
County of Los Angeles; Janet Troy v. Church of Scientology of Boston and
Church of Scientology of California, No. 41073, Superior Court
Commonwealth of Massachusetts; Kim L. Vashel v. Church of of Boston and
Church of Scientology of California, No. 47237, Superior Court for the
Commonwealth of Massachusetts; Margery Wakefield v. Church of
Scientology of California, No. 82-1313 Civ-T-10 United States District
Court for the Middle District of Florida Tampa Division. Bent Corydon v.
Church of Scientology International. et al., No. C 694401, Superior
Court of the State of California, County of Los Angeles.
Other Categories of Cases:
Although the cases generated by Michael Flynn comprised the majority of
tort litigation against the Church of Scientology between 1980 and 1986,
there were some other cases that arose during the same period of time
that were not entirely "Flynn" cases although they were generally of the
same ilk. Flynn shared information, witnesses, tactics and sometimes
acted as coordinating counsel for other attorneys involved in similar
litigation against the Church. In other instances, while there was no
apparent direct link between Flynn and a particular plaintiff or
attorney in a suit, the similarity of claims and tactics suggests that
these individuals or attorneys were copying Flynn's strategy. The
following cases fall into this category: Alberto Montoya v. L. Ron
Hubbard. Church of Scientology. et al., No. 450094 Superior Court of
California, County of San Diego; Joan Edin v. Church of Scientology
Mission of Davis. et al., No. 287191, Rita Engelhardt B. v. Church of
Scientology. et al., No. C 312 692, Superior Court of California, for
the County of Los Angeles. Each of those cases was dismissed.
There are a few cases where Flynn's influence was felt that deserve
separate discussion as they are cases that actually went to trial and
were adjudicated.
Christofferson:
The Christofferson case was actually originally filed in 1977, prior to
the period covered by the Service's question.
In 1977, after taking a few elementary courses at the Church of
Scientology Mission of Portland and working for a short time at another
organization, Julie Christofferson was kidnapped and, over a four day
period, deprogrammed to give up her religion by convicted felon Ted
Patrick. She was
10-15
then turned over to attorneys by the anti-religion group involved so she
could bring suit against the Church on a contingent fee basis.
At trial, Christofferson's attorneys derided and distorted Scientology's
beliefs and practices to such an extent that the Oregon state Court of
Appeals overturned the $2 million verdict, finding that Scientology is a
religion and that the trial had been rife with First Amendment
violations. Upon remand, Christofferson's lawyers - by then FAMCO
members -- applied Flynn's tactics and inflamed a jury into a $39
million verdict that led the trial court to declare a post-verdict
mistrial in May of 1985. There never was another trial. The
Christofferson case was part of the 1986 global settlement with Flynn.
Wollersheim
Larry Wollersheim had been in and out of churches of Scientology for
over a decade before he finally left for good in 1979. While in the
Church he was continually in trouble over his unethical business
practices He filed suit against the Church for a variety of claims,
Wollersheim v. Church of Scientology of California, No. C-332-027, in
State Court in Los Angeles in 1980, represented by attorney Charles
O'Reilly, a participant in the original FAMCO planning meetings.
During the five month trial in 1986, O'Reilly applied the FAMC0 tactics
and relied upon Flynn's stable of witnesses and obtained an absurd
verdict of $30,000,000.
While the Wollersheim case is still going through the appeals process,
the jury verdict has been reduced to $2,500,000 from its original
$30,000,000, and further appeals are pending.
GO Criminal Activity Fallout Litigation:
Another category of cases involved Guardian's Office members or stemmed
from GO illegal activities. This included, for example, proceedings to
compel testimony before a grand jury convened in Florida to investigate
GO activities and an action by the State of Florida to disbar Merrell
Vannier, an attorney who was also a GO operative and who violated the
canons of ethics as an attorney. It was this kind of activity that was
rooted out and condemned in the disbanding of the GO. Nonetheless a
certain amount of fall-out litigation from the years of GO criminality
had to be expected. Cases falling into this category -- i.e., cases
which were not against the Church but which present allegations about
the GO -are as follows: The Florida
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Bar v. Merrell G. Vannier, No. 61,691, Supreme Court of Florida (Vannier
was disbarred); Merrell and Francine Vannier v. Superior Court for the
State of California. County_of Los Angeles No. 60 478, Supreme Court of
California (Vannier lost an appeal against an extradition order); In re
Charles Batdorf; United States v. Batdorf, No. 80 CV Misc (MM-188),
United States District Court, Southern District of New York (Batdorf
convicted); In re Grand Jury Proceedings (Mitchell Hermann, Peggy Tyson
Richard Weigand, and Duke Snider), Nos. 80-5 Misc-T-H and 80-614 CIV-T-
H, Municipal District State of Florida -- Tampa Division (investigation
dropped); United States v. Stephen E. Poludniak, Libby Wiegand No. 80-
00143 CR (1), United States District Court for the Second District of
Missouri (defendants plead guilty).
The Mayo Cases:
Mayo was removed from a senior post in 1982 due to unethical conduct and
the discovery that he had altered Scientology religious practice and
Scriptures. Mayo then left the Church and along with a few other ax-
Scientologists established the Church of the New Civilization, dba
Advanced-Ability Center, in Santa Barbara, California, where he
delivered his own version of Scientology religious services to ax-
Scientologists. He also sought the defection of Church members in order
to build his membership. Mayo then acquired copies of certain
confidential advanced Scientology Scriptures which had been stolen by
some of Mayo's confederates from a Church facility in Denmark.
As a result, in 1985, Religious Technology Center, Church of Scientology
of International and Church of Scientology of California sued David Mayo
and others in a suit alleging RICO causes of action based on the
conspiracy to acquire the secret confidential materials of the
Scientology religion and use them for the economic advantage of Mayo's
organization and other related splinter groups. This litigation consists
of the consolidated cases, including counter-claims, of Religious
Technology Center. et al. v. Scott. et al., U.S. District Court (C.D.
Dal. 1988), No. CV 85-711 JMI (Bx) and Religious Technology Center et
al. v. Wollersheim. et al., U.S. District Court (C.D. Cal. 1985) No. CV
85-7197 JMI (Bx).
Although this litigation is still ongoing, Mayo's Advanced Ability
Center has long since ceased to operate and the various individuals who
had been associated with it have for the most part scattered to
different areas.
The IRS has been supportive of Mayo's efforts. Mayo became an IRS
informant during the CID investigation of the
10-17
mid-80's. Whereas Scientology organizations have been unable to obtain
exempt status, the IRS granted exempt status to Church of the New
Civilization - even though it had closed its operations and its sole
remaining business was to contest this litigation. Further, much of this
litigation is financed by wealthy psychiatrist Sarge Gerbode. In 1986,
Gerbode formed a trust known as the "Friends of the First Amendment."
The IRS granted exempt status to this anti-Scientology fundraising
entity, and Gerbode has funnelled in excess of $1.4 million dollars to
fund Mayo's litigation through that trust as charitable tax deductions
for himself.
The Aznaran/Yanny Litigation.
Vicki Aznaran is the former President of Religious Technology Center and
her husband, Richard, is a former Church staff member. Vicki was removed
from her position by the Trustees of RTC in March 1987 as she had
betrayed the trust of her position and was not acting in the best
interests of the religion. By her own testimony, she first got in
trouble when she sought to place an ex-GO criminal in RTC's personnel
department. Vicki and her husband then left the Church after Vicki's
removal.
Joseph Yanny served as an attorney for RTC and various churches from
1983 until November of 1987. His primary contact with the Church was
with RTC and Vicki Aznaran, with whom he developed a close personal
relationship.
After Vicki's departure, the new officers of RTC examined Yanny's
performance, determined it to be sub-standard, and learned that he was a
user of LSD. He was then discharged.
Upon his termination, a billing dispute erupted between Yanny and the
Church, and Yanny enlisted the aid of the Aznarans in supporting him in
his billing dispute and, in exchange, acted as de facto counsel for the
Aznarans in helping them prepare and file a lawsuit against his former
clients. The Aznaran suit, Aznaran v. Church of Scientology of
California. et al., U.S. District Court (C.D. Cal. 1988), No. CV 88-1786
JMI, was filed on April 1, 1988. Despite Vicki Aznaran's high
ecclesiastical position as the head of RTC for a number of years, her
suit portrays her as a victim who didn't know for all these years that
she was really "brainwashed" and under "mind control" - plus the other
stock inflammatory allegations that characterize this sort of
litigation. It seeks $70,000,000 in damages and is still pending.
Shortly after the Aznaran complaint was filed, Yanny
10-18
received from Vicki Aznaran a declaration by her as the former President
of RTC supporting Yanny's claim that a retainer he received in 1985 was
"non-refundable." Yanny used this declaration in his fee dispute over
the retainer which is now in litigation along with claims against Yanny
for his breach of his fiduciary duties.
Even before the Aznaran case was filed, Al Lipkin, one of the agents who
conducted the IRS's CID investigation in 1984 and 1985, was in contact
with Yanny and the Aznarans. It was Lipkin who arranged for the Aznarans
to be interviewed by Exempt Organizations agents from Los Angeles who
were conducting an on-site review of Church records, ostensibly the
final step in negotiations concerning tax exempt status for Scientology
churches. The day after issuing summonses to the Aznarans to be
interviewed and to produce documents relating to their lawsuit, the same
agents issued document requests to Religious Technology Center asking
RTC to produce Vicki Aznaran as a corporate officer of RTC.
While the allegations of the Aznaran complaint serves as the purported
reason for the summonses and interview, in reality the taped interview
was a contrived setting for an IRS/Aznaran diatribe against the
Scientology religion and L. Ron Hubbard, with the IRS agents urging the
Aznarans to press their litigation and the Aznarans urging that the
tapes of the interview be furnished to Lipkin and LA IRS CID.
It was the Church's discovery of this event which precipitated the
breakdown of the earlier negotiations between the Church and the IRS.
Coincident with their interview with the IRS, the Aznaran's personal tax
problems evaporated and their private investigation business was
retained by Guess? Jeans -- the large jeans manufacturer that Al Lipkin
befriended during an earlier IRS CID investigation (which also involved
tampering with civil litigation and was the subject of a Congressional
investigation).
The Aznaran suit is still pending at this time and has not yet gone to
trial. Meanwhile Yanny has pursued an agenda to cause as much harm as
possible to the Church by repeatedly betraying his fiduciary duties as
former Church counsel by providing information concerning the Church to
the Aznarans and a number of other litigants against the Church, as well
as to the IRS and the FBI.
10-19
Other Current Litigation:
Several other suits are pending against Churches of Scientology that
allege some form of tort claim. Although there are variations in the
claims and different attorneys representing the plaintiffs, there is one
common denominator underlying most of these suits: the influence of the
Cult Awareness Network ("CAN").
CAN, which the IRS has recognized as exempt under section 501(c)(3) as
an educational organization, is in fact a bigoted hate group that
targets and tries to destroy churches and religions. CAN's principal
activities are negative propaganda campaigns, covert dissemination of
false information for purposes of subversion and acting as a referral
service for deprogrammers on a fee sharing arrangement. Although
complaints have been made to the IRS about CAN's continued exempt status
in light of its true activities, no action has been taken.
The Church of Scientology is presently CAN's principal target for
attack, and CAN's favorite tactic is to spread false and defamatory
information about the Church through all available means while holding
itself out as an authority on the subject. When contacted by anyone with
a complaint about the Church, CAN manipulates them to attack the Church
either through the media or by referring them to an anti-Scientology
attorney.
The majority of the suits against Churches of Scientology recently filed
and presently pending, that have not been otherwise discussed above,
fall into this category. None has gone to trial. The following are cases
instigated or influenced by CAN either directly or as a result of one of
CAN's spread of false information: Terry Dixon v. Church of Scientology
Celebrity Center of Portland. et al., No. 9010-08200 Multnomah County -
Circuit Court of Oregon (in arbitration); John Finucane. David Miller.
Alexander Turbyne v. Emery Wilson Corporation. et al., No. C 045216,
Superior Court of the State of California for the County of Los Angeles
(pending); Dorothy Fuller. an individual v. Applied Scholastics
International. et al., No. 92K 11466, Municipal Court of the State of
California for the County of Los Angeles (just filed); Lisa Stuart
Halverson v. Church of Scientology Flag Service Organization, et al.,
No. 92K11186, Municipal Court for the State of California, County of Los
Angeles (settled); Thomas and Carol Hutchinson v. Church of Scientology
of Georgia, et al., No. D90315, Superior Court of Fulton County, State
of Georgia (pending); Mark Lewandowski v. Church of Scientology of
Michigan, et al., No.
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91-421716-LZ, State of Michigan in the Oakland Circuit Court (pending);
Peter and Francis Miller v. Church of Scientology et al., No. 027140,
Superior Court for the State of California, County of Los Angeles (case
abated re the Church and in arbitration re Sterling); Ted Patrick et al.
v. Church of Scientology of Portland. et al., State Court of Oregon for
the County of Multnomah (dismissed); Dee and Glover Rowe v. Church of
Scientology of Orange County. et al., No. BC 038955, Superior Court of
California (pending); Frank and Joan Sanchez v. Sterling Management
Systems
et al., No. 91-224-CV, 4th Judiciary District Court San Miguel County,
State of New Mexico (pending); Thomas Spencer v. The Church. of
Scientology et al., BC 026740, Superior Court of the State of California
for the County of Los Angeles (settled); Irene Zaferes v. Church of
Scientology, Superior Court of the State of California County of Los
Angeles (dismissed); Jo Ann Scrivano v. Church of Scientology of New
York et al., No. 87-1277, Supreme Court of the State of New York, County
of Suffolk (in discovery stage); Marissa Alimata and Richard Wolfson v.
Church of Scientology of California. etc. et al., No. C 650 988,
Superior Court of the State of California, County of Los Angeles
(judgment entered for the Church).
Personal Injury, Medical-Related Suits:
Another category of lawsuits involve claims by individuals who have been
injured on Church premises or in some way attributed responsibility to
the Church for an injury or death. For example, in the Rabel case listed
below, a stereo speaker accidentally fell out of the window of a
Scientology mission and hit someone on the street below. The case was
settled. The Arbuckle case was brought by the parents of an individual
who died while a parishioner of a church of Scientology. Although his
death from kidney failure was traceable to his use of steroids, the case
was settled to avoid expense of litigation. Each of this group of cases
was either settled or dismissed. Mira Chaikin v. Church of Scientology.
L. Ron Hubbard. et al., No. 81 Civ 7525, United States District Court of
the Southern District of New York; Gary and Susan Silcock v. Church of
Scientology. Mission of Salt Lake. et al., No. C 86-7213, Third Judicial
District Court for the Salt Lake County, Utah; Rimando, Pedro H. Irene
Marshall v. The Church of Scientology of San Francisco. et al., No. C
669015, California Superior Court, County of Los Angeles; Wendy and
William Rabel v. Eric Rising. Jane Doe Rising. his wife: Church of
Scientology Mission of University Way. et al., King County Superior
Court, Washington State; Francine Necochea. a minor child, by her
guardian Ad Litem
10-21
Cecilia Garcia v. Church of Scientology. et al., No. C 165360,
California Superior Court for the County of Riverside; Roxanne Friend v.
Church of Scientology International. et al., No. DC 018 003, California
Superior Court, County of Los Angeles; Bruce and Lynnel Arbuckle v. Skip
Pagel M.D.. Church of Scientology Celebrity Center Portland. et al., No.
8907-04119, Multnomah County, Oregon Circuit Court.
A final category of lawsuits includes cases that have arisen out of
financial or property disputes or transactions involving individual
Scientologists, their businesses or creditors or organizations or
individuals that Churches of Scientology or related organizations have
had financial dealings with. Often the Church is named in such cases
simply as a perceived "deep pocket" or as a tactic to try to coerce a
settlement. Such cases are typically dismissed or settled. These cases
are as follows: In re Dynamic Publications Inc., U.S. Bankruptcy Court
in Maryland (settled); Gregory F. Henderson v. A Brilliant Film Company.
et al., No. 164213, California Superior Court, County of San Joaquin
(settled); Gregory F. Henderson v. Marvin Price. et al , No. 165165,
California Superior Court, County of San Joaquin (settled); Peter Siegel
v. Religious Technology_Center. et al., CV 89-5471, United States
District Court, Central District of California (pending); Steve Dunning
v. Church of Scientology, et_al., No. 060613, California Superior Court
County of Los Angeles (dismissed with prejudice); Jeff and Arlene Dubron
v. Church of Scientoloqy International. et al., No. NCC 29267B, Superior
Court of California Burbank Division (settled); Sherry Fortune v. Church
of Scientology American Saint Hill Organization and Chuck Tingley, No. C
099061, Superior Court of California, County of Los Angeles (dismissed
as to the Church and settled as to Tingley); Vicki Adler v. American
Sun, Inc.. Church of Scientology of Los Angeles, SWC 81874, Torrance
Superior Court of California (settled); Benham v. Church of Scientology
Celebrity Center of Dallas, No. 91-08216, 9th Judicial District Court,
Dallas County (settled); Michael Burns v. The Recording Institute of
Detroit. Inc.. et al., No. 91-412334-CZ, Oakland County Circuit Court,
State of Michigan (pending); Clay Eberle and Eberle & Jordan Law Firm v.
Church of Scientology of California, No. NCC 166486, Superior Court of
the State of California, County of Los Angeles in the City of Glendale
(dismissed in favor of the Church); Mario Metellus v. Church of
Scientology of New York. Linda Barragabm No. 01133-89, Superior Court of
the State of New York, County of New York (settled).
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------------"PART TWO" OF IRS 1023 DOCUMENT-------------
Question 10
INTRODUCTION
In the responses that follow, the Church is providing all of the
information the Service has requested in the various subparts to
Question 10. It is only fair, however, that the following responses be
considered in their proper context, and for that reason we submit the
following additional information by way of introduction.
Question 10 relates exclusively to public policy questions, focusing on
civil litigation involving the Church. There is no escaping the irony of
being asked to catalogue the unsubstantiated allegations of civil
litigation adversaries when those allegations often have been
manufactured, promoted, disseminated, and even subsidized by a cadre of
anti-Scientology individuals within the Service itself. The Church does
not believe that the Service as an institution, hates Scientology. We
believe there are and have been, however, a core of dedicated
"Scientology-bashers" within the Service who have allied themselves with
encouraged, and even fixed the tax problems of the principal sources of
the tired civil allegations we are now being asked to chronicle.
Question 10.e.i and 10.e.ii request a list of all of the tort
allegations that have been made against any Church of Scientology in
more than a score of cases arising within the last twelve years and for
copies of all verdicts, decisions or findings made by any court that any
of those allegations were true. As may be seen in the following
responses, two of the only four cases where any such decision has been
issued, and a majority of the other cases were instigated or heavily
influenced by the Cult Awareness Network ("CAN").
CAN and its influence on the litigation in question was described in
passing at page 10-20 of our response to Question 10 of your second
series of questions. There is no escaping the fact that CAN has been
able to survive financially and has drawn much of its false veneer of
credibility from the Service's recognition of it as exempt under section
501(c)(3).
CAN was formed in 1975, under its original name, Citizen's Freedom
Foundation. CAN's activities, from its inception until today, have
consisted of negative propaganda campaigns against nontraditional
religious organizations and promoting and perpetrating "deprogrammings,"
a euphemism for kidnapping people and using force and coercion to
dissuade individuals from maintaining their voluntarily held religious
beliefs.
CAN applied for tax exemption in March of 1976 as an educational
organization. Literature provided with its
10-1
application' however, clearly evidenced CAN's biased views and its
involvement in deprogramming. Indeed this material shows CAN's close
association with Ted Patrick (one of its founders)' who has been
convicted on numerous occasions for kidnapping, assault and related
charges arising from his violent deprogramming activities. It was
Patrick who touched off the premier tort case against Scientology when
he deprogrammed Julie Christofferson in 1977. (This is further described
at pages 10-15 and 10-16 of our response to Question 10 of your second
series of questions and infra.)
The IRS denied CAN'S initial application for exemption because "after
reviewing your publications, we concluded that a significant portion of
your viewpoints were not supported by relevant facts." CAN reapplied in
1977 but the application and CAN's accompanying literature showed that
CAN had not reformed. Consequently, the Service again informed CAN that
its application was being denied because "Your revised application for
exemption contains disparaging statements about organizations which are
not supported by facts. Your revised application indicates that the
reasons for our denial of your previous application are still present."
(Exhibit III-10-A).
CAN did not give up. In July 1978, CAN submitted additional information
to the IRS including a "Statement of Purpose, Functions and Activities"
which included the claim that one of CAN's functions was to recommend
personnel and facilities for deprogramming. CAN furnished the Service
with an example of how CAN would handle a contact from a caller who
intended to join the Church of Scientology: referral of the person to
ax-members for negative information on Scientology and to an attorney in
his or her area, as well as providing the person with a list of "Dos and
Don'ts" which included advising the person to file complaints with the
government. (Exhibit III-10-B). CAN identified the Church of Scientology
as one of its principal targets and the Service granted CAN tax exempt
status. (Exhibit III-10-C).
>From that point forward until the present, CAN has followed the precise
modus operandi concerning Scientology that it described to the Service
in 1978. CAN refers individuals to ax-members for negative information
about the Church and to attorneys who then create causes of action
against the Church that almost always recite the same boilerplate tort
claims. As will be seen in the response to Question l.e.i, a large
number of the cases listed in that section have been filed by attorney
Toby L. Plevin. Plevin is a CAN member who gets all of her client
referrals from CAN in exactly the manner CAN described in its 1978
application supplement.
CAN also continues to be involved in the felonious practice CAN calls
deprogramming, which is as flagrant a violation of public policy as can
be imagined. While CAN enjoys exempt status
10-2
its deprogrammers are being arrested and jailed by local police agencies
and the FBI. Recently, CAN deprogrammers Galen Kelly and Bob Moore, and
CAN attorney Robert ("Biker Bob") Point, were arrested by the FBI and
charged with conspiring to kidnap Lewis DuPont Smith, heir to the DuPont
fortune, and to "deprogram" him from his support of Lyndon LaRouche's
political organization. (Exhibit III-10-D). At this writing there are
several other CAN deprogrammers under indictment as a result of their
deprogramming activities, including Joe Szimhart, Mary Alice Chrnaloger,
Karen Reinhardt and Randall Burkey. (Exhibit III-lO-E). It is troubling
that in the face of this kind of evidence individuals in the Service
like Jacksonville District EO agent Melvin Though, continue to use CAN
as an investigative arm to drum up false charges against the Church of
Scientology. (Exhibit III-10-F).
There are individuals in the Los Angeles IRS Criminal Investigation
Division ("CID") who harbor sentiments about Scientology very much akin
to those espoused by CAN, who have directly brought about or have had a
major influence on Scientology-related civil litigation. Much of this
information has been covered before or is covered in more detail in the
responses to specific subparts of Question 10 that follow. Consider the
following:
* The decision in Gerry Armstrong's case is one of those described in
detail in response to Question 10.e.ii. Armstrong's fanatical hatred of
Scientology ingratiated him with the LA CID and earned him the status of
IRS operative in an unlawful scheme to infiltrate and destroy the Church
through, among other things, the seeding of Church files with forged or
manufactured documents. Armstrong was a link between the CID and Michael
Flynn, whose multi-jurisdictional litigation campaign against
Scientology was encouraged and assisted by the CID. (See pages 10-8 to
10-16 of our response to Question 10 of your second series of
questions). The allegations, first manufactured by Armstrong and Flynn,
have been adopted and parroted by many of the other tort litigants whose
cases are described in the response to Question 10.e(i). In exchange,
Gerry Armstrong has been insulated from liability for his theft of
Church documents and encouraged to continue and to expand his nefarious
efforts.
*The Aznarans, whose case was described at pages 10-18 and 10-19 of our
response to Question 10 of your second series of questions, left the
Church and filed suit for $70,000,000,
10-3
resulting almost immediately in their being embraced by the IRS CID. The
CID agents then passed the Aznarans on to like-minded EO agents in Los
Angeles who interviewed them, encouraged them to continue their attacks
on Scientology, treated their claims as fact and used their allegations
as a basis to throw five years of cooperation from the Church down the
drain. A tax debt that the Aznarans had been unable to handle with the
IRS for ten years disappeared when they became civil litigants against
the Church and CID informants.
*Question 10.e.iii asks for a description of the criminal case involving
the Church in Canada, which is described in the answer to Question 10-e-
(iii) and in a memo from counsel for the Church of Scientology of
Toronto attached as Exhibit III-10-U. As that memo details, LA IRS CID
agents fed information, allegations and witnesses to the Ontario
Provincial Police ("OPP") and plotted with Armstrong, Flynn and OPP
officers to bring about the "collapse" of the Church. CID agents
traveled to Canada where they encouraged the OPP to bring indictments,
offering to help locate L. Ron Hubbard and others in the Church if OPP
moved forward with their case. The CID and OPP also utilized apostate
David Mayo and his cronies to recruit ex-GO criminals as government
witnesses to testify against the church and their former subordinates
about crimes that they themselves had perpetrated. Mayo is further
described below.
* As early as 1969, a CID operative named Gene Allard was allowed to get
off scot-free with the out-right theft of Church records. (See response
to Question 10.d.1, infra.).
* Laurel Sullivan, who left and became disaffected with the Church after
she was removed from her Church post for being a Guardian's Office
sympathizer, was embraced as an informant by the CID, and was
represented by a government attorney when the Church sued her personally
for improperly disclosing attorney-client information to the IRS. (See
page 3-40 of our response to Question 10 of your second series of
questions).
* As described below apostate David Mayo gained favor with the IRS as an
informant and IRS reciprocated by granting exempt status to his group in
support of his anti-Scientology stance.
This list could go on with example after example of times when some
person or organization has manifested an anti-Scientology sentiment and
has suddenly emerged as an IRS ally, operative or beneficiary. At that
moment such a person or group is transformed into a fountainhead of
unassailable virtue whose claims are gospel, whose protection is
guaranteed and who is given unwarranted, improper encouragement and
assistance. As described in detail below, while Churches of Scientology
receive unprecedented scrutiny when they apply for tax exemption,
apostates who sue the Church and attack the religion have been aided by
IRS tax exemption subsidies.
10-4
An anti-Scientology sentiment has existed in the IRS National Office
Exempt Organizations Technical Division, dating at least back to CAN's
1978 exemption. Certain EO Technical Division officials appear to have
directly colluded with the CID in 1984 and 1985, using information
gathered by the CID, including the statements and allegations of their
informants, to sabotage the Church's exemption proceedings at that time.
Evidence of their bigotry is best seen in their treatment of anti-
Scientologists.
David Mayo:
David Mayo was removed from a senior Church position for moral
turpitude. He was using his position for economic advantage. Even more
serious from a Scientology perspective, he was the source of serious
alteration and denigration of the technical scriptures of Scientology.
Rather than atone for his misdeeds, he left the Church in 1982.
Upon leaving, Mayo and a few others established an organization he
called the Advanced Ability Center ("AAC"), which utilized a badly
altered version of Dianetics and Scientology technology in an effort to
lure parishioners away from the Church for economic advantage. For
example, Mayo dropped the use of Scientology ethics technology
altogether, eschewing ethics as an applicable concept. Solely for the
tax advantages it would afford, he incorporated the AAC under the name
"Church of the New Civilization" ("CNC"), but it operated solely as the
Advanced Ability Center. Mayo's prime objective was to obtain copies of
the confidential upper level scriptures so that he could represent that
CNC/AAC could deliver the entire Bridge as it existed in the early 80's
and thus attract a larger following. Mayo conspired with like-minded
apostates in Europe and effected the theft of these scriptures on
December 9, 1983 from AOSH EU &AF in Denmark. These events prompted the
suit by RTC and the Church as described on pages 10-17 and 10-18 of our
response to Question 10 of your second series of questions. Mayo also
actively endeavored to lure Scientologists away from Scientology,
including putting out a publication of negative propaganda on the
Church.
In 1984 CNC filed for tax exemption. The original application identified
CNC's source of financial support to be "Fees received from parishioners
for counseling." CNC's statement of activities stated that "The program
of activities of [CNC] are limited to personal counseling and spiritual
studies" and responded affirmatively to questions on whether or not
recipients would be required to pay for counseling. Subsequently, Mayo
gave an opposite answer to the question. Eventually, the 1023
application was forwarded to National Office for processing by Rick
Darling who inquired further into CNC's fundraising methods. Mayo
responded that "Parishioners receive spiritual enhancement and guidance
from the Church in a program of services for which monies are given and
received" to a question asking why parishioners would donate to CNC.
10-5
During the same time period Darling and Friedlander were considering the
CNC application, they were using "commercialism" as a reason to deny tax
exemption to various church of Scientology applicants. Their purported
reason was that the Church charged fixed donations for services giving
them a "commercial hue and purpose." Shortly after issuing adverse
determination letters to the Scientology applicants, EO granted CNC's
application on substantially identical information as to funding
practices.
Mayo had become a CID informant (Exhibit III-10-G) and
Darling/Friedlander were now aware that Mayo was an enemy of the Church
of Scientology. (Exhibit III-10-M). On March 27, 1986, David Mayo
himself responded for CNC to a set of questions from Darling. In
response to a question whether CNC charged fixed amounts for their
services, Mayo provided information which contradicted CNC's 1023 record
and was flatly impossible stating that CNC had "no predetermined price."
(Exhibit III-10-M).
Frank Gerbode:
Psychiatrist Frank Gerbode is an heir to the Alexander Baldwin sugar
fortune. He left psychiatry for Scientology in the 1970s and for several
years was the mission holder of the Palo Alto mission. He ran afoul of
Church management in the early 1980s when the Church tried to reform his
financial misdealings. In March 1984, Gerbode left the Church to join up
with David Mayo. He set up a parallel operation he also called Advanced
Ability Center in Palo Alto which, for tax purposes, he named the Church
of the Universal Truth ("CUT"). Gerbode's 1023 application, along with
those of CNC and various Church applicants also went to Darling and
Friedlander.
The exemption applications for the churches of Scientology were denied;
the applications for CNC and CUT were granted. While Darling and
Friedlander asked endless intrusive questions of the Scientology
applicants, they chose not to find out about CNC and CUT. For example,
by the time they recognized CNC's exempt status, CNC had long since
ceased operations. Mayo had cashed in its assets and deposited them in
his personal Liechtenstein bank account and had gone to work for Gerbode
at CUT. He essentially liquidated the corporation into his own pocket,
even though it was a non-profit organization purportedly dedicated to
section 501(c)(3) purposes.
More specifically, the last known letter from Mayo to the IRS on the CNC
exemption application is the one mentioned above, dated March 27, 1986.
(Exhibit III-10-M). According to the deposition testimony of his wife,
Julie Mayo, CNC closed its doors one month later, on April 30, 1986, at
which time David and Julie Mayo both resigned their respective director
and officer positions. They also sold the house in which they were
living that had been purchased in their name by CNC as a "parsonage,"
and using other
10-6
rsed to them from CNC as "severance pay," "travel expenses" and
"vacation pay accrued," they traveled for the next several months to
Europe, Australia and Florida with Gerbode and his wife. While on this
trip they stopped over in Liechtenstein where Gerbode introduced Mayo to
his banker who opened an account for him with the $80,000 received from
the sale of their "parsonage." CNC's exempt status was granted
subsequent to these events. In fact the only ongoing activity of CNC at
the time it was granted exemption was ongoing litigation with the Church
of Scientology.
Gerbode obtained tax exemption for CUT ostensibly based on
representations that the organization was a church and conducted
exclusively religious activities. (Exhibit III-10-I). In fact, once tax
exempt status was obtained, CUT ceased carrying out any religious
activities and began dispensing a novel brand of psychology under the
name Center for Applied Metapsychology ("CAM"), and promoting Gerbode's
personal books and literature, co-authored by Mayo, much of which are
plagiarized from the works of L. Ron Hubbard. In 1986, Gerbode also
established the Institute for Research in Metapsychology ("IRM"),
another tax exempt organization which operates at the same address using
the same personnel as CAM, and which produces the literature and
materials that CAM promotes and distributes. IRM characterizes
metapsychology in scientific terms, making it clear it is not a religion
and followed no belief system. Yet metapsychology is what Gerbode's
church, CUT operating as CAM, dispenses.
Compare the representations made by CUT in Exhibit III-10-I, a letter to
the IRS in support of their exemption application in December 1985, to
the representations made by Gerbode concerning the same organization on
November 2, 1992 in Exhibit III-10-J. In the December 5, 1985 letter in
support of its exemption application, CUT discussed its purported
"religious doctrine" and "religious history" and submitted copies of
their baptismal, funeral and marriage ceremonies, representing that it
was a Church conducting exclusively religious activities. (Exhibit III-
10-I). On November 2, 1992, Gerbode wrote to the City of Menlo Park,
California in response to a "complaint that a church is being operated
at the premises" to set the record straight so that they would not lose
their zoning permit:
. . .
CAM [really CUT] is classified under the IRS code as a church
However . . . CAM does not hold worship services, perform baptisms, or
carry out other such activities typical of churches.
* * * *
"'Church' means a structure intended as a meeting place for organized
religious worship and related activities." We feel that this does not
apply to the building or the activities occurring therein.
10-7
Exhibit III-10-J.
This is the "church" that passed muster with Friedlander and Darling as
soon as it was apparent to them that, like Mayo, Gerbode was no longer
associated with and was opposed to L. Ron Hubbard and the Church of
Scientology. Gerbode has made substantial "contributions" to both CAM
and IRM, which he deducts on his personal income tax returns as
charitable contributions. However, at the same time Gerbode receives the
direct benefit of the bulk of these "contributions" from CAM and IRM in
the form of rent, salaries and payment of personal expenses. The
organizations also provide Gerbode with an administrative staff and
office facilities, all tax-free. The following are specific tax law
violations Darling and Friedlander could have found if they had
subjected CUT to the same kind of scrutiny they had subjected Churches
of Scientology to during the same period.
In 1982 and 1983, prior to the incorporation of CUT, when
Gerbode was still the mission-holder of the Church of Scientology
Mission of Palo Alto, he claimed substantial tax deductions on his
personal tax returns for books, office furnishings, equipment, artwork,
etc., that he purchased for use at the Mission. When Gerbode left the
Mission in 1984 and established CUT, he donated
equipment and artwork to the new corporation and again claimed them as
charitable contribution deductions on his personal tax return. These
were listed as donations in the 1023 application for CUT that Darling
reviewed in 1986. When Gerbode left Scientology in 1984 he evicted the
mission from his building in favor of his new operations, CAM and IRM
from which he now collects rent. It is also evident that he launders
donations to CAM/IRM back to himself as rent in order to get the benefit
of both the charitable deductions and depreciation write-offs.
Mission in 1984 and these same books, office furnishings,
The IRS continues to probe litigation involving the Church while it
ignored litigation against Mayo et al. Indeed the Service gave a de
facto subsidy to the Gerbode/Mayo litigation by granting exemption to
their litigation tax shelter. In the letter that Mayo wrote to the
Service in support of CNC's exempt status in March of 1986 (Exhibit III-
10-M) he sent along part of the complaint in the suit RTC and CSI had
brought against Mayo and CNC which alleged theft and violations of the
RICO statute. Darling apparently did not consider it necessary to
inquire about the possible public policy implications of this litigation
once he saw that Mayo was on opposite sides in the litigation to the
Church and granted exempt status.
In 1986, Gerbode and Mayo established and obtained tax exempt public
charity status for the Friends of the First Amendment ("FFA"), an
organization purportedly established to support and promote First
Amendment rights, but which in fact enabled Gerbode to claim tax
deductions for hundreds of thousands of dollars he
10-8
"donated" to FFA, which sums were then used to pay Mayo's litigation
costs in his litigation with the Church. Although Gerbode is not a party
to this litigation, a central issue in the suit concerns the control of
copyrights in the name of L. Ron Hubbard that Gerbode has exploited.
Gerbode struck a deal with David Mayo that Mayo will continue the
litigation provided that Gerbode funds it, with the understanding that
Gerbode will be reimbursed for the litigation costs if Mayo wins a
counterclaim for damages. Thus, Gerbode has used FFA to deduct as
charitable contributions what are in reality his own litigation
expenses, that he expects to recover if the litigation is successful.
David Mayo, on the other hand, hopes to net millions of dollars if the
counterclaim is won. Gerbode. has also disguised some of the millions of
dollars he laundered through FAA so that they would not appear to be
from him in order to avoid FFA being found to be a private foundation,
and cemented this by shutting FFA down just before its advance ruling
period on private foundation status expired in 1090.
The only question Mayo's and Gerbode's groups were asked concerning
litigation was whether their "legal defense fund" was set up solely to
battle the Church of Scientology. When they answered in the affirmative,
exemption was awarded.
Unlike CNC, CUT, and CAN, who to this day enjoy exemption, our principal
clients have no such status. Yet we alone of that group have been and
are providing truthful and full answers to each question you have asked.
All of the information the Service has requested in the various subparts
of Question 10 is contained in the responses to the individual subparts
that follow.
. . . .
10-9
[Editor's note: The following, in bold on the original, appear to be
the IRS questions to the applicant.]
Questions 10.a, 10.b, 10.c, and 10.d.2.
In question 10 of our second
series of questions, we expressed our concern over the possibility of
continuing violations of public policy and requested certain information
to assuage these concern-. We have additional follow-up questions in
this regard.
a. Attached is a document relating to a program referred to as Snow
White that apparently existed as of December 16, 1989. Please explain
the apparent discrepancy between the document contained at the
attachment and the response to Question 10.b. [Jump to Answer]
b. The response to Question 10.b refers to a decision by Judge Osler of
the Supreme Court of Ontario (page 10-5). Please provide a complete copy
of the cited opinion. [Jump to Answer]
c. What is the status of Operation Transport Company? Does it continue
in existence? If not, please specify when and to whom all assets were
distributed or transferred. [Jump to Answer]
d.2. Please provide the following information with respect to Exhibit
II-10-A; (i) fill in the blank under the heading of "Primary" contained
in #6; (ii) an explanation of the reference to "HF" or "AS" under the
heading of "Primary" at #7; and, (iii) fill in the blanks under the
heading of "Vital Targets" contained in #7. [Jump to Answers]
As a preliminary matter, we note that question 10 has two subparagraphs
denominated as "10.d." For the sake of clarity, we will refer to the
first as "10.d.1" and the second as "10.d.2." Subparagraph 10.d.1 and
paragraph 10.e are addressed in separate responses. This response
addresses the remainder of question 10.
Subparagraph 10.a
Subparagraph 10.a asks for an explanation of an "apparent discrepancy"
between the response to Question 10.b of your second series of questions
and Exhibit II-10-A.
That which is attached is a copy of a document written in December of
1989 by a person holding the position of Snow White Programs Chief in
the Office of Special Affairs United States,
10-10
and describes her functions and those of the Snow White Unit. The
document also specifically mentions the Snow White program and its
"Ideal Scene": "All false and secret files of the nations of operating
areas brought to view and legally expunged and OTC, "Apollo" and LRH
free to frequent all Western ports and nations without threat and all
required ports open and free."
Initially, it must be stated that the document in question was stolen
from Church offices by an individual who had infiltrated the Church at
the behest of the Cult Awareness Network. It was then passed on to the
IRS by the CAN infiltrator via CAN. (See page 10-20 of our response to
your second series of questions and supra for discussions of the Cult
Awareness Network).
The "apparent discrepancy" to which subparagraph 10.a refers seemingly
arises from use of the word "programs" in a post title that includes the
words "Snow White" viewed against the statement on page 10-5 of our
response to your second series of questions that "The Snow White program
is not being executed today." There is no inconsistency. That same page
also states that the term Snow White became synonymous with the activity
of legally locating and correcting false reports on the Church. The
Church vigorously pursues these objectives through the use of the
Freedom of Information Act and through direct negotiation with
government agencies intended to persuade them, at minimum, that if
ex[imge,emt of false reports is not feasible, corrective reports should
be filed.
The original Snow White program, provided as Exhibit II-10-A, was
written specifically to address problems which existed in 1973 with
respect to OTC, the Apollo and Mr. Hubbard. Because the United States
State Department and other government agencies had. engaged in the
circulation of false reports, free access to various Western ports and
nations had been severely curtailed. The Apollo was sold in 1975, OTC
became inactive at that time, and Mr. Hubbard passed away in 1986.
Clearly, the original Snow White program became obsolete within a couple
of years of its creation and is no longer in effect. In fact, the Apollo
no longer exists. Once converted by its new ownership to a restaurant
in Texas, it was involved in a train collision and in dry dock was cut
into scrap. So, there is no way the Apollo will be frequenting Western
or any ports!
However, obsolescence of the actual program did not invalidate Mr.
Hubbard's observation that when governmental and police agencies are
allowed to accumulate false information in their files, and disseminate
it to other agencies, they then "...tend
10-11
to act on the file without the presence of the real scene data which is
factually good but which is then ignored." In an ongoing effort to
practice the Scientology religion free from the interference of
misinformed government agencies, the Church continues to pursue the Snow
White objectives with the legal means at its disposal. Only when the
Church is free from governmental harassment and is accorded its rights
will the 6 need for Snow White activities vanish.
Subparagraph 10.b
Subparagraph 10.b requests a copy of Justice Osler's decision cited in
the June submission. A copy of that Supreme Court of Ontario decision is
submitted as Exhibit III-10-J-1, with the appropriate sections
highlighted.
Subparagraph 10.c
Subparagraph 10.c addresses the present status of OTC, as well as
details regarding the timing and distribution of any of OTC's former
assets.
OTC effectively ceased to operate in late 1975 when the Church
activities that had been housed on the Apollo moved ashore in Florida.
OTC remained inactive from that point forward except for ongoing
litigation against the Portuguese government which is described on page
10-3 of our response to your second series of questions.
In July 1981, OTC's aggregate assets were approximately $2,244,252 plus
Pounds Sterling 2,254,8S2. At that time, OTC transferred all of its
assets except for approximately Pounds Sterling 200,000 and its pending
Portuguese claim to the Scientology Endowment Trust. This trust was
recognized as tax exempt by the IRS under Section 501(c)(3) in 1983
after the particulars relating to the transfer of funds from OTC were
specifically reviewed. In 1988, OTC dissolved and all assets still
remaining, approximately $180,000, were transferred to Church of
Scientology Religious Trust.
Subparagraph "10.d.2"
In subparagraph "10.d.2," you ask to have some blanks in the copy of the
Snow White program provided to you with the June submission filled in
and for an explanation of the terms "HF" and "AS."
The version of the Snow White program provided with the June submission
contained blanks in the places that you noted, apparently left there by
whoever retyped that version. We have located, and are including here as
Exhibit III-10-K, another
10-12
version which appears to be a copy of the original version and contains
no blanks. The abbreviations "Cont," "Gdn" and "DG/US" in Vital Target 7
stand for controller, Guardian and Deputy Guardian United States.
The abbreviation "HF" stands for Hubbard Freedom Foundation. Our records
show that it was set up as a Liberian corporation in November 1972 for
scientific, research and educational purposes, received a total of $500
from OTC, but then never became active and never received any other
funding.
The abbreviation "AS" stands for American Society which was another
Liberian corporation also established in late 1972, at or around the
same time as the Hubbard Freedom Foundation and probably for similar or
related purposes. The best available information is that the American
Society had a fate similar to Hubbard Freedom Foundation, receiving a
small amount of money to get started, but then never actually carrying
out any activities or function.
As neither of these Liberian corporations was ever active and as no
effort was made to maintain their corporate charters in Liberia, we
assume that they were dissolved by operation of law many years ago. The
Liberian attorney who originally formed them was killed in a political
upheaval more than a decade ago, and we, therefore, have no access to HF
or AS records.
10-13
Subparagraph 10.d.1
In our prior question 10, we expressed our concern over the possibility
oft continuing violations of public policy and requested certain
information to assuage these concerns. We have additional follow-up
questions in this regard.
* * * *
d. In CSC v. Commissioner, 83 T.C. 381 (1984) at 531-437, there is a
discussion of the actions of several persons identified by name or
office (e.g., Vicki Polimeni). Please identify the persons who held the
following offices during the period referenced at pages 431-437 of the
CSC opinion: (i) FBO International; (ii) FBO AOLA; and (iii) FBOs at
various other Advanced Organizations as described at page 431 of the CSC
opinion. Please state whether Vicki Polimeni or any of the individuals
identified in the response to this question have at any time subsequent
to 1989 been related by reason of being service-provider or otherwise)
to any Scientology-related organization (either as staff or in any other
capacity). Please describe the current relationship between Martin
Greenberg and Scientology-related organizations.
During the period of time described at page 431 and 432 of the CSC
decision, i.e., May through August 1969, there were only three Advanced
organizations in existence. Consequently, the positions you have
inquired about and the individuals who held them were:
FBO International -- Al Boughton FBO AOLA -- Lauren Gene Allard FBO AO
United Kingdom -- Don Clark FBO AO Denmark -- Rob Sanderson
Vicki Polimeni, Don Clark and Rob Sanderson ceased having any
relationship with any Scientology-related organizatio many years ago,
long before 1989. From 1989 to the present, Al Boughton has been a staff
member at the American Saint Hill Organization (ASHO) in Los Angeles. He
holds the position of Auditing Supervisor for the Saint Hill Special
Briefing Course, responsible for overseeing the auditing done by
students training to be Scientology auditors on this course. The Church
has had no specific information concerning the activities or whereabouts of
Gene Allard since 1981, when he appeared as an IRS witness in the Tax
Court trial of the CSC case.
The Church has long suspected that Allard was sent into AOLA in 1969 by
IRS Intelligence Division agent John Daley, to infiltrate the Church as
an agent provocateur. John Daley was an agent in the IRS' Case
Development Unit in Los Angeles, a unit
10-14
which served as a model for a national intelligence operation known as
the Intelligence Gathering and Retrieval System ("IGRS"). The IGRS was
disbanded in 1975 when Congress found that it had "fostered
unrestrained, unfocused intelligence gathering and permitted targeting
of groups for intelligence collection on bases having little
relationship to enforcement of the tax laws." Congress found that "there
were the beginnings of politically motivated intelligence collection in
at least one district; and evidence that the fruits of similar
investigative efforts in two districts had been destroyed." One of the
districts that destroyed its files on the eve of the Congressional
investigation was the Los Angeles District (i.e. John Daley's files) and
the other was the St. Louis District, where Congress found that a file
labelled "Subversives" that "contained only material on the Church of
Scientology" had been destroyed. (See pages from Supplementary Detailed
Staff Reports On Intelligence Activities And the Rights of Americans.
Final Report of the Select Committee to Study Governmental Operations
With Respect to Intelligence Activities, attached as Exhibit III-10-L).
Circumstantial evidence strongly suggests that Allard was a clandestine
operative who reported to Daley. Daley had been investigating the Church
since at least 1968 and, by the time Allard first appeared at AOLA,
Daley had already used a plant inside Crocker Bank who provided Daley
with illegally-obtained copies of the Church's confidential bank
records. After occupying the position of FBO AOLA for barely two months,
Allard suddenly disappeared, taking with him some internal Church
correspondence and other Church assets. Allard turned over the documents
to the IRS in Kansas City; the documents were forwarded to John Daley in
Los Angeles.
The Church filed criminal charges against Allard. He was later located
and arrested by the FBI in Florida and brought back to Los Angeles. Not
long after Daley interviewed Allard in jail, the California Attorney
General's office decided the evidence against Allard was insufficient
and dropped the charges. Then, in 1981, Allard surfaced as a witness for
the IRS in the CSC case along with the documents that he had stolen,
admitting on cross-examination that he was hopeful of receiving a reward
if his testimony resulted in collection of any taxes. Judge Sterrett
demonstrated a willingness throughout the CSC trial to regard any anti-
Church witness as credible, but even he had problems with Allard's
testimony: Judge Sterrett found that "There were significant
inconsistencies in his testimony . . .". 83 T.C. 509.
Nevertheless, it was Allard's testimony and the documents that
he stole that formed virtually the sole basis for the findings at
10-15
pages 431 and 432 of the CSC decision about which you now inquire. Judge
Sterrett's gratuitous comments suggested that whatever occurred at AOLA
in 1969 constituted some kind of criminal conspiracy. All of this
evidence however, was known in 1969 when Revenue Agent Woodrow Wilson
unsuccessfully sought to institute a fraud investigation. In June 1969,
Daley even went so far as discussing with California State officials the
use of the Allard evidence as "grounds for dissolution" of the Churches
of Scientology. (Exhibit III-10-M.) In August of 1969, Wilson presented
this information in the form of a "fraud referral" in an effort to
elevate it from "case development" status to an actual criminal
investigation. The fraud referral was declined by the Chief of
Intelligence. (Exhibit III-10-N.)
You have also asked about the current relationship of Martin Greenberg
to any Scientology-related organizations. Mr. Greenberg has not been on
the staff of any Scientology-related organization since early 1980's. He
is a certified public accountant with an accounting practice in
Clearwater, Florida. Although we understand that individual Church
members have used his services for their personal or business
accounting, he has not to our knowledge been retained nor has he done
any accounting work for any Scientology-related organizations for many
years. Mr. Greenberg is a parishioner of the Scientology religion.
While in Los Angeles in 1978, Martin Greenberg, along with CPA James
Jackson, formed the firm of Greenberg and Jackson. In 1983 Greenberg
moved away and sold his interest in the practice to Jackson, who
retained the name "Greenberg and Jackson" for the professional
corporation. At that time Mr. Greenberg ceased having any involvement in
or knowledge of the affairs of any Scientology-related organizations.
Recently, Mr. Jackson also sold his interest in this practice and
presently there is neither a Greenberg nor a Jackson associated with
"Greenberg and Jackson." Several Scientology- related organizations
continue to utilize the services of CPA Brad Bernstein, one of the
present shareholders of that firm. ~
. . . .
10-16
Questions 10 e(i)-(ii)
In our prior question 10, we expressed our concern over the possibility
of continuing violations of public policy and requested certain
information to assuage these concern-. We have additional follow-up
questions in this regard.
* * * *
e. We have carefully reviewed the response to Question lO.d. The Service
still requires a more complete understanding of the cases listed in the
response. Please provide the following information, as well as any other
information or documentation that you believe would assist the Service
in this regard.
(i) For each of the cases listed on pages 10-20 through 10-22, please
provide a short description of all claims by the non-Church of
Scientology parties. In particular, please describe any allegations that
the Scientology-related organizations, and/or the individuals, described
in Question 2.d of our second series of questions have engaged in any
action that is an intentional tort and/or that would violate any
criminal law. In your description, please include the date the action is
alleged to have occurred and the party alleged to have committed the
action.
(ii) For each of the cases on pages 10-8 through 10-22, other than the
"GO Criminal ActiVity Fallout Litigation" cases listed on pages 10-16
and 10-17, please provide a copy of any jury verdict, or any decision,
finding or statement by a court that any Scientology-related
organization, and/or any individuals described in our prior Question
10.d, engaged after 1980 in any action that is an intentional tort
and/or that would violate any criminal statute. The copy should be
provided regarding of the ultimate disposition of the underlying legal
action (e.g., even if an appeal is still pending or the action was
settled, dismissed, or successfully appealed). With respect to each copy
provided, please state whether the Church agrees with the court's
statement, and, it so, whether there in presently any connection or
relationship between the individual(s) involved and the church.
------------------
Subparagraph 10 e(i)
In our response to the Service's prior Question lO.d, we provided a
lengthy description of litigation involving Scientology-related
organizations or individuals since 1980. To facilitate the Service being
able to understand these cases and put them into proper context, the
cases were grouped according to the kind of case and allegations and the
phenomena that brought the various suits about.
10-17
In this follow-up question the Service is asking for copies of any jury
verdicts or judicial findings respecting all but a few ofthose cases,
where it was found that a Scientology-related organization or individual
committed a tort or criminal law violation; and with respect to just
three of the groupings of cases, the Service wants further information
concerning the allegations made in those cases. Those groupings are: 1)
cases listed as financial or property disputes or transactions; 2)
personal injury or medical-related suits; and 3) suits that appear to
have been instigated directly or indirectly by the Cult Awareness
Network.
As described above in the Introduction to Question 10, in the vast
majority of these cases the allegations that have been made and which
are described below, trace back in one way or another to the IRS itself.
Nonetheless, in the spirit of cooperation, we are providing in this
response all of the information requested -- i.e. the description of the
allegations in each of the cases listed on pages 10-20 to 10-22 of our
response to your second series of questions and copies of the verdicts,
decisions and findings requested in Question 10.e (ii). We feel it is
appropriate, however, to make the following preliminary observations.
Public Policy As An Exemption Issue:
All of these questions concerning litigation relate to the issue of
public policy. Section 501(c)(3), however, contains no express condition
that an organization must operate in conformance with public policy to
qualify for tax exemption. Whether or not an organization violates
public policy is relevant to exemption only in the context of whether
the organization is operated exclusively for one of the exempt purposes
that section 501(c)(3) enumerates.
Only one judicial decision has ever applied a public policy condition to
the exempt status of a church -- the Tax Court decision concerning the
Church of Scientology of California (the "CSC decision"). Judge
Sterrett, however, limited his findings of public policy violations
affecting CSC's exempt status strictly to the activities of the
Guardian's Office ("GO'') that resulted in a number of GO members being
convicted of crimes. Thus, although the Service was prepared to present
testimony in the CSC case from tort claimants such as Larry Wollersheim
and some of attorney Michael Flynn's clients, Judge Sterrett precluded
that testimony and made no finding regarding public policy based on any
civil tort claims. (See our response to Question 10.d of your second
series of questions for a description of Michael Flynn's and Larry
Wollersheim's claims infra.).
10-18
The CSC decision, upon which the Service has often relied, itself
highlights the irrelevancy of pending, dismissed or settled legal cases
where any form of tort allegation has been made. The public policy issue
was addressed in the CSC case and decided in that case, and the only
acts of any Church of Scientology members that were found to provide a
basis for questioning exempt status were the criminal activities of the
Guardian's Office. If Judge Sterrett did not find the allegations of
Flynn's clients, Wollersheim and the rest to be relevant, there can be
no legal basis for considering the same kinds of allegations now.
The Church has addressed the Guardian's Office both here (see responses
to Questions 3.e, 10.a and 10.d) and in our prior response (responses to
Questions 3.d and 10.d). The Church also addressed at some length the
various kinds of other litigation Scientology-related organizations and
individuals have been involved in (response to your prior Question
10.d). On this basis, the Church feels that it has adequately addressed
public policy against the relevant legal authorities.
Public Policy As Applied to Other Churches:
The Service has enforced the public policy standard selectively,
applying it only to the Church of Scientology and not to other churches
to which it could just as easily, if not more appropriately, be applied.
For example, for most of the past decade the Catholic Church has been
embroiled in a major scandal arising from the exposure of an
astonishingly large number of instances of child molestation involving
Catholic priests. Copies of newspaper and magazine articles about this
subject are attached as Exhibit III-10-D. A book published in October
1992, Lead Us Not Into Temptation by Jason Berry, states that between
1984 and 1992 four hundred Catholic priests in North America were
reported for molesting children, and in this same period the Catholic
Church has paid out $400 million to resolve these cases. The book
further details how other Catholic officials, including many high in the
Catholic hierarchy, have covered up what occurred or were guilty of
complicity by knowing what was happening and ignoring it or reassigning
a tainted priest to another job where he would still have contact with
children. These are not merely cases where unproven allegations have
been made; some of the cases resulted in criminal convictions of the
priests involved. In the case of Father Gilbert Gauthe, for example,
Father Gauthe pleaded guilty to 36 counts of child molestation while
serving as a parish priest in Louisiana. The attempts to cover-up Father
Gauthe's crimes described in Jason Berry's book spanned the Catholic
hierarchy and included archbishops, bishops, other priests and
directions and orders emanating from Rome. Thus a jury also awarded a
verdict of $1.25 million to one of the victims and his-family against
the responsible Catholic diocese.
10-19
We are not suggesting that the IRS should now investigate the Catholic
Church or make a tax exemption issue out of an unfortunate scandal that
should be dealt with in the criminal justice system. Rather, this
example serves simply to illustrate the unfair double standard that has
been applied to the Church of Scientology.
Nevertheless, the following is a description of the cases that were
listed in our prior response, describing the allegations in those cases
of commission of intentional torts or violations of criminal statutes.
Description of Tort Litigation:
The suits listed on pages 10-20 through 10-22 each have their own set of
facts and assortment of claims, but for the most part are of the same
general character. They involve frivolous claims by "crazies" who think
they can make some money suinq Scientology; suits against former spouses
or business associates naming the Church to seek a tactical advantage;
and a considerable number of suits inspired by the Cult Awareness
Network, which bombards the person with negative information about the
Church and then refers them to an attorney who tells them they can sue
the Church and get rich. (See the "Introduction To Question 10" for
further information on CAN). There are a few instances, like the Rabel
case, where a stereo speaker fell from the window of a Scientology
mission injuring someone walking below, where there was a valid claim
which the Church equitably settled. Not one of the cases asked about in
Question has been adjudicated by a court; thus all the claims listed are
unproven.
Because many of these suits are refund suits, it is useful first to
review the Church's refund policy. It has been a long-standing policy of
the Church that if someone is dissatisfied with their Scientology
services and asks to have their contributions returned within a three
month period these amounts will be returned. Likewise, if the person
asks for return of ccontributions for which no services were received
(i.e. an advance payment), there is no three month limitation period.
Anyone newly enrolling in services at a Church of Scientology is
informed of the policies and signs an agreement to abide by them. As a
further condition of receiving a refund or repayment, the person
understands that they may not again receive services from the Church.
10-20
Within the Church, there are two separate terms: A "refund" refers to a
return of contributions to a parishioner within 90 days of participating
in religious services while a "repayment" refers to a return of a
parishioner's advance payment before he or she has participated in
religious services. For simplicity, the following discussion will use
the term "refund" to describe both types of transactions, because both
involve a return of parishioner contributions.
The Church's refund policy is exceedingly fair. If someone isn't happy
with Scientology -- which is a very small minority of people -- he
simply has to make a proper request for his donations back, agree to
forego further services and his donations will be returned. For the
Church, in addition to the fact that this policy aligns with Scientology
principles of exchange, it also serves the purpose of allowing our
churches and the parishioners who are very happy with Scientology, to
carry on without the unhappy few in their midst.
The presence of a considerable number of refund suits in the following
list is directly related to the influence of CAN and CAN attorneys. As
described in the "Introduction to Question 10," CAN's modus operandi is
to seek out anyone who is unhappy with Scientology feed them negative
information and then refer them to an attorney. The CAN attorney then
convinces the person that he can not~onTy get a refund of his donations,
but by allowing the attorney to handle the claim he can get damages as
well, and possibly get rich. As will be seen in the descriptions of the
cases that follow, almost one for one such suits are ultimately settled
for the refund amount the person could have obtained in the first place
simply by requesting it.
It is also of interest that we know of no suit filed for refund that
wasn't instigated by CAN. In fact, the Church rarely has any refund
requests, by suit or otherwise, except when instigated by the IRS-
sanctioned CAN. And in most cases, further discussion reveals the person
was quite happy with his service at the Church and seeks his money back
only after CAN has told him how "terrible" Scientology is.
Descriptions of individual suits follows:
Mira Chaikin v. Church of Scientology, L. Ron Hubbard. et al.: The
following is from the judge's ruling dismissing the case, which says all
that needs to be said about this case:
"In this pro se complaint, which can most charitably be described as
bizarre, plaintiff Mira Chaikin ('Chaikin') alleges that the various
defendants are exploiting her, impersonating her and 'implanting' her.
10-21
She alleges that because defendant Ron Hubbard has been 'flowing to
(her) sexually and romantically' she is his 'true wife,' as well as
'having been (his) wife in (her) last life who was murdered. ' Thus, she
further alleges, defendant Mary Sue Hubbard is 'in no way the wife of
Lafayette Ron Hubbard ' but has merely been impersonating plaintiff with
resulting severe endangerment of plaintiff's mental health.
"As against the Church of Scientology, Chaikin appears to be claiming
that the organization is acting contrary to its theoretical foundation.
For the reasons set forth below, I dismiss the complaint.
"An action may be dismissed 'when the allegations of the complaint are
beyond credulity . . .' [cite omitted]. I find plaintiff's
allegations, to the extent they are comprehensible at all, to be
patently incredible."
Terry Dixon v. Church of Scientology Celebrity Center of Portland. et
al.: This is a typical CAN-influenced suit for refund by Terry Dixon,
which also asks for damages based on claims of breach of contract and
breach of fiduciary duty. Dixon alleges that the Church of Scientology
Celebrity Centre Portland, Church of Scientology of Portland and Church
of Scientology Flag Service Org, breached a contract with him and their
fiduciary duty, by failing to deliver to him results he considers to
have been promised him from Scientology religious services. The suit was
filed in December 1990.
Each of the three churches filed motions to abate the case pending
arbitration, based on enrollment agreements signed by Dixon while he was
in the Church, which include a clause that any disputes between the
Church and the parishioner must be arbitrated. The judge ordered the
case to arbitration and it has now been settled for the refund amount.
John Finucane. David Miller. Alexander Turbyne v. Emery Wilson
Corporation, et al.: This suit was instigated directly by CAN and CAN
attorney Toby Plevin. All of the plaintiffs are dentists who were
clients of Sterling Management Systems (Emory Wilson Corporation) for a
brief period of time and also briefly received some services from the
Church of Scientology of Orange
County. Sterling is a company that has been owned and run by
Scientologists and uses methods of organizational administration
developed by L. Ron Hubbard to help business people improve their
businesses. Some of these individuals, upon being impressed with Mr.
Hubbard's works, have become interested in Scientology.
The lawsuit was filed in LA Superior Court on December 26, 1991 by
Finucane, Miller, and Turbyne, who reside, respectively, in Aiken, South
Carolina, Sacramento, California, and Sohigan, Maine,
10-22
against Sterling and the Orange County Church. The complaint contains
causes of action for deceptive trade practices, fraud, and injunctive
relief, alleging that Sterling misrepresented itself to be an
independent management training organization when, in fact, it was a
part of the Church of Scientology and operated as a recruitment office
for the Church with the goal of procuring new members and getting them
to take Church services.
Miller and Turbyne settled their cases with the Church of Scientology of
Orange County for a refund, but not with Sterling, leaving all
plaintiffs with claims against Sterling, and only Finucane suing the
Orange County Church. Finucane has so far refused offers from the Church
to have his claim arbitrated as per the enrollment agreement he signed.
The Church therefore filed a counter-claim and criminal complaint
against Finucane relating to his breach of contract (his refusal to
abide by the enrollment agreement) and invasion of privacy (for secretly
tape-recording a conversation with a Church staff member and then
broadcasting a heavily edited version of it on national television).
Dorothy Fuller. an individual v. Applied Scholastics International et
al.: This is another Toby Plevin, CAN instigated suit filed in April
1992. The claims are breach of lease, fraud and negligent
misrepresentation. Applied Scholastics leased a residential property
from Fuller who claims that the house was misused in several ways,
including housing more people than agreed upon in the lease, use of the
house as a child center, dormitory style living, and fabrication of
products for resale. Thus it is a minor property dispute escalated by
Plevin into tort litigation. It is expected that this suit will be
quickly settled.
Lisa Stuart Halverson v. Church of Scientology Flag Service Organization, et al.:
This was another suit for refund that CAN attorney
Toby Plevin filed, alleging several torts for purposes of effect. The
claims were for violation of the deceptive practices act and fraud,
based on Halverson being told she could get a refund and then not being
able to get it. The suit was settled for the refund amount.
Thomas and Carol Hutchinson v. Church of Scientology of Georgia, et al.:
The complaint in this suit is virtually a carbon copy of the complaint
in the Corydon case, one of the Michael Flynn cases listed at page 10-13
of our prior response. Although the Corydon case was settled, Hutchinson
apparently got a copy of the complaint, very likely provided by CAN, and
felt its inflammatory claims against a wide array of Church
organizations would add spice to what is otherwise a suit for refund of
money paid to the Church of Scientology of Georgia. The claims are
stated as fraud and deceit and infliction of emotional distress, seeking
unspecified damages and injunctive relief. However, the claims revolve
around a core that the teachings of Scientology differ from those of
10-23
Fundamentalist Christianity, a topic constitutionally barred from
secular adjudication.
The Church anticipates dismissal of this suit, favorable summary
judgment or settlement for a refund of the Hutchinson's donations.
Mark Lewandowski v. Church of Scientology of Michigan. et al.: This suit
was against the Church of Scientology of Michigan and two individuals,
one former and one current staff member of the Michigan Church. Mark
Lewandowski, who had previously been under psychiatric treatment with a
substance abuse disability, took some courses at the Church of
Scientology of Michigan in 1988. Although Lewandowski's relationship
with the Church was short, in his suit he alleges that the Church
committed consumer fraud by failing to ascertain his unstable mental
condition, fraud, for allegedly misrepresenting the nature of the
courses he took, and intentional infliction of emotional distress
through the above. The nature of Lewandowski's claims and allegations
strongly suggest that he was influenced to file suit by CAN.
This case went before a mediation panel where a settlement was accepted
by the Lewandowski's attorneys for a refund. The Church of Scientology
of Michigan is in the process of paying this amount to end the suit.
Peter and Francis Miller v. Church of Scientology et al.: The suit was
filed on April 29, 1991 by CAN attorney Toby Plevin
against several organizations, including CSI, Church of Scientology
Orange County and Sterling Management Systems. This suit makes claims
not unlike those of the Finucane suit described above, that they were
misled into Sterling and Scientology and therefore want their money
back. The claims include fraud, breach of express and/or implied
warranties, invasion of privacy, intentional infliction of emotional
distress and negligence. The Millers' claims against Sterling were
arbitrated, with the millions the Millers originally claimed reduced to
the refund amount. The case is still at the pleading stage as regards
the Church parties.
Dee and Glover Rowe v. Church of Scientology of Orange County. et al.:
This is another Toby Plevin/CAN suit naming the Church of Scientology of
Orange County, RTC, CSI, the Sea Org and Does 1-100. It was filed on
October 7, 1991, alleging fraud/deceptive trade practices, invasion of
privacy, false imprisonment, assault, and intentional infliction of
emotional distress. The suit essentially repeats the allegations made by
the Rowes in the May 6, 1991 edition of Time magazine, that they took
courses at Sterling Management Systems and allegedly under the guise of
management training were induced to take Scientology services. Discovery
in this case has demonstrated that the Rowe's claims are contrived and
maliciously false, and that these are people with a history of criminal
activity. Glover Rowe embezzled
10-24
money from a fraternity in college and Dee Rowe has a history of
emotional turbulence starting long before any contact with any
Scientology organization. One of their claims, which has already been
dismissed on summary judgment, was that the Church bugged their hotel
room. This was a completely fabricated claim as seen by the fact that
the staff of the hotel testified that this was impossible and that the
Rowes could "support" it only by stating without any proof that their
room "must have been bugged." It was not, a fact quickly recognized by
the court. The Rowes were referred to Time magazine by CAN and continue
to be encouraged by CAN .
Pretrial summary judgment motions are still being considered in this
case and the Church expects all of the Rowe's claims to be dismissed.
The Church also expects to prevail on a counterclaim naming the Rowes
and CAN defendants, for libel and breach of contract, and that by
deprogramming the Rowes, CAN interfered with the Church's relationship
with the Rowes.
Frank and Joan Sanchez v. Sterling Management Systems. et al.: This is
yet another CAN-inspired suit involving a dentist, Frank Sanchez and his
wife, Joan Sanchez, filed against Sterling, the Church of Scientology of
Orange County and IAS.
The Sanchezes attended a Sterling seminar at the end of October 1989,
after which Sanchez asked Sterling to administer a program in his
office. The Sanchezes went to the Church of Scientology of Orange County
in December 1989 and were involved with the Church for less than a
month. Sanchez wanted help with
his marriage as he and his wife had marriage counseling over a twenty
year period but it had been unable to straighten out problems arising
from twenty years of adulterous affairs. Joanne Sanchez was opposed to
the trip to Sterling and Orange County and went only because her husband
wanted her to go.
The Sanchezes paid some money to Sterling and the Orange County Church,
but then returned to New Mexico and refused further participation in any
services at either Sterling or the Church, which would appear to have
been directly caused by negative information provided them by CAN.
Although the bottom line of what they are seeking is a refund of their
money, their complaint asks for damages for breach of contract,
intentional infliction of emotional distress, breach of covenant of good
faith and fair dealing, for fraud and all the usual, boilerplate CAN
allegations. The suit was dismissed with respect to the Orange County
Church and it is expected that ultimately it will be settled for a
repayment of the money they paid to Sterling.
Thomas Spencer v. The Church of Scientology, et al.: This suit was
settled for a refund and dismissed on August 31. 1992. It was another
suit for refund laced with the standard CAN claims,
10-25
breach of contract, fraud, and intentional infliction of emotional
distress.
Irene Zaferes v. Church of Scientology: This was a personal injury suit
filed in April 11, 1989. The plaintiff was a Hollywood woman who claimed
that a wrongful death occurred when her brother, Luke Andrea (a.k.a.
Louis Zaferes) died on April 12, 1988, some months after he did some
"heavy construction work" at the church of Scientology Flag Service Org,
while having a heart condition. Zaferes was acting as her own attorney.
The case was dismissed.
Jo Ann Scrivano v. Church of Scientology of New
York. et al.:
Jo Ann Scrivano, had an extensive psychiatric history including the
use of heavy psychiatric drugs; before she came to the Church of d '
Scientology Mission of Long Island in January of 1986. After receiving a
small amount of introductory level auditing for which she donated $450,
Mrs. Scrivano became upset and blamed this on her auditing. She was
offered her money back, but refused it and left. She subsequently filed
a suit naming not just the Long Island Church but also a number Church
organizations that had never heard of her. She even alleged an array of
torts and sought $10,000,450 in damages. Her claims include Fraud,
Constructive Trust, Breach of Fiduciary Duty, Malpractice, Negligence,
and Intentional Infliction of Emotional Distress. None of these claims
is true, and both Scrivano's own attorneys and the judge assigned to the
case have encouraged her to accept a token settlement offered by the
Church just to get rid of the suit.
Marissa Alimata and Richard Wolfson v. Church of Scientology of
California etc.. et al.: This case, of Marissa and Richard Wolfson,
furnishes an excellent example of how any fruitcake can file a civil
suit. The Wolfsons sued for $1 billion alleging intentional infliction
of emotional distress and that the conduct of the Church was
"outrageous, fraudulent, malicious, abusive, indecent, intentional,
unduly influential, willful, wanton and beyond bounds of common human
decency." They claimed to have been subject to "undue influence" and to
have suffered "violation of fiduciary relationship," interference with
prospective economic advantage, loss of consortium and fraud. Before
winning summary judgment on all of the Wolfsons' claims, the church was
required to endure the public airing of delusional charges and suffer
through such bizarre conduct as Mr. Wolfson appearing at his deposition
dressed as Mrs. Wolfson.
_
Sherry Fortune v. Church of Scientology American Saint Hill Organization
and Chuck Tingley: This case was brought by Sherry Fortune against the
Church of Scientology American Saint Hill Organization and Chuck
Tingley, her former husband, an independent contractor who had been a
computer programmer at the Church. The case was essentially a domestic
dispute between Fortune and Tingley that involved the rights to some
computer software Tingley had
developed. Fortune believed that naming the Church in her suit
10-26
would give her additional leverage over her former husband so she
alleged that the Church was guilty of intentional interference with
economic advantage, fraud and misrepresentation, intentional infliction
of emotional distress, and conversion. The frivolous claims against the Church were dismissed and Fortune and Tingley reached a settlement
between them.
Gary and Susan Silcock v. Church of Scientology, Mission of
Salt Lake et al.: The Silcock's received some religious services from
the Church of Scientology Mission of Salt Lake in 1984 and then asked
for a refund. The refund amounts requested were paid to the Silcocks and
the suit was dismissed in September 1986.
Pedro H. Rimando and Irene Marshall v. The Church of Scientology of San
Francisco. et al.: This suit was a suit brought by the parents of Rodney
Rimando, a former Church staff member who committed suicide in November
1986 by jumping out of a window of a Church of Scientology building. The
suit's claims were wrongful death, intentional infliction of emotional
distress, negligence, and outrageous conduct. The suit claimed that
Rimando came to the Church of Scientology of San Francisco for spiritual
guidance and that no precautions were taken to prevent his suicide or
see that he got psychiatric help. This suit only came about because a
CAN attorney incited the parents to file it. The parents did not really
believe the Church to be responsible for their son's suicide. The suit
was never served and was voluntarily dismissed with prejudice.
Wendy and William Rabel v. Eric Rising. Jane Doe Rising, Church of
Scientology, Mission of University Way. et al.: As described previously,
this suit involved an incident where a stereo speaker placed in the
window of the University Way Mission in Seattle, Washington fell out of
the window and struck Wendy Rabel on the head. A settlement payment was
negotiated and the case was dismissed in January 1988.
Francine Necochea a minor child. by her Guardian Ad Litem Cecilia Garcia
v. Church of Scientology. et al.: This was an insurance suit dealing
with an incident in 1983 when a girl on a motorized bike hit a Golden
Era Studios Bus. She sustained a broken leg and other minor injuries.
The girl's family sued the Church and the Church's insurance company
handled the case and settled it for $5,000.
Roxanne Friend v. Church of Scientology International. et al.: Some
background leading up to the filing of this suit will help make it
understandable.
Shortly after breaking away from the Church of Scientology, Roxanne
Friend became romantically involved with a non-Scientologist. After an
on-again, off-again relationship, they
10-27
finally broke off the relationship in August 1989. For months after this
Friend experienced what she later characterized on a medical
questionnaire as a "nervous breakdown."
Documents authenticated by Friend in her own hand illustrate her state
of mind during this period, and outline the series of bizarre and
violent acts that she admits were preceded and prompted by the break-up
with her non-Scientologist boyfriend. She first secretly absconded with
her former boyfriend's young son and molested him sexually. She next
tried to persuade a karate instructor to murder her former boyfriend.
Failing this, she wrote letters to the ax-boyfriend claiming that he had
drugged, hypnotized and forced her to perform lewd sexual acts for he
and his friends. When all of this further alienated the man, her conduct
became more bizarre. She scrubbed her mare's vagina with bleach causing
the animal severe pain and then physically assaulted and injured the
proprietor of the stable when she tried to intercede on behalf of the
horse. A bit later Friend was stopped for dangerous reckless driving and
resisted arrest by assaulting a police officer.
Church staff who knew Friend and Friend's brother, nonetheless attempted
to help by taking her to doctors in Los Angeles and then escorting her
to Florida to be in a less stressful environment where she could also be
examined by doctors. Once in Florida, Friend refused help, and went to
the police with the hallucinatory claim that someone put crack cocaine
in her cigarettes to account for her bizarre behavior. She was taken to
a hospital at her insistence. The Church attempted to get her to submit
to a full medical examination, knowing that most such behavior episodes
are initially prompted by some undetected and untreated physical
ailment. Friend refused.
Friend was then taken to her mother along with a written recommendation
from the Church that she receive a full medical examination.
Friend's mother ignored the recommendation and Friend was later
arrested, incarcerated in a mental hospital and sent for counselling at
a Jewish support group. A psychiatrist at that group turned her over to
the Cult Awareness Network (CAN). As they do in every such case, CAN
promptly pumped Friend full of false and derogatory information about
the Church and turned her over to their attorney Plevin. Up to that
point, when CAN became involved, Friend had never considered the efforts
of the Church members to help her as anything other than help, and
despite her agitated state, had never accused the Church of causing the
condition -indeed she recognized that the break-up of her ill-fated
romance was what brought it on. After being manipulated by CAN, however,
Friend decided the Church was to blame and should pay her damages.
10-28
Months after the Church had its last communication with Friend, she
finally received two medical examinations. The first found nothing wrong
with her. The second found that she had a large lump in her abdomen and
it was diagnosed as a very rare form of cancer. Friend's CAN attorneys,
the same attorneys who had represented the Aznarans (see description of
the Aznaran litigation in the response to your prior Question 10.d)
considered this the next best thing to a plane crash, and suddenly saw
in Friend the prospect of a circus trial with a dying woman to play on
the emotions of a jury. Her attorneys rushed to court with a lawsuit
that claimed the Church was responsible for her cancer not being earlier
detected by not allowing her to see a doctor, and that all her psychotic
episodes stemmed from this undetected physical condition. The attorneys
characterized the efforts of Church members to help her as examples of
assault and battery, wrongful imprisonment, invasion of privacy and
intentional infliction of emotional distress. The suit also claimed the
Church was guilty of fraud and false advertising and breached express
and implied covenants in representing it would refund money to those not
satisfied but then failing to do so.
These claims were completely unfounded as discovery proved that Friend
had seen many doctors on a regular basis during the period that she was
at the Church, both at the Church's direction and on her own, and thus
the Church took the appropriate measures to see that she got the care
and diagnosis needed. Her own doctor testified that the type of cancer
Friend contracted was very rare and virtually undetectable by modern
medical science until well developed and spread. The doctor testified
that the only way to detect such cancer was for the patient to complain
of a lump and then have a biopsy performed. Friend subsequently
testified that she had felt a lump developing for two years, but never
mentioned it during that time to the several doctors she did see.
The Church settled this case for nuisance value, for less than the cost
of a trial, even if the Church prevailed. David Miscavige met with
Friend in settlement talks as he was concerned that her attorneys would
leave her destitute when doctor reports were submitted in court stating
she only had several months left to live. Once settlement terms were
generally agreed upon, the first thing Friend did was ask whether if she
miraculously recovered, could she get back into the Church and take
services. Thus, in the final analysis Friend herself acknowledged that
her frightening claims against the Church were contrived.
To our knowledge, despite the claims that were made by Friend and her
attorneys of imminent death, she is still alive.
Bruce and Lynnel Arbuckle v. Skip Pagel M.D. Church of Scientology
Celebrity Center Portland. et al.: This suit was brought by the parents
of Chris Arbuckle, a former Church
10-29
parishioner, who died of kidney failure. The suit's claims were wrongful
death against Scientologist Dr. Skip Pagel and the Tuality Community
Hospital, and breach of fiduciary duty against the Church of Scientology
celebrity Centre Portland, Church of Scientology of Portland and Church
of Scientology Mission of Fairfax. Arbuckle, a 25-year-old chiropractor,
participated in the Purification Rundown after first receiving a
physical examination by Dr. Pagel. Subsequent to this Arbuckle died, in
August of 1986, of a heart attack resulting from a kidney failure which
followed a dying liver, with the cause of the dying liver attributed to
"probably hepatitis" on the death certificate. The complaint alleged
that the Purification Rundown caused this to occur. What was found on
further examination was that Arbuckle was known to be abusing steroids
for body building purposes, that he had undergone a bout of hepatitis
prior to doing the Purification Rundown (which he did not disclose to
Dr. Pagel), and that a pathologist familiar with Arbuckle's death stated
that his liver died as a result of Hepatitis B, and that there was no
way the Purification RD could have caused this to occur. The suit was
settled and dismissed in August 1990.
In re Dynamic Publications Inc.: Dynamic Publications was a company
owned by two now-expelled former Scientologists, who filed for
bankruptcy in early 1987 in United States Bankruptcy Court for the
District of Maryland. The trustee in bankruptcy, appointed by the court
to collect all the assets of the company, determined that these
individuals had made donations to Churches of Scientology and
Scientology-related organizations through the company and sought to get
some of this money back as having been fraudulently conveyed when the
company was in debt. The suit was settled in January of 1991.
Ted Patrick. et al. v. Church of Scientology of Portland. et al.: The
Church of Scientology of Portland filed a suit against the deprogrammers
of Julie Christofferson in September, 1980, suing them for barratry and
practicing medicine without license. Ted Patrick, a convicted felon, was
one of the deprogrammers. He filed a counterclaim alleging abuse of
process and claiming that the Church's suit was frivolous and vexatious.
The attorney on the suit was an associate of Michael Flynn associate.
The counter-suit was ultimately dismissed.
Gregory F. Henderson v. A Brilliant Film Company, et al. and Gregory F.
Henderson v. Marvin Price. et al.: Henderson had a contract with
Brilliant Film Company to shoot a movie written by L. Ron Hubbard.
Brilliant Film went bankrupt and Henderson filed suit on May 14, 1982
against a series of defendants, including L. Ron Hubbard. It raised
financial claims and also that there had been a conspiracy to induce
Henderson to agree to a loan that would not be repaid and to keep him
from pursuing his legal remedies. He
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also filed a second suit, against Marvin Price, an ex-scientologist who
had was the mission holder of the Church of Scientology Mission of
Stockton stating claims for negligent misrepresentation, fraud, breach
of fiduciary relationship and conspiracy to defraud. The suit with
Brilliant Film Company was settled and the other suit was then dismissed
with prejudice in July 1984.
Peter Siegel v. Religious Technology Center. et al.: Peter Siegel is a
"sports hypnotherapist", doing business as "Achievement Plus Institute".
Siegel used a logo similar to a trademark owned by RTC. Attempts were
made prior to litigation to settle Siegel's confusion as to the
ownership of the mark, which was registered by RTC in December 9, 1986,
and to obviate the need for litigation. Siegel was uncooperative in this
and RTC and CSI filed suit. Siegel filed a pro per cross-complaint on
December 20, 1989 for registration of the mark in his name, cancellation
of RTC's registration, trademark infringement, intentional infliction of
emotional distress and revocation of RTC and CSI's tax-exempt status.
Siegel has no valid claim to this trademark and RTC's summary judgment
motion is presently pending. Although Toby Plevin came in at the last
minute to represent the defendant at the summary judgment hearing, the
court, after hearing her argument, told Plaintiff's counsel to propose
an order on the summary judgment motion to be written from the viewpoint
that the court was ruling in Plaintiff's favor. The court has also asked
for more detailed information concerning RTC's pending motion for
attorneys fees.
Steve Dunning v. Church of Scientology. et al.: Dunning was a Church
staff member for three months in 1983 and came and went for very brief
periods after that. He is currently in a half way house for psychiatric
patients where he committed himself because he could not function in the
outside world, has an outstanding warrant for his arrest in North
Carolina for assault with a deadly weapon and another arrest for
threatening someone with a knife. He filed a suit against the Church
asking for over $5 billion claiming breach of contract, breach of
implied covenant of good faith and fair dealing claims, fraud and
intentional infliction of emotional distress. The suit was completely
groundless and it was dismissed in favor of the Church in August 1987
when Dunning failed to appear at the hearing on the Church's Motion for
Entry of Final Judgment.
Jeff and Arlene Dubron v. Church of Scientology, International. et al.:
This suit which named 21 defendants and 50 "John Doe" defendants,
alleged claims of defamation, invasion of privacy, outrageous conduct,
and negligent infliction of emotional distress. The suit stemmed out of
an incident where some Church staff posted a notice around Scientology
churches calling for Scientologists to report unethical conduct and used
some facts concerning Dubron as an example. The suit was voluntarily
dismissed.
Church of Scientology
10-31
Vicki Adler v. American Sun, Inc., Church of Scientology of Los Angeles:
This suit alleged emotional distress as a result of Adler's alleged
brainwashing by American Sun, a business owned and operated by several
Scientologists. The suit was essentially an employment dispute between
Adler and American Sun where Adler made Scientology an issue to
intimidate the company. The suit was settled and dismissed in 1988. '
Benham v. Church of Scientology Celebrity Center of Dallas. This was a
personal injury case in Dallas, Texas. Vicki Benham alleged that she was
injured while on the Purification Rundown and that she had emotional
distress. The case was settled in 1991 for a refund and nominal nuisance
fee which was paid by the insurance company.
Michael Burns v. The Recording Institute of Detroit, Inc.. et al.: This
case was filed on July 25, 1991 against the Church of Scientology of
Michigan, Church of Scientology Flag Service Org and several individual
Scientologists, and a recording school owned by a
Scientologist. Burns claimed that he was subjected to mind control by
the Scientologist from the recording school and that this induced Burns
to become involved with Scientology and join Church staff, which
prevented him from pursuing his studies in the recording field. The case
alleged fraud, breach of contract, intentional interference with a
contractual relationship, intentional infliction with emotional
distress, and conspiracy. The suit has no merit and is expected to be
dismissed shortly.
Clay Eberle and Eberle & Jordan Law Firm v. Church of , Scientology of
California: Eberle is an attorney who formerly represented
refund/repayment claimants suing the Church. His suit alleges that he
was damaged when CSC settled directly with some of the claimants as the
claimants then did not pay him attorneys' fees. In April 1988, the Court
granted the Church's summary judgment motion dismissing the case and
ruled that there was a qualified privilege for the Church to deal
directly with its former members notwithstanding the retention of an
attorney by the former member, and there was no evidence that the Church
intended for the persons to breach their attorney/client contracts with
Eberle, and no evidence that the Church caused the attorney/client
contracts to be breached.
Mario Metellus v. Church of Scientology of New York. and Linda Barragan:
Metellus was a non-Church member who responded to an advertisement
placed by the New York Church for part-time help. After working less
than a day, on November 29, 1989 he was dismissed. Metellus refused to
leave and the police had to be called in to remove him from the
premises. Metellus even refused to respond to the police officer's
directions to leave and
10-32
was arrested. When Metellus refused to allow the police to take his
fingerprints, he was held in custody. The complaint, claimed that
Metellus was falsely accused of criminal trespassing and falsely
arrested. Metellus also sued the City of New York. The complaint against
the New York Church was settled for a nominal amount.
Subparagraph 10.e(ii)
In this subparagraph, the Service has asked for a copy of any verdict,
decision or judicial finding that any Scientology-related' organization
or individual was involved in the commission of an intentional tort or
violation of criminal law. Copies of these documents are attached as
Exhibit 10-P. There were verdicts, or decisions with judicial findings
of intentional torts in only four of the cases discussed on the pages of
the prior submission referenced in this question, and all of these cases
were discussed in the response to Question 4.d of the Service's May
letter -- the Stifler case, the Christofferson case, the Wollersheim
case, and the Armstrong case, discussed at pages 10-12; 10-15 to 10-16;
10-16; and, 10-12 respectively, of our prior response.
The Service has asked the Church to state whether it agrees with the
findings of the Courts in each of the above decisions. The Church's
response to this part of the question follows:
Lawrence Stifler v. Church of Scientology of Boston:
The Stifler case was, for all practical purposes, won by the Church, as
the only money judgment in the case was entered against an individual
Church member for $979 in medical bills. This was one of Michael Flynn's
stable of cases described in our prior response at 10-12. Lawrence
Stifler accosted a staff member of the Boston Church, Roger Sylvester,
on the streets of Boston, Massachusetts in the early 1980's. Stifler
verbally abused Sylvester for attempting to disseminate his religion.
Both men lost their tempers and came to blows. As a result of the
altercation Stifler suffered a minor injury to his knee. Stifler filed
suit claiming $4,250,000 in damages.
During the 1984 trial, Flynn attempted to show that the altercation was
part of a nefarious Church of Scientology scheme. Flynn sought to
introduce his standard retinue of professional anti-Church witnesses in
order to reap a large punitive damages award. The Court refused to go
along with this charade, bifurcated the Boston and California Churches
from the trial and prohibited Flynn from introducing any of his general
Scientology issues or "evidence."
10-33
Stifler claimed to have suffered major trauma to his knee which had
permanently incapacitated him. Yet, when the evidence was presented at
the trial, the defense showed that whatever injuries he may have
suffered at the time of the altercation with Sylvester were extremely
minor. Evidence supporting this defense included photographs of Stifler
engaging in competitive stair climbing up skyscrapers at the very time
he claimed to be incapacitated. The jury awarded a mere $979.00 against
Sylvester to cover Stifler's medical costs, and the Church defendants
were dismissed from the case.
The Church disagrees with the fact that Stifler was awarded any money at
all. The Church agrees with the dismissal of the Church of Scientology
of Boston and the Church of Scientology of California from the case.
Church of Scientology v. Gerald Armstrong:
We have included some background information here and an epilogue to the
decision in question. That is because the Service has continuously
thrust the Armstrong case at us, demanding an explanation. The Armstrong
case decision was so inflammatory and intemperate that it was used to
stigmatize the Church in the legal arena and make other outrageous
decisions possible. As we shall demonstrate below, all this decision
ever involved was Armstrong's state of mind, which subsequently obtained
evidence proved conclusively to be one sordid, sado-masochistic
nightmare. Furthermore, Armstrong's state of mind horror stories have
fallen on deaf ears in recent litigation. Relying on Armstrong or the
Armstrong decision is wholly unjustified.
During the later years of his tenure as an employee of the Church,
Gerald Armstrong was placed in charge of a huge quantity of documents
that belonged to Mr. Hubbard that contained private and personal
information regarding Mr. Hubbard. Part of his duties included research
to support the work of an author who had been retained to write an
authorized biography of Mr. Hubbard.
In late 1981 after the initial clean out of the higher levels of the
Guardian's Office, and when investigations were turning toward
identifying those in alliance or sympathy with the GO, Armstrong
suddenly vacated Church premises and left its employ, taking with him
huge numbers of confidential documents that belonged to Mr. Hubbard or
his wife which the Church was holding as bailee. It was no coincidence
that Armstrong left at that time because he had repeatedly expressed his
ambition to join the GO and work in Bureau 1 (Information Bureau), the
same area of GO that had been responsible for the criminal acts of the
70's. Armstrong also had been a long-time friend and confidant of Laurel
Sullivan. Just prior to the take over the GO taking place, Sullivan had
made a
10-34
proposal to place convicted GO members into corporate positions of
control throughout the top of the ecclesiastical hierarchy. She was also
found to be spying on the CMO for the GO during the early days of the
CMO's investigation into the GO. Armstrong assisted and supported
Sullivan in her efforts.
In the summer of 1982 the Church received evidence that Armstrong had
stolen thousands of documents from archives when he left the Church.
Church counsel wrote to Armstrong, demanding that he return them.
Armstrong denied the theft.
Once the demand for return of documents was made, Armstrong turned the
stolen documents over to Michael Flynn, with whom Armstrong decided he
could make a lot of money.
In August 1982, the Church sued Armstrong for conversion, breach of
fiduciary duty and confidence, and invasion of privacy based on
Armstrong's theft of extensive amounts of private papers owned by the
Church or the Hubbards. The Church sought return of the papers and the
imposition of a constructive trust over them, and any proceeds derived
from them, as well as preliminary and permanent injunctive relief
against dissemination or disclosure of the private documents.
In September 1982, Armstrong, represented by Flynn, answered the
complaint and raised the defense that he was justified in stealing the
documents entrusted to him as a fiduciary because he wished to make
public information about Mr. Hubbard and the Church out of fear for his
safety and well-being. His defense was stricken on four different
occasions by three different judges.
In April 1984, the case was assigned for trial before Judge Paul
Breckenridge, Jr. At that time, the Church presented motions in limine
to prevent Armstrong from introducing the stolen, confidential documents
since their introduction into evidence would vitiate the very rights of
privacy the action sought to protect. The Court not only allowed
Armstrong to introduce the confidential documents, but also allowed him
to raise his four-times stricken defense with a new perverted twist. He
would not have to prove there was anything to fear from the Church, but
only his state of mind when he stole the documents. The Church was
completely ambushed in the trial by these documents, as in most cases
Armstrong had stolen the only copy that existed. Then, after he and
Flynn had ample time to prepare their case from them, the documents were
placed under seal in the Court. Although the inflammatory allegations
that Armstrong made and purported to support with these documents could
have been shown to be false or grossly distorted by other evidence, the
Church had no chance to prepare and put on that evidence before being
hit with the documents in court.
10-35
During the trial, Armstrong presented testimony from numerous witnesses
who testified for the purpose of establishing Armstrong's supposed
"state of mind" with regard to his alleged justification for stealing
the documents. Each of the witnesses was hostile to the Church and, in
fact, was a plaintiff against or taking a position adverse to the Church
in other litigation in which Flynn was the counsel. Each witness gave
general testimony about his or her own viewpoint on relationships with
the Church in an effort to bolster Armstrong's state of mind
justification defense.
The Court did not allow the Church to put on evidence to rebut the
testimony of those witnesses. The Court also declined to allow the
Church to put on evidence explaining the confidential documents and
precluded the Church's proffered rebuttal evidence on the ground that
the adverse testimony was admitted only for the purpose of establishing
Armstrong's state of mind and not for the truth or falsity of the matter
testified about.
On July 20, 1984, Judge Breckenridge issued a Statement of Intended
Decision which became final a month later, which held that the Church
had "made out a prima facie case of conversion.... breach of fiduciary
duty, and breach of confidence" (as the former employer who provided
confidential materials to its then employee for certain specific
purposes, which the employee later used for other purposes to employer's
detriment). Judgment, however, was entered in favor of Armstrong. The
Statement of Decision adopted as the facts of the case the allegations
which Armstrong had made in his trial brief. These allegations included
the statements on which Armstrong premised his justification defense;
i.e., that defendant "... became terrified and feared that his life and
the life of his wife were in danger, and he also feared he would be the
target of costly and harassing lawsuits." The judge went on to
pontificate on the psychological mind-set of not only Mr.
Hubbard, but Scientology at large. The only lawsuit that there was to
fear was the one that was ultimately filed for return of the stolen
documents. It never would have been brought had Armstrong voluntarily
returned the documents when asked, despite the theft.
The IRS CID, however, absorbed Breckenridge's findings as the definitive
statement of what Scientology is, and used this decision and the Flynn
witnesses who testified at the trial as the nucleus of their
investigation. The Church tried repeatedly to explain to the IRS that
the Armstrong decision was nothing more than a statement concerning
Armstrong's state of mind. The CID and EO weren't interested, as they
found in Armstrong a kindred spirit who echoed their own sentiments.
They therefore embraced Armstrong and the Flynn witnesses and used their
fabrications as the basis for their investigations and denials of
exemption.
Evidence found after the Armstrong trial proves not only that Armstrong
never was afraid of the Church as he claimed at trial,
10-36
------------"PART THREE" OF IRS 1023 DOCUMENT-------------
Question 1-c
c. As part of the response to Question 1 and elsewhere, entities are
listed about which the Service has little or no information. Have any of
the following entities had, at any time after December 31, 1988, gross
assets in excess of $1,000,000 or annual gross receipts/contributions in
excess of $250,000 If so, please provide for each such entity the
information contained at Exhibit I-9 and Exhibit I-17. Where possible
data should be for 1989 and 1990. The entities are as follows: (i) the
publication organizations that were first described in your June 29,
1992 response; (ii) Nesta Investments, Ltd.; (iii) C.W. Properties,
Inc.; (iv) Dexter Development Company; (v) Graymoss, Inc.; and (vi)
Northstar Publishing (disclosed on CSI Form 1120 for 1987). If the
entity dissolved or otherwise wound up its operations, please state when
and to whom all assets were distributed.
(i) The answers relating to the publications organizations are as
follows:
(1) New Era Publications International ApS Tokyo
This corporation did not have gross assets over $1,000,000 or gross
receipts over $250,000 at any time since 31 December 1988.
(2) Nueva Era Dinamica, S.A.
This corporation did not have gross assets over $1,000,000 or gross
receipts over $250,000 at any time since 31 December 1988.
(3) Importaciones v Exportaciones Nueva Civilizacion S.A. de C.V.
This corporation did not have gross assets over $1,000,000 or gross
receipts over $250,000 at any time since 31 December 1988.
(4) Continental Publications (Pty) Ltd
This corporation did not have gross assets over $1,000,000, but it did
have gross receipts over $250,000 since 31 December 1988. Therefore, a
schedule of its Exhibit I-9 data for 1989 and 1990 is attached.
(5) South African Publications Trust
This trust did not have gross assets over $1,000,000 or gross receipts
over $250,000 at any time since 31 December 1988
1-3
(6) 719008 Ontario Limited
This company did not have gross assets over $1,000,000 or gross receipts
over $250,000 at any time since 31 December 1988.
(7) Scientology Publications Limited
This company did not have gross assets over $1,000,000 or gross receipts
over $250,000 at any time since 31 December 1988.
(ii) Nesta Investments. Ltd. (page 1-45);
This company did not have gross assets over $1,000,000 or gross receipts
over $250,000 at any time since 31 December 1988.
(iii) C.W. Properties. Inc. (page 1-46);
This US corporation, which was formed in 1990 as a wholly owned
subsidiary of Church of Scientology Religious Trust, was dissolved in
September 1991. It did not have gross assets over $1,000,000 or gross
receipts over $250,000 at any time since 31 December 1988. All of its
assets were transferred to Church of Scientology Religious Trust.
(iv}Dexter Development Company (page 1-46);
This US corporation, which was formed in 1990 as a wholly owned
subsidiary of Church of Scientology Religious Trust, was dissolved in
September 1991. It did not have gross assets over $1,000,000 or gross
receipts over $250,000 at any time since 31 December 1988. All of its
assets were transferred to Church of Scientology Religious Trust.
(v) Graymoss, Inc. (page 1-46);
This corporation was formed in 1990 as a wholly owned subsidiary of
Church of Scientology Religious Trust. It was inactive until early 1991
when it purchased real estate in Clearwater with funds provided by the
Trust on behalf of the Trust. It was dissolved in October 1991 and all
of its assets were distributed to Church of Scientology Religious Trust.
Exhibit I-9 information for 1989 and 1990 is therefore not applicable.
1-4