Monday, 15 July 2013

The Dianetics Scam

IRS-conducted audits proved that Hubbard was skimming millions of dollars from the church, laundering the money through dummy corporations in Panama, and stashing it in Swiss bank accounts. Moreover, church members stole IRS documents, filed false tax returns, and harassed the agency's employees. By late 1985, with high-level defectors accusing Hubbard of having stolen as much as $200 million from the church, the IRS was seeking an indictment of Hubbard for tax fraud. Scientology members "worked day and night" shredding documents the IRS sought, according to a defector who took part in the scheme. (Hubbard, who had been in hiding for five years, died before the criminal case could be prosecuted.) None of this, however, convinced the IRS, which assessed the church more than $1 million in back taxes for the years 1970 through 1972. Scientology appealed to the U.S. Tax Court, where, in 1984, it was handed one of the worst financial and public relations disasters in its history. The battle with the Internal Revenue Service was finally resolved on October 1, 1993. On that day, despite all the evidence to the contrary, the IRS issued letters recognizing the Church of Scientology and its related churches and organizations as tax-exempt under section 501(c)(3) of the Internal Revenue Code. In return, the Church of Scientology paid the IRS $12.5 million to settle any tax assessments prior to 1993, and dropped all its lawsuits against the IRS. The IRS also agreed to drop any outstanding audits of Scientology organizations and declared several related Scientology organizations as tax-exempt, including a trust that oversees the church's 440-foot cruise ship, Freewinds. Also, church members were permitted to henceforth deduct from their personal income taxes the fees they pay for "auditing."

Since the ship was registered in Panama, the Panamanian consul tried his luck, but with no better results. He found the ship 'in a very bad state of repair' and believed that 'the lives of the crew had been in jeopardy' while the vessel was at sea. 'The Panamanian consul has tried unsuccessfully to meet Commodore Hubbard, who has taken a suite at the El Mansour Hotel and has instructed the hotel personnel to refuse all telephone calls.'[2]

In frequent communiqu├ęs from the ship to his faithful disciples, Hubbard expounded on the enemy forces ranged against Scientology and elaborated on the 'international conspiracy' theory of which he had always been enamoured. Out in the Atlantic, cruising on his flagship, the Commodore's pre-occupation with Communist conspiracies developed into a fixation about something called the 'Tenyaka Memorial' - a name he gave to the mysterious agency he claimed was co-ordinating the attacks on Scientology. His hunt for the Tenyaka Memorial was the subject of a rambling thirty-one-page monologue, dated 2 November 1969 and headed 'Covert Operations', in which he said that he and Mary Sue had 'just discovered' that members of the World Federation of Mental Health were working for British and US intelligence agencies. 'These bastards who are in charge of security in these Western countries,' he wrote, 'ought to be simply electric shocked to death. I'm not kidding. Because these same guys . . . have meetings with the Russians every year.' Later the Commodore decided that the Tenyaka Memorial was run by a Nazi underground movement intent on world domination.[3]

Both Hubbard and Mary Sue, who rejoiced in the titles of 'Deputy Commodore', 'Commodore Staff Guardian' (CSG) and 'Controller', peppered their memoranda with military terminology and intelligence jargon. Mary Sue ran the powerful Guardian's office, which was Scientology's intelligence bureau. In a 'Guardian Order' dated 16 December 1969, she warned that the 'enemy' was infiltrating double agents into the church and urged the use of 'any and all means' to detect infiltration. One of the 'operating targets' was to assemble full data by investigation for use 'in case of attack'.[4] 'Smersh' even figured in one of Hubbard's 'flag orders', which defined Scientology's second zone of action thus: 'To invade the territory of Smersh, run it better, make tons of money in it, to purify the mental health field.'[5]

The need for security was made very real to those Scientologists who were flown out to join the ship at its various ports of call. They were briefed and repeatedly drilled on their 'shore stories' - that they were employees of Operation and Transport Corporation, a business management company. They were warned not to use Scientology-speak on shore, to deny any link between OTC and Scientology and, in particular, to feign ignorance of L. Ron Hubbard.

All outgoing private mail had to be left, unsealed, with the master-at-arms and every letter was read by an ethics officer to check for possible breaches of security. Approved mail was shipped in bulk to Copenhagen for posting. Lest curiosity prompted enemies ashore to sift through the ship's garbage for incriminating paperwork, all papers were bundled up and dumped at sea. And on the rare occasions when 'wogs' were allowed on board, the crew carried out a 'clean ship drill', which involved hiding any Scientology materials from view and turning all the pictures of L. Ron Hubbard to the wall.

Hubbard's persistent reiteration that Scientology was beset by dark forces, seeking to destroy anything that helped mankind, fostered a siege mentality among the crew of the Apollo and provided spurious justification for the harsh conditions on board. Throughout the Sea Org, the need for dedication, vigilance and sacrifice was constantly stressed and it generated fierce loyalty which was blind to logic or literal truth. The 'shore story', which everyone knew was a pack of lies, was a regrettable necessity if the world was to be saved by Scientology.

It was also a regrettable necessity to prevent anyone from 'blowing the org'. Although all the passports were locked in a safe, attempts to jump ship were not unknown. Whenever it happened, Sea Org personnel were rushed ashore to stake out the relevant local consulate, where the fugitive was likely to try and obtain a new passport. If they were too late, a 'dead agent caper' was activated. The runaway was accused of being a thief or a trouble-maker in order to discredit whatever story he was telling in the Consulate; in the parlance of wartime spies, he would be neutralized and considered a 'dead agent'.[6]

Despite the continuing restrictions on personal liberty, life on board improved somewhat after the Apollo left the Mediterranean. The 'heavy ethics' were eased - there was no more overboarding, for example - and the Commodore's demeanour was markedly sunnier. 'He'd often take a stroll along the promenade deck and stop to talk to people,' said Urquhart. 'He normally wore a white silk shirt with a gold lanyard, a cravat and naval cap with lots of scrambled egg on the peak and you could always see him in the centre of the crowd that gathered round him whenever he stopped to talk. But there was still a lot of tension on board and the very real possibility that somebody would make a mistake that would cause a flap. Someone might upset a harbourmaster, or say the wrong thing in answer to a question, or let slip something about Scientology. Some shit was going to hit the fan every day, you could count on it.'

No attempt was made on board ship to maintain the myth that Hubbard was no longer in charge of Scientology. Between forty and fifty feet of telex messages arrived every day from Scientology offices around the world and he received weekly reports detailing every org's statistics and income. Money was, without question, one of the Commodore's primary interests, although he liked to profess a lofty disregard for such matters as financial gain. Loyal members of the Sea Org, who were paid $10 a week, believed the Commodore drew less than they did, because that is what he told them. The reality was that Hubbard was receiving $15,000 a week from church funds through the Hubbard Explorational Company and that huge sums of money were being creamed from 'desk-drawer' corporations and salted away in secret bank accounts in Switzerland and Liechtenstein. When one of these accounts had to be closed in 1970, $1 million in cash was transferred on board the Apollo.[7] 

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