Scientology Financial Crime through the Years: an introduction to a new series

I was first drawn to the Scientology critic movement as a result of my background in anti-money laundering, countering the financing of terrorism and the forensic analysis of financial crime. Having come across several Interpol reports that mentioned L. Ron Hubbard’s money movements from his days on the Apollo, my interest was piqued as to the why and how of his intentions. The further I delved into the financial affairs of Scientology, the more I became convinced I was potentially dealing with a Transnational Criminal Organization (TCO) of significant proportions. While I’ve enjoyed investigating a variety of topics within Scientology, over the next few weeks I’ll be returning to this premise.

I’ll be looking at the historical perspective of money in the church in roughly three eras: the first era will address Hubbard’s financial behavior up until the time of his final days; the second, David Miscavige’s assumption of power and the 1982 Mission Holder’s shakedown, and third, money in the church under Miscavige following the Mission Holder shakedown up to the present day. Over the last several months, I’ve had the pleasure of speaking with several key figures in Scientology history who are intimately familiar with money management over the three eras I’ve mentioned. Further to these firsthand experiences, in recent weeks we’ve undertaken several investigations into some of the foundational writings of Scientology, as well as the link between conspiracy theory, Scientology and cults in general.

This doctrinal and psychological perspective has further shaped my understanding of the ideology, indeed the criminal mindset that underpins much of Scientology’s financial dealings. Hubbard’s writings contain his motivations for believing Scientology to be mankind’s last hope and central to his thesis is that the ends will always justify the means. Paradoxically, while often stating that he, and therefore Scientology was the most ethical belief system on the planet, his motivations have always been criminal in many ways, especially when it comes to his views on authority, governments and the acquisition, movement and retention of money. Using Hubbard’s own words, framed within the terms of a criminal investigation, we can then easily begin to establish the means, motive, and opportunity of how the Scientology TCO has operated over these 60 plus years.

Money in the Hubbard Era

Next week I’ll begin by setting the stage not only from a historical perspective, but also in practical terms as to what constitutes financial crimes such as money laundering, fraud and tax avoidance. Significant to Hubbard’s financial behavior in the early days of Dianetics and Scientology was the use of cash only, and when Scientology began to boom in the early 1960s, the exploitation of offshore tax havens. So why go offshore? Well first, “offshore” has many connotations, and can denote both legal and illegal financial behavior. There are legitimate reasons for high net worth individuals such as LRH to maintain offshore companies, trusts, and other “vehicles”, mainly to lessen one’s tax obligation or to ensure privacy in sensitive, though legal, financial matters. Other reasons include political instability or corruption in their home country, or the registration of large assets such as planes and boats, as well as financing the associated insurance costs. Lawful tax avoidance involves organizing one’s financial affairs to legally minimize the amount of tax to be paid, versus tax evasion, which involves hiding one’s assets altogether from the responsible reporting authorities.

Hubbard’s primary focus was tax evasion. He hated taxation with a vengeance and did everything in his power to keep his money away from the IRS, state and local tax collectors, as well as those in the many international locales where Scientology had a presence. As I’ll discuss, he used the Apollo and her crew as a means to move money internationally, as well as Sea Org money mules to establish and service numbered bank accounts throughout the world up until landfall in 1975. I’ll also look at the first IRS inurement investigation and the first revocation of Scientology’s tax exemption.

Money in the David Miscavige – Mission Holders Transitionary Era

While Hubbard tried to maintain the fiction that he’d withdrawn from day-to-day management, he was still firmly vested in the movement of money within Scientology up until his final days. There is substantial anecdotal evidence of his having received suitcases full of hundreds of thousands of dollars in cash, as well as using couriers and telexes to manage his financial affairs abroad. David Miscavige’s coup d’etat demonstrated a ruthlessness that remains his MO to this day. No more so was this evident in his management of the International Finance Police’s actions against the mission holder network in 1982. In addition to eliminating a lucrative income stream, this action also predicated the formalization of Scientology’s offshore financial strategy, as well as imposing an extortionate “uplines” revenue model. While money has always been at the heart of Scientology, as I’ll explore in part two, under the new reign of David Miscavige, money assumed a whole new urgency.

Money Throughout the Miscavige Era to the Present

In parallel with Miscavige’s assumption of power, there were changes to the financial crime enforcement regime that, as I will contend, Scientology has continued to ignore. This is especially crucial in the post-9/11 era of the PATRIOT Act and other, more recent enforcement tools. Suffice to say, Scientology’s abject disdain for all things wog appears to have have continued unabated throughout it’s financial affairs and may leave them significantly exposed. I’ll be paying special attention to how this behaviour invalidates much, if not all of the financial terms of Scientology’s 1993 agreement with the IRS, as well as assessing their regulatory vulnerabilities not only domestically, but internationally as well. I’ll also be looking at how the opaque organizational and corporate structure of the church enables potential criminality, as well as possible remedies.