(Note: This article was originally published at Tony Ortega’s Underground Bunker and is reposted here for informational and archival purposes)
Contributor Jeffrey Augustine keeps a close eye on Scientology’s financial documents. And he has some new information today that backs up what we’ve been told anecdotally by our other sources — that Scientology’s flagship drug rehab center in Oklahoma, Narconon Arrowhead, is in serious trouble. Take it away, Jeffrey…
Here in the US, religious groups do not have to file tax returns. The only exception is if they have “unrelated business income.” If they do, thanks to a 2006 law change, religious groups must file an IRS form “990-T.” And even then, we don’t have much interest in the “unrelated” income that they report. The Church of Scientology, for example, owns a nine hole golf course at Gold Base that it rents out to local civic groups. The Flag Land Base in Clearwater and Celebrity Centre International in Hollywood each have ballrooms that they rent out. These tend to be trivial amounts and don’t tell us much about the real money they’re taking in for courses and donations.
However, the real value of the 990-T form is that it contains one really interesting question: It requires that the filer estimate the total “book value” of the organization. In other words, Scientology entities that submit these forms have to admit how much they’re worth.
And that’s forced several Scientology entities to admit to being worth a total of about $1.7 billion in assets. (And that’s only for the entities that report unrelated business income. Some of Scientology’s entities don’t submit 990-T forms, so we can only guess at their book value. But it would certainly mean that Scientology as a whole is worth billions more.)
Meanwhile, Scientology’s entities that can’t claim to be religious in nature — like the secular front groups, including the drug rehab companies under the Narconon umbrella — do submit annual tax returns (990 forms) if they have gross receipts of more than $200,000 or assets of $500,000 or more. There is typically a two year lag in getting 990s and 990-Ts. The forms Scientology submitted for the tax year 2014 are just now beginning to become available.
David Miscavige has always held out Narconon Arrowhead as the “flagship” of the drug rehab network. Located in Canadian, Oklahoma the facility has been rocked by a series of scandals and lawsuits – as have Narconon Georgia, Narconon in Canada, and several other Narconon centers.
The Underground Bunker has broken these stories to its international audience, and readers here have followed what seems to be the implosion of Narconon. Now, we can report that Narconon Arrowhead lost money in 2014 and has experienced a serious “stat crash.”
Narconon Arrowhead’s most recent 990 tax return, for 2014 (see below), paints a grim story.
Gross receipts that year were $4,117,845, a combination of gifts ($2,034,017) and sales of services ($2,044,407).
How did Narconon Arrowhead come up with $2 million in gifts? The answer is on another 990 tax form, the one submitted by Narconon’s Scientology umbrella organization, the Association for Better Living & Education (ABLE). In 2014, ABLE gave Arrowhead a “grant” of $1,879,286 for “general support.” Arrowhead’s remaining gift amount presumably came from other Scientology organizations. We can say that with some confidence based on precedent. In 2008, Scientology’s Social Betterment Properties International (SBPI) donated $180,000 to Narconon Arrowhead. Apparently, and for public relations reasons, David Miscavige cannot allow Narconon Arrowhead to become insolvent — it is, after all, the flagship of Narconon.
Arrowhead’s losses (revenues less expenses) for the year were $310,714. But that’s misleading. The real number, once you take away what was “gifted” to Arrowhead by ABLE to keep it afloat, is a real annual loss of at least $2,190,000. In other words, Scientology’s other groups had to prop up Narconon Arrowhead with $2 million in gifts so it would only show an annual loss of $310,714 in 2014. Of course, it is possible to work the numbers in different ways, but I am using very basic accounting. I welcome comments and analysis from the real numbers people here at the Bunker.
Even with Arrowhead’s lousy 2014 numbers, its losses in 2013 were even worse — a total of $3,713,907 in losses after subtracting operating costs from revenue. That might explain why Scientology found a couple of million to “gift” Arrowhead in 2014, which it didn’t do in 2013.
Meanwhile, ABLE wasn’t only propping up Arrowhead. It “gifted” plenty more to other Narconon entities that are struggling: Narconon International ($541,053), Narconon Fresh Start ($866,739), Narconon Pacific Coast ($15,561), Narconon Freedom Center ($34,047), International Academy of Detox Specialists ($30,762), and Narconon Georgia ($33,620).
For decades, Narconon was a reliable moneymaker for ABLE and the Church of Scientology. Now, after Narconon became a nightmare of lawsuits and scandals, Scientology is having to fork out serious money to keep it from collapsing.
Arrowhead’s decline is particularly stark. After its income rose to a peak of $12 million in 2012, it fell off a cliff after, that year, three patients died in a nine-month period:
As Tony reported recently, he’s heard from his sources that Arrowhead, which was designed to house more than 200 patients, is reportedly now down to ten staff and only three patients. If Miscavige is going to continue to prop up his flagship drug rehab, he’s going to have to keep giving it “gifts” in the millions.