Scientology Financial Crime, Part 2: From Tax Evader to Mob Boss

This week, we continue our examination of Scientology’s evolution from that of a self-help process, the origins of which were rooted in founder L. Ron Hubbard’s pseudo-scientific epistle Dianetics, to that of a mafia-like Transnational Criminal Organization (TCO), essentially a criminal conglomerate couched as a “religion.” In understanding Hubbard’s motivations for wealth accumulation, it was clear from last week’s examples that Hubbard’s obsession with money was as much about funding the furtherance of his legacy as it was furthering Scientology. In continuing with our use of behavior within a given era to examine the evolution of Scientology’s financial criminality, we now go from the era of Hubbard as tax evader, on to the transitional era of Hubbard as an established crime boss-like figure. Contemporary to Hubbard’s transitional era is the seemingly inevitable rise of David Miscavige, from that of indispensable lieutenant to consigliere and in our final era, his eventual role as capo de tutti capi of Scientology.  


From Tax Evader to Mob Boss

The loss of tax exemption in 1967 did nothing to impede Hubbard’s (and thus Scientology’s) abuse of the domestic tax regime, nor its rapacious quest for wealth. If anything, Hubbard’s incorrigibility towards authority further entrenched Scientology’s institutional disdain for any sort of regulatory oversight, a mindset that continues to this day. Hubbard’s antipathy towards authority was not uncommon for the times; however, in combination with his demonstrably sociopathic personality, he began manifesting a variety of increasingly worrisome behavior. He was experiencing ever-increasing levels of paranoia that may have been compounded by undiagnosed mental health issues as well as ongoing experimentation with a variety of drugs. When coupled with his poor health in general, it’s no wonder he demonstrated varying levels of irascibility and intransigence towards those around him as well as authority in any form. However, despite Hubbard’s personal complexities, as well as Scientology’s antagonistic, confrontational gestalt, the years from roughly 1965 to the late 1980s marked what many perceive as Scientology’s “Golden Age.”

As an organization, Scientology enjoyed significant growth in membership during this timeframe; its orgs and missions throughout the United States were thriving, as well as enjoying a significant international presence, to the extent that Scientology was, among a vast selection of contemporary alternatives, considered a viable choice for those seeking some form of spiritual enlightenment. However, while Scientology’s public face was one of growth and success as a purveyor of abundant human fulfillment, behind the scenes it was anything but. As a result of Hubbard’s pathological need for control and later, his declining physical and mental health, the end of the 70’s into the early 80s could be considered the beginnings of Scientology’s transition from Hubbard’s spiritual fiefdom and personal cash cow to an organization resembling a fractious, burgeoning criminal racket with a sociopath at the helm. During this time, Scientology’s own La Cosa Nostra (LCN)-like management structure would emerge in the form of the Sea Organization, which then begat the likes of David Miscavige, complete with the stirrings of his Machiavellian machinations towards assuming the role of capo de tutti capi of Scientology.

The Rise of the Sea Org and its Role as Hubbard’s Muscle

Hubbard’s odyssey on the Apollo, and later, his reclusive, transient existence up until his death, spurred by his ongoing tax troubles and fear of arrest by the FBI during this period, are well documented. However, there are a series of distinct events that occur in this timeframe, events that serve as markers or indicators that further reinforce the viability of Hubbard as crime boss and the Sea Org as a LCN analogue. Hubbard and his Apollo-based Sea Project, whose members were now known as the Sea Organization (“Sea Org”) made landfall in Clearwater in 1975, and while Hubbard was still avoiding any public role, it did not mark the end of his involvement in the church’s day-to-day affairs; on the contrary, despite having eventually become a virtual recluse by 1982, it was the beginning of Hubbard’s consolidation of financial, organizational, and personal control over all facets of Scientology though his proxy enforcement muscle, the  Sea Org. The parallels between Hubbard’s behavior here and that of mob bosses like Carlo Gambino or Genovese Family boss Frank Costello are uncanny, especially in their use of opaque, highly complex organizational structures to distance themselves from the day to day criminal affairs of their organizations, all while maintaining lucrative personal income streams though an iron grip on power and the vicious eradication of any perceivable threat. Thus contextually, it’s readily apparent that Scientology resembles a LCN racket run by the Sea Org, as Jesse Prince describes:

“The Sea Organization is the actual nexus that controls the scientology empire. Sea Organization personnel are authorized to take over and control scientology organizations and to demote personnel, move bank accounts and run the corporation as if the SO personnel were employees or representatives of that corporation but they are not. This is true if the organization was part of the “Church of Scientology” or one of the secular areas such as Bridge Publications. This is possible because the only personnel allowed into executive positions in these organization are those who are in full agreement that the Sea Organization is the commanding organization. This weeding out process guarantees there will be no executives who will resist or protect their corporate integrity. This is how the Sea Organization can operate with impunity, and continue to claim that it is merely a “fraternal organization.” The Sea Organization is a “fraternal organization” the way the Cosa Nostra is.”

In keeping with our LCN analogy, as Hubbard’s enforcers, the Sea Org wielded enormous power over those underlings who managed Scientology’s many rackets. The Sea Org had at this time, (and continues to do so), a very hierarchical structure that in the early 1980s, was becoming increasingly fractious in its approach to organizational management. It was fraught with competing individual and group agendas, with the Commodore’s Messenger Organization (CMO), led by David Miscavige being particularly intransigent. While Hubbard’s management style had much to do with this “dog eat dog” daily existence, it was apparent that this infighting was having a detrimental effect on profitability, especially in regards to managing Scientology’s many fronts, the most important at the time being the lucrative Mission Holders’ network.

In expanding a business or criminal enterprise, leverage is the fastest growth strategy, either through distributorships, profit sharing relationships, or franchises. For Scientology, leveraged growth was through its Mission Holder network franchisees, which represented a significant share of revenue. Despite this fact, Hubbard, in lacking the objective intellectual rigor of a reasoned business strategist, made a capricious, subjective decision, in wanting to consolidate power and increase direct revenue streams at the expense of his entire Mission Holder network. Such was the extent of this decision, that the final outcome would be known as “The Mission Holder Shakeout” (MSO), held Oct. 17, 1982 at the San Francisco Hilton. Indeed, Hubbard’s eventual eradication of this iteration of the Mission Holder network was a spectacular economic and strategic error. Not only did the Missions provide feeder staff for the orgs and corporate Scientology facilities such as Flag, they were significant revenue generators on their own, yet they still weren’t safe from Hubbard’s ire. For instance:

“‘A major “problem’ identified by Miscavige was that of Kingsley Wimbush’s Stevens Creek Mission in San Jose, CA, which was making as much as $100,000 a week – more than all the other 80 missions put together – but was using an unapproved technique called “de-dinging”. The success of Wimbush’s ‘deviant’ technique was evidently seen as a threat to the authority of the new rulers of Scientology. He had been intercepted as he arrived at the San Francisco Hilton and was promptly dragged off to the RPF gulag.”

While the doctrinal “crimes” of Wimbush and company may have seem insignificant relative to their yearly income potential, Hubbard’s demands for control superseded any reasoned business case for allowing the Stevens Creek Boulevard Mission to remain viable at that time; more so, rather than replicating Wimbush’s success across the remaining Missions, Scientology’s new regime felt it more appropriate to punish this high earner, regardless of the economic and organizational ramifications of such an incoherent and overwhelmingly counterproductive act of spite.

A Case Study of a Mob Take-over

The MSO was a classic LCN-like power consolidation and organizational decapitation action. Wendell Reynolds’ “International Finance Police,” Scientology’s own internal protection racket, set the tone, by locking all the mission holders in a claustrophobic conference room, allowing no one to leave, so they could then be collectively harangued by Miscavige’s CMOs for all their monumental “crimes.” This meeting had several important outcomes in furthering Hubbard’s consolidation efforts. Not only did it remove a significant level of competition for Scientology’s internal rackets, it also ensured any and all revenue from any delivery of services within Scientology would be centrally controlled and exploited, as well as establishing a LCN-like power structure that continues to this day. The MSO further served to confirm David Miscavige’s ruthlessness and emphasizing his prominence in the Sea Org, as well as highlighting his suitability as a Hubbard consigliere and potential future Scientology capo de tutti capi.

The violence of action demonstrated during the MSO was also an example of the “Young Turk” zealotry that would, upon Hubbard’s death,  portend the eventual spectacular fall of the old guard, represented by members of Hubbard’s inner circle such as Pat and Annie Broker. While Miscavige’s ascendance may have been an implied outcome of the MSO, the primary raison d’etre of the event was intimidation, extortion, and the imposition of Hubbard’s will on all those Mission Holders present. To grasp the significance of what transpired that day, we again return to Jesse Prince, as quoted from his deposition in the 1984 Latey judgement, where he goes on to state that:

“L. Ron Hubbard was upset with the Mission Holders because he felt that the Mission Holders in general were withholding tithes owed to Sea Org International Management. L. Ron Hubbard had also sent down orders stating that several Sea Org members in high leadership positions within the Commodore’s Messenger Organization International (“CMO Int.”) and the Office of the Executive Director International (“ED Int.”) were dissatisfied with Scientology management and were siding with the Mission Holders. L. Ron Hubbard’s orders went to David Miscavige and they were clear: Handle this insurrection and crush anyone who protested.

I was part of the mission headed up by David Miscavige that was ordered to handle the San Francisco Mission Holder’s Conference. The first thing the mission did upon its arrival in San Francisco was to visit the local Scientology Organization. Missionaire I/C, David Miscavige immediately bypassed all corporate lines of authority and started an inspection of the organization. He decided that the Executive Director of the organization was incompetent and he viciously interrogated him with an e-meter, (a form of lie detector), physically abused him, and removed him from his position on the spot.

From the local Org, we proceeded to the Mission Holder’s Conference. By this time, David Miscavige had really worked himself into a lather, and he declared two mission holders “Suppressive Persons” and expelled them on the spot. This is brazenly bragged about in the issue “The Sea Org Moves In.” The doors to the conference room were locked and guarded. Miscavige then lined up approximately 20 other Mission Holders, most of whom were crying and terrified, and told them to get their checkbooks ready as they had been “ripping off” Scientology Organizations of their ‘rightful income’ for too long. In reality, Miscavige and several others just took whatever amount of money they wanted out of the Mission Holders’ corporate accounts.

Miscavige introduced Larry Heller, attorney for Scientology who was personally hired by Miscavige, who informed the Mission Holders that the “New Tough Management” intended to prosecute and jail anyone who did not comply with the orders and directions of the new management.

Lyman Spurlock, a senior Sea Org executive who was one of Miscavige’s inner circle, threatened the Mission Holders with prosecution and explained that the Sea Org now had the power to do this to the Mission Holders because of all the new corporate changes that were designed to exert more control over the Mission Holders.”

The orchestration and outcome of the MSO was a case study in the ruthless take-over of a competing racket through a unquestioned consolidation of power, income, and influence. It also sent a clear internal message of deterrence to anyone contemplating a challenge to the incumbent power structure or “squirreling the tech;” it arguably set the tone for how Scientology would be managed from that point on, as well as establishing the primacy of the Sea Org as Scientology’s enforcement arm. Along with eventually eliminating the Mission Holder threat, in 1982, Hubbard also directed a reorganization of the church’s various corporate entities under the supervision of David Miscavige, (though Miscavige has denied this under oath), as a means to further entrench his hold on any and all incoming revenue streams, his own and the church’s intellectual property and lastly, all the church’s various licensing revenue then in play. While the complexities of this reorganization are beyond this post, a detailed examination of this convoluted process can be found here on Jeffrey Augustine’s Scientology Money  Project blog.

Not unlike LCN’s elimination of rivals during Prohibition, or the feuds between LCN’s New York Commission and Chicago’s Syndicate, Hubbard’s efforts at consolidation and reorganizing Scientology’s many rackets in the years preceding his death, were all about eliminating any threats to his income streams and insulating himself from any legal scrutiny. His response to any threat from any authority, be it the Feds, Interpol or other supranational bodies was the same as any mob boss: ruthlessly eliminate the competition by any means and tolerate no dissent. Ensure you are surrounded by loyal underlings, yet trust no one, and be ruthless in all you do.

In Conclusion

Though his last few years would find him far removed from the daily management of the church, Hubbard maintained a semblance of control almost to the end, despite his failing physical health, his at times Vistaril-addled mental state, and the plotting by Miscavige and other factions within Scientology to exploit the circumstances around his final days. Hubbard was reliant primarily on Pat and Annie Broker as a conduit for this control, and as one of the many available “last days” narratives goes on to state, they were:

omnipresent during Hubbard’s final years and lived with LRH in Creston. While their official duties were to take care of Hubbard’s welfare, as those closest to Source, they became important players in the operation of the church itself, given their enormous influence over LRH as his day-to-day caretakers. On a more practical level, Pat Broeker, in particular, oversaw the financial dealings between Hubbard and the church, and eventually became such a trusted friend that LRH named him as successor, the Loyal Officer who would look after his church after his passing.

LRH left behind a vast corporate empire, including millions of dollars worth of copyrights and trademarks, as well as a personal fortune rumoured to be in the hundreds of millions. Rumour, though, is all that is available – the vast portion of Hubbard’s riches were buried far inside the CoS ledgers, safe from the prying eyes of the IRS, which had been threatening an audit of Hubbard for years, right up until his death. But even leaving aside his personal fortune, Hubbard’s legacy was rich – and there was no shortage of people eager to take a cut. ”

Given what was at stake, the death of Hubbard is surrounded by mystery and numerous conflicting narratives, a significant reason being the existence of several wills. However, one consistent fact during this time is that Miscavige’s hostile take-over began concurrently with Hubbard’s death, through his use of subterfuge, intimidation, and forgery; in doing so, he attempted to maintain a facade of normalcy for Scientology’s members during the transition from LRH’s reign to that of his own.

If we look to yet another LCN analogy, the events around Hubbard’s demise read much like that of Paul Castellano, with Miscavige playing the role of John Gotti. Before his execution at the hands of Gotti’s hit team, Castellano had been viewed as weak, vulnerable and expendable to a hostile takeover by Gotti and his young wise guys. While Miscavige may have, for the most part, had more respect for Hubbard than Gotti did for Castellano, his ruthlessness in ensuring his ascent to power has all the same hallmarks of of Gotti’s violent ascension to the head of the Gambino crime family: a resolute sense of entitlement backed by a loyal band of followers; the ability to bide one’s time until the right moment presents itself and to be ruthless in one’s execution when that moment arises, and lastly, to ensure there are no rivals around during your transition to power. In our final installment, we’ll examine David Miscavige’s power grab and his role as current capo de tutti capi, as well as Scientology’s vulnerabilities in a new age of financial crime regulation and oversight.