Scientology's Crushing Defeat

A previously unpublished saga of an $8 million check

“To them, it was a pittance,” Streckfus says.

Goldberg has refused to discuss the matter since he left the IRS. A New York Times analysis of the affair estimated that Scientology saved tens of millions of dollars in taxes.

“The war is OVER!” Miscavige said in his Los Angeles speech, and at one point referred to a “billion dollar tax bill” that Scientology would not have to pay.

“It’s a sad commentary,” says Streckfus about the IRS cave-in. “You or I would have been sent up the river. But if you have enough resources, you can beat off the IRS.”

The IRS no longer describes Scientology as a money-making dictatorship headed by one man, but a religion which contains many separate, legally distinct entities, each with its own board of directors and corporate officers.


For tax reasons, in other words, it is important for Scientology that David Miscavige, Hubbard’s successor, describe himself merely as the chairman of the board of one particular entity, RTC, and not, as Wollersheim labels him, the iron-fisted ruler of a vast empire mixing tax and non-tax exempt purposes.

“They caved because we had the goods on these guys in direct contravention to their tax exempt status. Miscavige has been running the church since 1986,” says Wollersheim attorney Dan Leipold. And it was one declaration in particular, penned by a dying man, that Leipold believes scared Scientology the most.

Today, Vaughn Young lives in Ohio, and is dying of cancer. But for 20 years, he was a Scientologist, worked directly with Miscavige, and at one time was Scientology’s most senior public relations officer. He was an insider who understood both how Scientology worked behind the scenes, and how it presented itself to the public. He left in 1989 and has been a key figure in numerous court battles since then. [Young passed away in June, 2003.]

“Vaughn gave a declaration that was unimpeachable,” says Leipold. “He took 80 different internal documents, and various publications from L. Ron Hubbard and official Scientology texts. He laid them out and showed how the entire organization operates outside the corporate lines of authority.”

Using Scientology’s own internal documents—many of which, penned by Hubbard and considered sacred, cannot be altered and must be followed to the letter—Young shows that Scientology has a rigid, paramilitary chain of command. Even non-religious entities that market themselves to the public as having no obvious tie to Scientology fall under the strict rubric. The Way to Happiness Foundation and Applied Scholastics, for example, are two organizations that market non-religious Hubbard writings to school districts and avoid mentioning a tie to Scientology. Narconon and Criminon, meanwhile, try to convince prison officials that they are effective methods for turning inmates from drugs and crime. “To the non-Scientology world,” Young writes, “they will say they are not Scientology and try to appear secular.” But internal documents, he shows, are explicit that these organizations fall under the command of the Scientology’s hierarchy.

Unique among all of Scientology’s entities, however, is the Sea Organization, the naval-uniform wearing men and women who have all signed billion-year employment contracts.

“Scientology’s own documents show that the Sea Org is a tough, elite, tight-knit organization that has the authority to move into and take over any organization...regardless of corporate lines,” Young writes. According to its own publications, the highest ranking positions in Scientology entities can only be held by Sea Org members.

Numerous documents describe Hubbard’s wish that his elite Sea Org members could be sent to any Scientology organization, secular or religious, and take over on the spot. “Sea Org Missions are used to cross corporate lines and to control all Scientology organizations and corporations, even into the private business sector,” Young writes. Numerous documents describe Sea Org members showing up at far-flung Scientology enterprises to take control, fire executives, and obtain payment for their work.

In 1987, Miscavige signed a directive which reiterated the Sea Org’s power to take control of any other Scientology entity.

But when he has been asked about the Sea Org’s power, and about his rank today as the captain of the Sea Org, Miscavige plays down his role.


Miscavige has said that the Sea Org is just a fraternal religious order—something akin to the Jesuits in the Catholic religion—and that he is only one of several Sea Org “captains.” The Sea Org has no legal or corporate status.

But Young argues that Scientology’s own documents show that Miscavige, as captain of the Sea Org, wields ultimate power over every single Scientology entity. In a sworn document submitted to the IRS in 1991, Scientology provided a telling description of how rank works in the Sea Org, admitting that “captain” in the Sea Org is, for all but one person, an honorary rank. Only David Miscavige himself, the document shows, holds the true earned rank of captain, and sits alone at the top of the Sea Org’s pyramid of power.

“David Miscavige is, by their own sworn document, at the top of the rankings and the only person holding a [non-honorary] rank of Captain. And this list is, according to them, the highest ranking officers in the Sea Organization,” Young writes.

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