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Documents Reveal Financial Workings of Scientology

December 21, 1993

WASHINGTON (AP) _ The Church of Scientology holds assets of nearly $400 million, including a cruise ship used as a ″seagoing religious retreat,″ according to a detailed portrait of the group’s financial network provided to the Internal Revenue Service.

The papers, which fill nine file boxes, were submitted by the church as part of its 39-year effort to gain tax-exempt status. The documents became public after the IRS granted an exemption to more than 20 Scientology organizations on Oct. 1.

The papers offer an unprecedented public view of the huge organization, which includes two publishing houses, a 2,845-acre California ranch used as a school for the children of church staffers and more than 45 buildings on 500 acres in Riverside County, Calif.

Other assets include reinforced vaults designed to preserve the church’s teachings in case of earthquake or nuclear attack, the documents said.

The assets reported in the various documents filed with the IRS totaled $398 million.

The Los Angeles-based church does not keep combined balance sheets but ″the combined total, if kept, would be somewhere in the range you list,″ Scientology spokeswoman Leisa Goodman said in a written response to questions.

The church was founded in 1954 by science fiction writer L. Ron Hubbard, whose best-selling ″Dianetics: The Modern Science of Mental Health,″ advocated the use of an ″electropsychometer″ - a lie detector-like device to purge negative images from people’s minds.

The IRS recognized one branch, the Church of Scientology of California, as a tax-exempt religious organization in 1957. But it revoked that status in 1967, questioning, for example, the way the church charged for classes that are part of the religious practice.

None of the IRS letters in the files explained the legal reasoning behind granting tax exemption this year. Some noted, however, that the IRS found no evidence of ″inurement,″ or private enrichment, which is barred under the tax law governing religions and charitable organizations.

IRS spokesman Frank Keith said the agency concluded the church ″is operated exclusively for religious and charitable purposes.″

According to the documents, most church officials receive modest salaries. David Miscavige, director of the Religious Technology Center and holder of the highest ecclesiastical position in Scientology, was listed as being paid $62,684 in 1991 and $34,779 in 1992.

Several Scientologists, however, earned six-figure commissions for raising donations to church entities, including the International Association of Scientologists, according to the filings.

One, identified in the documents as Barry Klein, was paid $217,694 in 1989 and $201,314 in 1990, the records show. Another named in the documents as Ken Pirak made $407,052 in 1991, and a third identified as Steve Grant earned $339,978 that year, the records said.

Goodman called those figures ″somewhat inaccurate″ because ″the amount paid to them represents commissions for themselves and all staff employed by them.″ She said the commissions could be divided among as many as five or 10 staff members.

The 440-foot cruise ship Freewinds is operated by Scientology’s Flag Ship Service Organization as ″a safe, distraction-free environment for the ministry of the highest and most confidential Scientology auditing level,″ FSSO said in its application for tax exemption.

″Auditing″ is a technique developed by Hubbard in which adherents are connected to an electropsychometer, which ″measures the mental state and change of state in individuals,″ according to Scientology literature.

Documents valued the ship at $12.5 million for insurance purposes, and said it can accommodate 300 passengers and a crew of 129. The filing described the Freewinds as having ″very limited recreational facilities - only one small pool, used four or five hours sporadically throughout the day; one volleyball court, used one hour a day, if that; one basketball hoop, which might be used a half-hour each day, and no shuffleboard or tennis courts. ... Gambling is not permitted and alcohol is not served to either passengers or crew.″

Several glossy, four-color travel brochures in the filings promise ″a level of service second to none.″ They show pictures of people lounging at the ship’s pool and attending evening events in formal wear.

Several church organizations are operated by members of the ″Sea Org,″ or Scientology religious order. These members ″must pledge the next billion years of their existence to the Scientology religion,″ according to the documents. They receive room, board, child care, medical and dental care and stipends of $30 to $50 a week - plus unspecified bonuses for good performance, the documents said.

The church has frequently garnered public attention.

Several of its officials were convicted of obstructing justice in a federal investigation of church activities in the late 1970s. In the mid-1980s, it paid an estimated $5 million to settle 20 lawsuits by former church members who alleged they had been harassed, blackmailed and emotionally abused.

In his later writings, Hubbard said that seeds of aberrant behavior were planted in humans 75 million years ago because of an evil tyrant named Xemu. Church leaders have said the media distorted the writings.

Hubbard died in 1986.

One entity, the Church of Spiritual Technology, reported spending nearly $13 million in 1992 to preserve his writings and lectures.

It has designed gas-filled, titanium time capsules to hold Hubbard’s teachings, and plans to place 10,500 of the capsules in three vaults, two built to resist earthquakes or nuclear attack, according to the documents.

Hubbard’s writings will be preserved on 1.8 million stainless steel plates and his lectures on 187,000 nickel records that could be played back with a stylus as crude as a thorn in the event of some future cataclysm, the documents said.

This division also plans to place large, indestructible obelisks around the world covered with pictographs explaining Scientology ″so that even a wandering savage will be able to understand and apply these principles,″ the documents said.