Scientology, ‘Going Clear,’ and the Church’s Long War With the IRS

As seen in VICE News:

Shortly after 6am on the morning of July 8, 1977, Special Agent Elmer “Lindy” Linberg stood at the gate in front of 4833 Fountain Avenue and pushed the call button. The night caretaker of the Los Angeles building came out, walked about 10 feet toward the gate, and then stopped. He refused to come any closer.

“We are with the FBI, and we are here to serve a federal search warrant,” Linberg shouted.

The imposing 500,000 square-foot building that once housed the Cedars of Lebanon Hospital had been purchased the year before by the Church of Scientology for $5 million. The church had then painted it blue and made it their international headquarters.

As Linberg, then the head of the FBI’s Los Angeles Field Office, later wrote in his official report of the incident (it was eventually made available to the public along with thousands of related documents via the Freedom of Information Act), “a large German Shepherd dog was noticed roaming free inside the fenced area.” Linberg ordered his agents to cut the lock and move in. The dog left them alone.

Agents entered the building and fanned out to begin their search. Many of the offices they needed to enter were locked, and church officials either couldn’t or wouldn’t give agents the keys. Linberg, a seasoned investigator who had worked the Patty Hearst kidnapping case a few years before, gave church members an hour to open the doors; they assured him the keys were on their way. In the meantime, a group of 40 Scientologists showed up with push brooms and “milled among the Agents and started to sweep the area.”

“SAC Linberg immediately advised [name redacted] and [name redacted] that the continued operation of the sweepers would interfere with the search, and SAC Linberg ordered all but one broom sweeper to clear the area,” reads the report. A few minutes later, “numerous individuals carrying clipboards, cameras, and tape recorders” appeared. They identified themselves as church “affiliates” and said they were on hand to “observe and record the Agents’ conduct.”

At 7:30am, the keys still hadn’t arrived. Linberg was told that the church’s “legal advisor” was en route, and that he’d have the keys there in 10 minutes. At 8am, Linberg instructed his men to open the locked doors and cabinets by force. No one identifying themselves as a legal advisor ever showed up with keys.

While all this was going on, the FBI was executing simultaneous search warrants at two other church locations: Scientology’s so-called Celebrity Centre two miles away, and the church’s offices near Dupont Circle in Washington, DC. At both locations, church members followed agents with cameras, clipboards, and tape recorders. According to FBI reports, church members at the Celebrity Centre shut off the water so agents couldn’t go to the bathroom.

At 9:40am, the Los Angeles agents reported that they had “struck gold.” About 90 minutes later, they informed supervisors that they had “got everything they were looking for and then some.” Agents in DC reported to headquarters at 1:03pm with “a cryptic message that ‘it looks like we scored.’ SAC Stames could not elaborate on this message at this time.” The FBI seized so many documents from church files that it took teams of three agents working 24 hours a day for 10 straight work days to Xerox them all. The Bureau had to rent 10 additional copiers to handle the load.

The purpose of the raid? To disrupt a dirty tricks campaign the church called “Operation Snow White.”

As Lawrence Wright noted in his 2013 book Going Clear — the book upon which the HBO documentary of the same name is based — the Church of Scientology has had a long, contentious history with the IRS. “Nothing in American history,” he wrote, “can compare with the scale of the domestic espionage of Operation Snow White.”

* * *

The seeds for Operation Snow White were sown in 1967, when the IRS revoked the Church of Scientology’s tax-exempt status. The church’s activities were “commercial,” the ruling said, and their findings “proved conclusively that the Church was operated for the benefit of L. Ron Hubbard and his family.” The church refused to recognize the decision or pay taxes. The US government didn’t take kindly to that, and the IRS began monitoring the church as a “dissident group.”

The church then launched Operation Snow White in 1973.

“Snow White was originally a litigation strategy to purge the government’s files of all the quote/unquote ‘false reports’ about Scientology,” said Marty Rathbun, once the No. 2 official in the Church of Scientology, who is also featured in Going Clear. “The original intent was to get all these documents legally through FOIA, but the litigation process wasn’t going fast enough to satisfy Hubbard’s demands. So they decide to flank the whole legal route, like, ‘Let’s get in there and see what the government is withholding.’ Their impatience with the process trumped everything else, which is what always happens with Scientology.”

Rathbun, who ran Scientology’s intelligence wing known as the Office of Special Affairs, told VICE News that part of the plan involved Cold War-era cloak-and-dagger tactics. In one instance, church officials planted a bug in an IRS conference room in which a meeting to discuss litigation involving Scientology was going to take place. Scientology operatives sat outside the building in a car, transcribing what they heard taking place in the conference room.

The other part of the plan, he said, involved installing “undercover” Scientologists in jobs within the US government — including the IRS — where the moles would have access to files related to the church. One of these moles, a Scientologist named Gerald Bennett Wolfe, got a job in November 1974 as a typist at the IRS in Washington. Over the next 18 months, he stole thousands of documents that had been withheld from the church when they requested their files via FOIA requests, and sent them to Scientology headquarters in LA.

In 1976, Operation Snow White was uncovered. An FBI teletype sent on June 20 explains that Wolfe “used fraudulent identification to enter the United States Courthouse in Washington DC and Xerox unknown records contained in that Courthouse.”

He was arrested by the FBI. The light sentence handed down to Bennett suggests some degree of cooperation with the government; he pled guilty to one count of “Fraudulent Use of a Government Seal,” and in June 1977, he was sentenced to two years probation and 100 hours of community service. In October 1979, eleven Scientologists were convicted of charges including burglary, obstruction of justice, and theft of government property. One of them was L. Ron Hubbard’s wife, Mary Sue, who was given a conditional sentence of five years and fined $10,000. She served one year.

* * *

After the Snow White fiasco, the church underwent a corporate restructuring of sorts, breaking up the central entity into many separate individual parts. Karin Pouw, the director of public affairs for Church of Scientology International, told VICE News that the criminal activity was “undertaken by individuals who were part of an autonomous rogue unit” who were “promptly dismissed.”

“The term Snow White referred to the name of a program written by L. Ron Hubbard in 1972 designed to locate and expunge by legal means false reports in government files,” Pouw said. “The name of the program was taken from the fairy tale Snow White and the Seven Dwarfs — appropriate because in the fairy tale, the plot against Snow White was carried out by secret means, and in the case of the spreading of false reports about Scientology, the governments concerned were spreading a fairy tale with no basis in fact.”

The church changed the name of its intelligence-gathering arm from the Guardian’s Office (GO) to the Office of Special Affairs. It also created a fearsome legal machine. According to Rathbun, he was largely responsible for this new beginning; he now likens it to Michael Corleone seeking to “legitimize” the business.

“The ‘2.0’ on the Church’s tactics after Snow White was really about ending all the infiltration, covert ops-type of activity for several years,” Rathbun said. “Our brief from Hubbard was like Inspector Renault from Casablanca, the whole, ‘I’m shocked there’s gambling going on in this cafe,’ sort of thing. So, that’s when just about everything started being done through attorneys and licensed private investigators.”

However, Rathbun added that after “a year or so of playing by the Marquess of Queensberry rules,” an edict came down from Hubbard in the form of a memo.

“I’ll always remember the exact words: ‘We need to make them afraid of us again,'” Rathbun said, explaining that the church kept things “literally legal” but took them as close to the edge of legality as possible. “We were still trying to retain some sort of aggressive effect on resistance, but it was a kinder, gentler, more socially acceptable form of harassment.”

Jeffrey Augustine, a one-time Scientologist who now runs the Scientology Money Project, a website devoted to investigating the church’s finances, said there is a mindset within Scientology deriving from Hubbard’s belief that the church should determine laws. Thus, stealing files from an IRS office isn’t really a transgression.

“The church truly believed they were equal to the US government,” Augustine told VICE News. “They thought they had the right to break into the IRS offices, and tried to trivialize it, like, ‘Hey, we’re just trying to correct the records.’ It was just shocking.”

* * *

Before he left the church in 2005, Jefferson Hawkins was a top official in the church’s elite private navy, the Sea Org. He now describes it as “Scientology’s inner, fanatical, paramilitary group.” Hawkins, who created the iconic Volcano commercial for Dianetics in the 1980s, told VICE News one of the first things he learned upon joining the church was the importance of throwing the first punch.

“Hubbard used to say, ‘Never defend, always attack,'” Hawkins said. “This was gospel.”

A prescient FBI teletype circulated internally about a week before the LA and DC Snow White raids reminded agents of “the extreme sensitivity of this matter,” adding that “nationwide publicity will possibly result from execution of above described search warrants.”

Less than a month after the raids, the church filed a motion in US District Court demanding their documents back. They also filed a $7.5 million suit against the FBI and two US Attorneys alleging excessive force and civil rights violations. At the same time, they went on a PR offensive, claiming the Snow White raids were done in response to an “exposé” the church had released a few weeks prior about a drug trafficking ring allegedly being run jointly by the FBI and Interpol.

Articles excoriating the bureau for its callousness and “gestapo-like” brutality were published in several major newspapers; agents from the LA Field Office sent a memo to FBI Director Clarence Kelley refuting the allegations.

Some things the agents felt they had to clarify to Kelley in the document, dated July 20, 1977:

  • No agents went into rooms occupied by unclothed occupants or burst into shower stalls where people were bathing.
  • No agent struck anyone over the head with a clipboard.
  • Agents did not chant ‘We have a search warrant.’ However, from the time of entry and periodically upon inquiry throughout the day, Church members were advised that the agents were on the property as a result of a federal search warrant, which was exhibited to anyone requesting to examine same.
  • All agents were properly attired in business dress throughout the entire period of the search even though working conditions were sometimes warm and in unventilated areas.

Since the documents seized by the FBI were part of an active investigation, officials couldn’t reveal the extent of what they had discovered. Meanwhile, letters started pouring into the Oval Office.

“Dear Mr. President,” read one, written in a looping cursive from a sender whose name was redacted. “I am writing to register my opinion in the incident involving the FBI’s storming of the Church of Scientology offices in Washington and Los Angeles. I feel that everything in our power should be done to immediately halt this outrageous infraction of the 1st Amendment. It is the first step in the suppression of basic rights granted to individuals in this country. More importantly, I feel that if the FBI and Interpol are involved in drug trafficing [sic] then for god’s sake let us thank the Church of Scientology for daring to expose it. To do anything else is to condone the FBI and Interpol’s behavior.”

* * *

In the fall of 1993, more than 25 years after the IRS first revoked the church’s tax-exempt status, the IRS unexpectedly reconferred it.

There has never been an official explanation from the IRS, which said that the terms of the agreement constituted confidential taxpayer information. The agency rejected a FOIA request by the New York Times, and Fred Goldberg Jr., the IRS commissioner who made the decision, said privacy laws prohibited him from discussing any of it. In 1997, the Times pointed out that this stood “in stark contrast to the agency’s handling of some other church organizations,” noting that other high-profile tax settlements — televangelist Jimmy Swaggart’s being one — came with a requirement by the IRS to disclose that they had paid all their back taxes as part of the deal.

The Times also found that the exemption “followed a series of unusual internal IRS actions that came after an extraordinary campaign orchestrated by Scientology against the agency and people who work there.” Specifically, the Times alleged private investigators hired by the church dug into the private lives of IRS officials and conducted covert surveillance to “uncover potential vulnerabilities.” They learned that Goldberg had instructed IRS tax analysts to “ignore the substantive issues” when reviewing the agreement.

Pouw paints a different picture: “By lawful means, the church demonstrated that it was entitled to charitable recognition by conclusively demonstrating that it met all the criteria, namely that its churches are organized and operated exclusively for charitable religious purposes,” she told VICE News.

On October 8, 1993, Scientologists gathered at the Los Angeles Memorial Sports Arena to celebrate their hard-won victory over the IRS.

“The war is over,” church leader David Miscavige told the crowd. “We have brought to an end 40 years of suppression of Scientology and Scientologists. Any discrimination or biased or unfair treatment of Scientologists by the IRS is over…. Our road to infinite expansion is now wide open.”

Augustine’s analysis of Scientology’s publicly available tax data recently showed about $1.7billion in assets. Augustine said he and his wife — a former high-ranking Scientologist herself — just spent $10,000 to fight off a legal challenge from the church, which alleged his wife posted copyrighted material to her YouTube account.

“The church now has to deal with a piece of art they don’t know how to respond to,” Augustine said. “So they’re spending a lot of tax-exempt dollars to slander, defame, and attack. Tell me, how is that for the public benefit?”