The Scientology Problem

The Wall Street Journal Interactive Edition/March 25, 1997

As no doubt befits a society founded by Pilgrims, America has a long tradition of controversial movements maturing to success, whether Mormons or Christian Scientists or Jehovah's Witnesses. Today, the latest cult forcing itself to our attention is the Church of Scientology.

Scientology was founded in the early 1950s by L. Ron Hubbard, a science fiction writer. He fashioned a creation myth around Xenu, who froze and transported thetan souls to volcanoes in Teegeeack, now earth. The creed holds that humans have repressed memories of thetan life, or "engrams" and need to be "cleared" through "auditing," with the help of an "e-meter," a primitive lie detector. Adherents, including movie celebrities Tom Cruise and John Travolta, find this helps their personal lives and engenders religious conviction.

Scientology is currently demanding acceptance throughout the world, mostly on the basis of a 1993 Internal Revenue Service ruling extending it 501(c)3 tax-exempt status. The State Department's human rights report, an ad by Hollywood figures and others have berated Germany over persecution of Scientologists. Other sects have also started with odd theology and behavior; is Scientology now traveling the road to respectability?

Conceivably so, though the Scientologists have more history than most to live down, most of it written in court decisions here and abroad. Scientology performs its "auditing" and "clearing" according to a schedule of set fees. Those who are "cleared" at one level go on to the next with further training and further fees. To many authorities, not to mention alienated former Scientologists, Mr. Hubbard's creation looks a lot like the business of personal counseling or psychiatry (to which Scientology also raises theological objection). There have been repeated reports that Mr. Hubbard told his science-fiction colleagues that the way to get rich is to found a religion.

In Church of Scientology of California v. Commissioner (1984), indeed, the U.S. Tax Court found that for the tax years 1970 to 1972 the California "mother church" was not tax-exempt "because it operated for a substantial commercial purpose and because its net earnings benefit L. Ron Hubbard, his family, and OTC, a private noncharitable corporation controlled by key Scientology officials." Millions of dollars were held in "trust" in Swiss bank accounts, and the court found, "The circumstances of this trust are just too bizarre to credit its validity."

The tax court also found that for eight years prior to a 1977 FBI raid on the church's offices, it perpetrated a conspiracy involving "manufacturing and falsifying records to present to the IRS, burglarizing IRS offices and stealing Government documents, and subverting Government processes for unlawful purposes." Mary Sue Hubbard, the founder's wife, and ten other Scientologists served jail terms after conviction of a conspiracy involving break-ins and electronic eavesdropping at IRS offices.

A long legal struggle between the Scientologists and the IRS started in 1967, when tax authorities revoked a previous tax exemption on the grounds that the organization operated for the benefit of Mr. Hubbard. The U.S. Supreme Court refused to consider appeal of revocation of tax exemption in 1988, but evidentiary and procedural issues involving the IRS and Scientology reached the High Court in 1987, 1989 and 1992.

The Supreme Court did rule on a basic issue in Hernandez v. Commissioner of Internal Revenue, (1989). It held 5-2 that payments for auditing sessions were not charitable contributions or otherwise tax-deductible. Two dissenters observed that in this case IRS litigation strategy was not to contest the issue of whether Scientology was a religion or commercial enterprise. They found the auditing payments similar to tithing or pew rents; the five majority Justices did not.

Scientology also had poor luck with libel suits. "In reality the church is a hugely profitable global racket that survives by intimidating members and critics in a Mafia-like manner," concluded an article by Richard Behar in Time magazine. In 1996, a judge threw out the last count of the church's libel suit against Time, saying "no reasonable jury could find that [the statements] were published with actual malice"--that is, the intent to harm required when a libel plaintiff is a public figure.

Similarly, Mitchell Daniels, an executive of Eli Lilly & Co., prevailed in a libel action. Following its anti-psychiatry theology, the church had supported lawsuits against Lilly contending that its anti-depressant drug Prozac induced patients into suicide and other aberrant behavior. Mr. Daniels was quoted as telling the editorial board of USA Today: "One thing we want you to understand is that the Church of Scientology is no church. It's a commercial enterprise. Every judge and every investigative journalist who has ever looked at it has come away with that conclusion. It is organized for only one purpose, which is to make money." The court held that this statement may not be strictly accurate as a matter of law, but that under the standard of actual malice, "it is impossible to conclude that Daniels entertained serious doubts as to the truth of his statement or spoke with a high degree of provable falsity."

In October of 1993, however, the IRS reversed the position it had defended for a quarter-century, issuing 30 tax-exemption letters covering more than 150 Scientology enterprises. David Miscavige, chairman of the church's Religious Technology Center, led a rally at the Los Angeles Sports Arena declaring, "The war is over!" And, "Our road to infinite expansion is now wide open." The IRS has refused to explain its change of heart, claiming tax confidentiality. In an attempt to elucidate the tax law, Tax Analysts, publishers of Tax Notes, filed a still-pending Freedom of Information action three years ago.

While the tax exemption ruling came in the first year of the Clinton administration, the process had started two years earlier. An exhaustive investigation by Douglas Frantz of the New York Times found that a special committee had been chartered in the Bush administration by Commissioner Fred Goldberg. The ultimate settlement also ended the Scientologists' litigation against the IRS and its individual agents. IRS Whistleblowers, a Scientology-backed organization, had also succeeded in exposing IRS abuses.

Mr. Hubbard died in 1986, transferring copyrights to his work and thus the principal assets of the religion to Mr. Miscavige's Religious Technology Center. The Scientologists promote anti-drug and anti-crime efforts, but even in the post-Hubbard era have been a magnet for controversy.

For one thing, they are confronting the Internet, using copyright and other laws to inhibit their critics, who gather in a discussion group called alt.religion.scientology. Scientologists have succeeded with U.S. copyright suits against the posting of secret Hubbard texts, but have angered the Internet community. The texts keep appearing, for example on a Norwegian site calling itself Operation Clambake. Further litigation is currently under way in San Jose and Denver, with the patience of presiding jurists being tested by both Scientologists and "netizens." Internet defendants are now challenging the validity of the copyrights, and seeking to depose the secretive Mr. Miscavige about the circumstances of their transfer.

The Scientologists have had more success in their battle with the Cult Awareness Network. A lawyer who is a Scientologist represented a group that bought the key assets of the CAN from a bankruptcy trustee. The CAN declared bankruptcy following a damage award to Jason Scott, an unwilling deprogramming subject. Though Mr. Scott is not a Scientologist, he was represented at the time by an attorney who is a Scientologist. Mr. Scott now has another lawyer, however, who complains that his interests were not served by the bankruptcy because his prospects of collection would have been better if it had remained in business.

[Note: WARNING! The Cult Awareness Network (CAN) was recently bankrupted and bought up by Scientology. We strongly recommend you do not contact them for assistance.]

Finally, Scientology is also in a controversy over the death of one of its members in Clearwater, Florida, in 1995. Lisa McPherson, 36, was detained by paramedics after she took off her clothes following a minor traffic accident. In lieu of psychiatric treatment, doctors released her to fellow Scientologists; 17 days later she died en route to another hospital where the staff included a Scientologist physician.

Joan Wood, the medical examiner for Pinellas and Pasco counties, found that Ms. McPherson died of a blood clot induced by "severe dehydration and bed rest," and Ms. McPherson's estate has filed a wrongful death suit in Tampa. Scientologists say that the death is an innocent tragedy, and charge that the issue is being exploited by local officials angry over the church's presence in Clearwater. The McPherson story, first reported by Cheryl Waldrip of the Tampa Tribune and quickly picked up by the St. Petersburg Times, has become a local cause celebre.

We certainly hope that the Scientologists finally win the respectability they seek, though we note that the Mormons did abandon polygamy and the Jehovah's Witnesses no longer beseech potential converts by setting up loudspeakers on their lawns. In the meantime, we wonder why the State Department is so exercised over German statements that would be protected by U.S. libel law, indeed, over a German position that was the U.S. position until the current administration. And we certainly think the IRS should share with the rest of us whatever persuaded it that money from the disturbed seeking solace is no longer being siphoned off into bank accounts in Switzerland.

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