LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:19 p.m. No.8815226   πŸ—„οΈ.is πŸ”—kun   >>5235

>>8815172

Scientology's war: the 1960s and 1970s

Tax evasion, money smuggling and inurement

At the time that the CSC lost its tax exemption, Scientology faced controversy in multiple countries around the English-speaking world. It had been banned in the Australian states of Victoria and South Australia following a scathing report by a public inquiry. It faced pressure from the media, politicians and mental health professionals which led to further inquiries in Canada, New Zealand, South Africa and the United Kingdom.[26]

 

Hubbard determined at the end of 1966 that he would leave these problems behind by relocating Scientology's leadership, and himself, aboard a small fleet of ships that would travel around the Mediterranean and eastern Atlantic, out of reach of governments and the media. An elite group of the most committed Scientologists – the Sea Organization, or Sea Org – accompanied Hubbard, crewed the ships and received training in the most advanced levels of Scientology as they were being developed by Hubbard.[27] He resigned as President and Executive Director of the HASI, though this supposed relinquishment of management was a fiction; he continued to issue a stream of executive directives and policy instructions and managed Scientology from his ship via a worldwide telex network.[28]

 

Financial support for the Sea Org was initially provided by the Hubbard Explorational Company Ltd (HEC). Hubbard held ninety-seven of the hundred issued shares. In late 1966, the Church of Scientology of California began paying $15,000 per month to the HEC, and made a one-off payment of $125,000 to one of Hubbard's Swiss bank accounts. He also ordered every Scientology organization to set up an "LRH Good Will Repayment Account" at its local bank and instructed the CSC to buy Saint Hill Manor from him. By this time, Saint Hill was enormously lucrative, taking in up to Β£40,000 (equivalent to $110,000 at the time) a week.[29]

 

The UK-registered HEC was replaced after about 18 months by the Operation and Transport Corporation, Ltd. (OTC). This entity was incorporated in Panama – a well-known tax haven – in February 1968 by Hubbard, his wife and Leon Steinberg,[11] a Sea Org member who served as supercargo aboard one of Hubbard's ships.[30] Immediately after the trio incorporated OTC, they resigned and were replaced by three Sea Org members.[11] Hubbard, however, remained very much in control; he held ninety-eight of the 100 issued shares[31] and the US Court of Claims later found OTC to be a "sham corporation".[11]

 

The Sea Org had no separate corporate identity, so the activities of the Scientology fleet were carried on through a division of the Church called Flag (for "flagship"), based aboard Hubbard's flagship Apollo. Money was funnelled from the CSC to Flag, which usually relied on cash to pay its bills, with little regard for the law. When the United Kingdom introduced restrictions on currency exports in 1968, Scientologists travelling to join Flag were instructed to smuggle large amounts of cash with them. One Sea Org member, Mary Maren, later recalled: "They gave me about Β£3,000 in high-denomination notes to take out to the ship. I hid it in my boots." Leon Steinberg, one of OTC's three co-founders, became an adept forger; his creations were dubbed "Steinidocuments" by the Scientologists.[30]

 

Hubbard himself received huge sums. While ordinary Sea Org members were receiving $10 a week, Hubbard was being paid $15,000 a week (equivalent to $104,578 today) via the HEC and other Scientology entities. When one of his Swiss bank accounts had to be closed in 1970, $1 million in cash was transferred to the Apollo.[32] Mike Goldstein, who was appointed Banking Officer aboard the Apollo, recalled that there "were drawers full of money everywhere and more than a million dollars in the safe, but no proper accounts. We paid for everything in cash and were working with three different currencies – Spanish, Portuguese and Moroccan – and it seemed that if anyone wanted money for something they just asked for it."[33]

 

Goldstein's role as banking officer was supposed to be the responsibility of OTC, which purportedly delivered banking services to Flag. However, in reality OTC had no offices, officers or employees. Flag's funds were deposited in OTC's Swiss bank accounts, on all of which Hubbard was a signatory. In 1972, Hubbard had $2 million in cash transferred from OTC's accounts to the Apollo, where it was stored in a locked file cabinet to which only his wife Mary Sue had the keys.[11]

LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:19 p.m. No.8815235   πŸ—„οΈ.is πŸ”—kun   >>5238

>>8815226

Another vehicle for inurement was the United States Churches of Scientology Trust, described by the US Court of Claims in 1984 as "a bogus trust controlled by key church officials" including Hubbard himself as, initially, the sole trustee. It was operational from at least 1970, though it was not put on a legal footing until 1973.[11] Three tax-exempt Scientology organizations in Michigan, Minnesota and New York joined the Washington and California churches in a June 1973 agreement to pay ten percent of their monthly incomes to the trust. Mary Sue Hubbard later replaced her husband as a lifetime trustee with the power to appoint two other trustees for two-year terms.[34] The trust's money was held in Swiss bank accounts for the ostensible purpose of the defense of Scientology, though the US Court of Claims found little evidence that the money was actually used for that purpose.[11]

 

In addition, Hubbard and his wife were paid directly by the church. The couple's salary payments rose from $20,000 in 1970 to over $115,000 by 1972, and the church also paid for their lodging, food, laundry and medical services. Scientology orgs tithed an additional ten percent of their income to Hubbard.[11]

 

The torrent of cash being funnneled to Hubbard had the ostensible justification of "debt repayments". In 1966, an LRH Finance Committee was established with the aim of determining how much the church supposedly owed him. He told the press that he had "forgiven" a $13 million debt. The Committee appraised the Saint Hill estate as having a "business goodwill" value of Β£2 million, though Hubbard had purchased it for less than Β£100,000, and included in the debt personal items of expenditure such as the purchase of a yacht in 1940 – twelve years before Scientology had been founded.[28]

LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:19 p.m. No.8815238   πŸ—„οΈ.is πŸ”—kun   >>5245

>>8815235

>

Obstruction of the IRS and conspiracy to defraud

When the Church of Scientology of California lost its tax exemption, it reverted to the status of a regular taxpayer. The church, however, did not accept its new status. Despite being told that it now needed to file income tax return forms, it continued to file the less informative Annual Information Returns as if it were still a tax-exempt organization.[11] It also withheld payment of the taxes that it owed.[14]

 

The church adopted a range of obstructionist tactics to make it as difficult as possible for the IRS to carry out audits. Hubbard told Scientologists that he wanted to make the IRS "swim in circles". The church followed his lead by seeking to obstruct the IRS's efforts to audit the CSC's finances. The CSC's accountant, Martin Greenberg, told a meeting of Scientology officials in 1970 that he had purposefully made it difficult for the agency to audit the church. IRS agents were given at least two million documents jumbled up in a random order with the intention, according to Greenberg, of making the IRS's examiner so overwhelmed that he would give up and accept Scientology's version of the facts.[11]

 

When another Scientology church faced an audit in 1972, Greenberg advised staff to "give the IRS agent a bunch of records in a box in no semblance or order, to place the agent in a dark, small, out-or-the-way room, to refuse to give practical assistance like locating records, and to notify petitioner's Guardian Office immediately of the agent's presence." The scheme proved effective, and a two-year effort by the IRS to audit the church's finances between 1971 and 1973 ended in failure.[11]

 

The church occasionally resorted to outright forgery. It falsified its own financial records to conceal the role of OTC, including creating fake invoices purporting to show that OTC had provided the CSC with training and consultation services. Further falsification took place in the spring of 1975 when a project was undertaken to falsify financial records aboard the Apollo in anticipation of an IRS audit. This plan, which the US Court of Claims ruled was part of a conspiracy to defraud the United States, was put into effect after church officials grew concerned that the outflow of cash from the CSC to OTC would jeopardise the CSC's tax-exempt status.[11]

 

Hubbard also considered using a front group, the United Churches of Florida, to "preserve the assets of Scientology" in the event that the church lost its fight with the IRS. He wrote in a 1975 memorandum, "We must be…prepared…to go right on operating throughout the U.S. and work until we get a straitjacket on IRS. The ultimate objective of IRS is to knock out all Scientology organizations in the U.S. on the pretext of tax. Thus newly operating under new corporate status that does not connect [with Scientology] is the obvious last-ditch effort."[35]

LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:20 p.m. No.8815245   πŸ—„οΈ.is πŸ”—kun   >>5251 >>5409

>>8815238

Espionage

 

Mary Sue Hubbard, who directed many of Scientology's espionage operations, pictured in 1957

While the church was fighting the IRS in the courts, it also mounted a sophisticated seven-year campaign of espionage against the agency and numerous other government and business organizations in the US, Canada, UK and other countries. Its methods included burglaries, electronic eavesdropping, infiltration and theft of government documents on a massive scale. The campaign was intended to bolster its effort to regain tax exemption, but ended disastrously for the church when it was exposed and led to the imprisonment of some of its most senior leaders, including Hubbard's wife Mary Sue.

 

The church's espionage campaign was run by the Guardian Office (GO), a department of the church established by Hubbard in 1966. It took over the mission of the church's short-lived Public Investigation Section to "help LRH [Hubbard] investigate public matters and individuals which seem to impede human liberty so that such matters may be exposed and to furnish intelligence required in guiding the progress of Scientology." He instructed its staff to target critics of Scientology and "start investigating them promptly for FELONIES or worse using own professionals, not outside agencies … Start feeding lurid, blood sex crime [sic] actual evidence on the attackers to the press."[36] He also ordered his followers to "bring the government and hostile philosophies or societies into a state of complete compliance with the goals of Scientology. This is done by high level ability to control, and in its absence, by low level ability to overwhelm. Introvert such agencies. Control such agencies."[37]

 

The GO was headed by Mary Sue Hubbard, the "Commodore Staff Guardian" (Hubbard was the "Commodore"), with Jane Kember carrying out day-to-day management as the Guardian World Wide. It employed Scientologist volunteers as agents to help it carry out intelligence operations against its targets. In April 1972 the GO developed a three-pronged strategy to target the IRS.[11] Several intelligence operations were instigated:

LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:20 p.m. No.8815251   πŸ—„οΈ.is πŸ”—kun   >>5261

>>8815245

Operation Search and Destroy targeted organizations and individuals providing information to the IRS. The GO would use overt or covert means to obtain information which could be used to discredit them, while avoiding any disclosure of Scientology's involvement. The GO had already obtained information on IRS informants and sought to expand its coverage.

Operation Random Harvest sought to document criminal activity on the part of the IRS.

Operation Paris aimed to identify individual IRS officials working on Scientology tax matters and investigate their background and activities. A 'plant' would be recruited to develop social and political contacts with IRS personnel.[11]

Operation Juicy Clanger targeted tax records of prominent politicians and celebrities. Scientology operatives infiltrated the Los Angeles offices of the IRS and stole confidential files on California's governor Jerry Brown, Los Angeles' mayor Tom Bradley, the singer Frank Sinatra and the actress Doris Day, as well as attempting to steal John Wayne's tax records.[38] The church appears to have intended to blackmail the IRS;[39] the operation envisaged the church pretending that it had received the stolen tax records from a whistleblower and threatening to release them to create what the plans described as "an additional pressure on [the IRS] to finish the audit [of Scientology tax matters] favorably".[38]

A number of other espionage "projects" – subplans of wider operations against the IRS – were also developed:

 

Project Horn was a plan to covertly release stolen documents without revealing the thieves' identity. The records of other taxpayers would be stolen and released along with those of the Church of Scientology. A GO operative within the IRS was instructed to steal letterheaded stationery from the agency so that letters could be forged in the name of a non-existent whistleblower supposedly responsible for the leaks.[40] The operative did so and also stole tax records for Bob Jones University and the Unification Church.[41]

Project Beetle Cleanup called for the theft of "all DC IRS files on LRH, Scientology, etc., in the Intelligence section, OIO [Office of International Operations], and SSS [Special Services Staff]". It ordered the placement of agents in the "required areas or good access developed".[41]

Project Troy was aimed "to get prediction on future IRS actions" by planting a permanent bugging device in the office of the IRS Chief Counsel. Information acquired by eavesdropping would be used to brief the church's lawyers to mount defensive actions.[41]

LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:21 p.m. No.8815261   πŸ—„οΈ.is πŸ”—kun   >>5266 >>5294

>>8815251

In October 1974 the GO set out a plan – Guardian Order 1361 – to infiltrate IRS offices in Los Angeles, Washington and London, steal files on Scientology and Hubbard and develop a cover story to disguise how the information was obtained.[40] To address a situation that it summarized as the IRS "persisting in its attack upon the C of S and LRH … despite extensive legal and PR handling", it set out an "ideal scene" envisaging "[the] IRS with no false reports in their files on Scientology, uninterested in Scientology taxes, other than as a routine matter, doing their jobs and busy elsewhere with the usual red tape of a bureaucracy, with the psychotics located and their influence eliminated."[42] It called for the GO to "immediately get an agent into DC IRS to obtain files on LRH, Scientology, etc. in the Chief Council's [sic] office, the Special Services staff, the intelligence division, Audit Division, and any other areas."[41] The agent was to obtain "every single false report in every single IRS file. Once the data has been revealed, the lies can be corrected, the SPs [Suppressive Persons] isolated and handled, further PR and legal actions initiated and the IRS attack turned off."[42]

 

Scientology operatives broke into the room in the IRS's headquarters building where staff credentials were made and created fake credentials for other operatives to use.[43] The following month, the operatives infiltrated the office of the IRS's Chief Counsel and planted an electronic listening device to eavedrop on a meeting of senior IRS officials dealing with the church's tax affairs. They parked outside in the Smithsonian Institution's driveway and recorded the proceedings via their car's FM radio.[40]

 

The GO also used the Freedom of Information Act (FOIA) to manipulate the IRS into making it easier for Scientology agents to steal documents. FOIA requests were made to the IRS in the belief that it would result in all of its Scientology files being collated in one place so that IRS attorneys could review them. Scientology agents could then burgle the office where they were being held and obtain them. This plan was successful, and Scientology operatives reported that they had gained access to all of the documents held by the IRS's FOIA attorney.[11] By May 1975, the operatives had stolen more than 30,000 pages of documents, equivalent to a stack of paper ten feet (3.0 m) high, on Scientology and the Hubbards.[40]

 

A key objective of the GO's campaign was to uncover the individual who Hubbard believed was responsible for the IRS "attack" on Scientology. He told his followers that the IRS's interest in Scientology was due to "an insane individual with insane plans" who was operating a "false reports factory." He ordered the GO in June 1975 to "find the who back of these IRS attacks and document it for exposure plus all other items of interest. It could be IRS and the government is attacking any vocal group to pave the way for some coup by the government. Evidence as to the why of these attacks must be gotten, powerful enough to destroy the attackers when eventually used or revealed."[42]

 

By the mid-1970s the church's senior leadership had become increasingly concerned that Hubbard himself faced possible indictment for tax evasion. He wrote a secret minute to the Guardian Office on November 26, 1975 in which he told the GO: "WE COUNT ON YOU GUYS TO MOW THE IRS DOWN AND WIN ACROSS THE BOARDS".[44][45] A month later, the GO issued Guardian Program Order 158, "Early Warning System", ordering the establishment of a monitoring system "so that any situation concerning governments or courts by reason of suits is known in adequate time to take defensive actions to suddenly raise the level on LRH Personal Security very high". An agent was to be inserted into the IRS Office of International Operations, whose files on L. Ron and Mary Sue Hubbard and the Church of Scientology were to be obtained.[41] At the time, Hubbard was living in seclusion in La Quinta, California to avoid possible process servers and government agents.[46]

 

The GO initiated a new intelligence program against the IRS codenamed "Off The Hook" in June 1976, intended to get Scientology "off the hook, future threat nullified". It called for continued monitoring of IRS handling of Scientology tax exemption applications "on [Guardian Order] 1361 lines" – i.e. through the use of infiltration and theft of information – and ordered GO operatives to "ensure all attack preparation is completed and honed to razor sharp edge" in the event of any of the applications being denied. A program was also put in place to ensure "Founder's Protection from IRS Attack", requiring the "1361 Collection line" – the burglary team – to keep a close watch on the section of the IRS dealing with Hubbard's tax returns.[47][48]

LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:21 p.m. No.8815266   πŸ—„οΈ.is πŸ”—kun   >>5282

>>8815261

On one occasion, the GO's espionage operation was nearly discovered by a cleaning lady who interrupted a burglary team at the IRS headquarters. She became suspicious and called a security guard, but the operatives were able to satisfy him of their credentials and persuaded him to open the locked door of the office they were trying to burgle.[43] They were not so lucky in June 1976 when a more alert security guard caught a GO operative in the building. The operative was released and a warrant was issued for his arrest, prompting the GO to move him to a safe house where he was put under a round-the-clock guard. He lived as a fugitive for eight months until he became so disgruntled by his virtual imprisonment that he escaped and went voluntarily to the FBI to make a confession.[49] A further misfortune befell the GO in July 1977 when a case containing secret documents about its burglaries of IRS offices in Washington was accidentally left in a Los Angeles parking lot. An attorney handed it in to the IRS.[11]

 

The exposure of the GO's operations led to one of the largest raids conducted by the FBI up to that time. On July 7, 1977, scores of FBI agents simultaneously raided Scientology premises in Washington and Los Angeles.[50] The documents they seized revealed the scale of the GO's illegal activities and resulted in the imprisonment of eleven senior Scientologists, including Mary Sue Hubbard, for conspiracy against the United States.[51]

LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:22 p.m. No.8815282   πŸ—„οΈ.is πŸ”—kun   >>5292

>>8815266

IRS investigations of Scientology

The Church of Scientology has claimed that it was targeted under President Richard Nixon's "enemies list", which cataloged over 250 organizations and individuals that the Nixon administration targeted through federal agencies including the IRS. It has pointed to a list of organizations of concern drawn up by the IRS in 1969. However, a review by the Los Angeles Times in 1978 showed that while the IRS listed the church as an organization that "by their very nature can be expected to ignore or wilfully violate tax or firearm statutes," there was no mention of enemies or any suggestion of harassment or retaliation. It was in the context of a drive to consolidate overlapping investigations into groups that the IRS regarded as likely tax evaders.[52]

 

A number of investigations of Scientology were carried out by the IRS during the 1970s, notably from special intelligence units within the agency. In July 1969 the IRS established an Activist Organization Committee, later renamed the Special Service Staff (SSS), to investigate "dissident groups" for suspected breaches of tax laws. 99 organizations, including the Founding Church of Scientology, were targeted. The SSS was disbanded in 1973.[11]

 

Another IRS investigative body, the Intelligence Gathering and Retrieval Unit (IGRU), was established in 1973. This was responsible for gathering general intelligence unrelated to investigations of specific allegations. The information it gathered was thus very broad in scope, and often unrelated to the enforcement of tax laws. The CSC was designated a "tax resister"; papers relating to it were held in a file labeled "subversives", which contained materials only about Scientology. The IGRU was disbanded in 1975.[11]

 

IRS intelligence-gathering against Scientology was also managed in California through the state branch of the agency's Case Development Unit. Two special agents were responsible for gathering intelligence between 1968 and 1974 on CSC's operations and financial affairs.[11]

 

All three branches took an expansive view of their responsibilities in investigating Scientology. As well as filing reports on the organization's financial activities, they also collected information linking the CSC and other Scientology entities with criminal activities in various countries, including allegations of "homicide, blackmail, guerrilla training, break-ins, drug trafficking and the transportation of illegal firearms".[11]

 

The IRS considered imposing a 30 percent withholding tax on funds being transferred from the United States to overseas Scientology entities, but acknowledged in a March 1967 memo that this would have little effect on the main beneficiary of the transfers. It noted, "this would net little tax and not reach the real tax target – Hubbard."[52] In 1984, the Los Angeles office of the IRS launched a criminal investigation of Hubbard, prompted by defectors from Scientology alleging that he had skimmed off millions of dollars from church funds.[53] A letter was sent to Hubbard's representatives in September 1985 warning that he faced indictment for tax fraud.[54] David Miscavige and another senior church official, Pat Broeker, were also put under investigation.[55] An IRS official, Marcus Owens, said that thousands of agency staff were involved in the investigations. However, according to other federal officials, the Department of Justice was unwilling to spend money on a prolonged conflict with Scientology.[56] The investigation was called off after Hubbard died in January 1986, as it was regarded as moot by that point.[53] The church was informed by the IRS in November 1987 that no charges would be filed against it, Miscavige or Broeker.[57]

 

Scientology's war: the 1980s and 1990s

LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:23 p.m. No.8815292   πŸ—„οΈ.is πŸ”—kun

>>8815282

David Miscavige, the current leader of the Church of Scientology

The jailing of the GO's leadership led to radical changes within the Church of Scientology at the start of the 1980s, and in turn to significant changes in the church's strategy towards the IRS. The legal position of the Church and Hubbard himself – who stayed in hiding at a ranch outside Creston, California until his death in January 1986 – was still very precarious. To address this problem, he created an "All Clear Unit" (ACU), headed by David Miscavige, the then twenty-year-old head of the church's Commodore's Messenger Organization (CMO). Its purpose was to resolve all of the outstanding legal problems so that it would be safe for Hubbard to come out of hiding.[58] The ACU removed Mary Sue Hubbard from her post in 1981[59] and the GO itself was dissolved in 1983. Its functions were transferred to a new section, the Office of Special Affairs (OSA), under the effective control of Miscavige.[60]

 

One of the lines of activity that came out of the "All Clear" project was a push to resolve the dispute with the IRS. The stakes for the church were extremely high. According to Mark Rathbun, who worked with Miscavige as the church's Inspector-General, by the 1980s the IRS assessed the church's tax liability as upward of a billion dollars, at a time when Scientology's assets were only around $200 million. Paying that liability would have wiped out the church several times over. Beyond the purely financial issues, though, Miscavige and Rathbun believed that tax exemption would have significant political and legal advantages. As Rathbun notes, "If you have tax exemption you have religious recognition, you're treated differently in courts, there's almost some level of First Amendment immunity."[61]

 

Rathbun was tasked with mounting a campaign intended to overwhelm the IRS on multiple fronts.[61] This involved litigating on a massive scale, establishing front groups, applying political pressure, employing private investigators against individual IRS officials and ultimately reaching a negotiated agreement with the IRS. At the same time, the Church undertook internal changes intended to make it harder for the IRS to have visibility of its finances.

LEONTOCEPHALINE ID: a39f42 April 16, 2020, 12:23 p.m. No.8815296   πŸ—„οΈ.is πŸ”—kun   >>5346

CATS gained political support from conservatives, claimed to have 3,000 members, and published glossy advertisements paid for by the International Association of Scientologists.[80] However, its ties to Scientology proved toxic for its longer-term success and deterred potential allies. Its proposals were adopted instead by another conservative organization, Americans for Fair Taxation, which campaigned to promote a sales tax "without the taint of Scientologist involvement".[78] CATS's signature proposal was rebranded the "FairTax" and was eventually adopted by prominent Republican politicians including John McCain and Fred Thompson. CATS itself withered after 1993 and by 2005 it was virtually defunct.[78]