Scientology Sells... And Profits -- IRS Files Shed Light On Church's Finances

Source: Seattle Times
Date: October 21, 1993

It pays to pitch Scientology, according to earnings reports the church has filed with the Internal Revenue Service.

One man averaged almost $200,000 a year in commissions from the fees of new members he had solicited to become Scientologists.

The church gives its proselytizers 10 to 15 percent of what newcomers "donate" for church services, such as the process called auditing that tells how far from salvation the newcomer is. That means the top pitchman in the 1990s, identified only as Barry Klein, drummed up more than $1.3 million for Scientology each year.

Scientologists who collect from other church members can make out even better. Ken Pirak made $407,000 in 1991 from a Western states "membership tour," as the church calls its fund-raising roundups.

The earnings reports stand out in the voluminous record of Scientology's 40-year battle to convince the IRS that as a religious organization it deserved to be exempt from taxes.

Last week the IRS announced it granted the exemption, and the Scientology files that led to the decision became public. They reveal a vast organization sophisticated in finances - and more than a little defensive about that sophistication.

"In truth, only 1 percent of Scientology Scripture has anything at all to do with finance," church lawyers wrote in one of their more combative replies to a written question from the IRS. They said the oft-quoted advice of the church's founder, the late L. Ron Hubbard, to "make money" is balanced by a passage in which Hubbard calls money "the weakest" motivation.

Millions in tax dollars were at stake, as well as a stamp of legitimacy for a religion that appears to offer its followers salvation on a fee-for-service basis.

Documents from 12 Scientology organizations, all but one dated 1992, list $275 million in assets. The church has holdings in real estate, stocks and gold bullion, but by far its largest source of revenue appears to be donations from its members and newcomers, who pay fees to undergo Scientology's ascending series of personal evaluation, called auditing.


Exact figures remain elusive, however, because money flows freely among the more than 30 Scientology organizations that received tax-exempt status this month. Their hierarchy is far from simple.

For example, the buildings in Clearwater house the church's spiritual headquarters, known as the Flag Service Organization. It had assets last year of $48 million and revenues of $74.3 million. Of those revenues, $24.3 million was transferred to the "mother church" - the Church of Scientology International in Los Angeles.

The mother church listed assets of $69 million in 1991. They were topped a year later by the $92 million controlled by the International Association of Scientologists, a "support" organization established to safeguard Scientology and raise funds. It is based in Sussex, England.

Meanwhile, the church's top executive, David Miscavige, is paid by Religious Technology Center, a $3.8 million organization that serves as "protector of the religion of Scientology" and its logos and slogans.

Easier to make out is where the church spends its money. In one document, lawyers detail $205 million in spending from cash reserves across two years, 1987 and 1988. The total includes $30 million in legal bills, and $3.4 million used to mount a Hollywood Boulevard exhibition on Hubbard's life.

The church spent relatively little on good works. Its own statement of one year's cash flow to organizations devoted to "social betterment," such as The Way to Happiness Foundation, totaled less than $9 million.

Meanwhile, Scientology spent $7 million on the seven nuclear blast-resistant doors for a vault where Hubbard's papers would be stored within titanium capsules, which cost another $7 million.

Other expenses: $1 million for the powerhouse public-relations firm Hill & Knowlton and $1 million to sponsor the Seattle Goodwill Games.

An IRS spokesman declined to explain how the agency came to decide Scientology qualified as tax-exempt.

The tax agreement appears to have grown out of a 1991 invitation from the IRS to come to an amicable conclusion on the issue. Yet the agency's questions understandably dwell on areas officials found most troublesome.


One was the Guardian Office.

From its establishment as a security arm in the 1960s, the documents say, the Guardian Office was run by Hubbard's wife, Mary Sue, as a secretive separate operation with 1,500 employees.

In due course, Mrs. Hubbard and 10 other Scientologists were imprisoned on charges of stealing government files and bugging an IRS office. Guardian Office and its Intelligence Bureau were disbanded altogether by Scientology and replaced by new services.

All are closely supervised, church lawyers assured the IRS.