Harry L. Manion III

Harry L. Manion III

Harry L. Manion III

Mark Rathbun: on Earle Cooley’s partner and protégé, Harry Manion (May 28, 2013)

We rented a number of units at a downtown condominium, walking distance from the [Multnomah County] courthouse. One unit was inhabited by Earle, his long-time mistress Jeannie and their fourteen-year-old son. Another one-bedroom unit was occupied by Miscavige and me. Another was reserved for a couple of Office of Special Affairs staff, and served as a document preparation area and repository. We had a dozen more staff working out of the offices of the mission, which were only a few blocks away. One more condo unit was occupied by Earle’s partner and protégé, Harry Manion.

Harry would prove pivotal to the case, though he did very little speaking in court. Harry was in his early thirties. A big, strapping man — if overweight, like Earle — with a boyish face and an infectious smile and personality. Harry was the archetypal hale fellow well met. He had a glib, friendly word for everyone he encountered, and a natural ability to make people feel comfortable and light. Harry had something else going for him. He was a former college and minor-league professional baseball player, and that really meant something to the judge.

Judge Don Londer was respected by many locally. But because he was Jewish, he was not really accepted into Portland’s traditionally WASP judicial circles. Londer consider himself an old jock, often reminiscing about his boxing career during his younger days in the Navy. He was also a decent, considerate man. However, he was not very bright. In the condo we used to joke that maybe he had his lights knocked out one too many times during his boxing career. But because Harry was a real professional athlete, in Londer’s eyes Harry could do no wrong. Harry struck up a relationship gradually by arriving a little early to court, and thus “bumping into” the judge regularly. The latter always wanted to hear jock war stories from Harry. Harry was the son Don Londer wished he had fathered. (pp. 266-7)

[…]

So dramatic were Earle Cooley’s cross examinations that we were all swept into the sweet oblivion of the drama of it all. We heard from Judge Londer, through Harry, and we heard from dozens of lawyers who attended as spectators and students: Earle Cooley was magnificent. (pp. 270-271).

[…]

When Cooley returned at the end of the weekend, he thought the motion 1 was brilliant. We filed it  early the following week. Harry Manion artfully used his weeks of informal credibility-and-sympathy-building with judge Londer to obtain his agreement to set a hearing for a few weeks down the road, to consider the motion. Londer would not and did not ever record the jury’s verdict. (pp. 272 )

[…]

We kept orchestrating Harry’s having “chance” encounters with Judge Londer, hoping to divine where he stood and hoping that he might begin to understand this case was not only important to the church and Earle, but to Harry’s future. Try as he might, Harry would come back from his meetings befuddled. His refrain was that Londer was as dumb as a sack of rocks, and he couldn’t tell whether anything we were presenting was getting through.

On the afternoon prior to the final hearing and the announcement of decision on the mistrial motion, Earle, Harry and I sat in Earle’s hotel room in Portland preparing our arguments. We had a last-minute brief to file, and had purposely waited until mid afternoon, when we knew Londer took a break. That way, when Harry was bringing the brief into the clerk, Londer might see him and invite him into his chambers for a chat. That went like clockwork. Earle and I beseeched Harry to call in any chips he might have with Londer. Earle told Harry to tell him outright that Londer needed to do this for Harry. Harry reported back that he had schmoozed with Londer, but that it wasn’t appropriate under the circumstances — open chambers doors — to make his ultimate personal pitch. However, Londer had invited Harry to come to his home that evening to meet his wife, since it might be the last time they would see one another. Harry had not committed, out of concern for doing something that would smell of impropriety and could come back to haunt us.

Earle and I discussed the matter in some detail. He explained the downsides of a visit — if it were ever found out it could raise the ugly specter of the decades of GO improprieties we were attempting to live down. “On balance,” Earle said, “this is up to the client. You need to brief the boss [Miscavige] and I’ll trust his instincts.” I called Miscavige and briefed him on all that had transpired. He said, “What is your hesitance? It’s a no brainer. Of course he sees Londer, and he does whatever he has to do to get the product.” I told Earle the verdict. Earle told me, “Okay, now it’s between me and Harry. I’m going to protect you and Dave. Leave it to me.”

Earle did report that Harry had gone to Londer’s home. He did not give particulars beyond saying that Londer was thrilled with the visit. He gave no guarantee of any particular outcome, “But,” Earle added, “tell Dave to relax.” And then Earle told me an anecdotal aphorism he would repeat several times to Dave and me over the next couple of years. He said, “Here is my only test of friendship. I know you are going to testify tomorrow in front a grand jury investigating me. Do I sleep tonight…or don’t I?” (pp. 275-6)

Rathbun, Mark (2013-05-28). Memoirs of a Scientology Warrior.

Notes

  1. Motion for mistrial in Christofferson.

Mark Rathbun: The Battle of Portland (May 28, 2013)

CHAPTER TWENTY-TWO
THE BATTLE OF PORTLAND

Men in general judge more from appearances than from reality. All men have eyes, but few have the gift of penetration. — Niccolo Machiavelli

Everything hung in the balance at the spring, 1985 trial of Julie Christofferson-Titchbourne vs Church of Scientology. This was the very case that my brother’s friend had tried to tell me about in 1977 in Portland, when he was making an effort to get me out of Scientology. Christofferson was a young woman who had taken a simple Communication Course. It was the very Communication Course that I had taken, at the same Portland mission I’d attended.

Christofferson had, however — according to her — an experience completely opposite to my own in taking the course. She and her Flynn-allied attorney Garry McMurry claimed that she was defrauded into taking the course in the first place, by false representations about L. Ron Hubbard’s credentials and Scientology’s scientific guarantees to bring her health, joy and happiness. According to the lawsuit, the course hypnotized Christofferson and the mission subsequently used that hypnotic state to turn her against her family. The case had originally gone to trial in 1977, and a Multnomah County jury had returned a verdict in her favor for more than two million dollars.

In 1982, the Oregon Court of Appeals reversed and remanded the case for new trial. The appeals court decision was one of our first major religious recognitions. While Miscavige took full credit for the victory with L. Ron Hubbard, in fact he had served as little more than a nuisance to its accomplishment. The case had already been argued and was pending decision when Miscavige’s Special Project came on the All Clear scene in 1981. His then-deputy Starkey had attempted to intervene in the matter, and wound up blowing off the attorney who would ultimately win the great precedent, Charles Merten.

Merten refused to re-try the case because of his disgust with the church’s new order. But he had already briefed and argued the appeal of the 1979 verdict, so there was no way for the Special Project to mess that up. Had it not been for the original Christofferson case appeals court decision, we likely would not have attained several of the more minor — but useful in their cumulative effect — religious recognition precedents we did wind up achieving through the perilous fight for an All Clear.

A new trial lawyer had been retained in Portland to try the case. Ted Runstein was a personable, seasoned and successful trial attorney. He was, however, demoted to ride shotgun to Earle Cooley and keep his mouth shut as local counsel after saying something for which Miscavige never forgave him. Runstein had suggested that “the jury needs to hear from some real Scientologists from the witness stand.” Miscavige replied that we have plenty of Scientologists on our witness list. Runstein countered, “Those are all Sea Org staff; I am talking about having them hear from Scientologist parishioners who live and work in the same community as the jurors — real Scientologists.” Miscavige snapped, “Sea Org members are real Scientologists, public Scientologists are dilettantes.” Miscavige ruminated on this affront by Runstein throughout the trial, calling him a “theetie-weetie, airy-fairy idiot” behind his back.

So when Earle Cooley rolled into town he had free rein.

David Miscavige, as the chairman of the board of Author Services, would spend the next several weeks in Portland supervising and dictating every last detail of the trial. He was going to show me, the dozens of other attorneys he categorized as “defensive losers,” and the entire OSA network how a trial was conducted, Scientology style. No more counter-intention from lawyers who knew best. He had a soul mate in Earle, so that in his view L. Ron Hubbard’s slash-and-burn policies with respect to detractors and attackers would run into no internal interference. David Miscavige would prove to Ron once again why he needed him to ramrod his intentions through. Hubbard himself was apparently incommunicado, as evidenced by little to no dispatch traffic arriving — which made Miscavige’s two-month, full-time battle of Portland stint possible.

We rented a number of units at a downtown condominium, walking distance from the courthouse. One unit was inhabited by Earle, his long-time mistress Jeannie and their fourteen-year-old son. Another one-bedroom unit was occupied by Miscavige and me. Another was reserved for a couple of Office of Special Affairs staff, and served as a document preparation area and repository. We had a dozen more staff working out of the offices of the mission, which were only a few blocks away. One more condo unit was occupied by Earle’s partner and protégé, Harry Manion.

Harry would prove pivotal to the case, though he did very little speaking in court. Harry was in his early thirties. A big, strapping man — if overweight, like Earle — with a boyish face and an infectious smile and personality. Harry was the archetypal hale fellow well met. He had a glib, friendly word for everyone he encountered, and a natural ability to make people feel comfortable and light. Harry had something else going for him. He was a former college and minor-league professional baseball player, and that really meant something to the judge.

Judge Don Londer was respected by many locally. But because he was Jewish, he was not really accepted into Portland’s traditionally WASP judicial circles. Londer consider himself an old jock, often reminiscing about his boxing career during his younger days in the Navy. He was also a decent, considerate man. However, he was not very bright. In the condo we used to joke that maybe he had his lights knocked out one too many times during his boxing career. But because Harry was a real professional athlete, in Londer’s eyes Harry could do no wrong. Harry struck up a relationship gradually by arriving a little early to court, and thus “bumping into” the judge regularly. The latter always wanted to hear jock war stories from Harry. Harry was the son Don Londer wished he had fathered.

In Miscavige’s view, the Christofferson case was the perfect test case. Christofferson had only ever had a few months engagement with Scientology. She had spent a total of $3,000 on auditing and courses. She had not been harassed by the Guardian’s Office. The court of appeals had already ruled that she could make no case for infliction of emotional distress/outrageous conduct.

Her only remaining cause of action was for fraud. The court of appeal had even narrowed the issue to whether the representations made to her were motivated by sincerely-held religious belief.

In retrospect, it was probably the stupidest move imaginable to not settle the case before trial, for those very reasons. Christofferson claimed fraud primarily based on alleged false representations about L. Ron Hubbard’s pre-Scientology credentials. These were the very issues aired in the Armstrong case, which had made an All Clear all but unattainable. By going to trial, we were affording a woman — who effectively had no damages to claim — a worldwide platform to replay the Armstrong inquisition all over again. Except this time Flynn’s stable of witnesses was bolstered by the former Executive Director of International Scientology, Bill Franks, and the former head of the organization Christofferson had interacted with — the Scientology Mission of Portland, Martin Samuels.

Samuels had been the owner of the Portland mission when both Christofferson and I were parishioners there. He was the owner of the Portland mission when the first Chistofferson trial played out. Samuels had joined the Flynn camp shortly after being expelled, during Miscavige’s mission holder purges of 1982. Samuels testified in the first Christofferson trial on behalf of the church. In the second trial we knew that he would testify that the mother church had not only run every single detail of the trial, but even forced Samuels to lie on the witness stand. And thus Christofferson II was rather a cinch for the Flynn camp to hit the mother church with a sizable judgment (something that had not occurred in the first trial).

But Miscavige — and thus we — looked at it in the simplistic, black-and-white, good-vs.-evil worldview of L. Ron Hubbard. This was our big opportunity to play it all over again. In our view, the 1979 Chistofferson verdict had been what motivated Flynn and FAMCO in the first place.

All of the testimony in the Armstrong trial (including that of Armstrong and Laurel Sullivan) came pouring into the record. More horror stories were added by Samuels and Franks, and by a host of other witnesses. Miscavige and I directed a couple dozen staff, frenetically working through each and every night to provide Earle with material to discredit each witness on cross examination. While direct examination was still in progress, I, Miscavige and several other staff would pore over the real-time transcripts being relayed from court, marking them up for every bit of discrediting documentation we had available in a massive file room at the mission. When the court day ended, we would huddle with Cooley and outline the preps required for the cross exam the next morning. The crews stayed up until 1 or 2 every night, putting the material together and getting final ok from me and Miscavige. Then we would sleep for two to three hours, wake up at 4 a.m. and prepare to meet Earle in his condo at 5 a.m. We would spend the next three hours briefing him on details about how each witness had lied, exaggerated, and twisted the truth or was somehow morally reprehensible. We liberally used material from the ethics records from their days in the church, even copying internal reports to use on cross. This went on for weeks. We continually engaged in echo-chamber, confidence-reinforcing sessions, reviewing how Earle had so thoroughly destroyed each witness’ credibility.

There were external indicia to support our overconfidence. Earle Cooley brutalized the plaintiff’s witnesses on cross examination. So dramatic were his cross exams, that each day Earle was up, the courtroom was packed with local lawyers. They had no interest in the case itself, but Earle’s cross examinations were so dramatic that word had spread through the legal community that Cooley was the best show in town. They were there only to watch a master of their own trade at work. What we were blind to was the cumulative impression that so much manhandling conveyed.

We received a wake-up call of sorts in the middle of the plaintiff’s case, but collectively chose not to heed it. We had planned to enter the covert Armstrong-Griffith-Park surveillance tapes into evidence during the cross examination of Armstrong. Earle set up Armstrong masterfully, leading him to deny that he had ever talked to anyone about taking over the church, orchestrating federal raids, and least of all manufacturing and planting documents in church files. Then Earle started quoting Armstrong from transcripts of the surveillance tapes, clearly demonstrating he was lying from the witness stand. The warning we did not heed came in the form of Judge Londer’s reaction to the courtroom spectacle. In chambers he loudly chastised the church’s behavior in being involved in such cloak-and-dagger activity to begin with. Londer, who clearly did not think much of Chistofferson’s case based on comments he had made up to that point in the trial, was more disgusted with the secret video-taping than the lies they revealed. Had we not been so thoroughly in the throes of a thought-stopping, alternate-reality creation, we might have given thought to how the jury felt about the aggressive, “gotcha” manner we were using with all the plaintiffs witnesses.

Even though it backfired in the case at hand, getting the Armstrong surveillance videos on the public record would serve as a major step in dealing with the more serious government threats of criminal indictments then still extant. The stakes were far higher than merely the Chistofferson case, and there was a great deal of tension in getting the tapes put on the record. We did not want to submit the producer, private eye Gene Ingram, to cross-examination, for fear that he would be forced to disclose anything about the increasing number of operations he was privy to. In the course of coordinating the transportation of the tapes to Portland and into the hands of church coordination attorney John Peterson, Miscavige insisted upon bypassing me and speaking directly to Ingram — something he had not done up to that point in time. I advised him that was a bad idea, should Ingram or he ever be subject to deposition.

I picked up the phone to make the call to Ingram, and Miscavige came flying at me — tackling me into a sofa and attempting to wrestle the phone from my hand. I would not relinquish my grip even though he was strangling me. I threw my chest out to buck Miscavige from me. He violently stabbed his fist into my chest and said menacingly, “Don’t you ever cross me,
motherfucker! I’ll have you declared [excommunicated] in a heartbeat if you ever fuck with me again.” I looked Miscavige in the eye for a moment and considered the weight of that statement. For four years no one on planet earth could communicate to L. Ron Hubbard but through Miscavige — not even his wife. Miscavige was the recipient of personal communications on a weekly basis from Hubbard — but for the extended periods the latter went incommunicado entirely. He was right, he could have me declared in a heartbeat, and all I’d fought for to date would have been for naught. I handed him the phone. He had established himself — much as he had done with Mary Sue Hubbard — as boss buffalo.

So dramatic were Earle Cooley’s cross examinations that we were all swept into the sweet oblivion of the drama of it all. We heard from Judge Londer, through Harry, and we heard from dozens of lawyers who attended as spectators and students: Earle Cooley was magnificent. Earle huddled us up in the condo one evening over beers.

“Have you guys ever heard of Percy Foreman?” Earle asked us.

We all replied that we had not.

“Foreman was one of the premier trial lawyers in American history. He once defended a woman who was up for a murder rap in Miami. The government brought a bunch of scumbag convicts in to bolster their case against her. Foreman demonstrated on cross examination that the testimony was obviously paid for. When he saw the jury understood that, he surprised everyone. After the case in chief, he rested the defense without calling a single witness. He wanted those cross examinations fresh on their minds when they went to deliberate.”

“Brilliant!” exclaimed Miscavige. “We don’t want to serve up our people to McMurry anyway.”

“Exactly,” Earle replied, “sending in Runstein and his ‘real Scientologists’ would be like sending sheep to slaughter.”

“You’re fucking-A right, Earle!” Miscavige proclaimed, as final authorization of the strategy.

And so Earle Cooley shocked the judge, the plaintiff’s team, and all who were watching when he announced the next morning in open court that the defense would call no witnesses, and rested. Judge Londer thought it was a great idea. He didn’t want to sit for another several weeks on this case. And he agreed with Earle that the plaintiff had never made a case worth a hill of beans. It was judge Londer’s nonchalant manner of dealing with jury instructions that helped set us up for the shock of our lives. Londer told Earle and Harry to relax on their stressed arguments to attempt strict control of the jury before their deliberations began. He said, “Hey, what has she got, three grand in damages? The jury isn’t stupid.” And so, with the judge’s assessment of the merits, we were optimistic — albeit nervous — as we awaited the verdict.

Nobody was prepared for the result. On a Friday afternoon the jury awarded Christofferson $39 million. That not only buried any idea of an All Clear, it put the church’s very future at risk. Earle Cooley wasn’t sure why he did it, but he asked the judge to hold off on recording the verdict for a few days. The judge wasn’t sure why either, but he granted Earle’s request.

Miscavige had flown back to Los Angeles after closing arguments. Cooley left that night for Las Vegas to blow off steam and to try to deaden the devastating loss with a weekend of amnesiainducing recreation. In a way, I was left alone holding the bag at the scene of the crime. Early Saturday morning I met with two associates of our local counsel in their Portland office. We frantically traded ideas for challenging the verdict before the case went up to the court of appeals for the two-to-three-year appellate process. One of the associates was a cheery, bright British woman. She came up with a wild idea. Since the verdict had not yet been recorded, we could still make a motion concerning the case before the lower court. That court retained jurisdiction until such time as the verdict was recorded.

We reckoned that since there were motions brought by our side continuously, against prejudicial matter being entered into evidence throughout the trial, and since those motions had been consistently denied, there was no way to challenge rulings already made along the way. However, what if we brought a motion for mistrial based on what was put before the jury during closing arguments? That was the one small window of trial history we had not already brought legal challenges to. With Cooley incommunicado, we got busy dissecting the transcript of the closing arguments to find something, anything we could hang our mistrial motion on. We noted some particularly prejudicial statements that plaintiff’s counsel had made, and drafted a motion for mistrial on the basis that the statements were so outrageous and prejudicial as to have potentially caused the jury to act on passion and prejudice, rather than on the evidence presented over several weeks of trial.

When Cooley returned at the end of the weekend, he thought the motion was brilliant. We filed it early the following week. Harry Manion artfully used his weeks of informal credibility-and-sympathy- building with judge Londer to obtain his agreement to set a hearing for a few weeks down the road, to consider the motion. Londer would not and did not ever record the jury’s verdict.

Miscavige returned to Portland and we had a conference in Cooley’s condo with a couple of legal staff. Miscavige was distraught and desperate. He talked of moving L. Ron Hubbard and Scientology management to a South American country in order to assure the church’s future survival. We discussed how with a 39-million-dollar judgment being publicized internationally, the three dozen similar FAMCO suits heading toward trial, and the DOJ and IRS champing at the bit to clean up anything remaining after the damage was done, the United States was about the least safe territory in the world for Scientology.

Miscavige railed about the stupidity of Judge Londer, how he continued to allow the trial to go out of control while reassuring us that the worst-case scenario was a few thousand dollars in damages. He ruminated how a mighty institution like Scientology could be brought to its knees by a group of degraded “wogs” (non-Scientologists) from a cow town. His own characterization prompted a lightning bolt from the blue.

“I got it!” he exclaimed. “We’ll take over this shit-hole town. I’ll bring in one hundred thousand Scientologists from around the world and we’ll surround that courthouse and make this town comply. We’ll overwhelm them. We’ll overwhelm not only the judge but every other criminal judge he talks to in his town.”

The battle of Portland had only just begun. We called in every Public Relations officer assigned to every church of Scientology in the world (several dozen) and gave them orders to call every person who had ever taken a service at each local church and order them to get to Portland for the biggest, most important event and contribution they would ever make to Scientology. Ken Hoden was pulled out of mothballs and put in charge of the “religious freedom crusade.” Hoden had been the Guardian’s Office person in charge of external affairs in Portland during the original Christofferson case appeal. Miscavige and Starkey had busted him and relegated him to backlines PR work in Los Angeles back in 1981, when they decided he had screwed up the appeal of the original case (the result of which was ultimately the vacating of the original two million-dollar judgment, and Scientology’s strongest religious recognition to date). But now Hoden was integral — he was the only one who knew the ropes in Portland, as well as all allies of the church and public officials in the Portland area. Hoden was instructed to wear a religious “dog collar” shirt and coat at all times in public. He would be the spokesman and he would position all utterances along the line that the Christofferson judgment was the worst assault on religious freedom in the United States in modern times.

Within days, several hundred Scientologists had shown up in Portland. Hoden organized them up, made signs and began regular marches around the courthouse. The trademark chant of the crusade echoed down the streets of Portland:

Hoden: “What do we want?”
The crowd: “Religious freedom!”
Hoden: “When do we want it?”
The crowd: “Now!”

Initially, the protesters came across as angry, in compliance with Miscavige’s orders to intimidate the city into compliance. As Miscavige was back in LA, and there was no allowance
for discussion of mitigation of his ideas, instead Hoden discussed with me the need to tone it down and create a far less threatening and far more dignified presentation. I told Ken he was right, and told him follow his instincts, just learn to report to Starkey and Miscavige in the language they liked to hear. That was to emphasize, in briefing them, how loud you were, how numerous you were, and how shocked and awed the public watching was — while taking a slightly different approach in conducting affairs on the ground. It was an art I had come to learn out of necessity, to avert many church catastrophes over the years.

Ken got the knack of how to play shock absorber to the brass — and did a masterful job in controlling the masses in a fashion that had maximum impact. Over the next week, thousands of Scientologists showed up and the regular protest marches easily surrounded the entire block the courthouse occupied, with parishioners marching in ranks of several abreast. Hoden took care to brief each arriving Scientologist on the importance of being polite and friendly, cleaning up after themselves and generally creating a good impression of “regular Scientologists.”

We wound up having two hearings before judge Londer, separated by several weeks. As much as the crusaders were creating the impression we wished they would, Londer could not wrap his wits around the constitutional arguments we were making. In one chambers meeting with counsel, he uttered something which, despite the public relations gains we were making with the “religious freedom campaign,” flagged our hopes of success. Earle Cooley had made a lengthy presentation, backed by citations to court case precedents. Londer had seized on one particular case that Cooley cited, buoying our attorneys’ hopes that he might understand and adopt our position. After a back-and-forth conversation about its parallels to the case at hand, Londer shocked them all by saying, “Wait a second. That was a court of appeals decision; this isn’t a court of appeals.” Of course, all legal precedent is created by opinions rendered by courts of appeal, and these are binding law for the lower courts to apply and follow. Londer’s statement belied a challenged cognitive capacity. As Earle Cooley put it, “Oh my God, we’re in the hands of the Philistines!”

We kept orchestrating Harry’s having “chance” encounters with Judge Londer, hoping to divine where he stood and hoping that he might begin to understand this case was not only important to the church and Earle, but to Harry’s future. Try as he might, Harry would come back from his meetings befuddled. His refrain was that Londer was as dumb as a sack of rocks, and he couldn’t tell whether anything we were presenting was getting through.

On the afternoon prior to the final hearing and the announcement of decision on the mistrial motion, Earle, Harry and I sat in Earle’s hotel room in Portland preparing our arguments. We had a last-minute brief to file, and had purposely waited until mid afternoon, when we knew Londer took a break. That way, when Harry was bringing the brief into the clerk, Londer might see him and invite him into his chambers for a chat. That went like clockwork. Earle and I beseeched Harry to call in any chips he might have with Londer. Earle told Harry to tell him outright that Londer needed to do this for Harry. Harry reported back that he had schmoozed with Londer, but that it wasn’t appropriate under the circumstances — open chambers doors — to make his ultimate personal pitch. However, Londer had invited Harry to come to his home that evening to meet his wife, since it might be the last time they would see one another. Harry had not committed, out of concern for doing something that would smell of impropriety and could come back to haunt us.

Earle and I discussed the matter in some detail. He explained the downsides of a visit — if it were ever found out it could raise the ugly specter of the decades of GO improprieties we were attempting to live down. “On balance,” Earle said, “this is up to the client. You need to brief the boss [Miscavige] and I’ll trust his instincts.” I called Miscavige and briefed him on all that had transpired. He said, “What is your hesitance? It’s a no brainer. Of course he sees Londer, and he does whatever he has to do to get the product.” I told Earle the verdict. Earle told me, “Okay, now it’s between me and Harry. I’m going to protect you and Dave. Leave it to me.”

Earle did report that Harry had gone to Londer’s home. He did not give particulars beyond saying that Londer was thrilled with the visit. He gave no guarantee of any particular outcome, “But,” Earle added, “tell Dave to relax.” And then Earle told me an anecdotal aphorism he would repeat several times to Dave and me over the next couple of years. He said, “Here is my only test of friendship. I know you are going to testify tomorrow in front a grand jury investigating me.

Do I sleep tonight…or don’t I?”

Even though Earle said he would sleep well that night, I did not. Of secondary importance was my own life. I was so thoroughly invested in the crusade to protect LRH and Scientology that the possible impact on them loomed larger than my own spiritual death — which would be a virtual certainty if we did not win. As I had learned by then on Hubbard’s lines of operation, there had to be a head on a pike after a catastrophe of this magnitude. And I had been around Miscavige long enough to know that regardless of his having micro-managed every move in the trial, down to strangling me the first time I attempted to counter him, it would not be Miscavige’s head on this particular pike.

The next morning, the Multnomah County Courthouse was surrounded by Scientologists. The hallways and wide stairways inside were packed with Scientologists, from the front door,
through the lobby, up to the third-floor courtroom of Judge Londer. Londer gave a touching soliloquy about how well the “real Scientologists” who had descended upon Portland had
conducted themselves. He said he might not have been so gracious and polite had his own religion been compared to botulism soup, as plaintiff’s counsel had done to the jury. He found
such conduct to be extremely prejudicial, and in violation of his own orders — having already determined that Scientology was a religion. The judge granted the mistrial motion, wiping out in one breath the $39,000,000 judgment.

After having survived a nuclear explosion by, among other things, successfully defrauding the court as to L. Ron Hubbard’s inaccessibility (Ron had been a named defendant, but we managed to get through the entire trial without the issue of his personal liability ever being adjudicated), Ron had two handwritten messages relayed to Miscavige. The first was a short note to the “real Scientologists,” the crusaders, commending them for having pulled off a feat of historical proportions by influencing the winning of the mistrial motion. The second consisted of two words and a single letter, sprawled across a full page in Ron’s signature style. It read, “Earle, congratulations! — R” The “R” stood for Ron, a signatory he had used for years on internal church dispatches.

Two months later, at our annual Sea Org Day celebration, Miscavige and I would be awarded special medals of honor, of a type never before issued by Ron. We had slipped on a banana peel and somehow managed to fall on a fur rug.

Notes

Complaint: Scientology v. 17 US Officials (August 12, 1991)

 

John J. Quinn
Eric L. Dobberteen
QUINN, KULLY AND MORROW
520 South Grand Avenue, 8th Floor
Los Angeles, CA 90071 (213) 622-0300

William T. Drescher
23679 Calabasas Road, Suite 338
Calabasas, CA 91302
(818) 591-0039

Earle C. Cooley
COOLEY, MANION, MOORE & JONES, P.C.
21 Custom House Street
Boston, MA 02110
(617) 542-3700

[stamped]
FILED
CLERK U.S. DISTRICT COURT

AUG 12 1991

CENTRAL DISTRICT OF CALIFORNIA
BY [initialed] DEPUTY

Kendrick L. Moxon
BOWLES & MOXON
6255 Sunset Boulevard,
Suite 2000
Hollywood, CA 90028
(213) 661-4030

James H. Berry, Jr.
BERRY & CAHALAN
2049 Century Park East
Suite 2750 Las Angeles, CA 90067
(213) 284-2183

Attorneys for Plaintiff
CHURCH OF SCIENTOLOGY INTERNATIONAL

UNITED STATES DISTRICT COURT

FOR THE CENTRAL DISTRICT OF CALIFORNIA

CHURCH OF SCIENTOLOGY INTERNATIONAL,Plaintiff,vs.

C. PHILLIP XANTHOS; ALAN LIPKIN; MARCUS OWENS; MARVIN FRIEDLANDER; S. ALLEN WINBORNE; ROBERT BRAUER; JOSEPH TEDESCO; CHARLES RUMPH; RAYMOND JUCKSCH; MELVYN YOUNG; CARL CORSI; GREGORY ROTH;WILLIAM CONNETT; KEITH ALAN KUHN; CHARLES JEGLIKOWSKI; MELVIN BLOUGH; RODERICK DARLING; and DOES 1 – 200,

Defendants.


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No. 91 4301 SVW (TX)COMPLAINT FOR DAMAGES FOR AND
INJUNCTIVE RELIEF FROM:

1. FOURTH AMENDMENT VIOLATIONS;
2. FIRST AMENDMENT VIOLATIONS;
3. DUE PROCESS VIOLATIONS UNDER THE FIFTH AMENDMENT: AND;
4. EQUAL PROTECTION VIOLATIONS UNDER THE FIFTH AMENDMENT1

JURY TRIAL DEMANDED

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JURISDICTION AND VENUE

 1. As this action seeks damages for violations of the United States Constitution brought under the authority of Bivens v. Six Unknown Accents of Federal Bureau of Narcotics, 403 U.S. 388 (1971), this Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331.

2. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b) in that jurisdiction is not founded solely on diversity of citizenship and the claims arose in this judicial district. Venue is also proper in this Court pursuant-to 28 U.S.C. § 1391(e) in that this is a civil action in which all the defendants are or were employees of a United States agency, some of whom are residents of this judicial district, which is the judicial district in which plaintiff resides and in which the causes of action set forth arose.

PARTIES

3. Plaintiff Church of Scientology International (“the Church”) is a not for profit religious corporation organized and existing under the laws of the State of California, with its principal place of business in Los Angeles, California. In accordance with the ecclesiastical policies of the Scientology religion, plaintiff is the Mother Church of the Scientology religion, an internationally recognized religion engaged solely in spiritual, charitable, humanitarian and community-oriented endeavors intended to enhance adherents’ spiritual knowledge of themselves and their Creator. The Scientology religion has more than 8 million members and Scientology Churches, Missions and groups exist in 90 nations around the world.

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4. Except for three who have retired from government service since performing the acts hereinafter averred, the defendants are, and at all relevant times were, employees of the Internal Revenue Service (“IRS”). The matters averred in this Complaint are largely drawn from information only recently discovered by the Church in the course of Freedom of Information Act (“FOIA”) litigation.

5. As the conduct which gives rise to the Church’s claims of constitutional violations occurred within different divisions and offices of the IRS, the defendants are grouped within their respective divisions for the purposes of the following identifying averments:

A. Los Angeles Criminal Investigation Division.

i. Defendant Philip Xanthos (“Xanthos”) is, and at all relevant times was, a Branch Chief of the Los Angeles Criminal Investigation Division of the IRS (“LA CID”). Upon information and belief, Xanthos resides in this judicial district.

ii. Defendant Alan Lipkin (“Lipkin”) is, and at all relevant times was, a Group Manager within LA CID. Upon information and belief, Lipkin resides in this judicial district.

B. National Office Exempt Organizations.

i. Defendant Marcus Owens (“Owens”) is currently the Director of the IRS National Office Exempt organizations (“EO”) Technical Division, and was, at all relevant times an official of the EO Technical Division. Upon

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information and belief, Owens resides in the State of Maryland.

ii. Defendant Marvin Friedlander (“Friedlander”) is, and at all relevant times was, an IRS Senior Conferee Reviewer in the EO Technical Division. Upon information and belief, Friedlander resides in the State of Maryland.

iii. Defendant S. Allen Winborne (“Winbourne”) was at all relevant times until approximately 1987 IRS Assistant Commissioner for Employee Plans and Exempt Organizations. Upon information and belief, Winborne resides in the State of Maryland.

iv. Defendant Robert Brauer (“Brauer”) was at all relevant times from approximately 1987 to and including approximately December, 1990, IRS Assistant Commissioner for Employee Plans and Exempt Organizations. Since in or about January, 1991, Brauer has been the IRS District Director in Pittsburgh, Pennsylvania. Upon information and belief, Brauer resides in the Commonwealth of Pennsylvania.

v. Defendant Joseph Tedesco (“Tedesco”) was at all relevant times until approximately 1987, Chief of the National Office Exempt Organizations Technical Division. Since in or about 1987, Tedesco has been in retirement. Upon information and:belief, Tedesco resides in the Commonwealth of Virginia.

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vi. Defendant Charles Rumph (“Rumph”) was at all relevant times until approximately 1986, an attorney in the Tax Litigation Division, Office of Chief Counsel at the National Office. Although he did not work in EO, plaintiff is informed and believes that Rumph worked in,conjunction with the other EO defendants in doing the acts hereinafter averred.

Since in or about 1986, Rumph has been in retirement. Upon information and belief, Rumph resides in the District of Columbia.

vii. Defendant Roderick Darling (“Darling”) is, and at all relevant times was, an IRS tax law specialist in the EO Technical Division. Upon information and belief, Darling resides in the State of Maryland.

C. Los Angeles Exempt Organizations Division.

i. Defendant Raymond Jucksch (“Jucksch”) is, and at all relevant times was, a Group Manager within the Los Angeles Exempt Organizations Division of the IRS (“LA EO”). Upon information and belief, Jucksch resides in this judicial district.

ii. Defendant Melvyn Young (“Young”) is, and at all relevant times was, a Revenue Agent within LA EO. Upon information and belief, Young resides in this judicial district.

iii. Defendant Carl Corsi (“Corsi”) was at all relevant times to and including

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July, 1989, a Revenue Agent within LA EO. Since in or about July, 1989, Corsi has been in retirement. Upon information and belief, Corsi resides in this judicial district.

D. Los Angeles District Counsel Office.

i. Defendant Charles Jeglikowski (“Jeglikowski”) is, and at all relevant times was, an attorney within the IRS District Counsel’s office located in Thousand Oaks, California. Upon information and belief, Jeglikowski resides in this judicial district.

ii. Defendant Gregory Roth (“Roth”) is, and at all relevant times was, an attorney within the IRS District Counsel’s office located in Thousand Oaks, California. Upon information and belief, Roth resides in this judicial district.

E. Los Angeles District Office.

i. Defendant William Connett (“Connett”) was at all relevant times to and including January, 1986, District Director of the Los Angeles District Office of the IRS. Since in or about 1987, Connett has been the IRS Representative in Paris, France, where, on information and belief, he now resides.

F. IRS National Office Internal Security

Division.

i. Defendant Keith Alan Kuhn (“Kahn”) is, and at all relevant times was, Chief of the

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Investigations Branch of the Internal Security Division of the Office of the Chief Inspector of the IRS. Upon information and belief, Kuhn resides either in the State of Maryland or the Commonwealth of Virginia.

G. St. Petersburg, Florida Exempt Organizations Division.

i. Defendant Melvin Blough (“Blough”) is, and at all relevant times was, a Revenue Agent within the Exempt Organizations Division of the St. Petersburg, Florida office of the IRS. Upon information and belief, Blough resides in the state of Florida.

6. Upon information and belief, IRS employees other than those named as defendants in this action performed acts which are unlawful and unconstitutional in connection with the facts set forth in this complaint. The Church will seek leave of Court to amend this complaint when the IRS employees not named as defendants, but whose conduct warrants their inclusion as defendants in this action, are identified.

NATURE OF PLAINTIFF’S CLAIMS

7. By this action, the Church seeks damages for violations of its First, Fourth, and Fifth Amendment rights arising from the conduct of the defendants and others within the Internal Revenue Service. While this action focuses on recent events, it is the culmination of three decades of IRS coercion in violation of the free Exercise Clause of the First Amendment, discriminatory treatment in violation of the

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Establishment Clause of the First Amendment and the Equal Protection component of Due Process under the Fifth Amendment, as well as the denial of procedural Due Process rights in violation of the Fifth Amendment, and actions in violation of the Church’s Fourth Amendment rights.

8. Although the IRS has withheld the vast majority of documents requested by Churches of Scientology under the FOIA, the limited FOIA information recently discovered by the Church through the production of documents and testimony demonstrates the actionable conduct hereinafter averred. This action, moreover, does not arise in a vacuum. It is an outgrowth of IRS conduct that includes:

a. Efforts by the IRS’ Chief Counsel’s office to persuade at least one municipal authority to find “local statutes and ordinances available as tools to curtail or close down” Scientology Churches;

b. Employment of “plants” to infiltrate Scientology Churches to obtain copies of Church records;

c. Recommendations of the IRS Chief Counsel that “defining church in regulations is one method to attack Scientology,” which recommendation was followed by the formulation of such a definition in General Counsel Memorandum 36078 entitled “Church of Scientology” (later promulgated as Revenue Ruling 76-415);

d. Targeting the Church of Scientology as

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“subversive,” and conducting non-tax-related surveillance and intelligence gathering that a United States Senate Subcommittee would later find was “used to stigmatize, to set a group of individuals and organizations apart as somehow inherently suspect .:.” and which a Senate Select Committee found to be “an effort to employ tax weapons for essentially nontax purposes”;

e. IRS documents which refer to the Scientology religion as “religious bunco” and a “grab-bag of philosophical voodooism,” as well as IRS tape recordings of witness interviews in which defendants Young, Corsi and Roth referred to Scientologists as “crazy devotees,” characterized Scientology’s religious services as a “dog and pony show,” compared adherence to the Scientology faith to drug addiction, and called the religion itself a “facade” and

f. Encouragement given by Corsi, Young and Roth to individuals pursuing civil cases involving claims for damages against plaintiff and other Scientology Churches.

9. The claims for relief asserted in this action arise from the demise of a two-year criminal investigation of plaintiff, other Scientology Churches, and individual Scientologists that produced no indictments, no charges, and nothing more than the refusal of the Department of Justice to take any action with regard to that lengthy investigation. In the aftermath of that investigatory debacle, defendants, as is

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more fully averred later in this complaint, embarked upon a course of conduct which has included: a. EO employees demanding documents from plaintiff and other Scientology Churches ostensibly to evaluate applications for exemption under 26 U.S.C. § 501(c)(3), while in reality making such demands so that those documents could be turned over to IRS criminal investigators in violation of the Fourth Amendment;

b. Inauguration of nationally and locally coordinated campaigns to single out plaintiff and other Churches of Scientology as targets for tax inquiries because they were Churches of Scientology, and to use such inquiries as a means to generate otherwise unavailable tax liabilities such as under the Federal Insurance Contribution Act and the Federal Unemployment Tax Act in violation of the Establishment and Free Exercise Clauses of the First Amendment and the Equal Protection component of the Due Process Clause of the Fifth Amendment; and

c. Embarking on a nationally and locally coordinated campaign of collections activity which arbitrarily and capriciously freezes and attempts to freeze bank accounts of plaintiff and other Scientology Churches for alleged tax obligation of still other Scientology Churches without notice and without any

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opportunity to be heard before seizing plaintiff’s property in violation of the Due Process Clause of the Fifth Amendment.

FIRST CLAIM FOR RELIEF

(For First, Fourth and Fifth Amendment Violations by Defendants Xanthos, Lipkin, Owens, Friedlander, Darling, Winborne, Tedesco, Rumph, Jucksch)

10. The Church repeats and realleges each and every averment set forth in paragraphs 1 through 9, inclusive.

11. The Scientology religion has been in existence for nearly four decades. From its earliest days, it has been a target of IRS scrutiny and hostility. After years of controversy and litigation, the IRS agreed with various Churches of Scientology to conduct an examination of a representative church and issue an exemption ruling based upon that examination for the representative church and all others similarly situated.

12. The IRS, for 25 consecutive days in March and April 1975, conducted an exhaustive examination of the Church of Scientology of Hawaii (“the Hawaii Church”), addressing every aspect of that church’s operations, including Scientology beliefs and practices. As a result of that examination, Church of Scientology of Hawaii and twelve other Scientology churches were granted exemptions under 26 U.S.C. § 501(c)(3).

13. The grant of exemption to the Hawaii Church followed an unsuccessful attempt by the IRS to employ a litigation tactic appropriately described as “harass and moot” to avoid judicial adjudication of the exemption issue. When the Hawaii Church

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filed suit contesting the IRS’ 1969 denial of exemption, the IRS tendered a refund of the taxes to avoid an unfavorable court decision. When the Church refused the refund and pressed for a judicial determination, the IRS moved to dismiss claiming that the issue had been rendered moot. After the Ninth Circuit rejected this litigation ploy, the IRS settled the case and later granted exemption.. The IRS, however, continued to resist applications for exemption by Scientology churches despite the fact that its only thorough, comprehensive examination of any church had resulted, begrudgingly, in more than a dozen exemptions.

14. Exemption applications for plaintiff Church of Scientology International, Church of Spiritual Technology and Religion Technology Center were filed with the Internal Revenue Service in 1983. These exemption applications were forwarded to the IRS National Office by the local offices where they were filed. Responsibility for the exemption applications resided with defendants Owens, Friedlander, and Tedesco of the National Office EO working in conjunction with defendant Rumph of the Office of the Chief Counsel. EO requested additional information of the filing entities. Discussions between Church counsel and the IRS personnel processing the applications began with regard to the IRS’ requests for additional information, and at the request of those defendants the applicants provided further information to the IRS based on the belief that the newly formed churches all qualified for exemption and that the IRS was acting in good faith in the negotiations. EO letter requests to plaintiff and the other applicants dated July 30

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and October 5, 1984 and January 18 and April 22, 1985 requested the applicants comment on specific allegations made by LA CID informants that were at the heart of the ongoing CID investigation. FOIA records and discovery in FOIA litigation reveal a continuous flow of information from EO to LA CID.

15. It is now clear, however, that defendants and the IRS were not dealing in good faith, but rather, were merely asking for and receiving voluminous financial and other records from plaintiff and the other churches without any intention of ever granting any section 501(c)(3) exemptions and as an unlawful means of obtaining data for LA CID. The use of the exemption process to obtain information for a criminal investigation deprived plaintiff of its rights guaranteed by the First, Fourth and Fifth Amendments to the United States Constitution, and violated specific IRS rules designed to protect those rights. The Internal Revenue Manual contains specific provisions which require EO to “immediately suspend” an inquiry if EO learns that “an assigned case involves a taxpayer who is the subject of a criminal investigation.” The EO agents responsible for plaintiff’s exemption application did not suspend the civil proceeding, but instead continued to use it as a means for gathering information for CID.

16. Between 1984 and 1986, LA CID conducted an extensive criminal investigation of plaintiff, other Scientology churches, and individual Scientologists, under the auspices of defendant Connett, the then-District Director, defendant Xanthos, the LA CID Branch Chief and defendant Lipkin, the assigned LA CID Group Manager. That investigation included the

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use of mail covers, paid informants, summonses to dozens of financial institutions and church members, and infiltration of Scientology’s ecclesiastical hierarchy. The infiltration of the Church was planned as an undercover operation by the LA CID along with former Church member Gerald Armstrong, who planned to seed church files with forged documents which the IRS could then seize in a raid. The CID actually planned to assist Armstrong in taking over the Church of Scientology hierarchy which would then turn over all Church documents to the IRS for their investigation. The CID further coordinated this plan with the Ontario Provincial Police in Canada, through direct contacts and exchange of information, hoping that through simultaneous assaults the “momentum of . . . charges will cause [Scientology] to collapse.” Thus, the documents being channelled from EO to CID were being used for the unlawful purpose of forwarding criminal investigations in both the United States and in Canada.

17. That criminal investigation, the results of which were ultimately rejected in full by the Department of Justice, was doomed from its inception because it was based upon a faulty premise — that plaintiff and the other Churches were engaging in criminal conduct (conspiracy to interfere with the collection of taxes) by the mere fact that they had applied for section 501(c)(3) exemptions. In other words, at the time that EO was allegedly processing the exemption applications, the IRS had already made a determination that the exemption applications were criminal instruments because the applying churches had already been prejudged as non-exempt.

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18. The IRS personnel charged with responsibility for the exemption applications — defendant Friedlander, and his superiors Owens, Tedesco and Winborne — were fully aware of the ongoing criminal investigation, yet despite the fact that the Fourth and Fifth Amendment and IRS written procedures mandate that all civil IRS proceedings concerning a given tax period be suspended during the time in which a criminal investigation of that same period is in progress, EO personnel continued to request and receive information and documents from plaintiff and the other Churches and delivered such information and documents to defendants Xanthos, Lipkin and the other LA CID personnel conducting the criminal investigation.

19. In late July 1984, the Church learned through the media that LA CID had initiated a criminal investigation relating to Scientology organizations and individuals. Leaks to the media regarding the CID investigation had already resulted in unfavorable and harmful media reports, prior to the time when the organizations and individuals became aware that they were under investigation. In response to one such article, Church counsel contacted defendant Connett who confirmed that an investigation of Scientology’s founder, L. Ron Hubbard, and another Scientologist was in progress, but who expressly misrepresented to counsel that the criminal investigation was separate and distinct from the ongoing exemption application process, and encouraged the Church to continue the application process. Connett,, with the assent of defendants Friedlander and Winborne, told the Church’s attorneys that the CID investigation did not directly involve

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any of the applicants and might not lead to charges being filed. He stated that in that case, it would not make sense to drop the existing team which was developing the exemption 4 applications. The truth of the matter was that defendants Friedlander and Tedesco were turning material over to LA CID, either directly, through Connett, or through the Los Angeles Exempt Organizations Division (which was staffed by defendants Jucksch, Corsi, and Young).

20. Connect did not merely misrepresent the status of the CID investigation to the Church. He also set into motion the coordination between the National Office employees processing the exemption applications, and the agents of the CID. In January 1985, Friedlander contacted Xanthos and his superior, CID Chief Ronald Saranow, at the suggestion of defendant Connett for the purpose of obtaining information from CID’s files. Friedlander informed defendant Tedesco of his plan to travel to Los Angeles along with defendant Rumph, for the purpose of reviewing CID’s materials as well as CID’s “draft prosecution letter.” In order to prevent plaintiff and the other churches from learning of the CID investigation, Friedlander proposed that EO and CID could mutually coordinate when or if any CID material would be included in any applicant’s administrative file to preclude premature disclosure. Tedesco approved of the trip, as did defendant Winborne, who stated they should leave when ready.

21. In approximately February 1985, during the course of EO’s information gathering on’behalf of LA CID, defendants Friedlander and Rumph traveled to Los Angeles and met with

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defendant Lipkin to acquire information about the criminal investigation and to learn of the criminal investigators’ areas of interest so that EO and LA CID might work together more efficiently. At that time, Friedlander was provided with a draft copy of a “Special Agent’s Report” (“SAR”) prepared by the LA CID defendants, Xanthos and Lipkin, requesting prosecution of various Scientology Churches, entities, members and their counsel, and setting forth the theories of prosecution. Friedlander thereafter sought information from plaintiff and the other applicants relating to areas addressed in the draft SAR, representing that the information was necessary for EO’s evaluations of the pending exemption applications. The information requested by Friedlander was supplied to EO, and thereafter forwarded by EO to LA CID to assist in the criminal investigation. Friedlander kept defendants Owens, Tedesco and Winborne informed regarding the provision of information by EO to LA CID. Moreover, Friedlander, knowing that he should have suspended the EO examination in light of the pending CID investigation, consulted agents of LA CID as well as Tedesco, Winborne and others concerning the requirement of suspending the EO proceeding. Friedlander was specifically directed to continue the exemption process, and he did so.

22. Following Friedlander’s return from viewing CID’s files in Los Angeles, EO employee Roderick Darling communicated with Friedlander regarding the use of the CID materials. Darling suggested that EO could pose questions to the Church based on certain documents in CID’s files, since it would not involve reliance on any testimony solicited by CID and,

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therefore, would not expose the IRS to the charge that the IRS EO function had allied itself with CID or was tainted by CID’s conspiracy theories. Darling also informed Friedlander that CID hoped that EO would somehow be able to extract information from the Church, and that EO would be able to turn up something which CID had not been able to. In March 1985, defendants Lipkin and Connett attended a meeting at the National Office to discuss the pending exemption applications with defendants Friedlander, Winborne, Rumph and Tedesco. They discussed the possible timing of denials of exemption to coincide with the CID’s prosecution. Connett also assured the EO defendants that CID would provide them with the Special Agent’s Report when it was completed.

23. Numerous instances of the provision of information from defendants responsible for EO functions to defendants responsible for LA CID functions are presently known to plaintiff through FOIA requests, FOIA litigation and discovery in such actions, and numerous other instances of such unlawful acts are believed to exist but have not.yet been discovered by plaintiff. The IRS has even attempted to thwart such Freedom of Information Act discoveries by improperly withholding documents and portions thereof concerning the unlawful collusion between EO and CID which should have been released. The IRS has improperly asserted that records revealing the collusion were not discloseable based on the IRS’ “deliberative process privilege,” and thereby seeking to keep its unlawful acts from coming to view.

24. To prevent the revelation of the unlawful and

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unconstitutional collusion between EO and LA CID, Friedlander destroyed copies of memoranda and notes taken during his visits to LA CID, and on information and belief, notes of subsequent telephone communications with Lipkin and others. Friedlander also destroyed documents he requested from LA CID because he did not want to place them in the application files and thereby be required to supply them to the applicant churches. Darling also supplied documents obtained during EO’s examination to LA CID for its use in its criminal investigation and received a copy of the draft SAR.

25. The initial conduit for transmitting information and documents from the Church through the EO in Washington, D.C. (defendants Owens, Tedesco, Rumph, Darling and Friedlander) to LA CID (defendants Xanthos and Lipkin, under the supervision of defendant Connett) was the Los Angeles Exempt Organizations Division (defendants Jucksch, Corsi and Young). At some time during the concurrent EO examination and LA CID criminal investigation, defendant Connett agreed to assume personal responsibility for transmitting the material from EO to LA CID.

26. Plaintiff and the other applicant Churches were unaware that EO and LA CID were colluding with one another behind the scenes, and continued to cooperate with EO personnel in conducting the examinations which the IRS represented were being conducted in good faith. Any potential suspicions by plaintiff or the other Churches that the information gathering may not have been completely for civil purposes, were allayed by the receipt of a letter to CST dated July 26, 1985, written by Friedlander and Darling, in which they stated: “We assure you

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that our questions (in previous correspondence) have heretofore been solely directed at developing the applications to the point where your purpose and activities have been sufficiently described in accordance with the standards for issuing rulings ….” These representations were fraudulent, as the SAR, written 2 months earlier, unequivocally called for denial of tax exemption.

27. Notwithstanding that representation, EO continued to gather information for use by LA CID. A copy of the SAR obtained in FOIA litigation makes it clear that the purpose of the defendants who participated in the EO – LA CID collusion was for defendants to combine their efforts to create “another round of denial of exempt status,” a circumstance which the SAR states was intended to cause “a final halt to” and “the ultimate disintegration of” the Scientology religion.

28. In September of 1985, plaintiff and the other applicants learned that LA CID had forwarded a recommendation for criminal prosecution to the IRS LA District Counsel’s office, and that at least RTC and CST were named as targets of the investigation. On information and belief, plaintiff was also a target of the criminal investigation. By December 1985, the District Counsel’s office had concluded that the SAR did not warrant immediate prosecution and forwarded the matter to the Justice Department with a request that an investigative grand jury be convened.

29. The request for a grand jury coincided with the January 7, 1986 issuance of letters by the IRS National Office proposing the denial of exempt status to plaintiff, RTC and

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CST. Defendant Friedlander made the decision to issue those letters at that time. At the same time, January of 1986, defendants Jucksch, Corsi and Young, on behalf of the IRS’ LA Exempt Organizations Division, prepared to launch a third prong of attack (to coincide with the grand jury request and the proposed exempt status denials) in the form of examinations conducted by LA EO. Those examinations were an outgrowth of the stalled LA CID investigation, and LA EO defendant Corsi had held a series of meetings during the course of the criminal investigation with LA CID defendant Xanthos.

30. The three prongs of attack which defendants had coordinated to begin’in January 1986 were all delayed, first, because the Justice Department did not convene a grand jury and, second, because plaintiff, RTC and CST submitted an approximately 500-page protest of the proposed exemption denials.

31. By October 1986, LA CID’s criminal investigation of the various Scientology Churches and individuals was moribund, and since the Justice Department had refused to pursue the matter before a grand jury, the case was about to be officially closed. By that time, the protests to the proposed denial of exempt status had bogged down the efforts of the EO defendants. In October 1986, with the investigation about to close, agents of LA CID attempted to utilize the news media to revive the investigation. The October 1986 issue of “Forbes” magazine contained an article by writer Richard Behar which falsely stated that the CID investigation was “gathering momentum.” On information and belief, these and other

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allegations which appeared in the Forbes article were “leaked” to Behar by defendants Lipkin with the knowledge and consent of defendant Xanthos to encourage the Department of Justice to more seriously consider the allegations set forth in the Special Agents Report. Indeed, Behar openly applauded the SAR’s stated goal – the “ultimate disintegration” of the Church – in a recent Time magazine article. Defendant Owens, in turn, was quoted by Behar in the recent article, stating that there have been thousands of IRS agents involved in Church related tax matters for years. The IRS also apparently provided Behar with information concerning the Church’s FOIA cases, as Behar was able to report on the number of such matters filed. Thus, the IRS’ pattern of utilizing media to flank its actions against the Church continues to the present.

32. In November 1986, the Department of Justice rejected the request made by LA CID through LA District Counsel to convene a grand jury to continue the criminal investigation. The LA CID defendants, however, remained undaunted, and further sought to exploit their collusive connection to the EO and the LA EO defendants. In that regard:

a. On or before December 16, 1986, defendant Lipkin of LA CID met with defendant Corsi of LA EO to arrange for a meeting between Lipkin and Corsi’s Group Manager, defendant Jucksch. At that December meeting, Lipkin discussed the LA CID files on the Church with Corsi and explained that defendant Friedlander of National Office EO had reviewed those files

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b. Defendants Lipkin, Corsi, and Jucksch met on January 5, 1987 to coordinate further actions with respect to plaintiff and other Scientology Churches;

c. In conjunction with National Office EO, LA CID and LA EO planned, coordinated, and implemented a plan to audit fourteen Churches of Scientology and two related trusts, all already exempt: and

d. LA District employees were invited to the National Office to review the data submitted by plaintiff, CST and RTC during the exemption application process. Plaintiff and the other applicants, unaware of the ongoing collusion among the EO, LA EO, and LA CID defendants, continued to negotiate with EO to attain rulings of exempt status under 26 U.S.C. § 501(c)(3). Those negotiations continued throughout 1987.

33. As a result of the conduct of the defendants, and each of them, plaintiff has been coerced into diverting resources and attention away from the pursuit of its religious beliefs in order to defend itself against defendants actions. Plaintiff also has been burdened in the free exercise of its religious beliefs by the intrusion of defendants into its records practices, beliefs and ecclesiastical structure and policies by the defendants as is hereinabove averred. Such coercion and burden each constitutes a violation of the, Free Exercise Clause of the First Amendment to the United States

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Constitution.

34. The collusion between the EO defendants, the LA EO defendants, and the LA CID defendants by which plaintiff was misled to believe that documents sought by defendants were for the purpose of a good faith exemption examination (rather than a sham exemption examination) when in fact such documents were being funnelled directly to criminal investigators, constitutes a violation of the Fourth Amendment to the United States Constitution.

35. The defendants, and each of them, by their conduct alleged herein, have singled out plaintiff for invidious discrimination in the application of the laws of the United States on the basis of plaintiff’s religious affiliation, in violation of the Equal Protection component of the Due Process Clause of the Fifth Amendment to the United States Constitution.

36. The conduct of the defendants, and each of them, has been arbitrary and capricious, and has resulted in the deprivation of plaintiff’s property. Such conduct, motivated by religiously rooted bias and prejudice, is a violation of the Due Process Clause of the Fifth Amendment to the United States Constitution.

37. Plaintiff has been damaged and continues to be damaged thereby in an amount to be proven at trial. That amount is not presently capable of precise calculation but is believed to be in excess of $20,792,850 which represents direct expenditures by plaintiff. Plaintiff has also suffered consequential and resulting damages in an amount to be proven at trial, but which is in an amount in excess of $100 million.

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SECOND CLAIM FOR RELIEF

(For First and Fifth Amendment Violations by All Defendants)

38. The Church repeats and realleges each and every averment set forth in paragraphs 1 through 35, inclusive.

39. On or about December 4, 1987, defendant Friedlander informed Church representatives that the IRS insisted upon a “limited” review of the financial records of plaintiff RTC, and CST for 1986, to be conducted by the Los Angeles District Office, for the purpose of verifying the integrity of their records and to rule out the existence of any private inurement, the only remaining potentially disqualifying factor. In early 1988, defendants Friedlander and Brauer assured plaintiff of favorable exemption determinations as long as the limited review did not uncover inurement or an inadequate accounting system.

40. Those representations were false. Documents released by the IRS in later FOIA litigation included drafts of final denial letters for plaintiff, RTC and CST written by Friedlander and Darling in January of 1988, at the very time when defendants Brauer and Friedlander were representing to Church counsel that exemption was imminent. In fact, the representations were no more than a ploy to entice plaintiff and the other Scientology Churches to continue turning over detailed information to the IRS in violation of the Church’s civil and constitutional rights.

41. On March 17, 1988, the National office provided plaintiff, RTC and CST with new letters of assurance stating that the IRS was prepared to conduct a review so that “we may

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complete favorable consideration” of the exemption applications. The letters further stated that the purpose of the review was to “determine the integrity of your financial and accounting systems” and “verify that no part of your net earnings inures to the benefit of any private shareholder or individual and that there is no other disqualifying activity.” Each Church executed its letter of assurance, permitting the extremely unusual process of an on-site document review of plaintiff’s records to proceed.

42. Extensive, on-site reviews began, starting with CST, in March of 1988. Despite the initial statement by Friedlander that the review would be limited, the Los Angeles office initially assigned four full-time agents to the review, and after eight weeks, another four full-time agents were added. This staffing represented 48 personnel weeks or roughly one year of IRS time. Friedlander and his superior, defendant Owens, testified that these examinations were the “most sweeping” examinations these officials had witnessed, “far exceeding” any they had previously experienced, and that the volume of information provided was “truly record-breaking.”

43. The examination of CST was completed on June 2, 1988. At that time, the IRS Branch Chief responsible for the review stated that the agents had found nothing to show inurement and affirmed that, as to CST, “we have no concerns at this time.” These statements confirm the findings of a memorandum written by defendant Friedlander in November 1987 which stated that private benefit ceased to be an issue following the death of L. Ron Hubbard in January 1986. Following the completion. of the

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examination fo CST, the IRS Los Angeles office began its review of RTC, which was completed in June 1988 — again with no concerns raised by the agents.

44. On June 22, 1988, the Church discovered that in May 1988, defendants Corsi, Young and Roth secretly interviewed two disaffected Scientologists, Richard and Vicki Aznaran, who were suing CSI and other Scientology churches. Prior to leaving the Scientology faith in 1987, Vicki Aznaran had served as one of RTC’s officers. These defendants had engaged in deceitful conduct designed to prevent the Churches from discovering that the IRS investigation was actually proceeding on two tracks: one known to the Churches, which was based ostensibly on good faith cooperation between the churches and the IRS, and the other which was covert and designed to undermine the progress the Churches believed had been made towards the granting of exempt status. The discovery of this conduct raised serious concerns about whether the IRS was proceeding in good faith and in accordance with the March 17, 1988 agreement. The Churches immediately sought a meeting with the IRS to discuss their concerns.

45. It was later revealed that defendant Lipkin of the CID was instrumental in arranging the interview of the Aznarans by the EO agents, thus demonstrating the continuing ties between EO and CID. Plaintiff, RTC and CST were also not aware at the time that the two senior LA EO agents in the examination, defendants Young and Corsi, had met several times with LA CID during the review, that defendant Lipkin had briefed all of the agents involved in conducting the review,

27

and that defendants Corsi and Young had by this time received and reviewed the Special Agent’s Report. Thus, CID collusion with LA EO did not end in 1985 when IRS District Counsel rejected CID’s request for prosecution, nor in 1986 when the Justice Department refused to convene a grand jury.

46. During their interview of the Aznarans, defendants Corsi, Young and Roth openly displayed their animus toward the Church and the Scientology religion. The agents referred to Church religious services as a “dog and pony show”, and referred to members of the Church as “crazy devotees”. Defendant Young actually encouraged the Aznarans to “take a stand” against the Church. Defendant Roth compared the Scientology religion to drug addiction. These actions violate Internal Revenue Service policies which require an employee to maintain “strict impartiality” between the taxpayer and the government. These agents, who openly denigrated the Scientology religion, should have been removed from any examinations of Scientology churches under The Internal Revenue Manual, Handbook of the Rules of Conduct which indicates that an agent should be removed if his actions could lead others reasonably to question the employee’s impartiality. I.R.M. 0735.1, Handbook of Employee Responsibilities and Conduct § 232.21, MT 0735.1-17 (November 26, 1986).

47. On June 22, 1988, plaintiff contacted IRS representatives from the Los Angeles office and asked why the the summonses had been issued to the Aznarans. The IRS refused to discuss the interview or confirm that it had taken place. Church counsel informed the IRS that the document review was

28

accordingly being suspended until the matter was resolved with the National office. On June 24, 1988, in response to a letter from the Church regarding its concerns that the document review was apparently being conducted in bad faith, defendant Friedlander admitted that the IRS “owed [the churches] an explanation.”

48. In January of 1988, prior to the start of the on site review, final adverse determinations were already drafted and circulated by Friedlander and Darling. After June 27, 1988, while the Churches were awaiting defendant Friedlander’s promised explanation, the IRS finalized the adverse determination letters from the pre-existing drafts without substantive amendment. On July 7, 1988, the IRS informed CST that in its view the IRS had proceeded in accordance with the March 17 agreement and that it viewed the suspension of the audit as a termination of that agreement.

49. The following day, July 8, 1988, plaintiff and the other Churches wrote the IRS reiterating that they had not terminated the examination, but were waiting for the promised explanation regarding the Aznaran interview. The letters stated that the Churches did wish to fulfill the terms of the March 17, 1988 agreement, and that all they sought was a meeting with the IRS to clarify matters before the examination procedure resumed. That same day the IRS issued final adverse ruling letters to all three churches denying tax-exempt status. These letters were nearly identical to those drafted six months earlier by Friedlander and Darling. Despite previous assurances to the contrary, the denials of the applications of

29

plaintiff and RTC were based, in part, on alleged commercialism in the sale of religious goods and services.

50. The IRS on-site review procedure was an utter sham, designed not to make any good faith determination of the tax exempt status of plaintiff, but merely to continue to collect information which would not otherwise have been provided to the IRS. The on-site reviews also included examination of myriad ecclesiastical and confidential Church scriptural materials and other materials concerning the religious practices of the Churches which had no reasonable relation to any tax exemption issue.

51. The defendants, and each of them, by their conduct alleged herein, have singled out plaintiff because of its position as Mother Church of the Scientology religion and, through those acts, have invidiously discriminated against plaintiff in their application of the laws of the United States, in violation of the Establishment Clause of the First Amendment to the United States Constitution.

52. The defendants, and each of them, by their conduct alleged herein, have singled out plaintiff for invidious discrimination in the application of the laws of the United States on the basis of plaintiff’s religious affiliation, in violation of the Equal Protection component of the Due Process Clause of the Fifth Amendment to the United States Constitution.

53. The conduct of the defendants, and each of them, has been arbitrary and capricious, and has resulted in the deprivation of plaintiff’s property. Such conduct, motivated by religiously rooted bias and prejudice, is a violation of the

30

Due Process Clause of the Fifth Amendment to the United States Constitution.

54. Plaintiff has been damaged and continues to be damaged thereby in an amount to be proven at trial. That amount is not presently capable of precise calculation but is believed to be in excess of $20,792,850 which represents direct expenditures by plaintiff. Plaintiff has also suffered consequential and resulting damages in an amount to be proven at trial, but which is in an amount in excess of $100 million.

THIRD CLAIM FOR RELIEF

(For First and Fifth Amendment Violations by All Defendants)

55. The Church repeats and realleges each and every averment set forth in paragraphs 1 through 54, inclusive.

56. The IRS began additional harassive actions against plaintiff and Scientology parishioners commencing in October, 1988, when the IRS issued letters to several Scientologist taxpayers, who had claimed deductions on their tax returns for money paid to their Scientology churches for religious services, informing them that their cases were part of a “designated tax shelter litigation project entitled Scientology.” Such a designation was blatantly improper and demonstrated discriminatory bias and creation of a suspect category of members of the Scientology religion.

57. Similarly, on February 14, 1989, the IRS office in Laguna Niguel, California sent a letter to two Scientologists concerning Church-related deductions, stating that no deduction would be allowed as they had not shown that Scientology is “other than a sham designed for the purpose of claiming

31

fictitious charitable contributions.” This statement, too, was blatantly false and the result of bias, since even the IRS has repeatedly acknowledged that Scientology is a bona fide religion and that Scientology churches are bona fide churches. The IRS was forced to correct their files to delete these references after the Scientologists who received this letter prevailed in Smith v. Brady, No. CV 89-2584-RG(Bx) (C.D. Cal. 1990). Indeed, the IRS acknowledged that such designations were improper in a national office memorandum issued in 1986, yet the IRS continued labelling Scientologists as tax protestors as late as 1989.

58. Documents obtained in FOIA litigation reveal an entire set of procedures set up for the purpose of targetting the tax returns of individual Scientologists, monitoring and coordinating the investigations of these individuals, and falsely designating them as “tax protestors.” These documents, from the Los Angeles District, show that the returns of Scientologists who claim deductions for their contributions to the Church are designated with a special code for “Alleged Contributions (incl. Scientology & Alleged Church)”. This code is part of the Tax Protestor Program described in the Internal Revenue Manual, and allows the returns, which are treated as “priority cases,” to be “controlled” through the IRS’ nationwide computer system. A special questionnaire for Scientology cases is included for use by IRS examiners. An internal memo, designed to assist IRS examiners in handling these cases, lists several organizations which have never even existed, and claims that these are names used by the “Church of

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Scientology.”

59. Defendant Melvin Blough attempted to utilize the Church audit procedures of 26 U.S.C. § 7611 to identify thousands of parishioners of the Church of Scientology Flag Service organization (“CSFSO”) for the purpose of selecting their personal tax returns for audit. Blough testified that he wished to obtain records from CSFSO which would: (a) identify all of its parishioners for a three year period: (b) identify each of the courses delivered by CSFSO and describe them: (c) identify the courses taken by the parishioners; and (d) pull the tax returns of a number of these individuals. Blough stated that CSFSO provides courses to an estimated 8,000 parishioners a year, and further claimed that the IRS would use as many agents as needed to compile this information. In fact, nearly 100 parishioners of CSFSO have received audit notices regarding their contributions to the Church since Blough announced his plans. Blough also utilized the Cult Awareness Network (“CAN”) as a means to improperly gather information regarding the Church. CAN is a modern day hate group, whose tactics include kidnapping, brainwashing and beating of individuals found to be guilty of holding “unacceptable” religious convictions. Despite these activities, CAN was granted tax exempt status by the IRS, and was used by Blough as an information gathering arm, for the purpose of procuring information on individual Scientologists and their businesses.

60. Assaults on churches of Scientology by or as a result of actions by IRS personnel have not been limited to the borders of the United States. William Connett is now stationed

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as the IRS’ foreign representative in France where he has a wide range of influence in European countries. Since his posting there have been raids on churches of Scientology by police and taxing authorities and unwarranted arrests of individual Scientologists in France, Italy and Spain. When two staff members of the Church of Scientology in Brussells were initially denied visas to travel to the United States, this was traced directly back to false information provided to the consulate officials by Connett.

61. In an effort to harass, discredit and smear plaintiff, to intimidate IRS employees who might otherwise treat plaintiff fairly or disclose IRS misconduct, and to evade FOIA disclosure obligations, defendant Keith Alan Kuhn has begun to proliferate unsubstantiated and patently false allegations against Scientology and Scientologists, which have been used as a pretext to manufacture security risks to IRS employees. In or about May 1990, Kuhn sent out a memorandum to each of the Regional Inspectors around the country, directing them to contact specifically named EO employees who were working on Scientology cases. Based on scurillous and unsubstantiated charges, Kuhn directed that these EO employees be told that there was a potential for harassment against them from the Church, thus creating a climate where plaintiff and other Scientology churches could not possibly receive unbiased treatment from any EO agent throughout the country. Kuhn’s allegations themselves are entirely without merit. The IRS filed a declaration by Kuhn which contained these charges in a FOIA case brought by a Scientology Church. The District Court

34

judge in that case ordered the declaration stricken from the record, describing it as “scurrilous” and “unfounded”.

62. After the collapse of the criminal investigation and after denying section 501(c)(3) exemption to plaintiff, RTC and CST, the nationwide examination of exempt and nonexempt Scientology Churches and entities which had been planned early in 1986 was resuscitated by defendants and the IRS. A three-day meeting on Scientology was convened at the IRS National Office on October 19, 20 and 21, 1988 to coordinate nationwide actions against various Scientology Churches, including plaintiff.

63. That three-day meeting was ordered by defendant Brauer, organized and convened by defendant Owens, and chaired by defendant Friedlander. Also in attendance were:

a. EO Operations employee Tom Miller, who had drafted the 1986 proposal to re-examine the exempt Scientology Churches;

b. Roderick Darling;

c. LA EO Branch Chief Mel Joseph, along with defendants Young and Corsi;

d. Defendant Blough;

e. IRS agents from at least the Brooklyn, Baltimore, and Los Angeles Regional offices; and

f. IRS National office representatives.

64. Various strategic plans for a continued IRS campaign directed at Scientology were discussed at the three-day meeting in October 1988. Defendant Young prepared and delivered a

35

briefing at that conference in which he proposed that and explained how the IRS could use the assessment of tax liabilities under the Federal Insurance Contribution Act (“FICA”) and the Federal Unemployment Tax Act (“FUTA”) to exploit the non-exempt status of various Scientology Churches, completely disregarding the fact that the Churches in question, including plaintiff, had filed waivers seeking exemption from those employment taxes which had been accepted by the IRS.

65. At that same three-day meeting, format material for a nationwide campaign of examinations of exempt and non- exempt Scientology Churches was distributed and discussed, and the decision was made during that meeting to commence tax inquiries of plaintiff, Church of Scientology Western United States (“CSWUS”), Church of Scientology Flag service organization (“CSFSO”), Founding Church of Scientology of Washington, D.C. (“FCDC”) and Church of Scientology of Boston (“Boston Church”). Those inquiries in fact did commence, upon the issuance of notices of tax inquiry to those Churches which were circulated during that three-day meeting.

66. Upon receipt of the virtually identical notices of tax inquiry, plaintiff, CSWUS, CSFSO, FCDC, and the Boston Church responded by pointing out inaccuracies and deficiencies in the standardized, coordinated notices and, despite those infirmities, responded to the questions posed by those notices. In each instance, however, the IRS issued a notice of church examination under the Church Audit Procedures Act, 26 U.S.C. § 7611. In four of those, summonses were issued and summons enforcement proceedings commenced in the appropriate district

36

court. In the CSFSO case, the matter is still pending in the United States District Court for Middle District of Florida; this Court, the Honorable Harry L. Hupp, presiding, quashed the majority of both the summonses issued to CSWUS and plaintiff; the United States District Court for the District of Massachusetts quashed the summons to the Boston Church outright. The FCDC examination was conducted, and despite nearly two years of intrusive inquiry, the IRS declined to cancel FCDC’s exemption.

67. The coordinated examinations of those five distinct churches were coupled with concurrently timed IRS activities directed against other Scientology Churches and individual Scientologists. These various coordinated activities against Scientology are the responsibility of what defendant Owens has described as “thousands of [IRS] employees in key districts and district offices around the country and the National Office.” Those coordinated actions have also been the subject of later meetings on Scientology at the IRS National Office, involving as many as 40 attendees from different IRS regions and divisions, in pursuit of what the SAR termed the “final halt to” and “ultimate disintegration of” Scientology.

68. Such coordination of IRS offenses against Scientology Churches and Scientologists generally also reaches down to the LA District level. Since approximately July 1989, monthly meetings have been held at the Pasadena, California courthouse that houses the United States Court of Appeals for the Ninth Circuit, to coordinate the actions of the Los Angeles EO (represented at such meetings by defendant Young), Examinations

37

Division, and upon information and belief, LA CID. These monthly meetings are arranged and coordinated by the Los Angeles District Counsel’s office, and are attended by a number of District Counsel staff and, in fact, are chaired by defendant Jeglikowski, who supervises the meetings and the matters coordinated therein, against plaintiff and other Scientology Churches in disregard of the Constitution, the Internal Revenue Code, and policies set forth in the Internal Revenue Code. A regular topic of these meetings has been civil lawsuits involving plaintiff and other Scientology churches. The cases specifically include the civil suit filed by the Aznarans, and a case involving a former attorney for the Church. Defendant Jeglikowski has met with an attorney for one of the civil litigants, for purposes of coordinating actions between the IRS and the civil litigants against plaintiff.

69. The monthly meetings in Pasadena, like the meetings held from time to time at the National Office, are the vehicles by which defendants have singled out a religion and its churches and parishioners for singular and unfair treatment based upon their religious affiliation and set about to administer the Internal Revenue Code in a manner designed specifically to affect such co-religionists in an arbitrary and capricious manner, and to cause the harm hereinafter averred.

70. Plaintiff has made repeated efforts to resolve any legitimate concerns on the part of the IRS. As shown above, the Church has provided voluminous information to the IRS over the years to allay any concerns and to respond to any legitimate questions. These efforts on the part of the Church

38

have been either been perverted (as in the use of this information for purposes of a CID investigation), or rebuffed. Within the past few months, plaintiff once again attempted to resolve various issues with EP/EO representatives, including defendant Owens. However, the IRS continuously demanded the production of voluminous quantities of documents as a precondition for further talks. Most of the information requested had previously been provided to the IRS over the past years, yet the EP/EO representatives demanded it once again. When informed that the production of documents being requested on a voluntary basis was so extensive as to require months if not years to review, one representative of EP/EO remarked that this did not concern him, as he had twelve years left in the IRS before retirement.

71. The defendants, and each of them, by their conduct alleged herein, have singled out plaintiff for invidious discrimination in the application of the laws of the United States on the basis of plaintiff’s religious affiliation, in violation of the Equal Protection component of the Due Process Clause of the Fifth Amendment to the United States Constitution.

72. Plaintiff has been damaged and continues to be damaged thereby in an amount to be proven at trial. That amount is not presently capable of precise calculation but is believed to be in excess of $20,792,850 which represents direct expenditures by plaintiff. Plaintiff has also suffered consequential and resulting damages in an amount to be proven at trial, but which is in an amount in excess of $100 million.

73. The conduct alleged herein is ongoing and, unless

39

enjoined by this Court through an order forbidding defendants from any and all further participation in any matter involving the IRS and plaintiff or any other Scientology Churches or any other Scientology entities or parishioners, the harm alleged herein will continue and the Constitutional violations will persist to plaintiff’s detriment.

FOURTH CLAIM FOR RELIEF

(For Fifth Amendment Violations by All Defendants)

74. The Church repeats and realleges each and every averment set forth in paragraphs 1 through 73, inclusive.

75. Defendants have, in the course of conduct hereinabove averred, acted in violation of the Constitution, the laws of the United States, and the policies, and procedures, and practices of the IRS created by the IRS for the benefit of taxpayers. Such conduct is a denial of plaintiff’s due process rights as set forth in the Fifth Amendment to the United States Constitution.

76. Plaintiff has been damaged and continues to be damaged thereby in an amount to be proven at trial. That amount is not presently capable of precise calculation but is believed to be in excess of $20,792,850 which represents direct expenditures by plaintiff. Plaintiff has also suffered consequential and resulting damages in an amount to be proven at trial, but which is in an amount in excess of $100 million.

77. The conduct alleged herein is ongoing and, unless enjoined by this Court through an order forbidding defendants from any and all further participation in any matter involving the IRS and plaintiff or any other Scientology churches or any

40

other Scientology entities or parishioners, the harm alleged herein will continue and the Constitutional violations will persist to plaintiff’s detriment.

WHEREFORE, plaintiff Church of Scientology International prays that:

78. Defendants, and’each of them, be preliminarily and permanently enjoined from any and all further participation in and responsibility for any matter involving the IRS and plaintiff or any other Scientology Church or entity, or any Scientology parishioner;

79. Plaintiff be awarded damages according to proof, which are believed to be in excess of $20,792,850 in direct expenditures by plaintiff, and consequential and resulting damages in an amount to be proven at trial, but which is in an amount in excess of $100 million, and

80. The Court award and order such other and further relief that it deems appropriate under these circumstances.

Dated: August 12, 1991 Respectfully submitted,QUINN, KULLY AND MORROWCOOLEY, MANION, MOORE &
JONES, P.C.BERRY & CAHALAN

BOWLES & MOXON

WILLIAM T. DRESCHER

By: [signed]
William T. Drescher

Attorneys for Plaintiff
CHURCH OF SCIENTOLOGY
INTERNATIONAL

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Notes

  1. This document in PDF format.

Lowell Sun: Charges of scheme to bilk church of $2M take new twist (August 22, 1986)

Charges of scheme to bilk church of $2M take new twist1
by Raymond Howell

BOSTON — An international con artist has been charged in a scheme to bilk the controversial Church of Scientology out of $2 million, adding a new layer of intrigue to a Byzantine case that already involves a reputed organized crime figure, a disbarred lawyer and a financial swindler-turned-FBI-Informant.

Ala Fadili Al Tamimi, a naturalized U.S. citizen born in the United Arab Emirates (UAE), was arraigned Tuesday in U.S. District Court in connection with the scam against L. Ron Hubbard, the late and reclusive Scientology founder. He pleaded innocent and was detained without bail.

Last May, reputed organized crime figure George T. Kattar of Methuen and disbarred attorney Harvey Brower of Swampscott were indicted on charges of offering the church false information about the scam in exchange for a $100,000 fee. Both are free on bail.

Kattar and Brower were implicated by Larry Reservitz, a disbarred Brockton lawyer, high-rolling gambler and convicted financial swindler who participated in the second alleged fraud as an informant for the FBI. He is in the federal witness protection program.

Extradited from Germany

Tamimi, 34, was indicted in the $2 million scheme last November. But at the time, he was serving a prison sentence in Germany for a fraud in that country. He was extradited last Friday.

Also indicted in the case was Tamimi’s brother, Akil Abdul Amir Al Fadili Al Tamimi. But Akil Tamimi is believed to be in the UAE, which does not have an extradition treaty with the U.S., according to Assistant U.S. Attorney Gary Crossen.

A federal grand jury continues to investigate the $2 million scam. “Our belief is there are other conspirators and there is therefore an ongoing grand jury investigation,” Crossen said yesterday.

Harry L. Manion III, a church attorney and spokesman, said: “Church officials wonder why at this point Ala Tamimi’s co-conspirators have not also been indicted.

“The church will press on to expose this conspiracy wherever the web of the conspiracy may lead and to expose whoever may be caught up in it,” he said.

Ala Tamimi also faces trial on fraud charges stemming from his dealings as president of a company called First Boston Arabian Corporation in 1981.

Promised lavish loans

The company purported to find Arab shieks willing to make lavish loans at low interest rates to real estate developers and other businessmen in the U.S.

Tamimi required borrowers to pay him advance finder’s fees, but he had neither loan commitments nor funds, the government charges.

His clients included a German national named Wolfgang Jurgens, for whom Tamlmi purportedly arranged a $75 million loan.

Tamimi’s fee was $2.5 million and he allegedly demanded $870,000 in advance of the closing. Jurgens paid it in the form of 1.7 million German Deutschmarks, two Mercedes-Benzes, two BMWs, $12,000 in U.S. currency and an $8,000 Rolex watch.

Tamimi was indicted in the First Boston Arabian case in March 1983. But in June of that year, he jumped bail.

Shortly afterward, he was arrested for fraud in Sicily, according to an FBI affidavit and Tamimi’s attorney, John C. McBride of Boston.

Tamimi spent two and a half years in an Italian jail. Upon his release, he was transferred to Germany, where he was wanted for fraud and where he ended up serving nine months in jail, according to McBride.

In March 1984, while he was incarcerated abroad, Tamimi was secretly indicted for perjury in connection with statements he made in court before he jumped bail in the first Boston Arabian case.

Court documents indicate that during bail hearings in that case, Tamimi claimed to have two passports — one from Jordan and another from the U.S. Both were eventually turned over to authorities.

But it was later learned that he possessed two other U.S. passports and used one of them in Italy, according to an FBI affidavit.

Tamimi cannot be tried on the perjury indictment, however, because the extradition agreement with Germany does not include that charge, said Crossen.

The German government was “disinclined to extradite hint based on the perjury indictment,” the prosecutor said.

It was also during his incarceration abroad that Tamimi was secretly indicted in the Scientology scheme.

The two-count indictment, returned Nov. 22, 1985, accuses Tamimi and his brother of conspiracy and interstate transportation of conterfeit checks.

It alleges that in May 1982, they obtained a $2 million forged check drawn on an account of Hubbard and a $500,000 counterfeit check drawn on an account of a company called Indian River Foods Inc. Both accounts were at the Bank of New England in Boston.

The indictment further alleges that in June 1982, they transported the checks from Massachusetts to New York and attempted to deposit them in the Middle East Bank Ltd., where Akil Tamimi had opened an account under the alias of Aquii Abdulamiar.

Suspecting that something was wrong, bank officials raised questions about the check and did not cash it.

Attorney McBride said yesterday: “We’re going the whole route. The government can’t prove its case.”

Referring to the fact that the check was never cashed, he said: “The church was never defrauded out of any money. Mr. Hubbard never lost any money.”

Although Tamimi had not been formally charged in the Hubbard check case until Tuesday, he has been linked to it as far back as 1984.

At that time, a private investigator hired by the church, Eugene Ingram, visited Tamimi in jail in Italy and brought back an affidavit in which Tamimi implicated himself and Boxford attorney Michael Flynn. The affidavit was turned over to the FBI and has been cited in civil litigation involving the church.

Flynn, who has been battling the church for years in numerous civil suits, has vigorously denied any involvement in the scam, denied knowing Tamimi and accused Scientology officials or trying to smear him.

Flynn was out of town and unavailable for comment yesterday, but an associate, Mike Tabb, said Tamimi has since sent telegrams to Flynn stating that the portion of the affidavit about Flynn is untrue.

Tabb also claimed that Ingram has been investigated by a grand jury for possibly having “procurred perjury” from Tamimi.

“From our investigation, it appears that Mr. Tamimi was involved in the Hubbard check, but Mike Flynn had no involvement in that,” Tabb added. “…The government has never indicated that Michael Flynn is a target of a grand jury investigation or that he is seriously considered a suspect.”

McBride, when asked about his client’s affidavit, said Tamimi has since disavowed it. He also claimed that the Justice Department has “publicly” rejected the “credibility” of the affidavit.

Assistant U.S. Attorney Crossen said the government has not made any public declarations about the credibility of the affidavit. But he refused to comment further on it.

The names of Flynn and Tamimi have begun to surface in court documents filed in the case of Kattar and Brower, who allegedly schemed to bilk the church in 1984.

In two handwriting exemplars filed by Kattar’s attorney, Michael Avery, during discovery proceedings, Kattar mentions Flynn and Tamimi as having been involved in the original check scheme.

The handwriting exemplars were requested by a grand jury in January 1988, along with photographs and fingerprints of Kattar, Avery said in an affidavit. Presumably, they were requested so they could be compared to identically worded notes already in the grand jury’s possession.

Noting that Kattar and Brower have been accused of fabricating a story about the $2 million scam, Tabb claimed the notes represented “the false story that Kattar told.”

Tabb also pointed to an FBI affidavit which quotes certain conversations involving Kattar and Brower. In the narrative, the affidavit says: “In essence, they decided to falsely accuse several persons of complicity in the check offense, including a Boston lawyer (Michael Flynn).”

Neither Assistant U.S. Attorney Crossen nor Avery, Kattar’s attorney, would comment on the handwriting exemplars.

Notes

The Boston Phoenix: What’s the scam? (June 3, 1986)

What’s the scam?1

by Jim Schuh

This article originally appeared in the June 3, 1986 issue of the Boston Phoenix

Back on the morning of June 7, 1982, a man walked into the New York branch of the Middle East Bank on the 25th floor of a Madison Avenue office building and tried to deposit a $2 million check. The man, a native of the United Arab Emirates, left without completing the transaction.

The check, written on an E.F. Hutton money-market account handled by the Bank of New England, was a forgery. Although attempted bank fraud of that ilk is not particularly unusual, this particular incident triggered a complex, bizarre and, at times, vicious battle that shows no sign of abating nearly four years later.

The forged check had been written on the account of L. Ron Hubbard, reclusive founder of the Church of Scientology, who died last January. No one has ever been charged publicly with that attempted fraud, which Scientologists have come to regard as the most brazen of assaults on their religion and church. Some Scientologists believe that Boston lawyer Michael J. Flynn — who has made something of a career out of suing the Church of Scientology — was behind the scam.

Flynn vehemently denies any involvement with the bogus Hubbard check. And indeed, the accusation has always seemed preposterous. For even if the Hubbard check had been successfully deposited, it is far more likely that the Bank of New England (or, to be more precise, the bank’s insurance company), and not L. Ron Hubbard, would have lost the money.

To gather evidence in the case, Scientologists offered a reward of up to $100,000 for information leading to the conviction of those who had tried to pass the bogus Hubbard check. And that reward offer produced results, though not necessarily what the Scientologists wanted. Among those who got portions of the reward were a con artist known as the Prince of Fraud, another man reputed to be an organized-crime figure, and a third character, who has since admitted involvement in the check scam — Larry Joseph Reservitz.

Larry Reservitz is a former lawyer who was disbarred for bilking insurance companies on bogus car accidents and for cheating a client out of a fee. He then moved on to other vocations: forger, cardshark, Las Vegas gambler, friend to politicians and professional athletes, black-marketer, international fugitive, and, in his latest incarnation, a protected government witness.

Reservitz is at the fulcrum of a complex tale of intrigue that has only begun to unfold in federal court. Much remains unknown, though it is clear that Scientologists, the FBI, reputed organized-crime figures, and private investigators have all engaged in some labyrinthine scheming. But in many ways it is unclear who is the victim and who is the culprit; who is the con man and who is the conned; who is investigating whom, for what crimes, and — finally — why.

The Scientologists have claimed in court documents that one man involved in the scheme was Ala Fadili Al Tamimi, a native of the United Arab Emirates, who blazed an unparalleled trail of fraud across Massachusetts before jumping bail, according to charges still pending against him. Scientologists say that they gave him $25,000 for writing an affidavit — a move which is technically legal, if risky — in which he claimed he had helped mastermind the bogus check scheme along with Flynn. When the Boston Globe, in July 1984, wrote about those allegations, Larry Reservitz got a laugh at the Scientologists’ pursuit of Flynn, who, Reservitz said, had nothing to do with the check. Michael Flynn didn’t laugh. He sued the Globe for libel, a case that is still pending.

(A federal grand jury, however, does not doubt that Tamimi had some involvement with the bogus Hubbard check. Indeed, court records in Germany, where he is being held, indicate that Tamimi was secretly indicted in Boston last November for attempting, along with his brother, to pass two bogus checks at the Madison Avenue Middle East Bank between April and June of 1982. The indictment remains sealed, apparently pending Tamimi’s extradition to this country on old fraud charges unrelated to this case. Tamimi recently was extradited from a prison in Italy to a prison in Germany, as he makes the rounds of atonement for a career of fraud.)

The latest chapter in the bogus-check case was made public last week: reputed organized-crime figure George T. Kattar, 67, of Methuen, and defrocked lawyer Harvey Brower, 49, of Swampscott, were indicted last week on fraud and extortion charges. The grand jury claims that Brower and Kattar offered to provide information to Scientologists about the bogus Hubbard check for $100,000. Brower and Kattar allegedly bilked the Scientologists out of an initial down payment of $33,333, using “threatened force, violence and fear.” The indictment says Brower and Kattar gave Scientologists inaccurate information about the check, but the indictment doesn’t detail the nature of that information.

Scientologists say that they were threatened in their dealings with Kattar and Brower. And Earle C. Cooley, a lawyer for the Scientologists, says that they were bilked in that they did not receive the documentation and witnesses they had been promised. But Cooley says he remains unconvinced that the information Scientologists did receive — which implicated Flynn — was inaccurate. “The church is satisfied that there is a complex breadth of obstruction and conspiracy involved in this entire affair,” says Boston lawyer Harry L. Manion III, who, along with Cooley, represents the church. “This indictment represents the outer skin if a very strong-smelling onion. The church will continue to peel the onion until its core is fully exposed.”

The Scientologists have become increasingly bitter over what they perceive as the federal government’s failure to aggressively investigate the bogus Hubbard check and the Kattar-Brower matter. They have taken out advertisements in newspapers offering a $75,000 reward for information about “complicity and/or obstruction of justice” by four federal prosecutors, three FBI agents, and two private lawyers. The indictment against Kattar and Brower was brought in part because a Scientologist, Geoffrey Shervell, secretly tape-recorded – at the behest of the FBI – his negotiations for their information, according to those familiar with the case. But part of the government’s case will be to prove that the information that Brower and Kattar allegedly supplied was phony. And given that Larry Reservitz claims, on tapes he made for the government, that he was involved in the check scheme, it seems likely he will take the witness stand for the prosecution to repeat that assertion, thereby undermining any contention Kattar and Brower might make that Flynn did indeed mastermind the Hubbard check.

Reservitz secretly tape-recorded his conversations with Kattar, a federal prosecutor has said in court during another case in which Reservitz is a government witness. It is unclear whether those conversations pertain to the Hubbard-check case or to yet another matter, for which the prosecutor said Kattar was under investigation — allegedly plotting to cash another bogus Bank of England check, this one from a Florida millionaire, for $12 million.

(Where the Kattar case may lead boggles the mind. The Wall Street Journal reported last Tuesday that ultra-conservative politician Lyndon H. LaRouche Jr. approved a $100,000 payoff to Kattar in 1980 to get LaRouche votes in the 1980 Democratic presidential primary. Kattar has reportedly confirmed helping LaRouche but has denied receiving the money. Brower, Kattar’s purported accomplice, was once a talented defense lawyer. He was disbarred for counseling a client to jump bail. Later, Brower, a drummer, formed a musical group called Harvey and the Bail Jumpers.)

Indeed, there are many Reservitz tapes. He spent nearly five months in late 1984 gathering evidence for the government, as part of his plea bargain, tape recording his telephone calls and sticking a tape recorder down his boot for documenting face-to-face meetings, according to court testimony. Reservitz and an odd assortment of characters star in more than 100 separate tapes, according to an FBI agent.

Many of those tapes have yet to become public, and some perhaps never will. Among them, according to those familiar with the case, is a tape Reservitz made for the FBI when he met in a law office with two Scientologists investigating the phony check written on the Hubbard account. During the session Reservitz reportedly received $12,500 in reward money from the Scientologists for information he provided them. Some people familiar with the case believe that Reservitz was sent into that meeting to gather evidence against Scientologists for obstruction-of-justice charges in their attempt to implicate Flynn in the bogus Hubbard check.

A witting attempt to provide fraudulent evidence to convince federal prosecutors to indict an innocent man – if that’s what occurred – would clearly be an obstruction of justice. “I do not believe anybody from the church will be indicted because that would be an obscenity,” says Cooley. “The church has pursued this investigation in good faith.”

International intrigue presumably is foreign to the Scientologists. But for Larry Reservitz, it is the habit of a lifetime.

The son of a lawyer, Reservitz grew up in Brockton and went to a private school in New Hampshire, graduating in 1959. He was an honor-roll student; he worked on the school newspaper and his class yearbook. Reservitz was athletic; he was a member of the varsity football and track teams and the junior-varsity basketball team. He was a proctor and a member of the dramatics club. His quote in the year book was an enigmatic “Eeee-yes.”
Reservitz went on to Tufts, where he majored in economics. During a recent appearance as a prosecution witness in a federal fraud case, Reservitz said he had departed Tufts because of “very poor grades.”

According to his own testimony, Reservitz switched to Suffolk University. For the six summers of his college career, he worked in his father’s law practice. Reservitz recently explained the work that he had done for his father: “Basically carry a briefcase, follow him around, and try to learn some things.”

While in college, Reservitz was heavily involved in high-stakes card games, according to a former classmate. Reservitz also boasted about his friendships with professional athletes, including players on the Red Sox and the Celtics. In 1967, Reservitz passed the bar and joined his father’s law firm, pursuing his career with, as one acquaintance recalls, “vim and vigor.”

But within a year Reservitz’s father died of a heart attack. And Larry – with vim and vigor, if not judiciousness – embarked on a career in crime. He started concocting phony car crashes and bilking insurance companies for damages, according to his own testimony. The motivation, Reservitz acknowledges, was “probably greed.”

“It was part of a large deal,” Reservitz testified. “They were set up accidents. It wasn’t that there was a legitimate client. The majority of these accidents were phony accidents, they were staged …Where there was a legitimate accident, if there were two people in the car, for example, by the time the case got ready for settlement it would have been four people in the car.”

Among Reservitz’s partners in crime was a man named Elias Kenaan of Braintree. Kenaan’s wife, Eileen, is the daughter of Ilario “Larry Baione” Zannino, now the reputed head of the Boston Mafia. Reservitz testified that he had probably filed more than 20 phony insurance claims during an 18-month period. The scheme had come to an abrupt halt when Reservitz read in a newspaper that a grand jury in Plymouth had been convened to indict an unnamed lawyer for filing false claims.

In early 1970, Reservitz, his wife, and their baby fled to Europe. Shortly before he left, he received a $650 fee to represent a Stoughton man charged with selling LSD to a state policeman. Reservitz never represented the man but did not return the fee. Reservitz said he’d hoped the move to Europe would bolster his faltering marriage. After landing in Geneva, Reservitz and his family moved to the Spanish island of Palma de Mallorca, about 120 miles off Barcelona. He invested in a nightclub and ran a small clothing store. Reservitz and his wife had another child. But one day Reservitz returned home to find his family had vanished.

A few months later, more trouble struck. A member of the Spanish secret police, whom Reservitz had befriended, told him that he was about to be arrested and extradited. While he was in Spain, Reservitz had been indicted in Plymouth County on more than a dozen charges of bilking from insurance companies, in bogus claims that exceeded $50,000.

Reservitz quickly sold off his interests in the clothing store and the nightclub at a loss and flew to Marseilles and then to Genoa. From there, he took a boat to Israel –  “because I’d never been there before and I wanted to see it.” He settled in a suburb of Haifa for several months, living off his savings and selling money on the black market.

During his travels, Reservitz met his future second wife, a Scottish woman named Antoinette. When they tired of life in Israel – hampered by their inability to speak Hebrew and Reservitz’s failure to find work – they moved briefly to Edinburgh, where Antoinette’s parents lived. Reservitz also spent time in London, frequently gambling in high stakes games at a club called the White House, a college classmate told the Phoenix. Scotland Yard became interested in him in part because his passport showed him frequently traveling between Rome and Britain. British police checked with investigators in Italy, who informed them that Reservitz was traveling with Antoinette, and that he was expected to visit her family in Edinburgh for the holidays.

Meanwhile, Scotland Yard learned that Reservitz was wanted back in the States for the insurance fraud. On New Year’s Eve, 1971, Reservitz was arrested at the home of Antoinette’s family. He was transferred to Pentonville prison in North London, a grim, forbidding structure built in the 1700’s. Reservitz was to stay there for the next four months.

He was held in solitary confinement in an eight-foot-by-five-foot cell, with one small overhead light, a window about one square foot, and a solid-steel door with a peephole for guards to observe prisoners. There was no sink or toilet, just a plastic pail that was emptied once a day. He was released from the cell for a half-hour every day. Showers were allowed on Sundays. The mattress was straw, and Reservitz had one worn blanket. He had no radio. A two-month-long power outage meant that Reservitz sat in darkness for half his stay. “That is a very, very old prison,” Reservitz testified. “It’s exceptionally unpleasant.” While he was incarcerated, he was notified that his first wife had filed for divorce.

A Massachusetts assistant attorney general eventually went to London and obtained Reservitz’s extradition. Reservitz was released on bail after arriving in Brockton. While awaiting trial, Reservitz and Antoinette moved to an apartment in Brookline and started a women’s-clothing business – with Reservitz’s mother providing some of the seed capital. After a year out on bail, Reservitz pleaded guilty to two larceny charges and was sentenced to 18 months in the Plymouth County jail.

Despite his legal problems, Reservitz apparently remained quite solvent. He and Antoinette bought a large brick house in Brookline for $72,000, where he installed a pool. While Reservitz was in jail, Antoinette ran the clothing business. When he was released in 1974, he appears to have gone straight – for awhile. He merged the dress business into a retail clothing firm, which operated a store called Feathers, on Boylston Street in Back Bay. Reservitz opened branches in Quincy, Brookline, Newton, and in several Gilchrist department stores. But the Gilchrist chain went into bankruptcy, taking the Feathers chain with it, Reservitz testified. “They forced me into bankruptcy because I had so many goods left over that weren’t sold. There was nothing I could do. I owed money to so many people. And actually before we went into bankruptcy the business was insolvent.” When Feathers folded in November 1976, it went down hard – owing taxes to the federal government and money to 99 creditors and 10 employees.

Without Feathers, Reservitz returned to an old skill to pay the bills: he gambled, playing cards and placing bets on sports events. In the late 1970s federal investigators charged Reservitz with possession of counterfeit money, but a magistrate dropped the charges because federal agents were unable to prove Reservitz knew the money was bogus.

Around 1980 Reservitz appears to have developed a source of information inside the Bank of New England. Reservitz says he then became involved in six or seven major frauds using bogus checks, some of which were, at least initially, quite successful. But two of those schemes eventually went sour and contributed mightily to the downfall of Larry Reservitz.

Reservitz testified he had worked with a man named Irwin Swartz to carry out those scams. Using fraudulent paperwork, they had arranged for a financial investment concern to transmit $2 million to the account of a Chicago jeweler in 1980. After the money transfer had occurred, Swartz, purporting to represent the financial concern, picked up $2 million worth of jewels for the jeweler. It was a scheme that netted Reservitz more than $100,000. But three weeks later, Swartz was arrested in Montreal while making a pick-up at a coin shop in a similar scam. Swartz was convicted of fraud and sentenced to a decade in prison. Despite pressure from investigators, Swartz initially refused to name Reservitz as the mastermind of the scams, because Reservitz was paying him to remain silent. But Swartz eventually cut a deal, and Reservitz was indicted on a variety of charges, including wire fraud, conspiracy, and obstruction of justice.

At about the same time, Reservitz erred again. He attempted to buy a truckload of marijuana form undercover agents of the Drug Enforcement Administration. That cost him a three-year sentence.

Swartz was partly through his testimony in the fraud case when Reservitz cut his own deal. He pleaded guilty on July 13, 1984, to five charges and secretly agreed to cooperate in criminal investigations for the federal government. Reservitz immediately informed investigators of another scheme that he was already helping orchestrate: an attempt to pass a bogus $12 million check from an account at the Bank of New England. The participants, Reservitz said, were Jack W. McNatt, 39, of Boxford, a departmental-systems manager in the corporate-agency department at the bank, and Arcangelo “Bochie” DiFronzo, 49, a Somerville man who was then co-owner of New England Mail Services Group. They were convicted this April following a trial at which Reservitz and his tapes were the star witnesses.

While Reservitz was gathering evidence for his new friends at the FBI, he had supported himself by gambling, he testified. He bet on sporting events, and he played gin with the fellows over at the swank Cavendish Club, in Brookline, where his gregarious personality made him a favorite.

It was while Reservitz was wearing a hidden tape recorder for the McNatt-DiFronzo investigation that he revealed his involvement in the Hubbard-check scheme. According to transcripts, Reservitz, sipping black Sanka in a Cambridge restaurant, chuckled as he told DiFronzo that Scientologists thought Flynn was behind the check scam. “They think that I’m part of a conspiracy to defraud the church, that I’m tied up with Michael Flynn [and other Flynn associates] . . . I’ve never heard of these people. I wouldn’t know these people if they stood up in front of me.”

And in another meeting that he tape-recorded with DiFronzo, Reservitz explained that the Hubbard-check scheme had failed because Hubbard himself had written a check to pay taxes at about the same time, thus drawing down his balance. Recalled Reservitz, “Do you understand that L. Ron Hubbard wrote out a tax check, the guy whose check it was happened to write out a tax check at the same time and take money out of the fuckin’ account?” Scientologists say that though Hubbard had recently paid his taxes when the bogus check was presented in New York, there was enough money in the account to cover the check.

It was within hours of completing his street work for the McNatt-DiFronzo case that FBI agents whisked Reservitz off to prison on December 6, 1984. The two-year sentence he eventually received on the check frauds was eventually consolidated with that from the marijuana case, and both were cut to 18 months. Reservitz served 13 months in prison and then returned to the streets.

Reservitz, his wife, and two children were relocated at government expense and given a new identity through the witness-protection program. There is an unconfirmed report that he was in a crowd at a recent Las Vegas fight featuring another Brockton man and Reservitz acquaintance, middle-weight champion Marvelous Marvin Hagler.

As FBI agent Dennis Carney testified at the recent McNatt-DiFronzo trial, the saga of 44-year-old Larry Reservitz may be far from over. “He’s free to engage in other scams right now,” Carney said.

Notes

  1. Retrieved on September 24, 2014 from http://thephoenix.com/Boston/News/90451-Whats-the-scam/?page=1#TOPCONTENT. This document in PDF format.

The Boston Globe: Ex-lawyer, N.H. man charged in plan to bilk Church of Scientology (May 29, 1986)

Ex-lawyer, N.H. man charged in plan to bilk Church of Scientology1

FBI agents yesterday arrested a New Hampshire man and a disbarred lawyer on charges of extorting $33,000 from the Church of Scientology by offering false information about a scheme to steal $2 million from the church.

George T. Kattar, 67, of Meredith, N.H., formerly of Methuen, was held without bail pending a detention hearing tomorrow. Harvey Brower, 49, of Swampscott, a former lawyer turned writer, was released on $50,000 bail.

According to an indictment issued by a federal grand jury in Boston, Kattar and Brower obtained the money from church officials by offering to provide them with information about a forged $2 million check drawn on an account of L. Ron Hubbard, the church founder.

Kattar and Brower allegedly offered the information — which proved to be false — in return for a $100,000 fee, one-third of which was to be paid in advance.

The indictment does not specify what information was allegedly supplied by the defendants in return for the $33,000.

Kattar and Brower, according to the indictment, used threats of violence. The scheme allegedly occurred between September and December 1984.

In January 1984, full-page advertisements were placed in The Boston Globe, The New York Times and other publications offering a $100,000 reward for information that would help determine who presented the forged check to the Bank of New England in June 1982. A teller questioned the check’s validity and it was not cashed.

Harry L. Manion 3d, a lawyer for the church, said yesterday the indictment is only “the tip of the Iceberg.”

He said “the church believes this is the beginning of the unraveling of the circumstances surrounding the forgery.”

Argued against bail

In arguing that Kattar be denied bail, Assistant US Attorney Brackett B. Denniston 3d said that releasing him before trial would pose a danger to witnesses and the community in general.

Denniston said Kattar “put out a contract on a cooperating witness in the case,” and, in conversations that were secretly tape-recorded, he discussed killing witnesses in other cases.

The prosecutor said one church official was told by Kattar: “Pay up or I’ll drop your name in a hat.”

The tapes were reportedly made by another disbarred lawyer, Larry Reservitz, who has cooperated with federal investigators in several cases following his conviction on drug charges.

Besides extortion, the indictment charged Kattar and Brower with three counts of wire fraud and one count of receiving stolen funds.

They pleaded innocent to all the charges at a hearing before US District Magistrate Lawrence P. Cohen. Their trial was scheduled for July 16.

Seized 131 guns

During an unrelated raid on Kattar’s home last month, FBI agents seized 131 guns and military supplies. The armaments included three homemade explosive devices, a number of machine guns, an Israeli submachine gun, automatic weapons, shotguns, rifles and handguns.

Also found in the raid, the FBI said, was the name of an individual who lives in Lebanon. Investigators said they planned to trace the origin of the weapons and attempt to determine if any of the guns were intended for shipment to Beirut.

Kattar has been a real estate developer and trucking company executive for the past 20 years.

Brower, a lawyer for 17 years with offices in Lawrence, was disbarred in August 1979 for cheating a client of $15,000.

Brower has represented the late Raymond L.S. Patriarca and several other high-level figures in organized crime. He served six months in prison in 1979 for conspiring to help a client jump bail in Louisiana and escape to Mexico. In 1982, Brower was fined $3,000 for conspiring to operate a bookie syndicate.

Notes

  1. This document in PDF format. Retrieved on September 24, 2014 from http://xenu-directory.net/news/library-item.php?iid=3021

Impact: The Lawyer’s View (Harry Manion) (1985)

Harry Manion

Harry Manion, Lawyer for the Church of Scientology: One of the Attorneys on the Portland case and largely responsible for the legal victory. Lifetime member of the International Association of Scientologists.

 The Lawyer’s View1

I had a cognition that these SPs2 have to be stopped once and for all. And I don’t think legal is the answer. Because the courts are only a stage. They’ll move on to other stages after we exterminate them there. They’ll move on and on. The only answer is the International Association of Scientologists. So I became a Lifetime Member and I proudly wear my pin! — Harry Manion

Notes

  1. IASA (1985) The Lawyer’s View Impact 4, 26,51. This document in PDF format.
  2. SPs: Suppressive Persons. Key documents to Scientology’s SP doctrine.

Christofferson: Excerpt of Proceedings (May 8, 1985)

http://gerryarmstrong.org/50k/legal/related/5208.php

Christofferson: Excerpt of Proceedings (April 16, 1985)

http://gerryarmstrong.org/50k/legal/related/5206.php