OPC Baden-W-rttemberg Report, April 2004: "The Scientology Organization's Fight for Recognition as a Non-Profit Organization in the USA and its Effects in Germany"

OPC Baden-W-rttemberg Report, April 2004: "The Scientology Organization's Fight for Recognition as a Non-Profit Organization in the USA and its Effects in Germany" Scientology

Webbed at: http://www.gerryarmstrong.org/50grand/media/bw-lfv-rpt-2004.html

The Scientology Organization's Fight for Recognition as a Non-Profit Organization in the USA and its Effects in Germany

This is an unofficial translation of the original German report available at http://www.verfassungsschutz-bw.de/broschuere-so-steuer-2004.pdf. For translation comments or help, please contact us.

Table of Contents

1. Preliminary remarks 2. The Creation of Scientology as Religion 3. The Infiltration of the IRS with the "Snow White" Program 4. The End of "Snow White" and the GO 5. The Fight for Tax-Exemption in the 1980s 6. The Path to "Peace" 7. The First Television Interview with David MISCAVIGE 8. The 1 October 1993 Agreement between the IRS and Scientology 9. SO declarations on IRS Form 1023 10. David MISCAVIGE's Speech on Tax Exemption 11. New Developments in the USA 12. The Effects of Tax Exemption on Germany 13. Appendix

1. Preliminary Remarks

In the story of the origins of Scientology, which arose in the United States in the early 1950s, there are several mysterious aspects, which would certainly include its tax exemption from the Internal Revenue Service (IRS), the USA's highest tax authority. The IRS granted the "Scientology Organization" (SO) tax exemption in 1957, but revoked it in 1967 on the following basis: "Scientology practitioners are profiting from the 'non-profit' Church; The Church's activities are commercial; The Church is serving the private interests of L. Ron Hubbard." The SO denounced the revocation, and declared its intention to ignore the decision. For the next 26 years the SO paid no taxes to the US revenue authorities.

When surveillance of the SO by the Germany Constitutional Protection authorities began in January 1997, it was only known that according to a 1 October 1993 agreement with the IRS, the "Church of Scientology" had been recognized as non-profit, a result of which was that all the organizations under the SO had attained tax-exemption. More specific details about what had led up to the agreement only became apparent in subsequent years, through the Internet in particular.

Because tax exemption from the IRS had the result in the United States of acknowledgment as a non-profit religious association, it is not at all surprising that Scientology has consistently tried to exploit this circumstance for advertising purposes. This is also the way it supported its demands in Germany and other European countries for recognition as a non-profit religious organization and submitted this as evidence in court proceedings, as ultimately happened in the Cologne Revenue Court1. Despite the fact that the SO is not recognized in many European nations as a religious community, it goes to great lengths to present itself to the world's public as a religious minority which is persecuted and discriminated against, especially in Germany. In doing this it has not been able to pass up the absurd and tasteless comparison with the persecution of the Jews in the Nazi era. The propagandistic intention of this tactic was obvious: by conjuring up a supposed possibility of a revival of cynical state despotism on German soil, distrust and skepticism was to be kindled in other nations, mainly the USA, against Germany, thereby hindering or even preventing effective proceedings by German authorities against the SO. Besides that, it was to give the impression, with reference to the special protection for freedom of belief and conscience under Article 4 of Basic Law (BL), that any state intervention against Scientology's practices were a blatant violation of the Constitution.

The question of whether the SO could actually be regarded as a religious or worldview association was, by decision of the German Constitutional Protection officials, not of primary importance in observing the organization.

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1 In those hearings the Cologne Revenue Court decided 24 October 2002 that SO license fees were tax exempt in Germany in accordance with the double taxation agreement with the USA - contrary to the SO presentation, this was not evidence of recognition as either a non-profit or a religious community. See chapter 12.

In accordance with the Constitutional Protection Laws of the land and its states, the Constitutional Protection authorities serve to protect the highest values of the Constitution, which are also described as liberal democratic basic laws. Article 4 of Basic Law is part of these basic laws. Because, however, it is only one of several elements of liberal democratic basic laws, and therefore depends of their continued existence, the consequence arises that one cannot, or cannot fully, invoke Article 4 to use the pretext of practice of religion or a related religious activity to eliminate the highest principles of value in the Constitution. Results of SO surveillance have shown that parts of Scientology's ideology are incompatible with liberal democratic basic law.

In the United States, however, religious freedom is defined differently. Because of its historical development, a strict separation of church and state exists there. Anyone who can make a credible display of being a religion can claim the corresponding constitutional protection. In addition, in 1981 the United States Supreme Court decided that protection of religious freedom in the First Amendment did not presume that the religious fundamentals had to be acceptable, logical, sensible or comprehensible to others.

These contradictions permit the question to be raised of why the Office for the Protection of the Constitution in Baden-Wuerttemberg is interested in the circumstances of "Church of Scientology" tax exemption in the USA. Especially noteworthy along these lines is the attempt by Scientology to exert influence on government agencies. Besides that is the fact that the SO establishments in Germany, in view of the global strategy, are in no way self-sufficient, but are part of a hierarchical organization that is tightly controlled from the USA. Therefore it seems appropriate to analyze the history of SO tax exemption in the United States and the associated methods of operation by its management, because comparable conduct cannot be ruled out in Germany. In an interview with the "St. Petersburg Times" in October 1998, the leader of the SO, David MISCAVIGE, told of his goal of attaining tax exemption or religious recognition, as the case may be, for Scientology in the most important European countries.2 Certainly the Federal Republic of Germany was included.

Unlike other legal agreements and the usual customs, the agreement between the IRS and the SO was kept secret, meaning it was regarded as a tax agreement with a private individual. Details were not known until a copy of the agreement was put on display at the end of December 1997 in the Wall Street Journal, which published it on the Internet. While so far there is no sort of proof that the SO proceeded illegally with regard to the agreement, it was at least engaged in putting as much pressure as possible on the IRS.

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2 http://www.sptimes.com/TampaBay/102598/scientologyquotes.html

None of the following points were contested by SO leadership, and several were even publicized by David MISCAVIGE in his October 1993 speech on tax exemption: 3

The IRS and its staff were sued by the SO for 128 million dollars. The SO filed a total of 2,5000 lawsuits against the IRS. The SO engaged private detectives to illuminate weak spots in the private lives of IRS management. The SO "Freedom Magazine" published sensational assertions about alleged IRS "crimes." The SO sent out press releases to the US press with picture sub-texts like "Don't kill my daddy," and "How do you spell IRS in Russian? Answer - KGB!". In the 30 December 1997 Wall Street Journal front page article "Scientologists and IRS settled for $12.5 million" it said:

"Further, the church agreed to drop thousands of lawsuits filed against the IRS in courts around the country and to stop assisting people or groups suing the agency based upon claims prior to Oct. 1, 1993, the settlement date. (...)

The 1993 agreement was nearly unprecedented and brought an end to an extraordinary battle. Starting in 1967, the IRS had argued that the main Scientology church should lose its tax-exempt status because it was a for-profit business that enriched church officials. The church's response was an all-out attack: filing suits against the IRS, feeding negative stories about the agency to news organizations, and supporting IRS whistle-blowers. (...)

The church's $12.5 million payment was intended to cover the church's payroll, income and estate-tax bills for an undisclosed number of years prior to 1993. It is unclear how much money the IRS originally sought. (...)

"The IRS normally settles on tax issues alone," said Robert Fink, a New York tax lawyer who reviewed the agreement. "What the IRS wanted was to buy peace from the Scientologists. You never see the IRS wanting to buy peace." 4

For a better understanding of the SO fight for tax exemption, events are subsequently presented in chronological sequence, beginning with 1950.

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3 http://www-2.cs.cmu.edu/~dst/Cowen/essays/bigdeal.html 4 http://www-2.cs.cmu.edu/~dst/Cowen/essays/wj301297.html

2. The Creation of Scientology as Religion

Until 1950, Lafayette Ronald HUBBARD, born 1911 in Tilden, Nebraska, tried, with a certain degree of success, to make a name for himself as a science fiction writer. It was not until "DIANETICS" and "Scientology," which he extolled as the results of his research work, that he gradually met up with success, since HUBBARD was then able to recruit a steadily increasing following for his teachings.

When L. Ron HUBBARD released his book, "DIANETICS: The Modern Science of Mental Health" in 1950, he described his findings as the result of research work in the area of the human mind. To further develop this "Science of the Mind," HUBBARD published another book, "Scientology - The Fundamentals of Thought" as the ideological superstructure of "DIANETICS." HUBBARD saw himself as a bearer of salvation, and described his "science" as the sole chance of ridding the world of all evil, like war, crime, illness and poverty. When he founded the "Hubbard Association of Scientologists International" (HASI) in 1952, there was not yet any discussion of this being a "church" or of Scientology being an "applied religious philosophy." However, HUBBARD soon saw the commercial advantage of stepping forward as a "church," since the status of religion would bring tax advantages with it. In April 1953, he wrote a long letter to Helen O'Brien, the director of the HASI establishment in Philadelphia, in which he discussed his considerations of converting Scientology into a religion. "I await your reaction on the religion angle," he wrote, and continued, "In my opinion, we couldn't get worse public opinion than we have had or have less customers with what we've got to sell. A religious charter would be necessary in Pennsylvania or NJ 5 to make it stick. But I'm sure I could make it stick."6

In December 1953, HUBBARD founded three "churches in Camden, Jew Jersey:" the "Church of American Science," the Church of Scientology" and the "Church of Spiritual Engineering." The signers of the founding charters were HUBBARD, his third wife, Mary Sue, along with daughter Henrietta. On 18 February 1954, the "Church of Scientology of California" was founded. Its message included assuming the goal, the purpose and the creed of the Church of American Science, as it was founded by L. Ron Hubbard." Another "Church of Scientology" was founded in Washington, D.C., and in 1954 HUBBARD urged that the organizations of Scientology should be converted into independent "churches" all over the United States. The directors of HASI establishments should, in the future, describe themselves as clergy, and to get this impression across better, wear church garb and add the title "Reverend" to their names.7

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5 New Jersey. 6 http://www.holysmoke.org/cos/really.htm 7 http://www.whyaretheydead.net/krasel/aff_ga82.html (Gerry Armstrong, Declaration of 22 July 1982). http://holysmoke.org/sdhok/essay.htm - The Corruption of Scientology by Chris Owen. http://www.altreligionscientology.org/f-rite.html - A Piece of Blue Sky by Jon Atack.

In the late 1950s, HUBBARD was living without any financial worries, the membership numbers of Scientology were steadily rising, as was its income. In 1957 the IRS exempted Scientology from reporting for taxes on the basis that Scientology was a business exclusively devoted to "religious and educational purposes and its income did not in any way profit an individual." However, the revenue office was not aware that HUBBARD and his family were living in grand style from the "church's" income. From the establishment of the "Founding Church" in 1954 to March 1957, HUBBARD received an annual salary of 6,500 dollars. In 1957, when the money started pouring in, he increased his salary to a commission, 10% of the gross income of the "Founding Church." Other Scientology groups paid similar amounts of money, 10%, called "tithes." In addition HUBBARD received income from his numerous books for royalties, a total of more than 250,000 dollars a year, considerably more than the president of the United States. The IRS finally uncovered these questionable practices and revoked the tax-exemption of the "Founding Church" and all other Scientology establishments. As was mentioned before, this decision was not recognized by Scientology.8

HUBBARD developed a regular conspiracy theory, according to which the United States, as well as other governments, were under the influence of a "psych" conspiracy, cleverly worked out by professional psychiatrists who constantly worked against him. His attacks against government and revenue authorities in text and in lectures are still seen as justified by the SO today, who continue to recognize the validity of the words and writings of their Founder:

"There have been in the United States several income tax attacks in Washington D.C. on myself and on the non profit status of the organizations there. (...) There was an income tax attack on myself earlier this year and last year from the United States and both of these actions were won by ourselves, which more or less removed any danger to the Washington organization, since the government was using the attacks on me as a pretext to seize the Washington organizations.(...)

Our enemies on this planet are less than twelve men. They are members of the Bank of England and other higher financial circles. They own and control newspaper chains, and they are, oddly enough, in all the mental health groups which have sprung up in the world. These chaps are very interesting fellows.

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8 http://www.holysmoke.org/cos/redux.htm - The Corruption of Scientology by Chris Owen

They have fantastically corrupt backgrounds; illegitimate children; government graft; a very unsavory lot. And they apparently, sometime in the rather distant past, had determined on a course of action. Being in control of most of the gold supplies of the planet, they entered upon a program of bringing every government to bankruptcy and under their thumb, so that no government would be able to act politically without their permission." 9

3. The Infiltration of the IRS with the "Snow White" Program

Revocation of tax exemption was not without consequence for the IRS. In April 1973, HUBBARD gave the order for the "Snow White" program, whose goal it was to remove all "false documents" about the "Church" and HUBBARD from governments around the world. The plan was set into action by the predecessor of today's SO intelligence service, the "Guardian Office" (GO). The GO was taken completely unawares in July 1977, though, when the FBI conducted a search of Scientology's headquarters in Washington, D.C., and seized tens of thousands of incriminating documents, including the complete details of the infiltration and the break-ins into the IRS, as well as other government agencies. In October 1979, eleven Scientologists, including HUBBARD's wife, Mary Sue HUBBARD, were convicted for conspiring against the government, and received sentences of from two to six years in prison. L. Ron HUBBARD withdrew to his hide-out in California, never appeared in public again, and died in January 1986. The indictment of the federal court of the United States for the District of Columbia in the criminal case against Mary Sue HUBBARD et al. contains the following facts of the case:10

"On November 21, 1973, Jane Kember, the Guardian WorldWide (Guardian W/W) wrote a letter to the Temporary Deputy Guardian U.S. (T/D/Guardian US) Henning Heldt "Re Interpol Washington." 'Interpol Washington,' (...). "we now know that Washington D.C. has police files on LRH, and if the reference is correct, Interpol Washington has a file on LRH as well." She then directed that "[I]t is important that we get cracking and obtain these files and I leave you to work out how."(...)

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9 "Rons Journal 67" deutsche �bersetzung der Bandabschrift durch Scientology 1986. 10 http://www.ingo-heinemann.de/usa-55.htm (Teile der Anklageschrift in deutscher �bersetzung). ttp://www.wwwaif.net/GO/Gostip/toc.html (English version) http://www.xenu.net/archive/go/legal/legal.htm www.xenu.net bei Operation Clambake/Scientology Court Files http://www-2.cs.cmu.edu/~dst/Cowen/essays/timeline.html

"The "project" called for the infiltration of the Interpol National Central Bureau for the United States, then located in the United States Department of the Treasury main building in Washington, D.C., in order to obtain all files regarding, or, referring to, Scientology and its founder L. Ron Hubbard The defendant Snider acknowledged the receipt of that 'project,' and by return mail approved its issuance. Mr. Meisner thereafter assigned the "project" to the defendant Mitchell Hermann, who was then Branch I Director in the District of Columbia Information Bureau. The Interpol files required to be obtained by Ms. Kember's outstanding order of November 21, 1973 (Government Exhibit No. 2) and Mr. Snider's order of July 1974, were not taken, however, until the burglaries of the office of Assistant United States Attorney Nathan Dodell in the United States Courthouse for the District of Columbia in May 1976."11

In part A of the indictment, the SO order to infiltrate the IRS in Washington, D.C. was described: "In the late summer of 1974, the defendant Cindy Raymond, who then held the position of Collections Officer in the US Information Bureau in Los Angeles, California, sent a directive to Michael Meisner ordering him to recruit a loyal Scientologist to be placed as a covert agent at Internal Revenue Service in Washington, D.C. That covert operative was to obtain employment with the Internal Revenue Service for the purpose of taking from that agency all documents which dealt with Scientology, including those concerning pending litigation initiated by Scientology against the United States Government."However, a suitable person could not be found.

In "Guardian Order 1361" authored by Jane KEMBER 21 October 1974, the operative goal was laid out concretely:

"(...) 10. 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. (...)

16. Collect data on the Justice Dept. Tax Division for the org board, the current terminals, and the people handling Scientology.

17. When the correct areas are isolated, infiltrate and get the files."

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11 Mssrs. SNIDER, MEISNER and HERMANN were then SO members.

"Guardian Order 1361" also dictated that the origin of the data attained should be kept under wraps, so it could be used against Scientology's enemies. It also says in the indictment that the accused, Michell HERRMANN, director of GO Information section 1, was to install an eavesdropping device in IRS management's conference room for a confidential meeting, which affected Scientology, that was to be held there. At that meeting, further methods of procedure against the various "churches" of Scientology were to be discussed, and the policies addressed were those needed to be able to found a "religious institution" with tax exemption in accordance with the IRS codes. The meeting, all of which was overheard by the GO, took place on 1 November 1974 and was transcribed by agents who sat outside in a car.

Between the end of December 1974 and July 1975, a number of documents were to be made off with, after which the accused, MEISNER received an order in spring 1975 to also steal documents that had nothing to do with Scientology, so as to camouflage the theft of the SO papers. In addition the "project" received the order to appropriate IRS letterhead paper, which would be used later on for other purposes.

On 27 May 1975, Mary Sue HUBBARD wrote a letter to her GO representative, Jane KEMBER, which described Scientology's strategy against the IRS:

"1. To use any method at our disposal to win the battle and gain our non-profit status.

2. To buy all the time we can in terms of years ... So we work to win, but also to delay as time works on our side, not theirs (...)."

In July 1975, the "Church of Scientology" submitted a "Freedom of Information Act" (FOIA) 12 request against the IRS. RAYMOND instructed MEISNER to get information from the office of Charles Zuravin, the IRS attorney that worked on FOIA documents. As a consequence, Scientology systematically sued the IRS and other federal agencies to then get the documents, which Scientology had demanded under the FOIA, out of the offices of the attorney.

4. The End of "Snow White" and the GO

Over 100 FBI agents participated in the search-and-seizure operations that began 8 July 1977 on GO establishments in Washington, D.C. and Los Angeles. Over 23,000 documents,

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12 The FOIA was also used as a model for a law in Germany that regulated access to official information. For SO's use of this informational alternative, see chap. 11.

many of which had been stolen from government offices, along with burglary equipment and electronic eavesdropping devices were confiscated. It was revealed during the investigation that a GO agent, who had been planted in the Justice Department, had been working in a restricted area in which top secret CIA documents were maintained. GO agents had also broken into the office of the attorney general. Parallel to this, it was discovered in Canada that the GO had also infiltrated various police positions there at the federal and state levels, as well as the office of the attorney general. The Scientology agents were charged with crimes that included infiltration and theft of documents from a number of state institutions, as well as private organizations. Especially affected by these mechanizations were Interpol, world organizations, attorneys' offices and newspapers.13

On 26 October 1979, nine high-level management personnel and GO agents were sentenced in an American federal court for theft and conspiracy against the government, including Mary Sue HUBBARD, who received five years imprisonment. 24 other Scientologists, including L. Ron HUBBARD, were designated as unindicted co-conspirators.14

In a "Reply of the Scientology Church" Germany to a 1998 brochure from the Hamburg Office for the Protection of the Constitution, which described GO operations in detail, it said, among other things:

"The Hamburg Office for the Protection of the Constitution uses its pages to hawk a church program, designated 'Snow White,' as having the 'character of an intelligence agency,' and tries to present it as 'conspiratorial' and as an illegal project that recommended illegal transactions. Actually this program, which the Hamburg OPC confidently tries to indicate is a product of its investigations, has been known for more than two decades. In the USA it is 'public record,' which means fully accessible to the public."

This choice of words is somewhat conspicuous when one notices what the judgment was, which was passed down by a regular United States Court based on the evidence submitted, and that the accused signed an acknowledgment of guilt. It says further in the "Reply":

"... The Office for the Protection of the Constitution did not find a shred of proof that the Scientology Church was politically involved in Germany or had ever in its now almost 30-year existence pursued a politically motivated goal - much less "opposed democracy or Constitutional ideals is a hostile or dismissive way."

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13 "A Piece of Blue Sky," Jon Atack (1992) p. 240 / "Los Angeles Times." 14 Brochure of Free and Hanseatic Hamburg, State Office for the Protection of the Constitution, "Scientology's Intelligence Service - Fundamentals, missions, structures, methods and goals," 1998

It's also interesting that in the process of "Snow White," there was a GO Order No. 732 of 20 April 1973, called "Project Coal." Under no. 27, the Federal Republic of Germany was addressed and the actions to be taken were listed as follows: 15

"The Federal Republic of Germany is peculiarly sensitive to a charge of GENOCIDE as the Nazi behavior against the Jews provided the impetous [sic] for the Convention. The country bends over backwards to mend its reputation as criminals. It is a signatory. (a) Coordinate with all GO actions and only operate through the GO. A suit is already in progress. (b) Using existing attorneys, obtain what legislation Germany passed to enforce the GENOCIDE Convention which it signed and ratified. (c) Seek to obtain, by subpoena in any existing suit and other legal means, any files or dossiers on Scn or its principals. (d) Compile a list of names of those who have been violating the Convention articles or its principles. (e) Do a rough draft of a petition to whatever authority in Germany was specified in the legislation in (b) above. Include all references and documents as well as the bona-fides of Sen. Cite those guilty of violations of the convention, document exactly how and the clause violated. (f) Have the attorney do the final draft. (g) Submit the petition. (h) Exploit any advantages gained. (i) In the case of no real success, be sure that all recourse has been exhausted as this goes before the UN and the Eu Commission. (j) See that this concludes as a deterrent to further attack."

After the top management of the GO was convicted, the SO tried to brush off the affair as a few leading members that deviated from the right path. All the criminal actions were purportedly committed by a handful of people, rather than by the "Church." This circumstance is presented by the SO in its "Reply" to the Hamburg Constitutional Protection brochure about the SO intelligence service the following way:

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15 http://home.snafu.de/tilman/krasel/germany/snowwhite.html

"... Hubbard, who had retired from church management back in 1966, was first informed of what had actually occurred in September 1981 by church management. That was the first point in time that it could be proved internally in the church that the criminal charges against a handful of GO staff corresponded to reality. Hubbard expressed his annoyance and explicitly praised every person who had taken effective steps to uncover this misunderstanding."

That would supposedly mean that HUBBARD first learned about the mechanizations of the GO four years after the FBI raided the SO headquarters in Washington, D.C. and in Los Angeles, and two years after the sentencing of his own wife, Mary Sue HUBBARD.

With the uncovering of the "Snow White" programs, the charges and conviction of those responsible, the fate of the "Guardian Office" (GO) was sealed as the SO intelligence service. Under the management of David MISCAVIGE, the old GO was dissolved in 1983, and the "Office of Special Affairs" was founded in its place.

Besides that, a radical restructuring of the entire structure of the "Church of Scientology" and all its enterprises ensued. At the October 1982 "Mission Holder Conference" in San Francisco, the new leadership ranks of David MISCAVIGE were introduced. The reorganization, which allegedly had "the goal of making the business structure of the Church more rigid and effective" 16, had the effect of making an overview of the individual corporations far more difficult, especially by the IRS.

5. The Fight for Tax-Exemption in the 1980s

Despite the fallout of the charges and conviction of former GO staff, the SO, under the new leadership of David MISCAVIGE and with its new structure, continued its "war" with the IRS. The method of procedure was more cautious, but no less determined than in the 1970s.

At exactly age 20, David MISCAVIGE took over direction of the SO as its new strong man in 1981. In May 1982, he took the first measure to ensure his power by installing the "Religious Technology Center" (RTC) in management as the highest command and control committee.

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16 Transcript of the tape recording of the "Mission Holder Conference" (Jon Atack, "A Piece of Blue Sky," Internet: http://www-2.cs.cmu.edu/~dst/Cowen/essays/irslegal.html).

After HUBBARD's death in January 1986, the RTC not only assumed control of the political power on the GO had up to that time, but as of today, as the holder of all rights and owner of all trade and service marks, also guarantees the existence of Scientology and ensures its effectiveness. Now it was up to MISCAVIGE to continue waging the battle to once again attain tax-exemption from the IRS, but to do it in such a way that the mistakes of the 1970s would not be repeated. The SO's refusal to pay any sort of taxes remained unchanged under the new management. In September 1984, Scientology lost the proceedings to dispute the IRS tax assessments for 1970-72. This court tax decision documented in detail how high were the amounts withdrawn by Scientology during the time in question and transferred to L. Ron HUBBARD. The judgment described the tactics as well, which were used against the IRS, such as putting the tax documents, about two million pages, out of order so that they had to be re-sorted at the cost of the American taxpayers.17

At the end of 1984, the SO came upon a new and extremely effective tactic against the IRS. They founded the front group, "National Coalition of IRS Whistle-blowers." Journalist Douglas Frantz detailed SO methods of procedure in a 9 March 1997 article in the New York Times:

"On the surface, the coalition was like many independent groups that provide support for insiders who want to go public with stories of corruption. But Stacy B. Young, a senior Scientology staff member until she defected in 1989, said she helped plan the coalition as part of Scientology's battle against the IRS in late 1984 while she was managing editor of the church's Freedom Magazine.

'The IRS was not giving Scientology its tax exemption, so they were considered to be a pretty major enemy,' Ms. Young said. 'What you do with an enemy is you go after them and harass them and intimidate them and try to expose their crimes until they decide to play ball with you. The whole idea was to create a coalition that was at arm's length from Scientology so that it had more credibility.' Ms. Young said she recruited Paul J. DesFosses, a former IRS agent who had spoken out against the agency, to serve as the group's president. DesFosses acknowledged that Scientology provided substantial financing, but he denied that the church created or ran the coalition. 'We got support from lots of church groups, including the Church of Scientology,' DesFosses said in a recent interview.

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17. Jon Atack, "A Piece of Blue Sky," chapter 3, Internet: http://www-2.cs.cmu.edu/~dst/Cowen/essays/irslegal.html

The coalition's biggest success came in 1989 when it helped spark congressional hearings into accusations of wrongdoing by IRS officials. Using public records and leaked IRS documents, the coalition showed that a supervisor in Los Angeles and some colleagues had bought property from a firm being audited by the agency. Soon after the purchase, the audit was dropped and the firm paid no money. Kendrick L. Moxon, a longtime church lawyer, acknowledged that the coalition was founded by Freedom Magazine. He said its work was well known and part of a campaign by Scientology and others to reform the IRS.

The church's war had a covert side, too, and its soldiers were private investigators.(...)"

Michael L. Shomers, another private investigator, said he shared none of Pena's qualms, at least initially.18 Describing his work on behalf of Scientology in a series of interviews, Shomers said that he and his boss, Thomas J. Krywucki, worked for the church for at least 18 months in 1990 and 1991. Working from his Maryland office, he said, he set up a phony operation, the Washington News Bureau, to pose as a reporter and gather information about church critics. He also said he had infiltrated IRS conferences to gather information about officials who might be skipping meetings, drinking too much or having affairs. "I was looking for vulnerabilities," Shomers said. Shomers said he had turned over information to his Scientology contact about officials who seemed to drink too much. He also said he once spent several hours wooing a female IRS official in a bar at a conference, then provided her name and personal information about her to Scientology. (...)

Moxon, the Scientology lawyer, said the IRS was well aware of the church's use of private investigators to expose agency abuses when it granted the exemptions. Moxon did not deny hiring Shomers, but he said the activities described by Shomers to The New York Times were legal and proper. Moxon and other church lawyers said the church needed to use private investigators to counter lies spread by rogue government agents."

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18 PENA and SHOMERS were private investigators hired by the SO.

6. The Path to "Peace"

It was only in 1991, when the SO entered into direct negotiations with the IRS, that the intensity of the mutual attacks by each opponent began to subside. The following steps between the parties and the associated agreement was confidential until the end of 1997. Douglas Frantz described the extraordinary turn of events in his 9 March 1997 article in the New York Times." 19

"Scientology made the initial gesture toward a cease-fire when Miscavige, the church leader, paid an unscheduled visit to the IRS commissioner, Goldberg. (...)

Miscavige does not grant interviews, church officials said, but Rathbun20 said the Goldberg meeting was an opportunity for the church to offer to end its long dispute with the agency, including the dozens of suits brought against the IRS, in exchange for the exemptions that Scientology believed it deserved. (...)

A former official in the IRS exempt organization division first disclosed the existence of the negotiating committee in a trade journal after the agreement was announced. He said in an interview that creating the group meant a settlement was almost preordained. 'Once the IRS decided to set up this rather extraordinary group, the wheels were in motion for a deal,...' Not even a stinging court decision in favor of the IRS could derail the talks. Midway through the negotiations, in June 1992, the U.S. Claims Court handed down its decision upholding the IRS denial of a tax exemption for Scientology's Church of Spiritual Technology. The ruling underscored the agency's longstanding concerns over the commercial nature of Scientology and other matters. (...)

A portion of the correspondence between the agency and church from the two years of negotiations was released when the exemptions were granted three and a half years ago. (...) The church provided extensive information on its finances and operational structure. (...)

In August 1993, the two sides reached an agreement. The church would receive its coveted exemptions for every Scientology entity in the country and end its legal assault on the IRS and its personnel.

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19 New York Times, 9 March 1997, http://www-2.cs.cmu.edu/~dst/Cowen/essays/nytimes.html 20 Marty RATHBUN is a high-ranking SO member.

There was just one more step. Scientology entities were required to submit new applications for exemption, which were to be evaluated by the agency's exempt organizations division. But something unusual occurred there, too. (...)

The agreement was announced on Oct. 13, 1993. The IRS refused to make public any of its terms, including whether the church paid any back taxes. The IRS also refused to discuss the legal reasoning behind one of the biggest turnarounds in tax history."

7. The First Television Interview with David MISCAVIGE

How much the IRS spent for its investigations of Scientology in the 40-year dispute, including the cost of defending itself from endless lawsuits filed by the "Church" and its members, is not known. All the same it's easy to determine that the SO remains true to the policies of its founder, L. Ron Hubbard: "The purpose of the suit is to harass and discourage rather than win." In 1992, Judge Ronald Swearinger of the Los Angeles district told an American lawyer's magazine he believed that Scientology had slit his tires and drowned his dog while he presided over court proceedings against the "Church." The SO contests these accusations. In 1993, Judge James M. Ideman was presiding over a suit involving Scientology in Federal District Court in Los Angeles when he took the unusual step of withdrawing from a case that concerned Scientology. He said he could no longer preside fairly because the church "has recently begun to harass my former law clerk who assisted me on this case."

Time magazine published journalist Richard Behar's article, "Scientology: Cult of Greed" in May 1991, which called the church "a hugely profitable global racket that survives by intimidating members and critics in a Mafia-like manner." 21 The "church" and a member sued Time magazine and Behar for libel. This process cost each side several million dollars. The SO complaint was dismissed by a federal court judge in 1996, but Scientology appealed. The proceedings finally came to a close ten years later, on 12 January 2001. A US appeals court found that Behar's article had not been maliciously libelous. 22

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21 http://www.cs.cmu.edu/~dst/Fishman/time-behar.html 22 http://laws.lp.findlaw.com/2nd/989522.html

How much of a threat Scientology viewed this cover story in their battle for tax exemption is expressed in three events. Behar was subjected to strong attacks on the part of the SO, which he wrote about in his article "The Scientologists and Me":

"For the TIME story, at least 10 attorneys and six private detectives were unleashed by Scientology and its followers in an effort to threaten, harass and discredit me. (...) By day's end, I later learned, a copy of my personal credit report -- with detailed information about my bank accounts, home mortgage, credit-card payments, home address and Social Security number -- had been illegally retrieved from a national credit bureau called Trans Union. (...) Two detectives contacted me, posing as a friend and a relative of a so-called cult victim, to elicit negative statements from me about Scientology."

When MISCAVIGE was giving his 8 October 1993 speech on tax exemption in Los Angeles, he mentioned Behar in connection to unfair methods of procedure by the IRS:

"His name is Richard Behar. The same SP who later wrote the "Time" article. (...) Just when it looked like the investigation was waning, Behar was brought on the scene to write a total hatchet job article accusing us of all manner of crimes. The plan was to fan the flames so that senior law enforcement officials would be pressured to make a move."24

How strong this pressure was felt by the SO and how much MISCAVIGE was set on countering Behar's "accusations" manifested itself in a subsequent event. Ted Koppel, the reporter on ABC News Nightline, tried for almost nine months to get an interview with MISCAVIGE on Richard Behar's article. When MISCAVIGE finally consented to an interview on 14 February 1992, it was a sensation, since this was his first appearance on television. When he spoke with Koppel it was quite evident that MISCAVIGE adhered to HUBBARD's "Tech" and simply raised assertions that couldn't be proved, true to the motto, "Never defend, always attack."

"KOPPEL: -but why were you so �what was it about the Time magazine story that so upset you?

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23 The SO designates its enemies "SP" ("Suppressive Person"). 24 http://www-2.cs.cmu.edu/~dst/Cowen/essays/speech.html 25 Methods of procedure, Management and Social techniques according to HUBBARD.

Mr. MISCAVIGE: Because it wasn't reporting on anything, it was an attempt to cause something. Richard Behar is a hater.

As the interview went on, Koppel asked Mr. MISCAVIGE whether he had testified in court as to his accusations against Behar:

"KOPPEL: You have affidavits?

Mr. MISCAVIGE: From them? Of course not. You think they'd admit it?

KOPPEL: Well, I mean, you're...

Mr. MISCAVIGE: But they're the ones who said it."

The complete interview is available on the Internet, and also accessible as a video file. 26

8. The 1 October 1993 Agreement between the IRS and Scientology

The official translation of the agreement between the IRS and the SO encompasses somewhat more than 60 pages, and will therefore not be included here in full. Excerpts are attached at the end of this brochure.

It is again emphasized in the introduction of the document that the two sides are making an effort to end years of controversy, and they intend "that the relationship between them begin anew." In addition, it is stipulated "that the Service will not examine the Church for any year ending prior to January 1, 1993. In exchange the SO and the organizations associated with it obligate themselves to not initiate any legal proceedings against the Service or its employees for the time prior to the date of the agreement. It is further explicitly stated that the "Church will make a single payment that is intended to extinguish any potential tax liability that may be due and unpaid by any Scientology-related entity for all tax years up to and including the tax year ending in 1992. Thus, as of December 31, 1992, the Church will be current with respect to all income, employment and estate tax liability."

In Section II. RESOLUTION OF OUTSTANDING ISSUES, items that led to tax law controversy in the USA are addressed.

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26 http://www.lisatrust.bogie.nl/Media/us-nightline-dm.htm

Timeline

1950 L. Ron Hubbard released the "DIANETICS" book and later published "Scientology: The Fundamentals of Thought" as its ideological superstructure.

December 1953 The Church of Scientology, Church of American Science and Church of Spiritual Engineering were founded in Elizabeth, New Jersey by L. Ron Hubbard.

2 January 1957 The Internal Revenue Service grants a tax exemption to the "Scientology Organization" (SO).

18 July 1967 The Internal Revenue Service revokes tax-exemption for the SO.

20 April 1973 L. Ron Hubbard gives the order for the Snow White Program.

21 October 1974 Jane Kember, director of the SO intelligence service, the "Guardian Office" (GO), issues Guardian Order 1361. In it the "Snow White" orders from L. Ron Hubbard are laid out.

1 November 1974 GO agents illegally eavesdrop on an IRS conference about Scientology's tax-exemption.

7 July 1977 The FBI raids Scientology's headquarters in Washington, DC and Los Angeles and seizes tens of thousands of incriminating documents.

October 1979 Eleven Scientologists, including Mary Sue Hubbard, are convicted of conspiracy and imprisoned for between two and six years.

1981 David MISCAVIGE takes over SO leadership.

Timeline

May 1982 The "Religious Technology Center" (RTC) is founded.

1983 Under the leadership of David MISCAVIGE, the GO is disbanded and the "Office of Special Affairs" (OSA) founded.

Late 1984 "The National Coalition of I.R.S. Whistle-blowers" is founded. Scientology's aim was to undermine IRS credibility.

Summer 1989 Scientology hires private investigators to investigate the personal lives of senior IRS officials.

October 1991 A meeting occurred in Washington, D.C. of high-ranking Scientologists David MISCAVIGE and Marty RATHBUN with IRS Commissioner, Fred T. Goldberg Jr.

13 August 1993 The IRS agrees to grant tax exemptions to every SO entity in the United States, plus foreign entities based in the UK and Cyprus. The Church files new applications for exemptions as part of the agreement.

1 October 1993 The agreement comes into force. Scientology pays the IRS $12.5 million in back taxes and drops all the lawsuits brought by Church entities and individual Scientologists against the IRS.

8 October 1993 David MISCAVIGE holds a "victory rally" attended by 10,000 cheering Scientologists in the Los Angeles Sports Arena.

30 December 1997 The secret agreement is leaked to the Wall Street Journal, which promptly puts it on its Web site and leads with a front-page story.

It is stated, with reference to set time limits, how the particulars are to be handled on the part of the "Church" with regard to declarations and/or changes inside the individual business areas of the church. It is further indicated that both sides will forego any lawsuit. The payments the SO has to make to resolve the open points of controversy are set in advance.

"B. Payment in Consideration of Resolution of Outstanding Issues. 1) At the same time this Agreement is executed, Church of Scientology International is paying by banker's draft the sum of Twelve and One-Half Million United States Dollars (US$12,500,000.00), receipt of which the Service hereby acknowledges, as consideration for the settlement of outstanding issues with the Service as set forth in this Agreement."

The section closes with the determination that the stipulations of section II are final and conclusive, "notwithstanding the seven-year transition period set forth in other provisions of this agreement." The transition period refers to the years 1993 to 31 December 1999.

In Section IV OBLIGATIONS AND UNDERTAKINGS IN THE TRANSITION PERIOD, the tax requirements the SO has to meet are laid out and the persons associated with these obligations are named. The Service made it a requirement of the "Church" to install a committee to implement the appropriate conclusions and meet regularly with IRS staff. The persons involved are high-ranking SO staff members who have been members for many years and are viewed by MISCAVIGE as trustworthy.

It is stated in another part of the agreement text that a report is required at year's end, and that accounting procedures are to be following in accordance with the agreement. The mode of contact between the IRS and the "Church" is also specified, reporting procedures as well as meetings, which are to be held annually. Guarantees, operating procedures and monetary fines in case of transgression are also arranged.

The duration for the submission of annual reports from an auditor, who reported to the CTCC,27 was set at three years, beginning with the close of 1993.This means that no reports were required from 1996 on.

Paragraph C arranges the fiduciary reporting requirements and determines that at year's end, information about the total compensation of the most highly compensated individuals within the SO has to be submitted.

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27 "Church Tax Compliance Committee," see attachment.

Besides that, modifications in organizational documents, payment of dividends, ownership change or the creation of new entities are to be disclosed. The length of the fiduciary reporting period is also set at three years, from 1993 through 1995.

Paragraph D indicates that the statements of the "Church," as well as the CTCC, are in agreement with applicable law. Paragraph E. concerns operational modifications, such as payment and transfer of funds, as well as dissolution of certain areas of business and transference of their assets to SO institutions.

Section V of the agreement deals with the disclosure of information as set forth in legal requirements. In doing this, a distinction is set between the information contained in IRS Form 1023 and the other information in other parts of the agreement.

In summary it's determined that the IRS will keep the agreement confidential and will not reveal any detailed information about the scope or nature of the deal it cut with the SO. The only thing to be disclosed was to be the official tax exemption of about 150 Scientology corporations. The fact that both sides are so concerned about confidentiality might have something to do with the 25 years of past dispute. Obviously everything possible was done to avoid further public discussion.

Section VII fixes the "Treatment of Parishioners' Contributions." It is stated that the Service agrees not to contest the deductibility of Church of Scientology fixed donations in connection with qualified religious services until 31 December 1999. It is further stated that the treatment of donations, as well as the associated tax refunds, will be decided in accordance with the tax laws of the United States. It is agreed to that donations will not be examined again until 1 January 2000, and then only if the requirement for this has been established through legislative modification.

9. SO declarations on IRS Form 1023

Of particular interest is a reference that, as of 1992, the US Supreme Court represented the opinion that Scientology exhibited a purely commercial character. The "agreement" addresses the form 1023, in which Scientology has to answer IRS questions. While most of this is not accessible to the public, some has been obtained through FOIA and published on the Internet.28

Among other things, the IRS asks in form 1023 about lawsuits in which Scientology and its members/former members were involved, and how the objections made by SO to the judgments should be rated.

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28 http://www-2.cs.cmu.edu/~dst/Cowen/essays/irs1023.html

As an example of the sort of argument used by the SO, only the most well-known case to date will be cited, the "Church of Scientology vs. Gerald Armstrong," which had a devastating effect not only upon the SO, but on its Founder, L. Ron HUBBARD.

Armstrong was a staff member of the "Church of Scientology" from 1969 to 1982, and was not only acquainted with HUBBARD, but also worked closely together with him. In his statement of 22 July 1982, he testified:

"I was a member of the Sea Organization of Scientology from February 1971 to December 1981, during which time I held many positions and was in many locations where I directly observed L. Ron Hubbard and other Scientology executives. At no time did I ever get the impression that Mr. Hubbard or any other senior executive considered that Scientology is a religion. (...) In January 1980, I was assigned to a project to collect materials about L. Ron Hubbard for the purpose of providing documentation for a biography to be written by Omar V. Garrison. During the following two years I read several thousand pages of documentation, much of it written by Mr. Hubbard himself. Never before had anyone within Scientology ever had all this information assembled in one place or had the opportunity to view and assimilate the whole truth about L. Ron Hubbard. From these documents and other sources I learned that Mr. Hubbard had continually misrepresented himself and had lied about his past, his accomplishments and credentials. I learned also from the documents I collected that Mr. Hubbard had lied about how and why Scientology had been established as a "religion". (...) I learned through my study of the documentation I assembled, and from more than ten years of observation of Mr. Hubbard and the Scientology movement, that Mr. Hubbard has cruelly deceived his followers to the point where they will themselves lie and attempt to deceive others about the truth concerning him and Scientology." 29

When Armstrong left Scientology at the end of 1981, he took some of the documentation that had been entrusted to him by HUBBARD so he could prove his own credibility. Later these documents were handed to biographer Omar Garrison. Armstrong was declared by the SO to be a "Suppressive Person,"30 subjected to a campaign of libel and taken to court.

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29 http://www.whyaretheydead.net/krasel/aff_ga82.html 30 See footnote 23.

In the civil complaint of Scientology vs. Armstrong, Judge Paul Breckenridge, Jr., presiding over the California Superior Court, issued a decision that described the methods of operation used by HUBBARD and his organization as follows:

"In addition to violating and abusing its own members civil-rights, the organization over the years with its "Fair Game" doctrine has harassed and abused those persons not in the Church whom it perceives as enemies. The organization clearly is schizophrenic and paranoid, and the bizarre combination seems to be a reflection of its founder LRH. The evidence portrays a man who has been virtually a pathological liar when it comes to his history, background, and achievements. The writings and documents in evidence additionally reflect his egoism, greed, avarice, lust for power, and vindictiveness and aggressiveness against persons perceived by him to be disloyal or hostile." 31

In part three of the IRS Form 1023, which is available on the Internet, the Service, in reference to this court decision, asked whether the "church" was in agreement with the court's position. Naturally it wouldn't be expected that the SO would let Judge Paul Breckenridge, Jr.'s decision go without comment or in any way agree with it, as it was this decision in particular that continued to influence the court in its decisions, which resulted in tax exemption being denied. Here the SO finally saw its big chance to present the matter from its point of view, thereby defusing that particular judgment. On Form 1023, the IRS's question was answered cleverly:

"We have included some background information here and an epilogue to the decision in question. That is because the Service has continuously thrust the Armstrong case at us, demanding an explanation. The Armstrong case decision was so inflammatory and intemperate that it was used to stigmatize the Church in the legal arena and make other outrageous decisions possible. As we shall demonstrate below, all this decision ever involved was Armstrong's state of mind, which subsequently obtained evidence proved conclusively to be one sordid, sado-masochistic nightmare. Furthermore, Armstrong's state of mind horror stories have fallen on deaf ears in recent litigation. Relying on Armstrong or the Armstrong decision is wholly unjustified."

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31 http://holysmoke.org/ga/breck.htm

Another part of that text describes how Armstrong left the "Church" at the end of 1981, taking with him confidential documents that had been entrusted to him. In summer of 1982, the SO said it had obtained proof that Armstrong had stolen thousands of documents from the archives to give to his attorney. Both these people were purported to have the intention of making money from these papers. In September 1982, Armstrong was said to have then, faced with imminent court proceedings, represented that he only took the documents to inform the public about HUBBARD and the "Church."

It says further in the SO statement:

"The Statement of Decision adopted as the facts of the case the allegations which Armstrong had made in his trial brief. These allegations included the statements on which Armstrong premised his justification defense; i.e., that defendant "... became terrified and feared that his life and the life of his wife were in danger, and he also feared he would be the target of costly and harassing lawsuits." The judge went on to pontificate on the psychological mind-set of not only Mr. Hubbard, but Scientology at large. The only lawsuit that there was to fear was the one that was ultimately filed for return of the stolen documents. It never would have been brought had Armstrong voluntarily returned the documents when asked, despite the theft."

Armstrong was correct in voicing the idea that the SO was persecuting him with annoying and extravagant court proceedings, because in 1993, when the "agreement" was settled with the IRS, SO lawsuits against Armstrong were still in progress. The organization tried (and tried), with all means, to silence Armstrong, since he was one of the few people who had been able to look at the documents about L. Ron HUBBARD, and by doing so had been cleared of any misapprehensions about the house of lies upon which HUBBARD's person as well as the SO were built. As to how the SO's explanation in Form 1023 of the Armstrong case could have satisfied the IRS to the point of bringing about a complete change of attitude on their part cannot, however, be answered here.

10. David MISCAVIGE's Speech on Tax Exemption

The "agreement" with the IRS could be one of the greatest successes of Scientology in the USA. Therefore it is not at all surprising that David MISCAVIGE announced the "spectacular victory" on 8 October 1993, at a celebration for the 9th anniversary of the "International Association of Scientologists" (IAS), in the Los Angeles Sports Arena.

Now if one would believe that because of the repeated assurances in the "agreement" that any mutual attack or accusation had ended, MISCAVIGE's speech would also have been conspicuous in this regard. But the manner and style of his presentation, the vehemence of his words against government authorities and especially against the IRS are far more reminiscent of settling accounts than of a factual presentation.

A special issue of "Scientology News" German-language edition Nr. 32/1993 for the celebration of the ninth anniversary of the IAS, said:

"'The war is over,' David Miscavige, the chairman of the Board of the Religious Technology Center, announced to the tumultuous applause of more than 10,000 Scientologists in Los Angeles. He said that the bitter, 40-year battle with the IRS of the United States had finally ended. The announcement was made on 8 October in the Los Angeles Sports Arena during the ninth anniversary of the International Association of Scientologists, which was the largest gathering of Scientologists ever to take place."

The transcript of David MISCAVIGE�s speech is available, however, only in the English language - on the Internet.32 MISCAVIGE began his account with 1950, the year HUBBARD came out with the "DIANETICS" book. He did not omit any of HUBBARD's "conspiracy theories," and began with the alleged attack by the "psychs," which according to HUBBARD had been extremely concerned about the publication of "DIANETICS" being so popular. Among other things, MISCAVIGE described the attack by the "psychs" and their alleged "co-conspirators," the IRS, with the following words:

"In the old days the Romans threw the Christians to the lions. So the psychs turned to the modern day, 20th century inquisitors. The creatures of the night. That's right, the vampires. And not little vampires, but the ones who suck the blood from the whole country and so the villain of this plot came on the scene - the Internal Revenue Service."

The theory that the psychiatrists caused all the difficulties between the SO and the IRS is repeatedly referred to in MISCAVIGE's speech.

MISCAVIGE also included the "false reports" that are purportedly produced and distributed worldwide:

"You've heard about false reports being spread through the world.

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32 http://www-2.cs.cmu.edu/~dst/Cowen/essays/speech.html

And often we have talked of Interpol being the conduit for these reports abroad. That is all true. But it was always the IRS creating the documents and sending them out in the first place. Don't forget - the IRS hadn't found the Church doing anything wrong. They just wanted to get us. So they had to resort to pure lies. Picking up a technique from their mentor, Adolf Hitler, in his book, 'Mein Kampf', they subscribed to the theory that "the bigger the lie - the more easily it would be believed."

That is not the only passage in which MISCAVIGE puts the IRS in the same ballpark with Nazi ideology. He also attacked former US President Nixon, who he said the SO had given first place on its internal list of enemies.

"With Nixon finally resigning the presidency in disgrace, the IRS's problems with Scientology were just beginning to build. They had been attacking the Church with the purpose of destroying it for over a decade. Yet Scientology had only grown. And the IRS was starting to lose on the legal front.They had won the case against the Founding Church's tax exemption on a technicality but their win was short-lived, as that Church had long since ceased to be the mother church and the hoped-for destruction of Scientology didn't occur. So a new strategy was in order. In 1974, the IRS convened a meeting with all their top people. It was 'the Final Solution Conference on Scientology.'"

Even if not directly stated, the allusion to the April 1943 Wannsee Conference, which was to decide the "Final Solution to the Jewish question," cannot be overlooked. MISCAVIGE emphasized, "We now have the minutes of that meeting which make it clear just how evil their motives were. IRS agents and lawyers sat around conspiring about how to deal with the Scientology problem." MISCAVIGE did not mention that those minutes were the result of a GO eavesdropping operation (see chapter 3), which carried legal consequences with it. He was trying to present Scientology as an innocent victim only trying to defend itself from the IRS.

In another passage, MISCAVIGE complained that after the removal of the GO and the subsequent reorganization of the SO, the IRS showed no interest at all in discussion. He saw the reason for this as the IRS having had undercover agents in the GO, who were removed when it was. Then MISCAVIGE went into great detail about the "attacks" from the IRS, and accused them of the most vicious tricks, the purpose of which was supposedly to eradicate the "church." He didn't leave out the press or the courts, either:

"Our church staff and attorneys fought this hard in the courts and were able to get hearings before judges across the country to declare these IRS actions illegal. And, that's where we stood at the beginning of 1991. Scientologists were being harassed left, right and center and our hopes were hanging on the judicial system while judges across the country considered our motions to stop this latest and most vicious assault. And then, just when it looked like we may get a fair shake,' Time' magazine hit the newsstands. It was but a few weeks later that we found one of the judges on our case had framed the cover and placed it in his chambers. And that the IRS attorney coordinating this assault against Scientology was playing tennis with this same federal judge. And although we may not know who won those tennis matches, you can be sure it wasn't the Church of Scientology!"

MISCAVIGE was not particular about using extreme language in representing the attacks of the tax authorities or the pressure put on his organization, e.g., "A battle of life and death was being fought on a daily basis," and "The IRS had made this war so personal that they would make it dangerous to just be a Scientologist." Of course there was no mention about the methods that Scientology used on the IRS and its staff.

Afterwards MISCAVIGE came to the events of October 1991 and described the "meeting" with the IRS chief. This was the way he said the goal of tax-exemption had been achieved:

"The magnitude of this is greater than you may imagine. And it may take some time to sink in. It hasn't with me yet! It's been a long, hard war - unprecedented in fact - but it is over! The most notable point is that Scientology organizations have been recognized as bona-fide and fully qualifying for tax exemption to the fullest extent of the law. What exactly does this mean? To begin, there are no outstanding tax assessments from the IRS against any Scientology or related entity in the United States. They are all gone. It also means that all Scientology organizations organized not-for-profit have been so recognized and are tax exempt. That's right-every single one of them. There are many non-religious groups we sponsor-which use LRH's tech to improve society in areas like drug rehabilitation, study, criminal reform and morals. All such groups have been recognized as fully tax exempt!

Later on MISCAVIGE described how he imagined the future of Scientology in Europe:

"And what about all those battles and wars still being fought overseas - many of which were brought about originally by IRS false reports. Well, there's good news on that front too. To begin with, we will waste no time carrying news of this new breakthrough to all foreign countries. Those battles have been being held in place by suppressive governments just quoting the IRS. The line has been 'You are an American religion. If the IRS doesn't recognize you, why should we' The answer is -- 'They do. And now, you better as well!' Make no mistake -- there is much work to be done on those fronts. But we have already taken the first steps in using this IRS victory to end the rest of the battles. What about all of the false reports I mentioned tonight. We are now in possession of them and will be receiving many more documents out of our files. We will diligently work to clean up all false reports."

MISCAVIGE refered to a letter that the IRS had agreed to send out "to the governments of every nation," which would include a factual report about Scientology, that the SO itself had written.

At the end of his speech, MISCAVIGE took a surprising turn and found moderate words for the IRS:

"But not everybody in the IRS is suppressive. In fact, over the years the IRS finally assembled a team of some very decent individuals to resolve these matters with us. Ones who were sick and tired of the war and who were courageous enough to stand up for what was right. (...) The real thing I want you to understand is that we didn't just get exemption,we ended a war.We wanted to end all conflicts, to have a fresh start - to get rid of any potential future conflicts so some SP33 couldn't start it all up again. It took time.

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33 See footnote 23.

It took a lot of work. It resulted in a peace treaty. I even brought a copy of it to show you. This represents what it took to resolve each and every outstanding conflict with the IRS. That's how big this war was. I want you to understand something else. The power of our group is greater than you can imagine. When we stand shoulder to shoulder, there is nothing we can't accomplish."

MISCAVIGE is cited as asserting that Scientology and its former enemy, the IRS, would now be friends, and that "The end of this war should not be considered as an end of cycle so much as a beginning of ... our greatest expansion ever." He concluded his speech with the following words:

"I am declaring a general amnesty for all Scientologists. Except for suppressive acts, any and all offenses committed are forgiven. Full details of this amnesty will be made available to you. Avail yourself of it. The future is ours."

11. New Developments in the USA

In the recent past there was a court hearing in the USA in which a complainant refereed to the agreement between the IRS and the "Scientology Organization." A couple of the Jewish Orthodox faith filed a complaint that the tax authorities did not view the school tuition money for their children, who went to a school that taught according to their beliefs, as tax-deductible. In the basis for the complaint, the couple included the October 1993 agreement between the "Church of Scientology" and the IRS, as published by the Wall Street Journal in December 1997. Because the IRS had granted the "Church of Scientology" similar deductions, it was a violation of jurisdictional equality and the terms of the contract set in law to refuse the same deductions to them as Orthodox Jews, as the complainants argued.

The complainants could not implement their claim to tax deductible school tuition, however, and Judge Stephen Reinhardt voiced the following in the basis of the decision:

"The IRS is simply not free to enter into closing agreements with religions or other tax-exempt organizations governing the deductions that will be available to their members and to keep such provisions secret from the courts, the Congress, and the public." (...)

"An IRS closing agreement cannot overrule Congress and the Supreme Court. If the IRS does, in fact, give preferential treatment to members of the Church of Scientology -- allowing them a special right to claim deductions that are contrary to law and rightly disallowed to everybody else -- then the proper course of action is a lawsuit to put a stop to that policy. The remedy is not to require the IRS to let others claim the improper deduction, too." 34

-------------------------------------------------------------------------------- 34 The basis of the decision of the United States Court of Appeals for the Ninth Circuit, Pasadena, CA of 29 January 2002, not yet in force.

The Jewish couple appealed this 2002 decision, especially because one of the judges had stated it appeared to him that Scientology, founded by L. Ron Hubbard, a sci-fi writer from the 1950s, was granted tax advantages in violation of the First Amendment. The hearing, which had originally been scheduled for 23 March 2004, was postponed until October 2004 on procedural grounds. The SO tax lawyer refused to take a position on the topic, because her client was not part of the process.

In the various newspaper articles that have appeared on the case in the US press, mention is made of demands to disclose the grounds for the SO receiving tax exemption in 1993 from the IRS. The sentence cited by judge Barry Silverman multiple times seems noteworthy: "The sole issue before us is whether the Sklars' claimed deduction is valid, not whether members of the Church of Scientology have become the IRS's chosen people.."

12. The Effects of Tax Exemption on Germany

In the Form 1023 which the SO was required to fill out by the IRS, there is a document of 16 December 1989, which concerns the "Snow White" program for the Federal Republic of Germany, and which apparently is still in effect. The objective of the program is still to find "false reports" on the Church and LRH in government files and to "expunge" them. The SO answered the question posed by the IRS in response to this program, in particular with reference to the GO's methods of operation in the years 1973 to 1977, by stating that the document in question had been stolen from church offices. In addition it was stressed that the "Snow White" program was still in use:

"In an ongoing effort to practice the Scientology religion free from the interference of misinformed government agencies, the Church continues to pursue the Snow White objectives with the legal means at its disposal. Only when the Church is free from governmental harassment and is accorded its rights will the need for Snow White activities vanish."

The agreement between the IRS and Scientology of October 1993 ended on 31 December 1999. A new agreement was settled, but the IRS is keeping it secret. From the SO viewpoint, however, the "Snow White" program has not lost validity in Germany. Since the beginning of the 1970s the SO has had establishments in Germany that receive their instructions from the USA via the European headquarters of the SO in Copenhagen. Tax exemption from the highest US tax agency and the associated briefings of the authorities in Germany has the consequence that the SO has spread their claim to acknowledgment as religion to other nations.

In October 1996 - before surveillance of Scientology by the Office for the Protection of the Constitution began in Germany - the press spokesperson of SO Hamburg, Gisela HACKENJOS, gave the "TAZ" newspaper an interview. In it she stated expressly what the SO strove for: "We are a church. We are a religion. Look at America. The Germans will have to wake up. Done, over and out!"

As early as June 1994 a four-page edition of the "Freedom" SO newspaper appeared in which the IRS's tax exemption was again presented and commented upon. The leading article read, "Acknowledgment for Scientology," and it once again contained the most important points of the agreement, which had previously appeared in the special edition of the "Scientology News." It was further presented that the IRS not only had granted tax exemption to Scientology and more than 150 of its associated corporations, but that it had simultaneously found that Scientology was considered to be a "charitable, religious organization."

However in none of the "agreement's" section is Scientology referred to as a religion, it just addresses tax exemption for a non-profit organization in accordance with US tax laws. The IRS October 1993 statement to Scientology contains a reference that the recognition of tax-exempt status has come about.

In the USA, the state is prohibited from deciding what is or is not a church/religion. Therefore the proceedings in the Scientology case are not surprising. At the end of an article in the "Freedom" magazine is an interesting statement which proves that the SO in Germany is in no regard separate from the management in the USA and their orders:

"But the Scientology Churches in Germany spread the same teachings in Germany, they word according to the same directives and follow the same finance system as in America. Their staff are bound to the same goals - the spiritual freedom of mankind. Their religious dogma and practices are identical."

Interestingly, only four months later a reference appeared for the first time in the US State Department's human rights report that Scientology and its adherents were discriminated against in Germany. This tactic continues to be used by the SO, whereby it does not flinch from simulating written proof, thereby deceiving the law:

* In November 1997 German and American media published a report about a German citizen who sought and attained asylum in the USA. The woman stated her reason for asylum was that she was a Scientologist and she had left Germany for "fear of persecution of her faith." Actually, the Scientologist woman wanted to avoid impending measures to be taken by the German tax authorities. In summer 2000 an investigation by journalists of "Stern" news magazine (issue 27/2000) revealed that the case had apparently been staged by Scientology to expose Germany internationally.

* In 1998 the "Menschenrechtsbuero der Scientology Kirche Deutschland e.V." was founded in Munich. Its stated goal was to expose supposed attacks or rights violations by German agencies against the SO and to introduce the appropriate steps. So, among other things, numerous protest actions for "Suppression of Religious Freedom" have been held by this "human rights office" in Germany, all of which indicate that Scientology received tax exemption and therewith acknowledgment as religion in America.

*In the 1980s the SO founded the "Kommission zum Schutz des Buergers gegen Datenmissbrauch e.V." ("Commission to protect citizens against data abuse") as the predecessor to this "human rights office," even though inquiries can be made at any time through the federal and state data protection laws and the government agencies also have reporting obligations. It can be surmised from this that the SO intends to bring about a general law about the viewing of government files so as to be able to determine what information about it individual agencies have. Apparently German agencies are expected to open their files in a manner similar to the "Freedom of Information Act" (FOIA).

* Laws comparable to the FOIA, called freedom of information laws, have existed in Brandenburg since 1998, in Berlin and Schleswig-Holstein since 2000 and in Nordrhein-Westfalen since 2002. At almost the same time the SO founded the "Aktion Transparente Verwaltung - Gegen Korruption und fuer Informationsfreiheit" in Munich and Hamburg. It is stated on their pages in the Internet that they are for passage of a freedom of information law, such as already exist in the states of Berlin, Brandenburg and Schleswig-Holstein.

In doing this, the SO is probably predominately concerned with getting a look into the files of the Office for the Protection of the Constitution and with expunging all "false reports" from official documents. Germany has what the SO regards as a "suppressive government," which is to be treated in accordance with the organization's policies and missions.

Since, as it has stated, the SO has obligated itself to the same goals in Germany as in America35 , it may be assumed that the same path to attaining tax exemption will be pursued here as in the USA. The corresponding legal disputes in the area of German associations have been pending over seven years in Baden-Wuerttemberg.

During the course of these proceedings, the organization also attempts to give court decisions its own interpretation. A current judgment by the Cologne Revenue Court36 was celebrated as an "important partial victory" by the SO. These proceedings resulted from a 1994 SO application for tax exemption of license fees for three of its German licensees under Article 12 of the Double Taxation Agreement (DTA) between the USA and the Federal Republic of Germany. Because the Federal Revenue Office turned down the corresponding exemption information, the SO filed a complaint in which the Cologne Revenue Court decided in favor of the SO for the following reasons: according to the DTA, a natural or legal person, resident to one of the agreeing nations (in this case, the USA), who draws revenue from a different agreeing nation (in this case, Germany), can claim advantages through the DTA if it is generally exempt from income tax in one of the agreeing nations. The SO submitted its approval from the IRS, from which it can be seen that the complainant has been classified as exempt from US federal income tax since 1 October 1993. This tax-exemption of the SO in the USA, the nation of residence in accordance with the DTA, has the effect, however, based on Article 28, that this tax exemption was tied to the question in dispute. The question of whether the complainant was a commercially engaged organization in Germany was not considered during the process of tax exemption in the USA. In that regard, the Cologne Revenue Court did not make a decision as to whether the SO was to be considered a charitable organization in accordance with any section, including section 51, of the German tax law. What was determined was that a certain product or service from the state of residence and its license fees had legally regulated tax advantages in accordance with Article 28 of the DTA. Questions of religion or worldview had no role in this. Besides that, the Cologne Revenue Court found, among other things, in its decision:

"The relationship between the complainant and its licensor was an economical determination, according to both the complainant's account and the presentation of the respondent. Special relations between the complainant and the licensor with reference to issues of worldview have been repeatedly and explicitly disavowed by the complainant in the proceedings at hand." 37

On this item the decision points in a different direction than the SO's self-presentation.

When one considers how long the SO persevered in the United States in the fight for its tax exemption, this confirms that the writings issued by L. Ron HUBBARD continue to be in force, and this continues to be stressed by the organization in its publications.

--------------------------------------------------------------------------------

35 "FREEDOM" magazine of June 1994. 36 Cologne Revenue Court, "Finanzgericht Koeln, Az.: 2 K 6626/96," available on the Internet. 37 Ibid.

In a 15 August 1960 policy letter, "Department of Government Affairs," HUBBARD explained:

"Peace is bought with an exchange of advantage, so make the advantage and then settle. Don't ever defend. Always attack."

And in "Ron's Journal" Nr. 34 of 13 March 1982, "The Future of Scientology," HUBBARD summed up by saying:

"The enemy cannot even plan for tomorrow. We work for eternity."

SO efforts have already been successful in Italy. On 25 October 2001, the Supreme Court in Rome decided that the "Scientology Church" would be acknowledged in Italy as a church community. In connection with that, the SO will enjoy extensive tax advantages.

Although the SO is still considerably far from its goal of being acknowledged in Germany as a religious community or being considered charitable, there is still reason for watchfulness in view of its ideology and its methods of operation in achieving its goals.

Appendix

1. In the following, excerpts from the agreement between the SO and the IRS are cited.

Closing Agreement On Final Determination Covering Specific Matters

Under section 7121 of the Internal Revenue Code, the parties named herein and the Commissioner of Internal Revenue make the following closing agreement:

WHEREAS, the Church of Scientology and its constituent entities (the "Church") and the Internal Revenue Service (the "Service") have a long history of controversy spanning over 30 years;

WHEREAS, the Church has pending with the Service applications on Form 1023 requesting that the Service recognize certain constituent entities within the Church as exempt from income taxation pursuant to section 501(a) of the Internal Revenue Service Code, as exclusively charitable organizations described in section 501 (c) (3) of the Code;

WHEREAS, the controversy between the parties includes litigation (hereinafter "the section 170 litigation") in which the deductibility under Code section 170 of parishioners' payments to the Church in connection with their participation in religious services of the Scientology faith is at issue;

WHEREAS, the Church signatories and individual Scientologists have initiated, supported and/or otherwise participated in litigation under the Freedom of Information Act (FOIA) to compel the Service to disclose information withheld by the Service in response to FOIA requests about its treatment of Scientologists and Churches of Scientology (hereinafter "FOIA litigation");

WHEREAS, in October of 1991, the key officials of the Church, David Miscavige and Mark Rathbun, approached the Service seeking to negotiate the resolution of the above-described matters, and met with the then Commissioner;

WHEREAS, at this meeting, the Commissioner indicated his desire to resolve all outstanding issues between the Church and the Service and appointed the Assistant Commissioner to negotiate and conclude a settlement with the Church on behalf of the Service;

WHEREAS, the Church and the Service intend this closing agreement to be final and conclusive with respect to all matters but, while also final and conclusive, that its provisions relating to the continuing duties and obligations of both parties during the transition period shall generally be effective until December 31, 1999;

NOW IT IS HEREBY DETERMINED AND AGREED, for purposes the Internal Revenue laws of the United States, and in consideration of the provisions contained herein that: (...)

A. Establishment of Church Tax Compliance Committee

1. Purpose of Church Tax Compliance Committee. The Church Signatories and others as described below shall form a Church Tax Compliance Committee (the "CTCC"). The purpose of the CTCC is (...)

2. Membership of Church Tax Compliance Committee. The CTCC shall consist of Corporate, At-large and Individual members. (...)

b. At-large members of CTCC. The Watchdog Committee (as described in the Qualified Written Material) shall be an At-large member of the CTCC and shall be represented on the CTCC by the Chairman of the WDC. In addition, the International Finance Director and the Chief Accountant International shall serve as At-large representatives on the CTCC. (...)

c. Individual CTCC members. The individual members of the CTCC are David Miscavige, Norman Starkey, Mark Rathbun and Heber Jentzsch. No individual member of the CTCC shall be permitted to withdraw from service on the CTCC, except by reason of death, being adjudicated an incompetent, or by mutual agreement of the parties to this Agreement.

3. Responsibilities of CTCC. In general, the CTCC is responsible for overall implementation of the duties and obligations imposed with respect to the Scientology-related entities by this Agreement during the transition period. Specific responsibilities and duties of the CTCC shall include the following: (...)

4. Actions of CTCC. David Miscavige will act as the initial Chairman of the CTCC. He may be removed from this office and replaced by another individual CTCC member by majority vote of the CTCC members. The CTCC shall promptly notify the Service of any change in the Chairmanship. The Chairman may act on behalf of the CTCC, and bind the CTCC, except where a specific provision of this Agreement requires the action of more than one CTCC member. (...)

D.2.e. Any other funds of a Scientology-related entity received from sources within the United States may be couriered overseas for deposit only if, and only to the extent, there are in place appropriate financial controls to ensure the processing, handling and tracing to such deposits to the account of the Scientology-related organization to which such payment is drawn. (...)

6. Norman F. Starkey, as Trustee of Author's Family Trust B, shall, no later than December 31, 1993, effectuate the transfer of substantially all of the corpus and income in Author's Family Trust B, including all the shares of Author Services, Inc. ("ASI") as permitted under the will of L. Ron Hubbard to the Church of Spiritual Technology ("CST") without consideration. (...)

10. The members of the CTCC shall, no later than December 31, 1995, effectuate the dissolution of WISE, Inc. and the transfer of all of its assets, including but not limited to its rights to the Scientology religious marks, to the Inspector General Network.

The date of this agreement is 1 October 1993.

It is concluded with date and signature of the "individual members" of the CTCC: David Miscavige, Norman F. Starkey, Mark Rathbun and Heber Jentzsch. Signing as CTCC "members-at-large" are Marc Yager, Chairman of the "Watchdog Committee," Jonathan Epstein, International Finance Director and Nigel Oakes, Chief Accountant International. Mark Rathbun signed as president for the "Religious Technology Center" (RTC) and Heber Jentzsch as the president of "Church of Scientology International." Other signatures are provided under power of attorney from the "Church of Spiritual Technology," the "Church of Scientology Flag Service Organization, Inc.," the "Building Management Services" and the "Church of Scientology Religious Trust."

John E. Burke, Assistant Commissioner (Employee Plans and Exempt Organizations) and James J. McGovern, Associate Chief Counsel (Employee Benefits and Exempt Organizations) signed for the IRS.

2. Advice for Internet users

If any of the Internet addresses cited in this brochure have changed, you can search on the text cited through the popular search machines on the archive pages provided on the Internet.

Advice for distributors

This informational material is released by the Baden-Wuerttemberg State Office for the Protection of the Constitution in the scope of its legal duties to inform the public. It may not be used by parties or candidates during elections to get votes. This applies to all German elections. (Other rules are given pertaining to German elections.)

All publications are available in the German language. See: http://www.verfassungsschutz-bw.de

� Gerry Armstrong http://www.gerryarmstrong.org

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