The Marketing

In 1992 during a tax litigation between the "Church of Spiritual Technology" and the IRS [Church of Spiritual Technology vs. United States, United States Claims Court, No. 581-88T] judge Eric Brugginck wrote in an opinion the following about Scientology's finances:

"The court has attempted above to describe Scientology's Byzantine management structure and financial arrangements. The task is difficult, due to the proliferation of entities and accounts and the overlap of personnel."

Such task has not become much easier, although the Church of Scientology has finally shown some effort to shed some light on its finances during its application for tax-exemption in 1992 and 1993. This chapter will describe the major internal operations concerning incoming and outgoing money.

Scientology's financial procedures begin with the, for a church, rather unusual way to promote for its "religious services" and "pastoral counseling devices." I cite from a few advertisements that were published in magazines by CSWUS and the FSO:

From FSO's "Source"-magazine [Exh. No. 72]:

"Get the exact auditing needed to handle your case and get you soaring up to OT! FLAG-ONLY CASE RESOLUTION RUNDOWNS – No two thetans are the same. Isn't that what makes them interesting? While we all have basic case barriers in common, each one handled on the Grade Chart, there are also very specific case phenomena requiring specialized handlings. ... But these rundowns aren't just for bugged cases. They're for anyone who wants to maximize his progress up The Bridge®. ... "

From CSWUS' "Advance"-magazine [Exh. No. 73]:

"THE TOOL THAT GUARANTEES YOU'LL GO OT – THE MARK SUPER VII QUANTUM E-METER™ - For eons, countless attempts have been made to return man to native state. But lacking an E-Meter, even the most enlightened of Earth's beings have been unable to blow through the barriers to OT. But today, we have that E-Meter – a Golden Age of Tech breakthrough that never misses a read: the Mark Super VII Quantum E-Meter. ... GET A QUANTUM – THE ONLY TOOL WITH THE ACCURACY & EXACTNESS TO TAKE YOU TO FULL OT. ... "

From CSWUS' "Advance"-magazine [Exh. No. 74]:

"SECRETS ... Who needs them? Regain your knowingness on NOTs® - The Second Wall of Fire ... Audited NOTs, New OT V, is delivered by our new breed of Golden Age of Tech Class IX Auditors. You are guaranteed 100% Standard Tech auditing. We have an auditor ready to take you in session – and guide you to the power that is you. ... "

From FSO's "Source"-magazine [Exh. No. 75]:

"SOAR TO THE HEIGHTS OF OT WITH SOLO NOTS® TRAINING AT FLAG – Here at Flag, we've put more than 3,000 students through New OT VI. We are quite expert at moving you through as rapidly as possible, teaching you the 79 tools which will give you complete command over every aspect of your own case. ... COME TO FLAG NOW FOR THE SOLO NOTS AUDITOR COURSE AND MOVE INTO THE UPPER REALMS OF OT. ... "

The way Scientology advertises its religious practices is part of a concept of high-pressure marketing that the individual organizations use to sell their services and products. The concept behind it is called by the organization "Hard Sell." To understand the intellectual mindset behind "Hard Sell" it is necessary to refer to one of the internal bulletins that were issued by CSI and deal with the marketing and selling of Dianetics and Scientology. On September 29th, 1987 the "Gross Income Executive International," a representative of CSI, issued a "International Management Bulletin" that was distributed to all the Scientology service organizations. The bulletin stresses the importance to use "hard sell" for marketing and selling Dianetics and Scientology, and orders the implementation of certain steps to achieve a higher rate of sales [Exh. No. 76]:

"For an endless number of years, man has been trapped with no better future in sight than death and decay. ONLY because of the discoveries of L. Ron Hubbard is there a way out. This is an exact laid out route and there is NO other way.

"Thus getting people onto the Bridge® and UP the Bridge makes the difference between the future of this planet being Total Freedom or a continuous dwindling spiral aiming at only endless torture and death.

"Neglecting to disseminate Scientology and Dianetics, neglecting to HARD SELL services and materials and INSIST that the person gets on and up the Bridge now, is in fact agreement with that person's bank [= "reactive mind"].

"HARD SELL is therefore a MUST in dissemination and selling of services and materials. ... "

The Selling

While the Church of Scientology uses "hard sell" marketing through its magazines, leaflets and other promotional pieces in order to spur the interest of public members for its services, the follow-up activity of the actual selling is executed by the "registrars," in-house sales personnel of the organizations.

The registrar's purpose is to "enlighten" the public member on the services the organization offers and to sell a large number of courses or "auditing intensives" (packages of 12 ½ hours of auditing) to as many people as possible, again by using hard sell techniques. It is also very particular that in Scientology the public members have to pay in advance for such courses and auditing, before having even started on these services.

Depending on the size, the organization may have several types of registrars that sell services to different types of public members. During the early 1990s the FSO, the biggest service and sales organization within the Scientology network, had five types of registrars:

- Advance Scheduling Registrars are responsible for getting public members who have made an advance payment towards a service, "fully paid" for this particular service.

- Body Registrars sell services to the public members that walk into the organization.

- Flag Service Consultants are stationed in other Scientology organizations around the world as sales representatives for the FSO. Their primary duty is to recruit new customers for the organization in Clearwater.

- Letter Registrars are writing personal letters to the organization's mailing list in order to get people to make advanced payments for services by mail.

- Tours Registrars are sales people of promotional tours that organize sales events outside the organization.

Due to the major role of money inside Scientology, the performance of registrars has always received an intense scrutiny by the organization's executives and its management. On July 5th, 1974 Scientology founder L. Ron Hubbard issued an "Executive Directive" called "Registration Program No. 2" that implemented a standard checklist for the production of registrars [Exh. No. 77]. Among other points registrars were/are requested

- to sell "blocks of (auditing) intensives,"

- to sell "blocks of courses,"

- "getting paid cash in hand in full" and

- giving "financial" or "bank loan advice" to public members.

In 1982 this "Executive Directive" was "adopted as official Church policy by CSI" and installed as a program whose constant implementation in all service organizations was/is permanently controlled by the management of Scientology, as seen in an earlier exhibit [Exh. No. 76].

The Banking

After the registrar has collected the money for a service from the public member in form of cash, check or through credit card it will be deposited with the "Department of Income" of the organization. There the money will be banked immediately upon receipt onto the "main bank account" of the organization. As Scientology organizations work worldwide on a strict weekly schedule that starts and ends always on a Thursday at 2:00 pm, shortly after that point in time the total weekly production is accounted for, which includes the "Gross Income", the total revenue of the organization.

The person who is responsible to perform the calculation of the Gross Income is the "Flag Banking Officer" (FBO), who is the local representative of Scientology's finance network at the concerned organization. Large organizations like the FSO may have a "Finance Director" with several staff [Exh. No. 78].

After having summed up the combined Gross Income for the organization for the past week, the FBO takes the money from the organization's main account and transfers it onto his own "FBO No. 1 account." From that account he sends it onto the accounts of CSI or RTC depending on the liabilities the organization has towards the international management of Scientology [Exh. No. 79].

Meanwhile the organization through its "Advisory Council" calculates the anticipated expenses of the organization for the upcoming week and submits them with a standardized "allocation form" to the FBO who, in case of granting it, re-transfers the allocated sum back onto the organization's account.

Depending on the type of organization different allocation forms are used, for example the form used by the FSO [Exh. No. 80] is different as the one used by the "Advanced Organization Los Angeles" which is part of CSWUS [Exh. No. 81].

The Central Reserves Bank Accounts

In 1993 CSI and the other major Scientology corporations like RTC, CST, etc. maintained dozens of bank accounts in Luxembourg. In case of CSI and its sub-organizations, as for example SMI, these accounts were used as so-called "Central Reserves Accounts" [Exh. No. 82]. The FSO, as the major income source for Scientology, used their bank accounts in Luxembourg to deposit "donations" received from public members within the US and from members from foreign countries who had paid for their courses and auditing with foreign currency [Exh. No. 83].

The International Central Reserves Committee

Within CSI, the "International Central Reserves Committee" controls the maintenance and all the expenditures from the reserves accounts. Not only has the committee the final say on all the financial matters concerning CSI and its sub-organizations and entities but it also controls the financial dealings of several other organizations like the FSO and CSWUS. These organizations are obliged to participate in the so-called "Central Reserves System" which is supervised and regulated by CSI and its Reserves Committee [Exh. No. 84].

In a statement to the IRS, CSI described the way it manages any expenditures from the reserves. At that time, in 1993, the Central Reserves Committee was composed of the following senior executives of CSI [Exh. No. 85]:

- the "WDC Chairman" Mark Ingber (Watchdog Committee),

- the "WDC Reserves" Thomas Ashworth (Watchdog Committee),

- the "International Flag Banking Officer" Sabine Peschken (International Finance Office),

- the "International Finance Director" Jonathan Epstein (International Finance Office),

- the "Sea Org Reserves Chief" Veronique Gouessan (International Finance Chief),

- the "International Landlord" Linda Stuart (International Finance Office) and

- the "Executive Director International" Guillaume Lesèvre (Senior Exec Strata).

Per CSI's statements the committee received on a weekly basis proposals from various CSI organizations or other entities from the Reserves system to finance their weekly upcoming expenditures or certain individual projects [Exh. No. 86]. CSI stated specifically that

"the International Reserves Committee does not approve any general or lump-sum ‘grants' of money for unspecified purposes. It only approves funds against detailed, written proposals, which specify the exact purpose of the expenditure. This purpose must fully align to the purpose of the religion, or it will not be approved."

After such proposals were found to be in alignment with "Scientology's religious purposes" by the committee, two other executives from the International Finance Office would disburse the allocated funds to the respective organizations or entities. In case of an U. S. organization this was done by the "Reserves Disbursement Officer," for non-U. S. organizations the "Deputy Sea Org Reserves Chief" (D/SOR) was responsible for this task. At the time of CSI's tax-exemption application the position of D/SOR was held by Pauline Chatterton, a New Zealand citizen.

When CSI submitted to the IRS an example of the Committee's financial planning ofr one particular week, the document showed that the "operating costs" of CSI and its various entities, including its intelligence service "Office of Special Affairs International" were included in such a proposal [Exh. No. 87]. The "Reserves Committee" was therefore the primary financing body for the intelligence operations of "OSA International." It also must have had knowledge about the nature and the target areas of individual operations as these were described described in above-mentioned proposals, if one takes CSI's statement about its financing procedures for granted. Trusts

CSI through its Reserves Committee maintains and controls several trusts in the United States and England that hold large amounts of money and which were officially created

"for religious purposes, ... to propagate the doctrines, tenets, practices and beliefs of the religion of Scientology and to the accomplishment of its goals."

Furthermore these trusts

"may support or benefit organizations that are organized and operated exclusively for the purposes of the religion of Scientology as founded and developed by L. Ron Hubbard."

During the last 15 years CSI maintained at least 10 of such trusts.

Today the most important trusts for Scientology's worldwide operations are "Church of Scientology Religious Trust" (CSRT) and the "Scientology International Reserves Trust" (SIRT), both under the control of the Reserves Committee and part of its financing system.

While CSRT apparently is primarily used to finance CSI's building projects within the United States [Exh. No. 88], SIRT funds are used to provide [Exh. No. 89, Excerpt]

"financial assistance primarily to (foreign) Scientology Churches ... and to defend them and their staff from unfounded and illegal attacks prompted by their status as Scientologists."

CSRT is registered in Los Angeles, California, while SIRT is managed from East Grinstead, England.