c.1997 N.Y. Times News Service<
On Oct. 8, 1993, 10,000 cheering Scientologists thronged the LosAngeles Sports Arena to celebrate the most important milestone inthe church's recent history: victory in its all-out war against theInternal Revenue Service.
For 25 years, IRS agents had branded Scientology a commercialenterprise and refused to give it the tax exemption granted tochurches. The refusals had been upheld in every court. But thatnight the crowd learned of an astonishing turnaround. The IRS hadgranted tax exemptions to every Scientology entity in the UnitedStates.
``The war is over,'' David Miscavige, the church's leader,declared to tumultuous applause.
The landmark reversal shocked tax experts and saved the churchtens of millions of dollars in taxes. More significantly, thedecision was an invaluable public relations tool in Scientology'sworldwide campaign for acceptance as a mainstream religion.
On the basis of the IRS ruling, the State Department formallycriticized Germany for discriminating against Scientologists. TheGerman government regards the organization as a business, not atax-exempt religion, the very position maintained for 25 years bythe U.S. government.
The full story of the turnabout by the IRS has remained hiddenbehind taxpayer privacy laws for nearly four years. But anexamination by The New York Times found that the exemption followeda series of unusual internal IRS actions that came after anextraordinary campaign orchestrated by Scientology against theagency and people who work there. Among the findings of the reviewby The New York Times, based on more than 30 interviews andthousands of pages of public and internal church records, werethese:
Scientology's lawyers hired private investigators to dig intothe private lives of IRS officials and to conduct surveillanceoperations to uncover potential vulnerabilities, according tointerviews and documents. One investigator said he had interviewedtenants in buildings owned by three IRS officials, looking forhousing code violations. He also said he had taken documents froman IRS conference and sent them to church officials and created aphony news bureau in Washington to gather information on churchcritics. The church also financed an organization of IRSwhistle-blowers that attacked the agency publicly.
The decision to negotiate with the church came after Fred T.Goldberg Jr., the commissioner of the Internal Revenue Service atthe time, had an unusual meeting with Miscavige in 1991.Scientology's own version of what occurred offers a remarkableaccount of how the church leader walked into IRS headquarterswithout an appointment and got in to see Goldberg, the nation's toptax official. Miscavige offered to call a halt to Scientology'ssuits against the IRS in exchange for tax exemptions.
After that meeting, Goldberg created a special committee tonegotiate a settlement with Scientology outside normal agencyprocedures. When the committee determined that all Scientologyentities should be exempt from taxes, IRS tax analysts were orderedto ignore the substantive issues in reviewing the decision,according to IRS memorandums and court files.
The IRS refused to disclose any terms of the agreement,including whether the church was required to pay back taxes,contending that it was confidential taxpayer information. Theagency has maintained that position in a lengthy court fight, andin rejecting a request for access by The New York Times under theFreedom of Information Act. But the position is in stark contrastto the agency's handling of some other church organizations. Boththe Jimmy Swaggart Ministries and an affiliate of the Rev. JerryFalwell were required by the IRS to disclose that they had paidback taxes in settling disputes in recent years.
In interviews, senior Scientology officials and the IRS deniedthat the church's aggressive tactics had any effect on the agency'sdecision.
They said the ruling was based on a two-year inquiry andvoluminous documents that showed the church was qualified for theexemptions.
Goldberg, who left as IRS commissioner in January 1992 to becomean assistant secretary at the Treasury Department, said privacylaws prohibited him from discussing Scientology or his impromptumeeting with Miscavige.
The meeting was not listed on Goldberg's appointment calendar,which was obtained by The New York Times through the Freedom ofInformation Act.
The IRS reversal on Scientology was nearly as unprecedented asthe long and bitter war between the organizations. Over the years,the IRS had steadfastly refused exemptions to most Scientologyentities, and its agents had targeted the church for numerousinvestigations and audits.
Throughout the battle, the agency's view was supported by thecourts. Indeed, just a year before the agency reversal, the U.S.Claims Court had upheld the IRS denial of an exemption toScientology's Church of Spiritual Technology, which had beencreated to safeguard the writings and lectures of L. Ron Hubbard,the late science fiction writer whose preachings form the church'sscripture.
Among the reasons listed by the court for denying the exemptionwere ``the commercial character of much of Scientology,'' its``virtually incomprehensible financial procedures'' and its``scripturally based hostility to taxation.''
Small wonder that the world of tax lawyers and experts wassurprised in October 1993 when the IRS announced that it wasissuing 30 exemption letters covering about 150 Scientologychurches, missions and corporations. Among them was the Church ofSpiritual Technology.
``It was a very surprising decision,'' said Lawrence B. Gibbs,the IRS commissioner from 1986 to 1989 and Goldberg's predecessor.``When you have as much litigation over as much time, with thegeneral uniformity of results that the service had withScientology, it is surprising to have the ultimate decision befavorable. It was even more surprising that the service made thedecision without full disclosure, in light of the priorbackground.''
While IRS officials insisted that Scientology's tactics did notaffect the decision, some officials acknowledged that rulingagainst the church would have prolonged a fight that had consumedextensive government resources and exposed individual officials topersonal lawsuits. At one time, the church and its members had morethan 50 suits pending against the IRS and its officials.
``Ultimately the decision was made on a legal basis,'' said asenior IRS official who was involved in the case and spoke on thecondition that he not be identified. ``I'm not saying Scientologywasn't taking up a lot of resources, but the decision was made on alegal basis.''
The church's tactics appeared to violate no laws, and itsofficials and lawyers argued strenuously in a three-hour interviewat church offices in Los Angeles last month that the exemptionswere decided solely on the merits. They said the church had beenthe victim of a campaign of harassment and discrimination by``rogue agents'' within the IRS. Once the agency agreed to reviewthe record fairly, they said, it was inevitable that the churchwould be granted its exemptions.
``The facts speak for themselves,'' said Monique E. Yingling, aWashington lawyer who represented the church in the tax case. ``Thedecision was made based on the information that the church providedin response to the inquiry by the Internal Revenue Service.''
Church officials and lawyers acknowledged that Scientology hadused private investigators to look into their opponents, includingIRS officials, but they said the practice had nothing to do withthe IRS decision.
``This is a church organization that has been subjected to moreharassment and more attacks certainly than any religion in thiscentury and probably any religion ever, and they have had toperhaps take unusual steps in order to survive,'' Ms. Yinglingsaid.
THE ORIGINS: AN EXPANDING CHURCH ON A COLLISION COURSE
Since its founding in 1950, Scientology has grown into aworldwide movement that boasts 8 million members, althoughdefectors say the actual number is much smaller. The church, whichhas vast real estate holdings around the world and operates a yachtbased in the Caribbean, describes itself as the only major newreligion to have emerged in the 20th century.
Its founder, Hubbard, asserted that people are immortal spiritswho have lived through many lifetimes. In Scientology teachings,Hubbard described humans as clusters of spirits that were trappedin ice and banished to Earth 75 million years ago by Xenu, theruler of the 26-planet Galactic Confederation.
Scientology describes its goal as ``a civilization withoutinsanity, without criminals and without war, where the able canprosper and honest beings can have rights, and where Man is free torise to greater heights.'' To reach those heights, Scientologistsbelieve, each individual must be ``cleared'' of problems andafflictions through a series of counseling sessions known as``auditing.'' The sessions are performed by a trained auditorassisted by a device similar to a lie detector, known as anE-meter.
Although Scientology's complicated finances make a totalestimate difficult, records on file at the IRS indicate that in theearly 1990s the church was earning about $300 million a year fromauditing fees, the sale of Scientology literature and recordings,management services and the franchising of its philosophy. Churchofficials said those figures were higher than actual earnings.
The original mother church, the Church of Scientology ofCalifornia, was established by Hubbard in Los Angeles in 1954.Three years later, it was recognized as tax exempt by the IRS. Butin 1967, the agency stripped the church of its exemption, and afierce struggle broke out between the agency and the church.
In its revocation letter, the agency said that Scientology'sactivities were commercial and that it was being operated for thebenefit of Hubbard, a view supported by the courts several times inthe ensuing 25 years. The church ignored the action, which itdeemed unlawful, and withheld taxes.
The IRS put Scientology on its hit list. Minutes of IRS meetingsindicate that some agents engaged in a campaign to shut downScientology, an effort that church officials cite as evidence ofbias. Some of the tactics led to rebukes by judges, including a1990 ruling in Boston that criticized the IRS for abusive practicesin seeking access to church records.
Scientology retaliated. In 1973 the church embarked on a programcode named Snow White. In a document labeled ``secret,'' Hubbardoutlined a strategy to root out all ``false and secret files'' heldby governments around the world regarding Scientology.
``Attack is necessary to an effective defense,'' Hubbard wrote.
Snow White soon turned sinister. Under the supervision ofHubbard's third wife, Mary Sue, Scientologists infiltrated theDepartment of Justice and the IRS to uncover information onHubbard. They broke into offices at night and copied mountains ofdocuments. At one point, an electronic bugging device was hiddeninside an IRS conference room the day before a meeting aboutScientology.
Critics say those actions fell under a church doctrine thatHubbard had called the Fair Game policy. Hubbard wrote that churchenemies may ``be deprived of property or injured by any means byany Scientologist without any discipline of the Scientologist. Maybe tricked, sued or lied to or destroyed.''
The conspiracy was uncovered in 1977, and Mrs. Hubbard and 10others were eventually sentenced to prison. Hubbard was named anunindicted co-conspirator because investigators could not link himto the crimes.
The church promised to change its ways. Scientologists saidmembers who broke the law were purged, including Mrs. Hubbard, andthe church was restructured to protect against a recurrence. TheFair Game policy, they said, has been misinterpreted by courts andcritics.
``There is nothing like that,'' said Elliot J. Abelson, thechurch's general counsel. ``It doesn't happen.''
THE COVERT WAR: WHISTLE-BLOWERS AND `VULNERABILITIES'
But interviews and an examination of court files across thecountry show that after the criminal conspiracy was broken up, thechurch's battle against the IRS continued on other fronts. WhenHubbard died in January 1986, his opposition to taxes lived onamong the new generation of leaders, including Miscavige, asecond-generation Scientologist.
Part of the battle was public. A leading role was played by theNational Coalition of IRS Whistle-Blowers, which Scientologycreated and financed for nearly a decade.
On the surface, the coalition was like many independent groupsthat provide support for insiders who want to go public withstories of corruption. But Stacy B. Young, a senior Scientologystaff member until she defected in 1989, said she helped plan thecoalition as part of Scientology's battle against the IRS in late1984 while she was managing editor of the church's FreedomMagazine.
``The IRS was not giving Scientology its tax exemption, so theywere considered to be a pretty major enemy,'' Ms. Young said.``What you do with an enemy is you go after them and harass themand intimidate them and try to expose their crimes until theydecide to play ball with you. The whole idea was to create acoalition that was at arm's length from Scientology so that it hadmore credibility.''
Ms. Young said she recruited Paul J. DesFosses, a former IRSagent who had spoken out against the agency, to serve as thegroup's president. DesFosses acknowledged that Scientology providedsubstantial financing, but he denied that the church created or ranthe coalition.
``We got support from lots of church groups, including theChurch of Scientology,'' DesFosses said in a recent interview.
The coalition's biggest success came in 1989 when it helpedspark congressional hearings into accusations of wrongdoing by IRSofficials. Using public records and leaked IRS documents, thecoalition showed that a supervisor in Los Angeles and somecolleagues had bought property from a firm being audited by theagency. Soon after the purchase, the audit was dropped and the firmpaid no money.
Kendrick L. Moxon, a longtime church lawyer, acknowledged thatthe coalition was founded by Freedom Magazine. He said its work waswell known and part of a campaign by Scientology and others toreform the IRS.
The church's war had a covert side, too, and its soldiers wereprivate investigators. While there have been previous articlesabout the church's use of private investigators, the full extent ofits effort against the IRS is only now coming to light throughinterviews and records provided to The New York Times.
Octavio Pena, a private investigator in Fort Lee, N.J., achieveda measure of reknown in the late 1980s when he helped exposeproblems within the Internal Revenue Service while working on acase for Jordache Enterprises, the jeans manufacturer.
In the summer of 1989, Pena disclosed in an interview, a man whoidentified himself as Ben Shaw came to his office. Shaw, who saidhe was a Scientologist, explained that the church was concernedabout IRS corruption and would pay $1 million for Pena toinvestigate IRS officials, Pena said.
``I had had an early experience with the Scientologists, and Itold him that I didn't feel comfortable with him, even though hewas willing to pay me $1 million,'' Pena said.
Scientology officials acknowledged that Shaw worked for thechurch at the time, but they scoffed at the notion that he hadtried to hire Pena. ``The Martians were offered $2 million; that'sour answer,'' said Moxon, whose firm often hired privateinvestigators for the church.
Michael L. Shomers, another private investigator, said he sharednone of Pena's qualms, at least initially.
Describing his work on behalf of Scientology in a series ofinterviews, Shomers said that he and his boss, Thomas J. Krywucki,worked for the church for at least 18 months in 1990 and 1991.
Working from his Maryland office, he said, he set up a phonyoperation, the Washington News Bureau, to pose as a reporter andgather information about church critics. He also said he hadinfiltrated IRS conferences to gather information about officialswho might be skipping meetings, drinking too much or havingaffairs.
``I was looking for vulnerabilities,'' Shomers said.
Shomers said he had turned over information to his Scientologycontact about officials who seemed to drink too much. He also saidhe once spent several hours wooing a female IRS official in a barat a conference, then provided her name and personal informationabout her to Scientology.
In one instance, information that Shomers said he had gatheredat an IRS conference in the Pocono Mountains was turned over to anassociate of Jack Anderson, the columnist, and appeared in one ofAnderson's columns criticizing top IRS managers for high living attaxpayer expense.
Shomers said he had received his instructions in meetings with aman who identified himself as Jake Thorn and said he was connectedwith the church. Shomers said he believed the name was a pseudonym.
Shomers said he had looked into several apartment buildings inPennsylvania owned by three IRS officials. He obtained public filesto determine whether the buildings had violated housing codes, hesaid, and interviewed residents looking for complaints, but foundnone.
In July 1991, Shomers said, he posed as a member of the IRSwhistle-blowers coalition and worked with a producer and cameramanfrom NBC-TV to get information about a conference for senior IRSofficials in Walnut Creek, Calif. The producer said that sherecalled Shomers as a representative of the whistle-blowers, butknew nothing of his connection to Scientology. The segment neverran.
At one point, Shomers said, he slipped into a meeting room atthe Embassy Suites, where the conference was held, and took a stackof internal IRS documents. He said he mailed the material to anaddress provided by his church contact.
Krywucki acknowledged that he had worked for Scientology'slawyers in 1990 and 1991, though he declined to discuss what hedid. He said he would ask the lawyers for permission to speak aboutthe inquiry, but he failed to return telephone calls after thatconversation.
It is impossible to verify all of Shomers' statements ordetermine whether his actions were based on specific instructionsfrom church representatives. He said he had often been paid in cashand sometimes by checks from Bowles & Moxon, a Los Angeles law firmthat served as the church's lead counsel. He said he had notretained any of the paychecks.
Shomers provided The New York Times with copies of records thathe said he had obtained for the church as well as copies of hotelreceipts showing that he had stayed at hotels where the IRS heldthree conferences, in Pennsylvania, West Virginia and California.He also provided copies of business cards, with fake names, that hesaid had been created for the phony news bureau in Washington andcopies of photographs taken as part of his surveillance work.
One of the IRS officials investigated by Shomers recalled that aprivate investigator had been snooping around properties he managedon behalf of himself and two other mid-level agency officials.
The official, Arthur C. Scholz, who has since left the IRS, saidhe was alerted by tenants that a man who identified himself as aprivate investigator had questioned tenants about him and the otherlandlords. He said the tenants had not recalled the man's name buthad noted that he was driving a car with Maryland license plates.
``He went to the courthouse and found the properties, and thenwent out banging on doors of these tenants and made a number ofallegations dealing with things that were totally bull,'' saidScholz, who had no involvement with the IRS review of Scientologyand was at a loss to explain why the church would have beeninterested in him. ``I notified the local police about it.''
Shomers, who has since left the private-investigation business,said he was willing to describe his work for the church because hehad come to distrust Scientology and because of a financial disputewith Krywucki.
Moxon, the Scientology lawyer, said the IRS was well aware ofthe church's use of private investigators to expose agency abuseswhen it granted the exemptions. Moxon did not deny hiring Shomers,but he said the activities described by Shomers to The New YorkTimes were legal and proper.
Moxon and other church lawyers said the church needed to useprivate investigators to counter lies spread by rogue governmentagents.
``The IRS uses investigators, too,'' said a church lawyer,Gerald A. Feffer, a former deputy assistant attorney general nowwith Williams & Connolly, one of Washington's most influential lawfirms. ``They're called CID agents''for Criminal InvestigationDivision``and the CID agents put this church under intensescrutiny for years with a mission to destroy the church.''
A blunt assessment of Scientology's victorious strategy againstthe IRS was contained in a lengthy 1994 article in InternationalScientology News, an internally distributed magazine. The articlesaid:
``This public exposure of criminals within the IRS had thedesired effect. The Church of Scientology became known across thecountry as the only group willing to take on the IRS.''
``And the IRS knew it,'' the article continued. ``It becameobvious to them that we weren't about to fold up or fade away. Ourattack was impinging on their resources in a major way, and ourexposes of their crimes were beginning to have serious politicalreverberations. It was becoming a costly war of attrition, with noclear-cut winner in sight.''
THE UNUSUAL PEACE: AFTER A MEETING, A 180-DEGREE TURN
Scientology made the initial gesture toward a cease-fire whenMiscavige, the church leader, paid an unscheduled visit to the IRScommissioner, Goldberg.
The first full account of that meeting and the events thatfollowed inside the IRS was assembled from interviews,Scientology's own internal account, IRS documents and records in apending suit brought by Tax Analysts, a nonprofit trade publisher,seeking the release of IRS agreements with Scientology and othertax-exempt organizations.
Feffer, a church lawyer since 1984, said he approached officialsat the Justice Department and the IRS in 1991 with an offer to sitdown and negotiate an end to the dispute.
The church's version of what followed is quite remarkable.Miscavige and Marty Rathbun, another church official, were walkingpast the IRS building in Washington with a few hours to spare oneafternoon in late October 1991 when they decided to talk toGoldberg.
After signing the visitors' log at the imposing building onConstitution Avenue, the two men asked to see the commissioner.They told the security guard that they did not have an appointmentbut were certain Goldberg would want to see them. And, according tothe church account, he did.
Goldberg said he could not discuss the meeting, although aformer senior official confirmed that it occurred. An IRS spokesmansaid it would be unusual for someone to meet with the commissionerwithout an appointment.
Miscavige does not grant interviews, church officials said, butRathbun said the Goldberg meeting was an opportunity for the churchto offer to end its long dispute with the agency, including thedozens of suits brought against the IRS, in exchange for theexemptions that Scientology believed it deserved.
``Let's resolve everything,'' Rathbun recalled saying. ``This isinsane. It's reached insane levels.''
Goldberg's response was also out of the ordinary. He created aspecial five-member working group to resolve the dispute, bypassingthe agency's exempt organizations division, which normally handlesthose matters. Howard M. Schoenfeld, the IRS official picked as thecommittee's chairman in 1991, said later in a deposition in the TaxAnalysts case that he recalled only one similar committee in 30years at the agency.
The IRS negotiators and Scientology's tax lawyers held numerousmeetings over nearly two years. An IRS official who participated,and who spoke about the meetings on condition that his name not beused, described the sessions as occasionally rancorous, but he saidthe general tone was far friendlier than over the preceding years.
There are indications that the early momentum was towardresolution. In a letter to Ms. Yingling on Jan. 19, 1992, John E.Burke, the assistant commissioner for exempt organizations, brushedaside what could have been a stumbling block. Ms. Yingling hadapparently objected to the potential public disclosure ofinformation that the church was providing to the IRS.
Burke said he did not want the dispute to delay the talks, andhe committed the IRS to allowing only a portion of the informationto become public. He said the only hitch would come ``in the eventthat our discussions break down, an eventuality that I have noreason to believe will occur.''
An IRS official involved in the talks said it was not unusualfor the agency to negotiate with a taxpayer over what is madepublic in an agreement. By agreeing at the outset that informationcould be withheld, however, the IRS seemed to relinquish a bigbargaining chip.
Paul Streckfus, a former official in the IRS exempt organizationdivision, first disclosed the existence of the negotiatingcommittee in a trade journal after the agreement was announced. Hesaid in an interview that creating the group meant a settlement wasalmost preordained.
``Once the IRS decided to set up this rather extraordinarygroup, the wheels were in motion for a deal,'' Streckfus said.
Not even a stinging court decision in favor of the IRS couldderail the talks. Midway through the negotiations, in June 1992,the U.S. Claims Court handed down its decision upholding the IRSdenial of a tax exemption for Scientology's Church of SpiritualTechnology. The ruling underscored the agency's longstandingconcerns over the commercial nature of Scientology and othermatters.
Ms. Yingling, the church's tax lawyer, said the Claims Courtruling ignored the facts and was filled with gratuitous comments.She said the IRS negotiators were fairer in considering theevidence.
A portion of the correspondence between the agency and churchfrom the two years of negotiations was released when the exemptionswere granted three and a half years ago. It fills part of a largebookcase in the IRS reading room in Washington.
The central issues are discussed in a series of lengthy answersby Scientology's lawyers to questions from the IRS. The churchprovided extensive information on its finances and operationalstructure.
The senior IRS official involved in the negotiations, who askednot to be identified, said the church satisfied the agency in thethree critical areas. He said the committee was persuaded thatthose involved in the Snow White crimes had been purged, thatchurch money was devoted to tax-exempt purposes and that, withHubbard's death, no one was getting rich from Scientology.
Ms. Yingling argued that nothing substantive had changed. Shesaid the church had been qualified for tax exemption for years, butbiased elements within the IRS had stood in its way.
``There were no changes in the operations or activities of thechurch,'' she said. ``What came about was finally that they lookedat all the information and saw that the church qualified forexemption, and they were satisfied.''
In August 1993, the two sides reached an agreement. The churchwould receive its coveted exemptions for every Scientology entityin the country and end its legal assault on the IRS and itspersonnel.
There was just one more step. Scientology entities were requiredto submit new applications for exemption, which were to beevaluated by the agency's exempt organizations division. Butsomething unusual occurred there, too.
Schoenfeld, the negotiations chairman, ordered the two taxanalysts assigned to the review not to consider any substantivematters, according to IRS memorandums and records in the TaxAnalysts case. Those issues, Schoenfeld informed them, had beenresolved.
Both analysts, Donna Moore and Terrell M. Berkovsky, wrotememorandums specifying that they had been instructed not to addressissues like whether the church was engaged in too much commercialactivity or whether its activities provided undue private benefitto its leaders.
Schoenfeld, who has since left the IRS, said he could notdiscuss the case. But the senior IRS official involved in the talkssaid there was nothing sinister about the instructions becausethose matters had been decided by the negotiating committee. Heacknowledged, however, that this was not the typical procedure.
The agreement was announced on Oct. 13, 1993. The IRS refused tomake public any of its terms, including whether the church paid anyback taxes. The IRS also refused to discuss the legal reasoningbehind one of the biggest turnarounds in tax history.
Tax lawyers said the IRS could have required the church todisclose terms of the agreement, which it has done in the past. In1991, the IRS required the Jimmy Swaggart Ministries to disclosethat the group had paid $171,000 in back taxes for violations. In1993, just a few months before the Scientology agreement, the IRSrequired the Old Time Gospel Hour, a group affiliated with the Rev.Jerry Falwell, to publicize its payment of $50,000 in back taxes.
``The IRS actually specified which media outlets we were tonotify and approved the release,'' said Mark DeMoss, a spokesmanfor Falwell. ``When nobody picked it up, they put out their ownpress release.''
William J. Lehrfeld, who represents Tax Analysts in its suit tomake the Scientology agreement public, said, ``You and I, astaxpayers, are subsidizing these people, and we should see thisinformation.''
THE AFTERMATH: A FORMER ENEMY BECOMES AN ALLY
Five days before the official announcement, Miscavige wentbefore the Scientology gathering in Los Angeles and declaredvictory. In a two-hour speech, according to the account inInternational Scientology News, Miscavige described years ofattacks against Hubbard and Scientology by the government.
``No other group in the history of this country has ever beensubject to the assault I have briefed you on tonight,'' he said,calling it ``the war to end all wars.''
As part of the settlement, Miscavige said, the IRS had agreed todistribute a fact sheet describing Scientology and Hubbard. ``It isvery complete and very accurate,'' Miscavige said. ``Now, how do Iknow? We wrote it! And the IRS will be sending it out to everygovernment in the world.''
Feffer, Ms. Yingling and Thomas C. Spring, another of thechurch's tax lawyers, appeared in formal attire on stage that nightand received Waterford crystal trophies in recognition of theirefforts.
Miscavige called the agreement a peace treaty that would markthe biggest expansion in Scientology history.
The church immediately began citing the IRS decision in itsefforts to win acceptance from other governments and to silencecritics. But the biggest public relations benefit may have comefrom the U.S. government itself.
Four months after the exemptions were granted, the StateDepartment released its influential human rights report for 1993, alitany of the countries that abuse their citizens. For the firsttime, the report contained a paragraph noting that Scientologistshad complained of harassment and discrimination in Germany. Thematter was mentioned briefly in the 1994 and 1995 reports, too.
Throughout those years, the dispute between Scientologists andthe German government escalated. In an intense publicity campaignthat included advertisements in this newspaper, the church saidthat businesses owned by Scientologists were boycotted and that itsmembers were excluded from political parties and denied access topublic schools. The church asserted that the German actionsparalleled early Nazi persecution of Jews.
The German government responded that Scientology was not achurch worthy of tax exemption, but a commercial enterprisethevery position the IRS had maintained in its 25-year war against thechurch. German officials said equating the treatment ofScientologists with that of Jews under the Nazi regime was adistortion and an insult to victims of the Holocaust, a viewsupported by some Jewish leaders in Germany.
The dispute turned into a diplomatic ruckus in January when theState Department released its 1996 human rights report, with anexpanded section on Scientology that said German scrutiny of thereligion had increased. Artists had been prevented from performingbecause of their membership in the church and the youth wing of thegoverning Christian Democratic Union had urged a boycott of thefilm ``Mission: Impossible'' because its star, Tom Cruise, is aprominent Scientologist, the State Department said.
German officials were angered by the criticism, and ForeignMinister Klaus Kinkel raised the matter with Secretary of StateMadeleine K. Albright when she was in Bonn on Feb. 18. Ms. Albrighttold him that the issue was a subject for bilateral discussions,but she said she found claims by Scientologists that they are thevictims of Nazi-style persecution ``distasteful.''
Nicholas Burns, the State Department spokesman, said that,despite the belief that Scientologists had gone too far in drawingcomparisons to persecution of Jews, the department had feltcompelled to expand on the church's troubles with the Germans inits latest human rights report.
``The Germans are quite adamant, based on their own history,that these are the kinds of groups that ought to be outlawed,''Burns said. ``However, for our purposes, we classify Scientology asa religion because they were granted tax-exempt status by theAmerican government.''<
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