THE THRIVING CULT OF GREED AND POWER
Ruined lives. Lost fortunes. Federal crimes.
Scientology poses as a religion but is really a ruthless
global scam - and aiming for the mainstream.
By Richard Behar
By all appearances, Noah Lottick of Kingston, Pa. had been a
normal, happy 24-year-old who was looking for his place in the world.
On the day last June when his parents drove to New York to claim his
body, they were nearly catatonic with grief. The young
Russian-studies scholar had jumped from a 10th-floor window of the
Milford Plaza Hotel and bounced off the hood of a stretch limosine.
When the police arrived, his fingers were still clutching $171 in
cash, virtually the only money he hadn't yet turned over to the Church
of Scientology, the self-help "philosophy" group he had discovered
just seven months earlier.
His death inspired his father Edward, a physician, to start his
own investigation of the church. "We thought Scientology was
something like Dale Carnegie," Lottick says. "I now believe it's a
school for psychopaths. Their so-called therapies are manipulations.
They take the best and brightest people and destroy them." The
Lotticks want to sue the church for contributing to their son's death,
but the prospect has them frightened. For nearly 40 years, the big
business of Scientology has shielded itself exquisitely behind the
First Amendment as well as a battery of high-priced criminal lawyers
and shady private detectives.
The Church of Scientology, started by science-fiction writer L.
Ron Hubbard to "clear" people of unhappiness, portrays itself as a
religion. In reality the church is a hugely profitable global racket
that survives by intimidating members and critics in a Mafia-like
manner. At times during the past decade, prosecutions against
Scientology seemed to be curbing its menace. Eleven top
Scientologists, including Hubbard's wife, were sent to prison in the
early 1980's for infiltrating, burglarizing, and wiretapping more than
100 private and government agencies in attempts to block their
investigations. In recent years hundreds of longtime Scientology
adherents - many charging that they were mentally or physically abused
- have quit the church and criticized it at their own risk. Some have
sued the church and won; others have settled for amounts in excess of
$500,000. In various cases judges have labeled the church
"schizophrenic and paranoid" and "corrupt, sinister and dangerous."
Yet the outrage and litigation have failed to squelch
Scientology. The group, which boasts 700 centers in 65 countries,
threatens to become more insidious and persuasive than ever.
Scientology is trying to go mainstream, a strategy that has sparked a
renewed law-enforcement campaign against the church. Many of the
group's followers have been accused of committing financial scams,
while the church is busy attracting the unwary through a wide array of
front groups in such businesses as publishing, consulting, health care
and even remedial education.
In Hollywood, Scientology has assembled a star-studded roster of
followers by aggressively recruiting and regally pampering them at the
church's "Celebrity Centers," a chain of clubhouses that offers
expensive counseling and career guidance. Adherents include screen
idols Tom Cruise and John Travolta, actresses Kirstie Alley, Mimi
Rogers and Anne Archer, Palm Springs mayor and performer Sonny Bono,
jazzman Chick Corea and even Nancy Cartwright, the voice of cartoon
star Bart Simpson. Rank-and-file members, however, are dealt a less
According to the Cult Awareness Network, whose 23 chapters
monitor more than 200 "mind control" cults, no group prompts more
telephone please for help than does Scientology. Says Cynthia Kisser,the network's Chicago-based executive director: "Scientology is quite
likely most ruthless, the most classically terroristic, the most
litigous and the most lucrative cult the country has ever seen. No
cult extracts more money from its members." Agrees Vicki Aznaran, who
was one of Scientology's six key leaders until she bolted from the
church in 1987: "This is a criminal organization, day in and day out.
It makes Jim and Tammy [Bakker] look like kindergarten."
To explore Scientology's reach, TIME conducted more than 150
interviews and reviewed hundreds of court records and internal
Scientology documents. Church officials refused to be interviewed.
The investigation paints a picture of a depraved yet thriving
enterprise. Most cults fail to outlast their founder, but Scientology
has prospered since Hubbard's death in 1986. In a court filing, one
of the cult's many entities - the Church of Spiritual Technology -
listed $503 million in income just for 1987. High-level defectors say
the parent organization has squirreled away an estimated $400 million
in bank accounts in Leichtenstein, Switzerland and Cyprus.
Scientology probably has about 50,000 members, far fewer than the 8
million the group claims. But in one sense, that inflated figure
rings true: Millions of people have been affected in one way or
another by Hubbard's bizarre creation.
Scientology is now run by David Miscavige, 31, a high school
dropout and second-generation church member. Defectors describe him
as cunning, ruthless and so paranoid about perceived enemies that he
kept plastic wrap over his glass of water. His obsession is to attain
credibility for Scientology in the 1990s. Among other tactics, the
* Retains public relations powerhouse Hill and Knowlton to help
shed the church's fringe-group image.
* Joined such household names as Sony and Pepsi as a main sponsor
of Ted Turner's Goodwill Games.
* Buys massive quantities of its own books from retail stores to
propel the titles onto best-seller lists.
* Runs full-page ads in such publications as NEWSWEEK and
BUSINESS WEEK that call Scientology a "philosophy," along with a
plethora a TV ads touting the group's books.
* Recruits wealthy and respectable professionals through a web of
consulting groups that typically hide their ties to Scientology.
The founder of this enterprise was part storyteller, part
flimflam man. Born in Nebraska in 1911, Hubbard was a moderately
successful writer of pulp science fiction. Years later, church
brochures described him falsely as an "extensively decorated" World
War II hero who was crippled and blinded in action, twice pronounced
dead and miraculously cured through Scientology. Hubbard's
"doctorate" from "Sequoia University" was a fake mail-order degree.
In a 1984 case in which the church sued a Hubbard biographical
researcher, a California judge concluded that its founder was a
Hubbard wrote one of Scientology's sacred texts, "Dianetics: The
Modern Science of Mental Health," in 1950. In it he introduced a
crude psychotherapeutic technique he called "auditing." He also
created a simplified lie detector (called an "E-meter") that was
designed to measure electrical charges in the skin while subjects
discussed intimate details of their past. Hubbard argued that
unhappiness sprang from mental aberrations (or "engrams") caused by
early traumas. Counseling sessions with the E-meter, he claimed,
could knock out the engrams, cure blindness and even improve a
person's intelligence and appearance.
Hubbard kept adding steps, each more costly, for his followers to
climb. In the 1960s the guru decreed that humans are made of clusters
of spirits (or "thetans") who were banished to earth some 75 million
years ago by a cruel galactic ruler named Xenu. Naturally, those
thetans had to be audited.
An Internal Revenue Service ruling in 1967 stripped Scientology's
mother church of its tax-exempt status. A federal court ruled in 1971
that Hubbard's medical claims were bogus and that E-meter auditingcould no longer be called a scientific treatment. Hubbard responded
by going fully religious, seeking First Amendment protection for
Scientology's strange rites. His counselors started sporting clerical
collars. Chapels were built, franchises became "missions" fees became
"fixed donations," and Hubbard's comic-book cosmology became "sacred
During the early 1970's, the IRS conducted its own auditing
session and 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 defector Aznaran, who took part in the scheme. Hubbard, who had
been in hiding for five years, died before the criminal case could be
Today the church invents costly new services with all the zeal of
its founder. Scientology doctrine warns that even adherents who are
"cleared" of engrams face grave spiritual dangers unless they are
pushed to higher and more expensive sessions that cost as much as
$1,000 an hour, or $12,500 for a 12 1/2-hour "intensive."
Psychiatrists say these sessions can produce a drugged-like,
mind-controlled euphoria that keeps customers coming back for more.
To pay their fees, newcomers can earn commissions by recruiting new
members, become auditors themselves (Miscavige did so at age 12), or
join the church staff and receive free counseling in exchange for what
their written contracts describe as a "billion years" of labor. "Make
sure that lots of bodies move through the shop," implored Hubbard in
one of his bulletins to officials. "Make money. Make more money.
Make others produce so as to make money...however you get them in or
why, just do it."
Harriet Baker learned the hard way about Scientology's business
of selling religion. When Baker, 73, lost her husband to cancer, a
Scientologist turned up at her Los Angeles home peddling a $1,300
auditing package to cure her grief. Some $15,000 later, the
Scientologists discovered that her home was debt free. They arranged
a $45,000 mortgage, which they pressured her to tape for more auditing
until Baker's children helped their mother snap out of her daze. Last
June, Baker demanded a $27,000 refund for unused services, prompting
two cult members to show up at her door unannounced with an E-meter to
interrogate her. Baker never got the money and, financially strapped,
was forced to sell her house in September.
Before Noah Lattick killed himself, he had paid more than $5,000
for church counseling. His behavior had also become strange. He once
remarked to his parents that his Scientology mentors could actually
read minds. When his father suffered a major heart attack, Noah
insisted that it was purely psychosomatic. Five days before he
jumped, Noah burst into his parents' home and demanded to know why
they were spreading "false rumors" about him - a delusion that finally
prompted his father to call a psychiatrist.
It was too late. "From Noah's friends at Dianetics" read the
card that accompanied a bouquet of flowers at Lottick's funeral. Yet
no Scientology staff member bothered to show up. A week earlier,
local church officials had given Lottick's parents a red-carpet tour
of their center. A cult leader told Noah's parents that their son had
been at the church just hours before he disappeared - but the church
denied this story as soon as the body was identified. True to form,
the cult even haggled with the Lotticks over $3,000 their son had paid
for services he never used, insisting that Noah had intended it as a
The church has invented hundreds of goods and services for which
members are urged to give "donations." Are you having trouble "moving
swiftly up the Bridge" - that is advancing up the stepladder of
enlightenment? Then you can have your case reviewed for a mere $1,250"donation." Want to know "why a thetan hangs on to the physical
universe?" Try 52 of Hubbard's tape-recorded speeches from 1952,
titled "Ron's Philadelphia Doctorate Course Lectures," for $2,525.
Next: Nine other series of the same sort. For the collector,
gold-and-leather-bound editions of 22 of Hubbard's books (and
bookends) on subjects ranging from Scientology ethics to radiation can
be had for just $1,900.
To gain influence and lure richer, more sophisticated followers,
Scientology has lately resorted to a wide array of front groups and
financial scams. Among them:
CONSULTING. Sterling Management Systems, formed in 1983, has been
ranked in recent years by INC. magazine as one of America's
fastest-growing private companies (estimated 1988 revenues: $20
million). Sterling regularly mails a free newsletter to more than
300,000 health-care professionals, mostly dentists, promising to
increase their incomes dramatically. The firm offers seminars and
courses that typically cost $10,000. But Sterling's true aim is to
hook customers for Scientology. "The church has a rotten product, so
they package it as something else," says Peter Georgiades, a
Pittsburgh attorney who represents Sterling victims. "It's a kind of
bait and switch." Sterling's founder, dentist Gregory Hughes, is now
under investigation by California's Board of Dental Examiners for
incompetence. Nine lawsuits are pending against him for malpractice
(seven others have been settled), mostly for orthodontic work on
Many dentists who have unwittingly been drawn into the cult are
filing or threatening lawsuits as well. Dentist Robert Geary of
Medina, Ohio, who entered a Sterling seminar in 1988, endured "the
most extreme high-pressure sales tactics I have ever faced." Sterling
officials told Geary, 45, that their firm was not linked to
Scientology, he says. But Geary claims they eventually convinced him
that he and his wife had personal problems that required auditing.
Over five months, the Gearys say, they spent $130,000 for services,
plus $50,000 for "gold-embossed, investment-grade" books signed by
Hubbard. Geary contends that Scientologists not only called his bank
to increase his credit-card limit but also forged his signature on a
$20,000 loan application. "It was insane," he recalls. "I couldn't
even get an accounting from them of what I was paying for." At one
point, the Gearys claim, Scientologists held Dorothy hostage for two
weeks in a mountain cabin, after which she was hospitalized for a
Last October, Sterling broke some bad news to another dentist,
Glover Rowe of Gadsden, Ala., and his wife Dee. Tests showed that
unless they signed up for auditing, Glover's practice would fail, and
Dee would someday abuse their child. The next month the Rowes flew to
Glendale, Calif., where they shuttled daily from a local hotel to a
Dianetics center. "We thought they were brilliant people because they
seemed to know so much about us," recalls Dee. "Then we realize our
hotel room must have been bugged." After bolting from the center,
$23,000 poorer, the Rowes say, they were chased repeatedly by
Scientologists on foot and in cars. Dentists aren't the only ones at
risk. Scientology also makes pitches to chiropractors, podiatrists
PUBLIC INFLUENCE. One front, the Way to Happiness Foundation, has
distributed to children in thousands of the nation's public schools
more than 3.5 million copies of a booklet Hubbard wrote on morality.
The church calls the scheme "the largest dissemination project in
Scientology history." Applied Scholastics is the name of still
another front, which is attempting to install a Hubbard tutorial
program in public schools, primarily those populated by minorities.
The group also plans a 1,000-acre campus, where it will train
educators to teach various Hubbard methods. The disingenuously named
Citizens Commission on Human Rights is a Scientology group at war with
psychiatry, its primary competitor. The commission typically issuesreports aimed at discrediting particular psychiatrics and the field in
general. The CCHR is also behind an all-out war against Eli Lilly,
the maker of Prozac, the nation's top-selling antidepression drug.
Despite scant evidence, the group's members - who are calling
themselves "psychbusters" - claim that Prozac drives people to murder
or suicide. Through mass mailings, appearances on talk shows and
heavy lobbying, CCHR has hurt drug sales and helped spark dozens of
lawsuits against Lilly.
Another Scientology-linked group, the Concerned Businessmen's
Association of America, holds antidrug contests and awards $5,000
grants to schools as a way to recruit students and curry favor with
education officials. West Virginia Senator John D. Rockefeller IV
unwittingly commended the CBAA in 1987 on the Senate floor. Last
August author Alex Haley was the keynote speaker at its annual awards
banquet in Los Angeles. Says Haley: "I didn't know much about that
group going in. I'm a Methodist." Ignorance about Scientology can be
embarassing: two months ago, Illinois Governor Jim Edgar, noting that
Scientology's founder "has solved the aberrations of the human mind,"
proclaimed March 13 "L. Ron Hubbard Day." He rescinded the
proclamation in late March, once he learned who Hubbard really was.
HEALTH CARE. HealthMed, a chain of clinics run by Scientologists,
promotes a grueling and excessive system of saunas, exercise and
vitamins designed by Hubbard to purify the body. Experts denounce the
regime as quackery and potentially harmful, yet HealthMed solicits
unions and public agencies for contracts. The chain is plugged
heavily in a new book, "Diet for a Poisoned Planet," by journalist
David Steinman, who concludes that scores of common foods (among them:
peanuts, bluefish, peaches and cottage cheese) are dangerous.
Former Surgeon General C. Everett Koop labeled the book "Trash,"
and the Food and Drug Administration issued a paper in October that
claims Steinman distorts his facts. "HealthMed is a gateway to
Scientology, and Steinman's book i a sorting mechanism," says
physician William Jarvis, who is head of the National Council Against
Health Fraud. Steinman, who describes Hubbard favorably as a
"researcher," denies any ties to the church and contends, "HealthMed
has no affiliation that I know of with Scientology."
DRUG TREATMENT. Hubbard's purification treatments are the mainstay of
Narconon, a Scientology-run chain of 33 alcohol and drug
rehabilitation centers - some in prisons under the name "Criminon" -
in 12 countries. Narconon, a classic vehicle for drawing addicts into
the cult, now plans to open what it calls the world's largest
treatment center, a 1,400-bed facility on an Indian reservation near
Newkirk, Okla. (Pop. 2,400). At a 1989 ceremony in Newkirk, the
Association for Better Living and Education presented Narconon with a
check for $200,000 and a study praising its work. The association
turned out to be part of Scientology itself. Today the town is
battling to keep out the cult, which has fought back through such
tactics as sending private detectives to snoop on the mayor and the
local newspaper publisher.
FINANCIAL SCAMS. Three Florida Scientologists, including Robert
Bernstein, a big contributor to the church's international "war
chest," pleaded guilty in March to using their rare-coin dealership as
a money laundry. Other notorious activities by Scientologists include
making the shady Vancouver stock exchange even shadier (see
accompanying article) and plotting to plant operatives in the World
Bank, International Monetary Fund and Export-Import Bank of the U.S.
The alleged purpose of this scheme: to gain inside information on
which countries are going to be denied credit so that
Scientology-linked traders can make illicit profits by taking "short"
positions in those countries' currencies.
In the stock market the practice of "shorting" involved borrowing
shares of publicly traded companies in the hope that the price will go
down before the stocks must be brought on the market and returned tothe lender. The Feshbach brothers of Palo Alto, Calif. - Kurt, Joseph
and Matthew - have become the leading short sellers in the U.S., with
more than $500 million under management. The Feshbachs command a
staff of about 60 employees and claim to have earned better returns
than the Dow Jones industrial average for most of the 1980's. And,
they say, they owe it all to the teachings of Scientology, whose "war
chest" has received more than $1 million from the family.
The Feshbachs also embrace the church's tactics; the brothers are
the terrors of the stock exchanges. In congressional hearings in
1989, the heads of several companies claimed that Feshbach operatives
have spread false information to to government agencies and posed in
various guises - such as a Securities and Exchange Commission official
- in an effort to discredit the companies and drive the stocks down.
Michael Russell, who ran a chain of business journals, testified that
a Feshbach employee called his bankers and interfered with his loans.
Sometimes the Feshbachs send private detectives to dig up dirt on
firms, which is then shared with business reporters, brokers and fund
The Feshbachs, who wear jackets bearing the slogan "stock
busters," insist they run a clean shop. but as part of a possible
probe into insider stock trading, federal officials are reportedly
investigating whether the Feshbachs received confidential information
from FDA employees. The brothers seem aligned with Scientology's war
on psychiatry and medicine: many of their targets are health and
biotechnology firms. "Legitimate short selling performs a public
service by deflating hyped stocks," says Robert Flaherty, the editor
of EQUITIES magazine and a harsh critic of the brothers. "But the
Feshbachs have damaged scores of good start-ups."
Occasionally a Scientologist's business antics land him in jail.
Last August a former devotee named Steven Fishman began serving a
five-year prison term in Florida. His crime: stealing blank
stock-confirmation slips from his employer, a major brokerage house,
to use as proof that he owned stock entitling him to join dozens of
successful class-action lawsuits. Fishman made roughly $1 million
this way from 1983 to 1986 and spent as much as 30% of the loot on
Scientology books and tapes.
Scientology denies any tie to the Fishman scam, a claim strongly
disputed by both Fishman and his longtime psychiatrist, Uwe Geertz, a
prominent Florida hypnotist. Both men claim that when arrested,
Fishman was ordered by the church to kill Geertz and then do an "EOC,"
or end of cycle, which is church jargon for suicide.
BOOK PUBLISHING. Scientology mischiefmaking has even moved to the
book industry. Since 1985 at least a dozen Hubbard books, printed by
a church company, have made best-seller lists. They range from a
5,000-page sci-fi decalogy ("Black Genesis," "The Enemy Within," "An
Alien Affair") to the 40-year-old "Dianetics." In 1988 the trade
publication PUBLISHERS WEEKLY awarded the dead author a plaque
commemorating the appearance of "Dianetics" on its best-seller list
for 100 consecutive weeks.
Critics pan most of Hubbard's books as unreadable, while
defectors claim that church insiders are sometimes the real authors.
Even so, Scientology has sent out armies of its followers to buy the
group's books at such major chains as B. Dalton's and Waldenbooks to
sustain the illusion of a best-selling author. A former Dalton's
manager says some books arrived in his store with the chain's price
stickers already on them, suggesting that copies are being recycled.
Scientology claims that sales of Hubbard's books now top 90 million
worldwide. The sceme, set up to gain converts and credibility, is
coupled with a radio and TV advertising campaign virtually
unparalleled in the book industry.
Scientology devotes vast resources to squelching its critics.
Since 1986 Hubbard and his church have been the subject of four
unfriendly books, all published by small yet courageous publishers.
In each case, the writers have been badgered and heavily sued. One of
Hubbard's policies was that all perceived enemies are "fair game" andsubject to being "tricked, lied to or destroyed." those who criticize
the church - journalists, doctors, lawyers and even judges - often
find themselves engulfed in litigation, stalked by private eyes,
framed for fictional crimes, beaten up or threatened with death.
Psychologist Margaret Singer, 69, an outspoken Scientology critic and
professor at the University of California, Berkeley, now travels
regularly under an assumed name to avoid harassment.
After the Los Angeles TIMES published a negative series on the
church last summer, Scientologists spent an estimated $1 million to
plaster the reporters' names on hundreds of billboards and bus
placards across the city. Above their names were quotations taken out
of context to portray the church in a positive light.
The church's most fearsome advocates are its lawyers. Hubbard
warned his followers in writing to "beware of attorneys tell you not
to sue...the purpose of the suit is to harass and discourage rather
than to win." Result: Scientology has brought hundreds of suits
against its perceived enemies and today pays an estimated $20 million
annually to more than 100 lawyers.
One legal goal of Scientology is to bankrupt the opposition or
bury it under paper. The church has 71 active lawsuits against the
IRS alone. One of them, "Miscavige vs. IRS," has required the U.S. to
produce an index of 52,000 pages of documents. Boston attorney
Michael Flynn, who helped Scientology victims from 1979 to 1987,
p\personally endured 14 frivolous lawsuits, all of them dismissed.
Another laywer, Joseph Yanny, believes the church "has so subverted
justice and the judicial system that it should be barred from seeking
equity in any court." He should know: Yanny represented the cult
until 1987, when, he says, he was asked to help church officials steal
medical records to blackmail an opposing attorney (who was allegedly
beaten up instead). Since Yanny quit representing the church, he has
been the target of death threats, burglaries, lawsuits and other
Scientology's critics contend that the U.S. needs to crack down
on the church in a major, organized way. "I want to know, Where is
our government?" demands Toby Plevin, a Los Angeles attorney who
handles victims. "It shouldn't be left to private litigators, because
God knows most of us are afraid to get involved." But law-enforcement
agents are also wary. "Every investigator is very cautious, walking
on eggshells when it comes to the church," says a Florida police
detective who has tracked the cult since 1988. "It will take a
federal effort with lots of money and manpower."
So far the agency giving Scientology the most grief is the IRS,
whose officials have implied that Hubbard's successors may be looting
the church's coffers. Since 1988, when the U.S. Supreme Court upheld
the revocation of the cult's tax-exempt status, a massive IRS probe of
church centers across the country has been under way. An IRS agent,
Marcus Owens, has estimated that thousands of IRS employees have been
involved. Another agent, in an internal memorandum, spoke hopefully
of the "ultimate disintegration" of the church. A small but helpful
beacon shone last June when a federal appeals court ruled that two
cassette tapes featuring conversations between church officials and
their lawyers are evidence of a plan to commit "future frauds" against
Foreign governments have been moving even more vigorously against
the organization. In Canada the church and nine of its members will
be tried in June on charges of stealing government documents (many of
them retrieved in an enormous police raid of the church's Toronto
headquarters). Scientology proposed to give $1 million to the needy
if the case was dropped, but Canada spurned the offer. Since 1986
authorities in France, Spain and Italy have raided more than 50
Scientology centers. Pending charges against more than 100 of its
overseas church members include fraud, extortion, capital flight,
coercion, illegally practicing medicine and taking advantage of
medically incapacitated people. In Germany last month, leading
politicians accused the cult of trying to infiltrate a major party aswell as launching an immense recruitment drive in the east.
Sometimes even the church's biggest zealots can use a little
protection. Screen star Travolta, 37, has long served as an
unofficial Scientology spokesman, even though he told a magazine in
1983 that he was opposed to the church's management. High-level
defectors claim that Travolta has long feared that if he defected,
details of his sexual life would be made public. "He felt pretty
intimidated about this getting out and he told me so," recalls William
Franks, the church's former chairman of the board. "There were no
outright threats made, but it was implicit. If you leave, they
immediately start digging up everything." Franks was driven out in
1981 after attempting to reform the church.
The church's former head of security, Richard Aznaran, recalls
Scientology leader Miscavige repeatedly joking to staffers about
Travolta's allegedly promiscuous homosexual behavior. At this point
any threat to expose Travolta seems superfluous: last May a male porn
star collected $100,000 from a tabloid for an account of his alleged
two-year liaison with the celebrity. Travolta refuses to comment, and
in December his lawyer dismissed questions about the subject as
"bizarre." Two weeks later, Travolta announced that he was getting
married to actress Kelly Preston, a fellow Scientologist.
Shortly after Hubbard's death the church retained Trout & Reis, a
respected, Connecticut-based firm of marketing consultants, to help
boost its public image. "We were brutally honest," says Jack Trout.
"We advised them to clean up their act, stop with the controversy and
even to stop being a church. They didn't want to hear that."
Instead, Scientology hired one of the country's largest p.r. outfits,
Hill and Knowlton, whose executives refuse to discuss the lucrative
relationship. "Hill and Knowlton must feel that these guys are not
totally off the wall," says Trout. "Unless it's just for the money."
One of Scientology's main strategies it to keep advancing the
tired argument that the church is being "persecuted" by
anti-religionists. It is supported in that position by the American
Civil Liberties Union and the National Council of Churches. But in
the end, money is what Scientology is all about. As long as the
organization's opponents and victims are successfully squelched,
Scientology's managers and lawyers will keep pocketing millions of
dollars by helping it achieve its ends.
MINING MONEY IN VANCOUVER
One source of funds for the Los Angeles-based church is the
notorious, self-regulated stock exchange in Vancouver, British
Columbia, often called the scam capital of the world. The exchange's
2,300 penny-stock listings account for $4 billion in annual trading.
Local journalists and insiders claim the vast majority range from
total washouts to outright frauds.
Two Scientologists who operate there are Kenneth Gerbino and
Michael Baybak, 20-year church veterans from Beverly Hills who are
major donators to the cult. Gerbino, 45, is a money manager,
marketer, and publisher of a national financial newsletter. He has
boasted in Scientology journals that he owes all his stock-picking
success to L. Ron Hubbard. That's not saying much: Gerbino's
newsletter picks since 1985 have cumulatively returned 24%, while the
Dow Jones industrial average has more than doubled. Nevertheless
Gerbino's short-term gains can be stupendous. A survey last October
found Gerbino to be the only manager who made money in the third
quarter of 1990, thanks to gold and other resource stocks. For the
first quarter of 1991, Gerbino was dead last. Baybak, 49, who runs a
public relations company staffed with Scientologists, apparently has
no ethics problem with engineering a hostile takeover of a firm he is
hired to promote.
Neither man agreed to be interviewed for this story, yet both
threatened legal action through attorneys. "What these guys do istake over companies, hype the stock, sell their shares, and then
there's nothing left," says John Campbell, a former securities lawyer
who was director of mining company Athena Gold until Baybak and
Gerbino took it over.
The pattern has become familiar. The pair promoted a mining
venture called Skylark Resources, whose stock traded at nearly $4 a
share in 1987. The outfit soon crashed, and the stock is around 2
cents. NETI Technologies, a software company, was trumpeted in the
press as "the next Xerox" and in 1984 rose to a market value of $120
million with Baybak's help. The company, which later collapsed, was
delisted two months ago by the Vancouver exchange.
Baybak appeared in 1989 at the helm of Wall Street Ventures, a
start-up that announced it owned 35 tons of rare Middle Eastern
postage stamps - worth $100 million - and was buying the world's
largest collection of southern Arabian stamps (worth $350 million).
Steven C. Rockefeller Jr. of the oil family and former hockey star
Dennis Potvin joined the company in top posts, but both say they quit
when they realized the stamps were virtually worthless. "The stamps
were created by sand-dune nations to exploit collectors," says Michael
Laurence, editor of LINN'S STAMP NEWS, America's largest stamp
journal. After the stock topped $6, it began a steady descent, with
Baybak unloading his shares along the way. Today it trades at 18
Athena Gold, the current object of Baybak and Gerbino's
attentions, was founded by entrepreneur William Jordan. He turned to
an established Vancouver broker in 1987 to help finance the company, a
4,500-acre mining property near Reno. The broker promised to raise
more than $3 million and soon brought Baybak and Gerbino into the
deal. Jordan never got most of the money, but the cult members ended
up with a good deal of cheap stock and options. Next time they
elected directors who were friendly to them and set in motion a series
of complex maneuvers to block Jordan from voting stock he controlled
and to run him out of the company. "I've been an honest policeman all
my life and I've seen the worst kinds of crimes, and this ranks high,"
says former Athena shareholder Thomas Clark, a 20-year veteran of
Reno's police force who has teamed up with Jordan to try to get the
gold mine back. "They stole this man's property."
With Baybak as chairman, the two Scientologists and their staffs
are promoting Athena, not always accurately. A letter to shareholders
with the 1990 annual report claims Placer Dome, one of America's
largest gold-mining firms, has committed at least $25.5 million to
develop the mine. That's news to Placer Dome. "There is no
pre-commitment," says Placer executive Cole McFarland. "We're not
going to spend that money unless survey results justify the
Baybak's firm represented Western Resource Technologies, a
Houston oil-and-gas company, but got the boot in October. Laughs
Steven McGuire, president of Western Resource: "His is a p.r. firm in
need of a p.r. firm." But McGuire cannot laugh too freely. Baybak
and other Scientologists, including the estate of L. Ron Hubbard,
still control huge blocks of his company's stock.
THE SCIENTOLOGISTS AND ME
Strange things seem to happen to people who write about
Scientology, Journalist Paulette Cooper wrote a critical book about
the cult in 1971. This led to a Scientology plot (called Operation
Freak-Out) whose goal, according to church documents, was "to get P.C.
incarcerated in a mental institution or jail." It almost worked: By
impersonating Cooper, Scientologists got her indicted in 1973 for
threatening to bomb the church. Cooper, who also endured 19 lawsuits
by the church, was finally exonerated in 1977 after FBI raids on the
church offices in Los Angeles and Washington uncovered documents from
the bomb scheme. No Scientologists were ever tried in the matter.
For the TIME story, at least 10 attorneys and six private
detectives were unleashed by Scientology and its followers in aneffort to threaten, harass, and discredit me. Last Oct. 12, not long
after I began this assignment, I planned to lunch with Eugene Ingram,
the church's leading private eye and a former cop. Ingram, who was
tossed off the Los Angeles police force in 1981 for alleged ties to
prostitutes and drug dealers, has told me that he might be able to
arrange a meeting with church boss David Miscavige. Just hours before
the lunch, the church's "national trial counsel," Earle Cooley, called
to inform me that I would be eating alone.
Alone, perhaps, but not forgotten. By day's end, I later
learned, a copy of my personal credit report - with detailed
information about my bank accounts, home mortgage, credit-card
payments, home address and Social Security number - had been illegally
retrieved from a national credit bureau called Trans Union. The sham
company that received it, "Educational Funding Services" of Los
Angeles, gave as its address a mail drop a few blocks from
The owner of the mail drop is a private eye named Fred Wolfson,
who admits that an Ingram associate retained him to retrieve credit
reports on several individuals. Wolfson says he was told that
Scientology's attorneys "had judgments against these people and were
trying to collect on them." He says now, "They are vicious people.
They are vipers." Ingram, though a lawyer, denies any involvement in
During the past five months, private investigators have been
contacting acquaintances of mine, ranging from neighbors to a former
colleague, to inquire about subjects such as my health (like my credit
rating, it's excellent) and whether I've ever had trouble with the IRS
(unlike Scientology, I haven't). One neighbor was greeted at dawn
outside my Manhattan apartment building by two men who wanted to know
whether I lived there. I finally called Cooley to demand that
Scientology stop the nonsense. He promised to look into it.
After that, however, an attorney subpoenaed me, while another
falsely suggested that I might own shares in a company I was reporting
about that had been taken over by Scientologists (he also threatened
to call the Securities and Exchange Commission). A close friend in
Los Angeles received a disturbing telephone call from a Scientology
staff member seeking data about me - an indication that the cult may
have illegally obtained my personal phone records. Two detectives
contacted me, posing as a friend and a relative of a so-called cult
victim, to elicit negative statements from me about Scientology. Some
of my conversations with them were taped, transcribed and presented by
the church in affidavits to TIME's lawyers as "proof" of my bias
Among the comments I made to one of the detectives, who
represented himself as "Harry Baxter," a friend of the victim's
family, was that "the church trains people to lie." Baxter and his
colleagues are hardly in a position to dispute that observation. His
real name is Barry Silvers, and he is a former investigator for the
Justice Department's Organized Crime Strike Force.