Australia

DOX: Scientology’s pricey Florida ‘spiritual mecca’ keeps up its value in latest tax records

(This piece was published on Tony Ortega’s Underground Bunker on 12.2.2017. It is republished here for archival purposes)

Jeffrey Augustine is once again keeping us up to date on Scientology’s financial documents. In this case, he has new figures on how much just one of many Scientology’s entities is worth, according to newly available tax documents.

In 2006, a change in the law required all non-profit organizations — even churches — to submit tax returns known as 990-T forms if they generated what is known as “unrelated business income.” A few years ago, I began finding and turning over to the Underground Bunker the 990-Ts for Scientology’s various entities.

Often, that income is fairly modest. But what’s more important for our purposes is that on each 990-T form there’s a box to fill out for “book value.” In other words, these organizations are asked to estimate their value in assets.

That requirement has led to a rare window into Scientology’s riches, and we like to keep up on the latest changes in those values.

In this case, I’ve found new documents related to the Flag Service Organization (FSO), the entity that runs Scientology’s Flag Land Base in Clearwater, Florida. This is where wealthy Scientologists from around the world come for expensive high-level auditing and other services. And keep in mind, FSO is just one of many entities that make up the Scientology movement, but it’s one of the more important ones.

So let’s see how the value of FSO has changed:

2008: $234.8 million
2009: $246.5 million
2010: $251.9 million
2011: $210.1 million
2012: $290.7 million
2013: $218.2 million
2014: $241.1 million
2015: $257.5 million

And here’s what that change in value looks like…

FSO is not the most valuable entity in the Scientology orbit. When we first began gathering these tax returns, for the year 2011, the Church of Scientology International was worth $790.8 million and the Church of Spiritual Technology listed a value of $434.4 million, for a total of $1.2 billion just for those two entities.

But even if it’s a distant third, the Flag Service Organization is steadily increasing in value.

This is consistent with what the newest defector from Flag told the Bunker recently. Peter Nyiri, who made a dramatic escape to freedom several months ago, said that the Flag Land Base is still bringing in huge income, of $2 million to $4 million a week — by starving the “outer orgs” and pressuring Scientology’s shrinking membership to come to Flag as often as they can for services.

Looking more carefully at recent returns by the FSO with the help of financial expert Dr. Jeff Wasel, we found a few noteworthy items…

In Part V of Flag’s 990-T returns filed in the period 2008-2013, FSO checked “Yes” on question 1 to indicate that it had an “interest in or other authority over a financial account (bank, securities, or other) in a foreign country.” Flag filled in the line to inform the IRS that it has financial interests in the United Kingdom and Australia. What are Flag’s financial interests in the United Kingdom and Australia? More importantly, how are they moving this money, and declaring these movements to the appropriate authorities, given these movements are between foreign entities?

In Part V of Flag’s 2014 and 2015, Flag checked “No,” indicating that it no longer had an “interest in or other authority over a financial account (bank, securities, or other) in a foreign country.” What happened to Flag’s financial interests in the United Kingdom and Australia?

In examining the 2013-2015 990-T’s, my personal view is that Flag’s stated costs for building improvements are either padded or excessive. For example, NOVA HRC is the firm that does the actual renovations on Scientology’s buildings (as well as many other clients). In the NOVA portfolio we have two hard data points:

1. Nova gives a project cost of $18,000,000 to renovate 393 guest rooms at the Ritz Carlton in Laguna Niguel, California. This is $45,801 per guest room.

2. Nova gives a project cost of $27,000,000 to renovate 220 guest rooms Flag’s Fort Harrison hotel. This is $122,727 per guest room. This seems utterly absurd and suggests, in my opinion, that the IRS should open an inquiry into why Scientology spends so lavishly on parishioner guest rooms. Scientology orders its parishioners to stay at Flag hotels and does not have to compete with secular hotels, so why the excessive spending?

In the Flag tax returns we see approximately $80,000 spent on exercise equipment for two properties. Additionally, their 2013 990-T form states that they spent some $14,296,680 on “improving” the Sandcastle Restaurant, used for public dining. For this money, it better be “Nobu” quality in food and atmosphere! The price mark-up on restaurant fixtures, as well as the same convoluted permitting process as that of the construction industry, are rife with the same potential for what seems to be excessive spending. What exactly is going on inside of Scientology and Nova that seems to be driving up renovation costs as compared to lower costs in the secular marketplace?

On a final note, even with the opening of the Super Power building on November 17, 2013 the Flag Land Base does not appear to have “boomed” whatsoever as a result of this edifice. Valued at $80,000,000, the Church of Scientology raised $145,000,000 for the project. Where did all the extra money go?

— Jeffrey Augustine

Flag Service Organization IRS 990-T forms 2008-2015

FSO Book Value 2015 $257,506,278

FSO Book Value 2014 $241,134,104

FSO Book Value 2013 $218,154,319

FSO Book Value 2012 $290,655,686

FSO Book Value 2011 $210,075,914

FSO Book Value 2010 $251,896,300

FSO Book Value 2009 $246,516,017

FSO Book Value 2008 $234,764,273

The Church of Scientology’s Meltdown Continues

Note: The following essay will be tl;dr for everyone except serious Scientology watchers. As such, it is not as accessible as other posts on the Scientology Money Project. Nevertheless, I wanted to post this in reference to what is happening to the Church of Scientology in Australia. Ref: Tony’s Ortega’s article of February 23, 2015.

Former Church of Scientology Sea Org executive Mick Wenlock wrote in 2006 that Scientology’s Advance Payments Received (APR) liability was in excess of one billion dollars. Mick also wrote the following in 2006 at xenu.net:

“The basic idea that orgs should be ‘upstat’ is a core administrative belief in Scientology – it comes from Hubbard hisveryownself. Where they are raising the money from their local members they are merely following in the footsteps of almost any other religion. I am not sure why anyone would find that surprising except for the fact that Scientology came very late to this idea.

“But that is in contrast to other deals where it is Scientology reserves that are buying the buildings – this move is a large gamble.

“…this is a reflection of certain “axioms” that exist in Scientology management. (I guess if I was feeling ironic I would describe them as held down 7’s…LOL)

“The biggest one is – ‘People love L. Ron Hubbard and Scientology’ (no do not laugh, I am serious). One thing you could not do, for example, is to bring up the idea that the general public think Hubbard is some sort of fat fraud. You would be off to the RPF – if you were lucky. You can, possibly, acknowledge that Scientology has a slight problem but you would have to base that on some local campaign run by SPs of some kind – not because the public think the idiots trying to body route them are really weird.

“So any program that is going to get done has this axiom as a starting point.

“The second axiom is that the Public really are trying to flood into the orgs in droves but Org Staff are incompetent out ethics fools who will fuck up at the drop of a hat and who actually repel people from coming in. (Again, I’m not kidding).

“Hence the need to have the real stuff out there in the reception area and not rely on those twits on staff.

“You have to realize that these are not ‘whys’ they are accepted truths.

“The way Scientology handles its finances is, of course, ass backwards. It FPs and spends every dime it gets in each week and almost all that meagre income is usually in the form of prepayments for service. i.e. they are taking money for auditing or training that will be taken sometime in the future.

“Thanks to Hubbards insane LRH ED 284 Scientologists paid in millions during 1976 – 80 to avoid the monthly price increases. This left orgs with huge amounts of APR (advance Payments Received) but, because the money itself was spent every week, it held very little in cash against these liabilities. Making the orgs very vulnerable to any repayment requests – they simply do not have the money in the bank.

“You can probably see the problem – if the orgs sell more ‘services’ in order to raise the money for a new building they merely compound the problem by a) making the APR even higher and b) spending the money.

“So this current drive to reg the locals to directly pay to the building fund is not that dumb a move. If the money is given as a non-refundable donation there is no future liability.

“But that leads to a different problem of course. Because there are so few Scientologists, almost all orgs rely on a select few (or in the case of small orgs just one family) as their main source of Org GI (which is where the staff pay comes from). If those people are being successfully taken to the cleaners then the Org GIs are going to go down and stay down.

“Now bear with me while I look further down the road on this.

“Orgs that reg their publics for the new building and do it successfully and do succeed in getting a new building out of it will have, during that period, drained their most active members of their money. The GI will be down.

“But thanks to the axioms I said above the org staff and management will ‘know’ that people will just flood in and with DM’s clever interactive screens giving the information directly to the adoring public the org GI will just go up and up.

“But of course that will not happen. Possibly a slight increase maybe but that slight increase will be offset by the increased maintenance costs associated with a much ‘better’ org.

But any increase, of course, merely makes the APRs higher.

Which raises a frightening spectacle – if the orgs own their buildings outright and then get hit with repayments(that they do not have the money to repay) they can be forced into bankruptcy and the assets disposed of. bye bye new building.

“It is an interesting subject to play around with.”

*****

Mick Wenlock was spot on in 2006.

IMO the Church of Scientology is now in the worst of all possible worlds:

1. The Scientology management axiom that “People love L. Ron Hubbard and Scientology” is demonstrably false; the Cult’s reputation is a radioactive slagheap. The Church of Scientology has, by analogy, gone critical and is melting down like Chernobyl did. No one inside the Cult sees it. Why? Because of the second Scn Mgmt axiom cited by Mick Wenlock in 2006:

2. “The Public really are trying to flood into the orgs in droves but Org Staff are incompetent out ethics fools who will fuck up at the drop of a hat and who actually repel people from coming in.” In failing to understand the severity and enormity of the crisis in which it is inexorably and irreversibly gripped, the Church of Scientology is doing everything it possibly can to make things worse. Hence, the hyper-irrationality of the Cult’s actions is being played out in a surreal panorama in which, for example, the work of 22 Scn lawyers in Texas can be undone by an incredibly ill-advised attack at LAX. Captain Miscavige is hellbent to take the Church over the cliff. He is too far gone to be even remotely rational.

3. Miscavige does not recognize the need to pour large amounts of cash into crisis management
and restructuring. Acting upon the two fallacious axioms cited by Wenlock, Miscavige — always the inveterate gambler — committed to an incredibly short-sighted and destructive Ideal Org fundraising effort in 2001 that devastated the future of the Church.

4. Miscavige’s actions show him to be irrevocably committed to Scientology’s irrational and self-destructive Ideology of Revenge that has arguably pierced the corporate veils and will result in the strategic loss of the Church’s 501(c)(3). That is the coup de grâce and the Church of Scientology does not understand that the opening act has begun.

5. Because the Church of Scientology is a one-man Dictatorship, the hands of all Scientologists are tied. Scientologists can do nothing but watch the disaster unfold. Many Scientologists understand the disaster and have left the Church. Many more will follow in 2015. The Scientology Diaspora I described in 2010 continues unabated as more Scientologists keep leaving the Church in protest over Miscavige’s ruinous “Scorched Earth” policies that leave Scientologists bankrupted and spiritually devastated. IMO, those still in the Church are, to a greater or lesser degree, PTS to the Church and Miscavige. The costume fundraising parties are an exercise in unreality and show the Church’s trajectory into the Abyss.

6. Miscavige’s Ideal Org program was a colossal flop. The “Era of Ideal Orgs” ended in 2013. Buildings did not, and cannot, boom Scientology. If anything, the buildings show David Miscavige’s inner poverty. This buildings are ultimately Miscavige’s statement about himself.

7. GAT II was meaningless shuffling of the cards and was not actually about anything. GAT II was DOA (Dead on Arrival).

8. The new Flag Building was DOA.

9. Whether it likes it or not, the Church of Scientology will become financially transparent. Everything will be made known. This is inevitable.

The Karmic Vortex has hyper-accelerated once again in 2015 and it will accelerate even more come March. Scientology “High Strangeness” will therefore increase in response as it always does.

*****

Historical Note: Mick Wenlock referenced L. Hubbard’s “insane LRH ED 284.” This was Hubbard’s wild 1976 Executive Directive ordering prices of Scientology goods and services to increase 5% each and every month. This cash-grab put tens of millions of dollars into Church coffers and equally lined Hubbard’s pockets with untold millions of dollars.