Internal Revenue Service
Church of Spiritual Technology
419 North Larchmont, Suite 162
Los Angeles, Ca 90004
Department of the Treasury
Washington, DC 20224
Person to Contact:
Mr. M. Friedlander
Refer Reply to:
Date: [stamp] JUL 8 1988
Employer Identification Number: 95-3781769
Tax Years: All Years
This is a final adverse ruling as to your exempt status under section 501 (c) (3) of the Internal Revenue Code.
This ruling is made for the following reasons:
1. You have failed to establish that you are operated exclusively for exempt purposes as required by section 501 (c (3) of the Code. You have not demonstrated that your activities and purposes conform to exempt purposes and activities as required by section 501 (c (3) of the Code.
You are one of a number of organizations which were created pursuant to a reorganization of the Church of Scientology which took place in 1981 and 1982. The reorganization was undertaken after the Service revoked the exempt status of the Church of Scientology of California, the former “Mother Church” of the denomination. The basis of the revocation was that the California church was an ordinary commercial enterprise, the Church’s income inured to L. Ron Hubbard, founder of the Scientology religion, and the Church had violated public policy by conspiring to impede the Service from assessing and collecting taxes which were lawfully due. Church of Scientology of California v. C. I.R., 83 T.C. 381 (September 1984). The revocation was sustained by the Tax Court and upheld by the Court of Appeals for the Ninth Circuit. 823 F. 2d 1310 (9th Cir. 1987).
An earlier case involving a Scientology organization had also resulted in a finding of private benefit to Mr. Hubbard and members of his family.Founding Church of Scientology v. U.S., 412 F. 2d 1197 (Ct. C1. 1969),cert. den., 39 U.S. 1009 (1970).
In the Church of California case, cited above, the Tax Court described how the Church attempted to frustrate the Service’s efforts to examine its financial affairs. The Church maintained no books or journals to record
Church of Spiritual Technology
and systematize its financial transactions. Therefore, the examination had to proceed on the basis of millions of separate checks, invoices, and disbursement vouchers. The Church’s accountant saw to it that these documents were provided in no semblance of order. He advised another church to “give the IRS agent a bunch of records in a box in no semblance of order, to place the agent in a dark, small, out-of-the-way room, [and] to refuse to give practical assistance locating records.” In the face of such tactics, the IRS spent approximately two years in an unsuccessful attempt to audit the Church’s 1958 and 1969 financial operations.
In addition to the above tactics, the Church knowingly and purposely misled the IRS concerning extensive operations it conducted in the United Kingdom. It concealed from the examiners the fact that it regularly received debit advices from foreign banks in lieu of canceled checks. It never produced canceled checks from some of its accounts which it maintained in the name of another corporation. When checks were produced, they were sometimes detached from their stubs. Boxes of records were mislabeled. The Church intentionally delayed in providing requested records and in some instances it never provided the records at all.
In order to establish whether the reorganized Church of Scientology was operated exclusively in furtherance of exempt purposes, we sought to obtain detailed information from you and from the other newly created entities which had filed applications for recognition of exemption. Although some information was initially provided, the information was incomplete or partial. Eight of the organizations eventually withdrew their applications without providing the information we had requested.
While the applications were pending, witnesses gave testimony in court cases involving churches of Scientology. See Church of Scientology of California v. Gerald Armstrong, No. C 420153 (Calif. Super. Ct., July 20, 1984);Founding Church of Scientology of Washington, D.C., Inc., et al. v. Director, Federal Bureau or Investigation, et al., 802 F. 2nd 1448 , cert. den., 56 U.S.L.W. 3231 (October 6, 1987). The testimony was to the effect that L. Ron Hubbard continued to control the Church of Scientology for his private benefit. Witness testimony in the Armstrong case alleged that the project known as Mission Corporate Category Sort-Out (MCCS) had been undertaken by the Church of Scientology of California in 1980. The alleged purpose of the MCCS project was, according to the testimony of Laurel Sullivan, to devise a new organizational structure to conceal L. Ron Hubbard’s continued control of the Church of Scientology. In the Founding Church.v. Director, F.B.I. case, to which the Service was a party, the government successfully argued that L. Ron Hubbard should be required to appear and be deposed because he was a managing agent of the Church. Mr. Hubbard did not appear and the case against the government defendants was dismissed with prejudice.
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We asked the remaining applicants who had not withdrawn their applications to comment on the matters noted in the Armstrong and Founding Church v. Director F.B.I. cases. They responded that the testimony related to other organizations and time periods, attacked the credibility of the witnesses, and stated that L. Ron Hubbard did not hold any position of control in any church of Scientology even though he was still revered as the founder of the religion.
We were told that the present corporate structure had been designed after those responsible for the MCCS project had been dismissed from the church and that the work done on the MCCS project was not considered or consulted in designing the new organizational structure presently in place. At the same time, we were furnished for the first time a chart showing levels of authority and departments within the new organizational structure. One of the departments, the Commodore’s Messenger Organization (International), exists within the corporate structure of Church of Scientology International, the new “Mother Church” of the denomination. According to allegations made in the Armstrong case, L. Ron Hubbard controlled the church through the Commodore’s Messenger Organization utilizing David Miscavige, Pat Broeker and Anne Broeker to carry out his orders. David Miscavige, Anne Broeker, and Lyman Spurlock were the original trustees of Religious Technology Center. Mr. Miscavige enjoys a position of influence in the reorganized Scientology structure which we have been informed derives from”moral authority” rather than from any official position in the corporate structure. Lyman Spurlock is president of Church of Spiritual Technology and, along with Mr. Miscavige, is an employee of Author Services, Inc. Author Services, Inc., is a for-profit corporation formed to provide services to L. Ron Hubbard in connection with exploitation of patents and copyrights which Mr. Hubbard owned.
On January 7, 1986, we issued an initial adverse ruling on your application. You submitted a written protest to our initial adverse ruling. In your protest we learned for the first time of the existence of still other organizations which were related to the new Scientology operating structure. Following your protest conference, which was held in January, 1987, we asked you to provide more detailed information about these new “international” organizations, including International Association of Scientologists, International SOR Trust, SOR Management Services, Ltd., Scientology International Missions Trust, and International Scientology Religious Trust. In a letter dated November 24, 1937, we noted that you had previously agreed to supply that information to us. However, you did not supply the information.
In support of the protest to our initial adverse ruling, we were supplied with copies of affidavits dated December 4, 1986, from Gerald Armstrong and Laurel Sullivan. Ms. Sullivan was the person in charge of the MCCS project. The affidavits state that the new church management “seems to have returned to the basic and lawful policies and procedures as laid out by the founder of the religion, L. Ron Hubbard.” The affidavits conclude as follows:
Church of Spiritual Technology
“Because of the foregoing, I no longer have any conflict with the Church of Scientology or individual members affiliated with the Church. Accordingly, I have executed a mutual release agreement with the Church of Scientology and sign this affidavit in order to signify that I have no quarrel with the Church of Scientology or any of its members.”2
The history of Scientology’s operations detailed in the Church of California case includes a lack of adequate financial records, public policy violations, deceptive practices and the maintenance of enemies lists against whom any actions, however illegal, were justified. The California case also demonstrates inurement of net earnings and benefit to the private interest of Mr. Hubbard, operations that primarily furthered commercial purposes conducted amid continuous representations denying control by and benefit to Mr. Hubbard, and a tenacious denial of the actual state of the organization’s affairs in the face of overwhelming evidence establishing the true nature of the organization’s operations. More recently, attempts to conceal Mr. Hubbard’s ongoing control of Scientology were alleged in the Armstrong case. Utilizing testimony any witnesses from the Armstrong case, the government successfully argued that Mr. Hubbard was a managing agent of the Church of Scientology as late as 1984. See the Founding Church v. Director, F.B.I. case, cited earlier.
The events detailed in these court cases, which span almost the entire period of Scientology’s history, create an inference that Scientology, even after reorganization, is not operated exclusively for exempt purposes. The fact that Mr. Armstrong and Ms. Sullivan elected to settle their personal differences with Scientology does not detract from the relevance of the statements they previously made concerning Mr. Hubbard’s use of Scientology organizations to serve his private interest. Our experience with your organization similarly reflects a continuation of the pattern of inurement and benefit to the private interest of Mr. Hubbard, operations that primarily further commercial purposes, and denials of control by and benefit to Mr. Hubbard for periods prior to his death despite contrary judicial and Service findings. Blanket denials that Mr. Hubbard personally profited from his position of influence in Scientology and assertions that your operations exclusively further exempt purposes do not dispel this inference.
Mr. Hubbard died on January 24, 1986. But, his death did not alter the history of Scientology’s prior operations or make available complete information about your actual operations. Moreover, the same individuals who controlled Scientology operations prior to Mr. Hubbard’s death, and who participated in arrangements which resulted in inurement and private benefit, continued to control your operations and those of the other top level Scientology organizations after Mr. Hubbard’s death. Thus, the possibility of inurement and private benefit continued after Mr. Hubbard’s death and more complete information about your operations and financial affairs was required to assure that your operations had changed to eliminate any further private benefit.
Church of Spiritual Technology
For the reasons explained above, in a letter dated March 17, 1988, we proposed to review your books of account and records and those of Church of Scientology International and Religious Technology Center. As explained in our letter of :March 17, 1983, the purpose of this review was twofold. First, to determine the integrity of your financial and accounting systems so we could verify that the information you had provided was accurate. Second to 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.Church of Spiritual Technology, Church of Scientology International, and Religious Technology Center agreed to participate in the financial reviews pursuant to the letters of March 17, 1988. Church of Spiritual Technology, Religious Technology Center and Church of Scientology International informed us by letter dated June 24, 1988, that they would no longer participate in the review. The refusal to continue the review, concentrating on those areas of concern, and their failure to fulfill the terms of the March 17, 1988, agreement, prevents us from concluding that Scientology’s operations have changed and that activities previously found to be disqualifying for purposes of section 5O1(c)(3) of the Code have been discontinued. Therefore, we conclude that you have not established that you are operated exclusively for exempt purposes as required by section 501(c) (3) of the Code.
2. You are operated for a substantial non-exempt commercial purpose.
In our initial adverse ruling of January 7, 1936, we concluded that you were operated for a substantial non-exempt commercial purpose because your activities assisted other organizations in maximizing sales of goods and services associated with the practice of Scientology.
In your protest and subsequent submissions you argued that your activities were engaged in for religious rather than commercial purposes. You contended that the provision of goods and services for a fee, which is characteristic of Scientology, was a permissible means of providing funds necessary for Scientology to support its operations, provide reserves for renovations and expansion, and to attract potential new members to the religion.
Church of Spiritual Technology
We have carefully considered your arguments, but fail to see that sales of goods and services for a fee by Scientology organizations under policies and directives which emphasize sales and profits does not result in a primary purpose of engaging, in activities similar in nature to those of an ordinary commercial enterprise, in which profits are the primary goal, rather than in advancing religious purposes. The fact that the fees provide a source of funds for operating expenses and future expansion and dissemination does nothing to distinguish these fee-for-service operations from similar activities of ordinary commercial enterprises. Therefore, by assisting and aiding in the marketing of Scientology, you are engaged in activities which further a substantial non-exempt commercial purpose.
Your archival activities relate to the materials constituting the scriptures of Scientology. These materials consist of the written and spoken works of L. Ron Hubbard on the subject of Scientology. Prior to his death, Mr. Hubbard held the copyrights on these materials. The works you collected were being commercially exploited by Mr. Hubbard and some of the organizations licensed by him. You were supported by income paid to you by some of the organizations engaged in this exploitation, notably Religious Technology Center and Church of Scientology Flag Service Organization, Inc., a subordinate of Church of Scientology International. You were thus performing functions which benefited these organizations and furthered their objective of marketing Scientology products and services.
After Mr.. Hubbard’s death, Religious Technology Center and Church of Scientology International and its subordinates have continued to market Scientology products and services. Your collection of original Hubbard writing and tape recordings enhances their marketing efforts because the products they market are derived from these original writings and tape recordings. Therefore, you are operated for a substantial non-exempt commercial purpose.
In addition, the refusal to continue the review agreed to in the letters of March 17, 1988, to Church of Spiritual Technology, Church of Scientology International, and Religious Technology Center, concentrating on those areas of concern, and their refusal to fulfill the terms of the March 17, 1988, agreement prevents us from concluding that Scientology’s operations have changed and that activities previously found to be disqualifying for purposes of section 501(c) (3) of the Code have been discontinued. Therefore, we conclude that you have not established that you are operated exclusively for exempt purposes as required by section 501(c) (3) of the Code.
Church of Spiritual Technology
3. You are operated for the benefit of private interests and your net earnings inure to the benefit of private individuals.
In our initial adverse ruling, we concluded that your operations furthered the private interest of and resulted in inurement of net earnings to L. Ron Hubbard because he received royalties on the sales of products associated with the practice of the religion he founded. We also concluded that your activities served Mr. Hubbard’s private interest through your participation in a plan to exploit Mr. Hubbards’s trademarks, trade names, service marks, copyrights, and patents through licensing and assignment arrangements. We also concluded that your activities served the private interests of and resulted in inurement of net earning to organizations associated with Mr. Hubbard.
In your protest you called our attention to the fact of Mr. Hubbard’s death and noted that his estate is in probate. Church of Spiritual Technology is the principal beneficiary of the estate and will receive the royalty income formerly received by Mr. Hubbard if it is determined to be exempt under section 501(c) (3). Based on these facts, you contend that private benefit, if there was any, ceased upon the death of Mr. Hubbard on January 24, 1986.
Mr. Hubbard’s death does not erase the benefit and inurement to his private interest that occurred.
Further, both before and after Mr. Hubbard’s death, you made the original writings and other materials formerly owned by Mr. Hubbard available to Church of Scientology International and Religious Technology Center in exchange for so-called “contributions” from Religious Technology Center and Church of Scientology Flag Service Org, Inc., a subordinate of Church of Scientology International. Religious Technology Center and Church of Scientology International engage in marketing Scientology to the public in a manner indistinguishable from that of an ordinary commercial enterprise. Therefore, your provision of the original Hubbard Materials to Religious Technology Center and Church of Scientology International serves the private interests of Religious Technology Center and Church of Scientology International.
In addition, the refusal to continue the review agreed to in the letters of March 17, 1988, to Church of Spiritual Technology, Church of Scientology International, and Religious Technology Center, concentrating on those areas of concern, and their refusal to fulfill the terms of the March 17, 1988, agreement prevents us from concluding that Scientology’s operations have changed and
Church of Spiritual Technology
that activities previously found to be disqualifying for purposes of section 501(c) (3) of the Code have been discontinued. Therefore, we conclude that you have not established that you are operated exclusively for exempt purposes as required by section 501(c) (3) of the Code.
4. You have failed to establish that you are not operated for the benefit of private interests and that your et earnings do not inure to the benefit of private individuals.
Trusts and corporations can be used to siphon income from allegedly exempt organizations for the benefit of private individuals. This happened in the Church of California case. An allegedly religious trust and dummy Panamanian corporations were used to funnel money to L. Ron Hubbard.
Although the organizational structures employed by Scientology have changed since the California case, you have not clearly established that your relationship with the new entities furthers your exclusively exempt purposes. The past history of Scientology’s operations suggests that the purpose of these organizations may be to disguise the fact that private interests are the ultimate beneficiaries of the reorganized operating structure.
An example of an organization which may serve private interests is International Publications Trust (IPT). Prior to the formation of IPT, L. Ron Hubbard granted licenses to New Era Publications (NEP) to produce Scientology books and E-meters. NEP sublicensed Bridge Publications, Inc. (BPI). The license and sublicense agreements provided for royalty payments from BPI to NEP and from NEP to L. Ron Hubbard. Then, IPT was formed to act as the holding company parent of BPI and NEP.
You informed us that IPT has two foreign trustees, Church of Scientology Religious Education College, a corporation, and Geoffrey Clunie, an individual. Our requests for additional information about IPT and its trustees and their relationship to the reorganized Scientology structure have not been answered. So, we see in place an entity that controls Scientology publications and E-meter production controlled by persons about whom no information has been provided. In the absence of any other explanation for this arrangement, we have no alternative but to conclude that the holding company’s real purpose could be to benefit Mr. Clunie’s private interest or the private interest of the College, just as intervening trusts and corporations were used to mask benefits to the private interest of L. Ron Hubbard.
Church of Spiritual Technology
It is also clear that NEP and BPI share in the commercial exploitation of these properties to benefit their own private interests. Mr. Hubbard’s death did not effect the rights that NEP had already received from Mr. Hubbard prior to his death. Therefore, NEP and BPI are continuing to benefit from their part in the commercial exploitation of these properties even though Mr. Hubbard is no longer sharing in the benefits of the commercial exploitation. Even if Church of Spiritual Technology does eventually become the owner of the patents and copyrights formerly owned by Mr. Hubbard the licenses granted to NEP will still be in effect. Thus the private benefit to NEP and BPI is ongoing even though Mr. Hubbard is dead and even though a number of new Scientology organizations have been created. Further, it has not been established that other new and old organizations about which our requests for detailed information remain unanswered are not sharing in private benefit. The potential beneficiaries include Author Services, Inc., SOR Management Servies, Ltd, International Scientology Film Trust, and International Scientology Religious Trust.
The same persons who were in charge of Scientology prior to Mr. Hubbard’s death hold positions of control or influence in some of these new organizations. For example, persons who hold positions of influence in the reorganized Scientology structure also hold positions in Author Services, Inc., a for-profit corporation formed to benefit L. Ron Hubbard, Lyman Spurlock, David Miscavige, Greg Wilhere, Terri Gamboa, Marion Meisler, Maria Starkey, and Becky Hay, persons who hold influence in the reorganized Scientology structure, also hold positions in Author Services, Inc. Author Services, Inc., is now performing the same function of “collecting royalties” for the beneficiary of L. Ron Hubbard’s estate. Thus, as happened in the Church of California case, the income of an allegedly exempt organization (Church of Spiritual Technology should it obtain recognition of exemption) will be passed through a for-profit corporation which is controlled by persons who also hold positions of influence in the Scientology structure.
A similar problem exists with regard to the “central reserves” of Church of Scientology International and its subordinate churches. A nonexempt foreign entity, SOR Management Services, is being paid under a contract to “manage” these reserves. Again, the income of allegedly exempt organizations is being passed through a nonexempt organization controlled by persons who hold positions in, or act as nominees for, organizations in the topmost levels of the reorganized Scientology structure.
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Moreover, a newly revealed organization, International SOR Trust, about which our inquiries remain unanswered, has an ongoing relationship with some of the organizations engaged in the exploitation of the properties formerly owned by Mr. Hubbard. For example, at one time International SOR Trust purchased the stock of Bridge Publications, Inc., from Church of Scientology of California and later disposed of the stock to International Publications Trust.
Furthermore, individuals closely associated with Cancorp Investment Properties, a for-profit British Columbia corporation allegedly formed to serve the private interests of L. Ron Hubbard, about which we inquired, have been in positions of influence in the reorganized Scientology structure. You refuse to provide detailed information about Cancorp Investment Properties or Religious Research Foundation, another organization allegedly formed to serve the private interest of L. Ron Hubbard, about which we also inquired.
The proliferation of associated entities also includes a number of other new “international” organizations, about which we have inquired but you have not responded to our inquiries. Since the Scientology operating structure is the only funding source for these organizations, they and the persons who control then are also sharing in the income generated by the activities of. Church of Spiritual Technology, Church of Scientology International, and Religious Technology Center.
In light of the past history of Scientology’s operations, this continuing sharing in the net earnings of Scientology by nonexempt entities is sufficient by itself to raise serious concerns about private benefit and inurement. Nonetheless, you have chosen to ignore these concerns or have provided incomplete or partial information which is not adequate to establish that private benefit and inurement are not flowing to nonexempt entities, some of which employ and are directed by the same people who hold positions of influence in the new Scientology operating structure. Such self-dealing does not lose its identity as private benefit and inurement merely because it is conducted through intermediary individuals and/or organizations.
Accordingly, we find that you are not exempt because you have failed to establish that you do not operate for the benefit of private interests and that your net income does not inure to private individuals contrary to the prohibition contained in section 501(c) (3) of the Internal Revenue Code. In addition, the refusal to continue the review agreed to in the letters of March 17, 1988, to Church of Spiritual Technology, Church of Scientology International, and Religious Technology
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Center, concentrating on those areas of concern, and their refusal to fulfill the terms of the March 17, 1988, agreement prevents us from concluding that Scientology’s operations have changed and that activities previously found to be disqualifying for purposes of section 501(c) (3) of the Code have been discontinued. Therefore, we conclude that you have not established that you are operated exclusively for exempt purposes as required by section 501 (c) (3) of the Code.
Furthermore, the Service considers your failure to fulfill the terms of the March 17, 1988, agreement as constituting a failure to exhaust administrative remedies, as required by section 7428(b) (2) of the Code.
Contributions to your organization are not deductible under Code section 170.
You are required to file federal income tax returns on the above form. Based on the financial information you furnished, it appears that returns should be filed for the tax years shown above. You should file these returns with your key District Director for exempt organization matters within 30 days from the date of this letter, unless a request for an extension of time is granted. Returns for later tax years should be filed with the appropriate service center as indicated in the instructions for those returns.
If you decide to contest this ruling under the declaratory judgment provisions of section 7428 of the Code, you must initiate a suit in the United States Tax Court, the United States Claim Court, or the District Court of the United States for the District of Columbia before the 91st day after the date that this ruling was mailed to you. Contact the clerk of the appropriate court for rules for initiating suits for declaratory judgment. Processing of income tax returns and assessment of any taxes due will not be delayed because a declaratory judgment snit has been filed under code section 7428.
If you have questions, please contact the person whose name and telephone number are shown in the heading of this letter.
(Signed) E. D. Coleman
Director, Exempt Organizations
DECLARATION OF MICHAEL J. FLYNN1
I, MICHAEL J. FLYNN, swear under the pains and penalties of perjury that the following is true and correct.
1) I am the attorney for Gerald Armstrong. In April-June 1984, I appeared for Mr. Armstrong as trial counsel in the case of Church of Scientology and Mary Sue Hubbard v. Gerald Armstrong, Los Angeles Superior Court.
2) During the Armstrong trial, extensive evidence was introduced, both documentary and testimonial, relating to the fraudulent and criminal conduct of L. Ron Hubbard in connection with his relationship with the Church of Scientology. This conduct began in the 1950’s and continued at least up until November 1982 as established by the evidence in the trial.
3) There was also extensive evidence in the Armstrong trial relating to L. Ron Hubbard’s background, which for the most part, had been completely falsified by the Church and by L. Ron Hubbard with respect to Hubbard’s professional, educational, health, military career and marital background qualifications and credentials. Literally thousands of documents in the form of hundreds of exhibits supported an overwhelming testimonial record that Hubbard was in fact, a “pathological liar” as eventually ruled by the Trial Court, and that he had in fact, manipulated and absconded with Church funds.
4) During the trial, specific issues arose relating to the “MCCS Mission” which was a Scientology/Hubbard program to conceal Hubbard’s control of Scientology, shield him from liability, shield him from the fact that millions of dollars of Church funds had been funnelled to him, and to perpetuate this fraud in the future without Hubbard incurring liability for it. Although the Court actually sealed the “MCCS” tapes containing such evidence, there was evidence relating to Hubbard’s control of Church funds in the trial itself and in an affidavit of Gerald Armstrong that had previously been filed in the case of Burden v. Church of Scientology. This affidavit specifically relates to the MCCS Mission. The affidavit is not under seal and has never been under seal. This affidavit specifically quotes from the MCCS tapes which are under seal. In one of the tapes as set forth in the Armstrong affidavit, the highest legal official of the Church of Scientology is quoted as saying that Hubbard’s taking 2.1 million dollars of Church funds “was a classic case of inurement, if not fraud.” The tapes also reveal, as set forth in the Armstrong affidavit, that throughout the history of the Church, while it was holding itself out as an entirely legitimate, separate and distinct religious corporate entity,
-2-5) As a result of the foregoing evidence and an abundance of additional extremely detailed evidence, for the most part supported by documents including cancelled checks, Swiss bank account numbers, correspondence and miscellaneous other documents, it became obvious that Hubbard had in fact, engaged in criminal and fraudulent conduct with respect to his control of the Church of Scientology. Much of this evidence and the conclusions about Hubbard’s conduct were reported extensively in the media in the New York Times, the Los Angeles Times, the St. Petersburg Times, the Clearwater Sun and additional publications. It is my assumption that as a result of this extensive media coverage, at some time after the Armstrong trial, and after the Court had issued its findings of fact, the Criminal Investigation Division of the IRS began an investigation. After the Armstrong trial, I was contacted by several investigators from the Criminal Investigation Division of the Los Angeles office of the Internal Revenue Service.6) I was first contacted by Mr. Al Lipkin, Mr.Daniel Rocha, and Mr. Al Restuccia of the C.I.D. These gentlemen informed me that they were conducting an-2-
investigation in connection with the Church of Scientology and L. Ron Hubbard and they sought my cooperation. I told them that I would give them my full cooperation and provide copies of any documents, affidavits, exhibits, etc. which were not under seal and which related to the Church of Scientology and L. Ron Hubbard. I also told them that my clients, which included numerous former high level Scientologists, including Gerald Armstrong, William Franks, Laurel Sullivan, Howard Schomer, and others would give their full cooperation in connection with the investigation of the C.I.D. Mr. Lipkin and either Mr. Ristuccia or Mr. Rocha came to my office and spent several days examining documents relative to this subject. They thereafter contacted many of my clients.-3-
7) At no time did Mr. Restuccia, Mr. Lipkin, Mr. Rocha or any other member of the C.I.D., or for that matter any other state or federal agency ever provide any information to me as to the course of their investigation, the evidence that they had collected, their conclusions, or anything else. In fact, Mr. Restuccia, Mr. Rocha and Mr. Lipkin conducted themselves with the utmost professional courtesy and discretion, and never disclosed any information to me of any nature or description during the course of their investigation.
8) Subsequently, pursuant to its written policies,
including the “Fair Game Doctrine,” “Attack the Attacker” and its “Black Propaganda” policies, the Church of Scientology engaged in a world-wide smear campaign, through press conferences, news releases, and publication of its Freedom magazine claiming that myself and several of my clients including Gerald Armstrong were in a massive conspiracy with the IRS, the FBI, the United States Government, the Canadian Government, the United States Attorney’s Office, and sundry others to destroy freedom of religion in America. These claims are absurd on their face. Among the more specific and ridiculous allegations of Hubbard and Scientology are that C.I.D. agents offered or promised various benefits to myself and my clients in exchange for manufacturing evidence and in effect framing L. Ron Hubbard and his Church. Suffice it to say that these allegations are completely unfounded, totally false and have no basis in fact or reality. Indeed, the allegations themselves reflect the paranoid condition of both Hubbard and the Church which was noted by the trial judge in the Armstrong. The judge specifically ruled that the Church and Hubbard were “paranoid and schizophrenic,” were actually utilizing the “Fair Game Doctrine” right up to the time of the trial to “destroy” Hubbard’s perceived enemies, and that it had engaged in forms of blackmail and extortion.
9) Upon information and belief, the present campaign of the Church of Scientology alleging the conspiracy between
myself and various governmental agencies, is simply an effort to divert the ever-increasing compendium of legal decisions which have reached the same conclusions as the court in the Armstrong case with regard to the background and activities of Hubbard and his Church. In order to avoid civil and criminal sanctions for their past conduct, Hubbard is now engaging in his classic Black propaganda campaign to attack and discredit those who are engaged in litigation against him. In fact, there is no truth in the absurd claims of him and his agents.
Signed under the pains and penalties of perjury this 24th day of September, 1985 under the laws of California, Massachusetts, and Florida.
[signed Michael J. Flynn]