A Fine Mess

WHAT LRH ORDERED: In the early 1980s, prior to his departure, L. Ron Hubbard re-organized the corporate structure of Scientology and ordered the new structure to be implemented. The newly-created governing bodies of Scientology became three California nonprofit religious corporations (i.e, CST, RTC & CSI) with seven separate boards of trustees, general directors and, for CST only, a third board of special directors. See: LRH Intent.

WHAT WAS DONE: The corporate structure has been followed in form only, never in substance. In reality, all the boards of general directors and trustees corporate boards are captive and under the control of one man: David Miscavige. That all organizations and aspects of Scientology is subject to one-man rule by Miscavige is one of those facts universally known to all Scientologists, but which, as with the policy of disconnection, the Church publicly denies.

As stated in PR Series No. 2, one should “NEVER USE LIES IN PR… Texas JusticeAll lies will dead end some day.”

These lies appear destined to dead end in a Texas courtroom. There, the corporate veils of the governing bodies of Scientology are being lifted to expose David Miscavige to personal liability for the alleged harmful actions done under his one-man rule.

It is a fine mess Miscavige finds himself in; one that he created and could have avoided; and one that still has a solution.

The Texas Legal Case

In a nutshell, Monique Rathbun, the wife of Marty Rathbun sued the three governing church corporations (CSI, RTC and CST) as well as David Miscavige, personally, and a few other individuals, claiming that she was harassed, put under constant surveillance, falsely accused of really being a man who had a sex change, and embarrassed at work (a dildo mailed to her, and flowers sent to a female co-worker in Monique’s name).

A Texas court issued a temporary restraining order (TRO) against all defendants, and set the case for hearing on a preliminary injunction. A TRO, as the name implies, is temporary. It lasts only until an evidentiary hearing can determine whether the order should be extended until a full trial of the case can be held to determine whether a permanent injunction should be issued.

The hearing on preliminary injunction was set for Thursday and Friday, September 12th and 13th. Two other matters were squeezed onto the hearing calendar.

One, defendants David Miscavige and RTC made a “special appearance” through a motion contesting the court’s jurisdiction over them. And two, the Church (CSI), which had accepted jurisdiction in Texas, sought to to disqualify Monique’s lawyers on the grounds that they had been tainted by receipt of privileged information from Marty, a witness in the case.

The judge heard partial argument and testimony on all three matters, but resolved none of them due to a lack of time, and continued the hearing until October 18, 2013.

However, based on the Judge’s comments during arguments, and his order that both RTC and CSI make corporate representatives available for deposition in the meantime, Miscavige and his legal case, are in big trouble.

Piercing the Scientology Corporate Veils

Counsel for Miscavige and RTC claimed, essentially, that they were not connected to the alleged wrongdoing, that any harm later proven to have occurred to Monique was the responsibility of CSI, not RTC or Miscavige. Piercing the Corporate ShieldThat position was severely undermined, however, by Marty Rathbun’s affidavit on the inner workings of RTC. Marty details, for example, how Miscavige micro-managed OSA (Office of Special Affairs) by using Marty as secret go-between Miscavige and Mike Rinder, the head of OSA International. This is highly improper because OSA Int is a department (Dept. 20, Div 7) of CSI, a separate corporation from RTC.

The legal significance of this aspect of Monique’s case is huge. All Scientologists should take careful note of it in order to appreciate what is at stake. Certainly, all future litigants against the Church will.

First, a little legal primer. There are two major benefits afforded nonprofit corporations: (1) tax exempt status and (2) protection from personal liability of its officers, directors, and members. In order to qualify for these benefits, corporate formalities, including independent boards of directors, must be followed.

Therefore, if Monique Rathbun can substantiate Marty’s testimony, she can “pierce the corporate veils” and expose David Miscavige, and potentially other directors and officers, to personal liability. A court ruling, and/or the evidence upon which it is based, could also form the basis of a revocation of tax exempt status action.

(In 1967, the IRS revoked tax exempt status for the California Church of Scientology due to lack of corporate board oversight. The California C of S was the-then “mother church” of Scientology and predecessor to CSI, the current “mother church.” The 1967 revocation of tax exempt status led to the “war” with the IRS and the corporate re-structure to remedy that loss of tax exempt status. Regaining tax exempt status was the primary purpose of the re-organization and was such a high priority to LRH that he created a board of special directors in CST who had the sole duty to not only obtain tax exempt status, but to maintain it.)

Therefore, Miscavige, by his failure to carry out LRH Intent to end one-man rule upon his death and govern Scientology through multiple checks and balances among seven (7) boards of trustees and directors in three (3) separate nonprofit religious corporations, and by his refusal to put the interests of Scientology above his own personal interests, has put at risk Scientology’s tax exempt status [fn. 1] in addition to creating the legal and PR quagmire in which Scientology finds itself engulfed, and into which it is sinking ever deeper over the last four years. Attacking whistleblowers never works, as we have previously written; only internal, independent investigations solve the problem of alleged corporate corruption.

Protecting Orthodoxy

On day one of the hearing, CSI’s attorney admitted that the Church surveilled the Rathbuns because they were challenging Scientology’s orthodoxy, by which he meant that Marty was violating the trademarks of Scientology by practicing the religion outside the Church.

A person trained in Scientology “grades” technology (i.e., a Class IV auditor or above) will recognize this statement to be a justification for wrongdoing. In an auditing session, the next question from the auditor would be, “How else did you justify that overt?”

A person trained in the law will recognize the Church’s actions to be vigilantism, or taking the law into one’s own hands in bypass of the legal system in an attempt to effect justice according to one’s own consideration of right and wrong.

For, if it is true that Marty violated Scientology’s trademarks, there is a legal remedy: a lawsuit for trademark violation under the Lanham Act (also known as the Trademark Act).

LRH gave to RTC the Scientology trademarks and the express duty to protect them. David Miscavige is the head of RTC. So why was this simple – and lawful – solution not taken?
Why did (allegedly) David Miscavige resort to sending a dildo in the mail to Monique’s place of employment and engage in other distasteful and legally actionable conduct, instead?

Under the Lanham Act, RTC had three years to file a lawsuit against Marty Rathbun and any other Scientologist who was violating Scientology’s “orthodoxy.” Because Marty set up shop in June 2009, the statute of limitations has expired. RTC is now forever barred from bringing a trademark suit. Arguably, the trademarks of Scientology have become part of the public domain, meaning that Miscavige may have lost the trademarks of Scientology rather than protect them, as he was charged to do.

(By the way, the other rights given to RTC by LRH were Scientology’s trade secrets, in other words, the Upper Levels. In 1983 these were stolen from the Advanced Organization and Saint Hill Organization combined for Europe and Africa (AOSHEU&AF) by a group of former Sea Org members, and the materials were subsequently leaked on the Internet. RTC lost these trade secrets; they are part of the public domain. This means that RTC completely failed its mission and has no purpose for it continued existence. For those Scientologists who still measure a staff member’s value based on production and results, rather than on PR or personality, this colossal failure should be telling.)

The answers to the questions raised above are obvious. First, RTC could not win a trademark violation suit. A person (or organization) suing for trademark violation must come into court with clean hands. Proof of wrongdoing on the part of the plaintiff is a complete defense. And Marty Rathbun, and other former high-ranking Sea Org members at Int Base, claimed that they were only practicing Scientology outside the Church because Miscavige had made life unbearable inside the Church for them: he created a culture of violence and personally beat staff in addition to inflicting them with other cruel and inhumane treatment that no person, even a Sea Org member, should have to endure. See, e.g.: Truth Rundown & Debbie Cook Testimony.

We are mindful that these are allegations, and that the Church has strongly refuted them. But, three points: (1) avoidance of a lawful solution is, like the flight of a criminal, evidence of guilt, and (2) this is not how one handles allegations of corporate corruption, as we have written on this blog: one investigates the claims of whistleblowers; one does not attack the whistleblowers; see point (1); and (3) allegations versus counter allegations do not resolve; like a problem of intention versus counter intention, they persist.

The second answer to the questions raised above is also obvious. Miscavige placed his personal interests – his position as supreme ruler of Scientology – over those of RTC, the aims of Scientology, and the wishes of LRH.

Solution

Here is the solution:

1. Implement the corporate checks and balances as previously established by LRH; that is, empower the boards of trustees and directors;

2. Miscavige step aside pending internal investigations conducted by the boards in conjunction with reputable audit firms and independent of David Miscavige and any subordinates who are implicated in the allegations made by former, long-term senior Sea Org executives;

(p>3. Make public the findings and all corrective actions taken to ensure that any wrongdoing does not recur.

4. Abolish the policies of disconnection, fair game and security checks by reissue of the Reform Code of Scientology. Hear Ron define it in RJ ‘68: Click here; See also: “Reform Code of Scientology” in the Modern Management Technology Defined, First Ed., p. 440.

The first step will bring Scientology into compliance with California law for nonprofit religious corporations and IRS rules and regulations on tax exempt status. Until this step is taken, tax exempt status is at risk. Probably the only reason that the IRS has not yet commenced a revocation hearing is due to a moratorium on revocation hearings pending the appointment of a high enough official within the IRS to authorize such proceedings.

The second and third steps are part of what is often referred to as the American Corporate Protocol for handing allegations of corporate corruption. The protocol evolved through the failure of attacks against whistleblowers and the success of internal investigation, independently conducted (so as to give the investigations and their findings credibility).

In 1968, LRH canceled the polices set forth in step 4 in response to broad public surveys which revealed the general public hated them. As practiced by the Miscavige Administration, these toxic policies are used as control mechanisms that the general public identify with cults. So, naturally, use of the policies define us to be a cult, which damages our communication line to the general public and impedes the aims of Scientology.

Board members of CSI, RTC, and CST (in particular), are requested to consider their actions, and failures to act, in light of their legal and Scientological responsibilities. They can, and we believe, they should, take action. They can contact us. We have specialized law firms on retainer and the resources to help you carry out your duties to solve the situation. We will treat your communications in absolute confidence.

Failure to Solve

The future is easy to predict if the situation is not solved. Just review the events since June 2009. Ever-increasing negative publicity, ever-decreasing public credibility. Ever-increasing independent field, ever-decreasing membership. Media are more emboldened to criticize the Church. Publishers have identified a market for books on Scientology. Filmmakers, too. Lawyers have fine-tuned law suits to pierce Scientology’s corporate veils; a formula for success has been developed; there will be more. One can foresee major legal actions attacking Miscavige and his control mechanisms. The IRS will seek revocation of tax exempt status. All this looms on the horizon.

All this can be reversed. This is good news – for every Scientologist not named David Miscavige or a facilitator therefor.

Footnotes:

1. Tax-exempt status was granted based upon representations made to the IRS that we were in compliance with with the corporate reorganization ordered by LRH. Failure to implement the multiple checks and balances of the three governing corporations of Scientology means that the Miscavige Administration has breached the terms of the 1993 Closing Agreement with the IRS that, after so many years of expensive litigation, resulted in tax exempt status.

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