One Scenario for the End of Scientology

On a recent trip, I met with a number of ex-Scientologists as well as some familiar faces in our community.  One question in my discussions always came up:

What is the endgame for Scientology, where the cult closes its doors for good and becomes a minor footnote in the pages of history?  

One of the main goals on this blog, as outlined in the original post back in November, is to try to develop and maintain a full scenario for the collapse of the cult. A full scenario would have several different alternatives along with an assessment of the relative likelihood of each of those alternatives actually coming to pass. This is not that document.  Over time, I would hope to be able to assemble from different individual scenarios such as this one, the complete assessment of the likely futures that may befall the church, and a series of guideposts that would help us tell which one of those scenarios is coming true.

This is simply one potential scenario, and it is one that had been on my mind, so I shared it with the people I was speaking with.

I think it safe to say that there are so many things going wrong both inside and outside the cult that it is beyond saving.  But I also caution that it will be difficult to predict exactly how and when corporate Scientology is brought low.  It is important to understand that it will probably take far longer than most people expect for the end game to play out, even if we are confident that the organization is doomed.  Parallels to attempts to predict the end of the Soviet Union are telling; though nobody got the “time, place form and event” (in cult-speak) exactly right, the act of trying to predict the unknowable was in fact useful.

Common Assumptions

No matter which scenario you believe will come to pass, there are several common assumptions that I believe will be common to all scenarios:

  • The cult will fail utterly at attracting new members. The damage to the Scientology brand resulting from press coverage of the cult’s bad behavior is irreparable. The Internet has made too much bad news too easily available to those seeking information about Scientology, and virtually all those who come in contact with the cult will easily discover that information. As a result, the battle will be solely about retention of existing members and the pool of new recruits will be substantially restricted to children or grandchildren of existing members. And, of course, the rich donor pool is aging, increasingly broke, and starting to die off.
  • Miscavige’s replacement (if and when) will be (at best) no more competent than he is.  Because Miscavige has so ruthlessly declared and purged anyone who could possibly pose a threat to usurp his role, there is no bench of internal candidates who could step into his shoes if there were a vacancy at the top, for whatever reason. Companies with outstanding management like General Electric have a deep bench of management talent that is actively and constantly groomed for promotion to greater responsibility. And GE’s Board of Directors ensures that the CEO does not spend his time exterminating potential claimants to the throne, but instead continues to keep high-quality management within the company. Needless to say, the board structure to provide checks and balances on David Miscavige’s power does not exist, as he has purged all of the board members.
  • “Admin Tech” will continue to act as a destructive force on the organization.  Even if we posit the unlikely, that competent new management takes over and somehow manages to reverse the trend and attract new members, arbitrary decisions that Hubbard made a half-century ago will sabotage the organization and keep it from succeeding. Among many other seeds of disaster planted by Hubbard are the insane use of statistics, financial metrics that measure the wrong goals and inevitably lead to bad behavior, and so much pressure on the staff that it is impossible to build any long-term viability into the organization.

What the End of the Road Looks like

For Scientology to go bankrupt, three things would need to happen:

  • Lose money from current operations, so that a realistic assessment of forward prospects concludes that there is little chance that the company would be able to turn around its fortunes and resume profitability.
  • Have cash reserves depleted so that the cult is no longer able to cover operating losses. The cult could lose money for a long time because it has access to cash, whether that is in the form of profits accumulated in past years (“retained earnings” in accounting parlance) or in access to bank loans, that would enable it to withstand ongoing losses.
  • Lose the ability to conduct operations due to loss of corporate facilities. In other words, if the cult has no cash and also loses control of its real estate portfolio and has no place to conduct business, then it cannot continue to operate.

If the cult runs out of cash, it could sell real estate to raise cash to continue operations, even if those operations are losing money; that is where paying cash for buildings comes in handy because the lack of debt means they cannot be foreclosed, and credit would be available, even if it is a fraction of the purchase price of the building.And if something happened to seize the cult’s real estate operation while it still had significant cash, they could always replace the real estate fairly quickly by throwing cash around.

So it is important to understand that in this scenario, for the cult to go completely bankrupt, it must lose both the cash reserves and the real estate portfolio. It can survive the loss of only one of these two things.

This scenario, then, deals with the circumstances under which the cult could lose both the cash balance and the real estate portfolio and thus have the doors forcibly shuttered.

A History of Operating Losses

My best current estimate is that Scientology remains profitable. According to my best estimates, I believe the cult pulled in around $180 million in 2013 from all sources (services, IAS, Narconon, etc.), and reaped an operating profit of approximately $30 million, excluding one-time legal settlements or reserves to allow for legal settlements in the future.  I believe both revenue and profits are down from prior years.  But this is hardly a disaster: many businesses of that size would kill to have profit margins like Scientology.

Despite the seeming health of the organization based on one year’s financial results, all is not well. I believe that revenue has declined steadily in the last five years, and that profits have actually declined by an even greater amount.

If the cult sees the revenue decline accelerate due to defections in the wake of disappointment over GAT 2, a drop in IAS donations, the failure of new real estate scams, the shuttering of Narconon centers due to lawsuits and license revocations, or a host of other looming problems, the cult could swing to operating losses.  I believe that once it begins losing money, it will be difficult for the cult to restructure in a way that’s needed to return to profitability.

Fixed Cost Business Models Are Great Until They’re Not

Economically, at this point, Scientology resembles a software company rather than a manufacturing enterprise. Software companies are interesting because virtually all of their expenses are fixed in the short term. There are almost zero raw materials used in each unit of product shipped, especially in the Internet era where software formerly shipped on CDs with paper manuals has now been completely shifted to Internet downloads.

In a fixed cost-only organization, any incremental revenue above your forecast turns into nearly pure profit. Suppose Microsoft budgets to sell $15 billion worth of software in a given quarter and plans to spend $10 billion, leaving $5 billion in pre-tax profits.  But business is booming and they sell $16 billion instead. About 90% of the incremental $1 billion in sales will drop directly to the bottom line. A revenue surplus of just 6% bumps profits up by almost 20%, and a revenue surplus of 12% boosts profits by an astronomical 40%.  That’s a pretty amazing business model, and it is one that propels Microsoft to being one of the most valuable companies in the world, even though its sales are quite a bit smaller than other extremely valuable companies.

While this fixed cost model is a wonderful thing when sales come in ahead of plan, it is equally painful when things go wrong. Suppose now that Microsoft planned to make $15 billion in sales, spending $10 billion to generate sales. But now suppose that, due to a bad economy, sales come in at only $13 billion, 12% below forecast. There are no variable costs in the manufacture of its products, so the entire $2 billion shortfall in sales will drop through to the bottom line, and profits will be only $3 billion instead of the expected $5 billion. That is a deficit of 40%. If that happened, the stock would be demolished, and we in Global Capitalism HQ would be at the head of the pack of investors brandishing torches and pitchforks, demanding that management institute changes to ensure that that screw-up does not occur again.

Manufacturing companies, where the cost to produce each automobile, iPad or cheap plastic doodad are a substantial portion of sales, can manufacture fewer units if they feel sales slipping, and thus cut manufacturing costs quickly. Profits will still decline if sales slump, but the ability to control spending on raw materials and labor cushions the blow so that profits to not fall as far in difficult times as that of a fixed-cost enterprise like a software company.

Scientology Is a Fixed Cost Business

Scientology works exactly like a software company: costs are fixed in the short and medium term, and there is little opportunity to cut labor costs when business turns bad. Unlike a consulting firm, Scientology has benefited for years from the sleeve labor wages it pays its employees, allowing it great profits when it has been in expansion mode. As a result, the cult has no incentive to manage its labor force efficiently. Furthermore, many of the job positions in existence are decreed by “Scripture” as laid down by Hubbard a half-century ago. So even if they wanted to cut costs by laying off staff to gain efficiency, they are prohibited by “religious” requirements.

It is important to understand that staff costs are not zero, even if individual paychecks are close to it. Sea Org staff need to be fed, need to be housed, and need to be shuttled from their apartment prisons such as the Hacienda Gardens facility in Clearwater where Debbie Cook was imprisoned before she exited the cult.  I would estimate that total employee costs for the cult are approximately $6,000 per person per year. If my estimate of 5,000 worldwide staff is correct, then labor costs are actually significant, totalling $30 million per year, or about 15% of what I believe the cult’s current annual revenue is.

That 15% of revenue figure sounds pretty cheap, until you realize that a highly profitable software company like Microsoft or Oracle typically spends about 30% of sales on employee compensation and benefits. In other words, while the low staff salaries are a disgrace and are horribly abusive on an individual basis, in aggregate, they do not confer a dramatic cost advantage to the cult. The cost savings from low individual salaries are offset significantly by dramatically more employees that are necessary to generate a certain amount of revenue.  Microsoft, for example, did $77.85 billion in revenue in its June 2013 fiscal year with 99,000 employees, or approximately $786,400 per employee (an extremely high number even for the highly profitable software industry).  Oracle, another software titan, did about $310,000 per employee.  By comparison, using my numbers, Scientology does a paltry $36,000 per employee, disastrous for any regular business.

Equally importantly, the low labor costs lead management to avoid making many decisions about how to manage costs effectively.  There’s an enormous amount of inefficiency baked into Scientology’s management practices, and the longer the cult has been able to get away with insane inefficiencies, the harder it will be to fix them.

… So Further Sales Declines Can Quickly Lead to Recurring Operating Losses

While Scientology is probably profitable and generating cash today, results can quickly move from profits to losses.  Let’s suppose that the cult loses 15% of members in 2014 due to disappointment with GAT 2, disconnection, death, and a host of other causes, a modest acceleration of the 5% to 10% decline I think we have seen in the last few years.  And, as we would expect, the cult at best does not undertake any significant cost reduction efforts.

In that case, we’d see revenue dropping by 15%, from $180 million to about $150 million.  Without aggressive cost reductions, profit would go from $30 million to just above break even, perhaps $5 million.  The following year, assuming a return to a modest 5% decline in membership, the cult would go into the red for what I believe would be the first time in many years.

I believe that the downside risk in the next two years is actually greater than a proportional decline in revenue. There are unique pressures building on the cult’s revenue and expense lines including:

  • Death or defections among the whales.  A handful of top donors like Bob Duggan are probably contributing $10 million or more per year, a significant portion of current operating profit. Losing the income stream from of any of these individuals would have a rapid negative effect on profits.
  • Collapse of Narconon.  I believe Narconon contributes less than $10 million of profits. But that empire has come under immense pressure lately in the wake of multiple lawsuits, and suits are being filed at an accelerating rate.  I believe that there are multiple insurance fraud investigations under way in the wake of discovery that perhaps 20% of Narconon Georgia’s billings (if I recall correctly; don’t have time to check the numbers) were from fraudulent claims.
  • Aging of the Freewinds:  Some data points including GPS data of the ship’s location suggest that the Freewinds business has basically collapsed.  At the same time, the ship is nearly 50 years old, long past the normal lifetime of a commercial vessel.  Unexpected repair expenses to hull plating or to engine room equipment are likely to be expensive, driving this minimally profitable operation deeply into the red.

But while the risk of going into the red and staying there for a long time is increasing, the reserves presumably mean that David Miscavige is not at this point particularly concerned about the future viability of the organization.

Losing the Reserves

If the cult starts losing money, reserves can sustain it without requiring significant retreat from its current operating posture.  This naturally sparks the question as to how those reserves might be decreased and that cushion eliminated.

How Much Money, Exactly?

I believe that the total cash position of the cult is made up of three different figures:

  • Sea Org reserves: this figure represents the profit from operations for most of the cult, particularly courses delivered at Flag.  I recall an interview with Mat Pesch, a longtime staffer, where he said that the Sea Org reserves were essentially depleted in the early 1990s.  Given a reasonable estimate of profitability from delivering services over the last 20 years, I estimate that these reserves are about $400 million.
  • IAS “war chest:”  this amount represents the donations to unrestricted IAS funds over the last 15 to 20 years. Some of these donations were used to build the Superpower building and for some other projects, plus used for legal settlements, I believe that the net balance currently is about $250 million, a bit less than the aggregate donation amount that I estimate at around $400 million.
  • Deposits: this represents money paid in for services not yet rendered. In cult accounting jargon, these referred to as “advance payments” (AP). I will use the term “deposits” since “AP” has a specific meaning in finance in the rest of the world (“accounts payable”).  Recently, when I’ve been interviewing former members for background information, I have asked how much money they have on deposit with the cult. Anecdotally, the average seems to be about $20,000-$25,000, but my sample is not terribly broad, consisting mainly of people who were “in” for decades. I think it reasonable to believe that the average balance from people who put money on deposit and then walked away might be closer to $15,000, but over the last 20 years, I think it reasonable to believe that 40,000 members walked away from money that they should have been repaid rather than risk the wrath of the cult. Total balance here I believe to be approximately $600 million.

When you add that up, the total cash balance in the cult appears to be in the neighborhood of $1.25 billion. I don’t think some estimates that have ranged as high as $5 or $6 billion are credible because I don’t think there are that many members over the last 20-25 years with enough disposable income to support that kind of accumulated profits.

I believe that most of this money is immediately routed offshore into non-interest-bearing bank accounts. Hubbard was fearful that the government would step in and seize cult funds without warning, and Miscavage has certainly continued that sort of paranoia.  While the reserves may seem unassailable, beyond the long arm of Uncle Sam, things may not be as safe as they seem.

How Could the Cult Lose That Money?

A $1.25 billion fortune is hard to squander, even if the cult is losing money at an increasing rate. Suppose the cult swings from a $30 million per year profit to an ongoing series of losses a similar amount. Those reserves would allow the cult to sustain operations without making any significant changes for almost 40 years. Clearly, then, the cult is not going to go bankrupt from operating losses alone.

An unanticipated external force would need to come in and reduce those cash balances significantly. Only if the reserves were decimated due to an unforeseen event would ongoing operating losses imperil the cult’s ability to operate. So what could possibly put this enormous cash hoard at risk?

I believe the Garcia lawsuit is the beginning of a wave of lawsuits that could significantly deplete cash reserves as claims are settled. Of the suit is about fraud in fund raising for Super Power, the argument revolves around something that, if allowed to stand as precedent, will be a shining beacon to guide attorneys in similar suits in the future: that the repayment mechanism is unconscionable, because it is inherently rigged against anyone seeking a repayment of funds.

Tony Ortega’s coverage of the Garcia lawsuit has mentioned in several places that the Garcia’s attorney, Ted Babbitt, has also been recruiting other plaintiffs to pursue similar actions against the cult in the future. Interestingly, one of the details that arose in the failed motion on the part of the cult to disqualify attorney Babbitt as counsel was the revelation that he was using a former cult attorney, who worked for the cult many years ago, to help recruit future plaintiffs.

I therefore believe that there is a “cottage industry” waiting in the wings made up of a network of law firms coordinating their efforts who will sue the cult for either fraud in IAS donations or for repayments, once the arbitration scheme is exposed as a sham.  As I have said before on Tony’s blog, since Miscavage micro-manages all legal affairs, a wave of individual lawsuits on this front will overwhelm him and leave him unable to function in other capacities. This will likely lead to rapid settlements including punitive damages.

I believe that, if this prediction of an avalanche of individual lawsuits comes to pass, the next step would be a class-action suit for all persons who have monies on deposit with the cult. In many class-action suits, damages are estimated, and by the time attorneys fees are deducted from the settlement, class members see recovery of only a few pennies on the dollar of what they believed their damages to be. That is a function of the difficulty in calculating damages, and of the incentive for companies to settle the damages are difficult to prove. Price-fixing cases, such as charges of fraud and diamond pricing or other similar actions, are examples of this sort.

I have talked to many ex-members, virtually all of whom have walked away from deposits, some in the six figure range, who are not interested in the expense and potential risks involved in suing the cult individually, but every single person I have talked to would happily sign up for a class action suit.

Unlike most class actions, damages incurred by each class member suing Scientology for refund of advance payments are trivial to determine: people have statements showing the amount on deposit, and the church should have tons of relevant records that would easily be discoverable. In other words, it is reasonable to believe that a class-action suit, if successful, would recover 100% of damages, rather than pennies on the dollar. An appropriately aggressive class-action attorney would insist that legal fees be added on top of the damages recovered for class members rather than deducted from them. 

If my estimate of the deposit amount is correct, and if you add on legal fees at a typical 30% contingency rate, it is conceivable that a successful class-action lawsuit could deplete the majority of the cult’s reserves.  Once those reserves are depleted, then operating losses are increasingly dangerous. But since operations are prescribed by “scripture,” the cult has little flexibility to cut costs.

But Could Plaintiffs Collect?

The corporate restructuring in the early 1980s, as documented by Denise Brennan and others involved, was clearly intended to shield the organization from liability for bad behavior and from asset seizures, using an impenetrably intertwined maze of onshore corporations, offshore shells and mysterious trusts.

Plaintiffs in a suit for refund of deposits would have to convince a judge to pierce all of these corporate structures in order to lay hold of assets to recover something for the victims of this fraud. When that corporate structure was laid down a third of a century ago, it was extremely difficult for courts to order that complex corporate structures be collapsed to get at the money.

The world is very different today as a result of changes to the international financial system made in the wake of September 11 terrorist attacks. The PATRIOT act and extensive behind-the-scenes diplomacy on the part of the US government has dramatically reduced the ability of enterprises to hide money in complex international corporate structures, and has made it much easier for the government to collapse networks of shell corporations and to seize funds held in offshore accounts ostensibly beyond the reach of justice. It is still not easy to do this, but it is far easier than it ever has been.

At the very least, it is reasonable to believe that the government would be able to sequester those funds and prevent them from being imported back into the US for use in daily operations of the cult.  In other words, while it could not seize cult funds that remain outside the US, it could seize funds that are repatriated to fund operation.  That’s why the move to operating losses is critical: that’s the circumstance in which the cult would be forced to repatriate cash, where it then becomes vulnerable.  Losing money erases the benefit of the complex corporate shield.  

In other words, it does not matter whether the government is actually able to seize cult funds held overseas. Instead, if the government is merely able to freeze those funds to prevent the cult from being able to make use of them itself, then the cult is essentially denied the money to backstop its operating losses, and the effect on operations is essentially the same as if the reserves were seized for lawsuit settlements: the cult can no longer use them to continue to operate once it starts losing money.

From Ideal Orgs to the Auction Block

In addition to being unable to use the reserves to sustain losses, the cult needs to be denied the use of its facilities. No company selling to the public can exist without bricks and mortar buildings.

In the case of Scientology, since the cult does not finance real estate purchases, instead paying cash for everything, it would seem as if real estate portfolio is a bulwark of strength against the “wog” world wishing it harm. While that is certainly true on the surface, there are several circumstances under which the cult could actually lose control of the real estate portfolio.

Many people wonder whether the Ideal Org strategy is a secret investment vehicle for the cult. As I have said on many occasions, I do not believe this is the case. I believe it is a pure marketing vehicle to attract new members (though one that is doomed to fail) and an opportunity to scam parishioners out of savings by collecting more in donations in the cult actually spends on purchase and renovation of these properties.

Scenario 1: Real Estate Seized for Settlements if Cash Is Beyond Reach

Let’s presume that over the next 3 to 5 years, the cult is successfully sued on a broad scale for repayment of deposits and further malfeasance.  But it’s further assume that, despite the best efforts of attorneys to unlock the doors to the cash vaults, that the reserves are not available for use of settlements. Attorneys may then move for seizure of the buildings in lieu of offshore cash to satisfy judgments.

If I am correct in believing that the aggregate value of settlements for repayment of outstanding deposits is at least $500 million, I believe that that exceeds the market value of the cult’s real estate portfolio. 

The real estate portfolio divides naturally into three categories:

  • Headquarters facilities, like “Big Blue” in Hollywood, Superpower and Flag in Clearwater, and Int Base in Hemet. While the oldest of these facilities were purchased for nominal sums and are undoubtedly worth far more than the cult paid decades ago, they are not in particularly desirable locations and, more importantly, the custom designs and improvements that the cult has ordered are of little value to future tenant, depressing the market value of these properties significantly. Anyone who purchases the buildings out of an asset sale would have to make significant modifications to make it useful for almost any other purpose.  If we estimate that the cult has invested $300 million in new construction at Int Base, it would realize very little of that if it sold that facility.
  • Local orgs, including both older facilities and Ideal Orgs, are typically located in out-of-the-way areas without much potential for conversion to retail or high-quality office space. The cult does a good job picking older, historic buildings and doing quality renovations, but I do not believe that its strategy will maximize resale value. The odd locations and the extremely specialized renovations (small auditing rooms without windows, large “Chapel” rooms too big for most corporations to use as conference rooms) will depress resale prices. In most cases, as evidenced by resale of facilities that the cult purchased for Ideal Org use and later resold, including Portland and Budapest among many others, it is unlikely that the cult will recapture the initial purchase price of the building, much less the high cost to pay for renovations.
  • Specialized facilities, including some of the CST sites with the storage vaults, are even more over-improved relative to their locations than the other types of buildings. It is unlikely in the extreme that a buyer would pay a premium relative to surrounding ranch properties for the paved airstrip and the expensive vault buildings at the New Mexico CST facility, to cite just one example.

Scenario 2: Revocation of the IRS Exemption Leads to Real Estate Seizures

Some anti-Scientology activists believe that the IRS may take action to revoke the cult’s tax exemption in the near to medium term future. If the IRS does take action, it is entirely possible they may seek to seize the real estate in the event that the cult enters into a significant settlement for violation of the 1993 agreements. One of the key provisions of the 1993 agreement is prompt repayment of deposits and refunds for dissatisfied customers, something that the cult has clearly willfully ignored over the last 20 years.

Of particular interest in considering whether the IRS might begin to reconsider the cult’s tax-exempt status is the idea that the government may be able to prove that the 1993 agreement was entered into fraudulently by the cult. If the government were able to obtain evidence that the cult committed fraud in negotiating that agreement, then it would be able to pursue damages not only for civil enforcement actions over the last few years, but potentially going back much further, and even re-opening the cases that were pending in the late 80s and early 90s, where the amounts being litigated were substantial.

I have said repeatedly that it is unwise to presume that the government can move aggressively against the cult, even if it wants to. The arcane details of the federal budgeting process means that individual portions of the government are restricted in the funding they can bring to bear for enforcement actions against the cult. In other words, IRS enforcement attorneys have a limited budget, even if potential recoveries are substantial. It is possible that the government could decide not to pursue the cult in order to maximize its “bang for the buck” particularly in maximizing deterrent effect by chasing after a large number of smaller scale tax dodgers.

It is thus difficult to assess the probability that the IRS will begin enforcement action. But if it does, it is reasonable to suspect that the IRS may move to seize real estate since it is likely to be easier to grab than cash held offshore. If the IRS were to do so, and if through either litigation or through IRS action, the church is essentially denied use of reserves, then we get to scenario where bankruptcy could happen within a relatively short period of time. Note, however, that this “relatively short period of time” would begin only after the cash reserves are taken out of the equation through several years of litigation, and after the IRS places liens on or seizes facilities.  Thus, the clock on that prediction would only start running at least 3-5 years from now, and possibly longer. 

Conclusions

Again, I stress that this is not necessarily the scenario for the collapse of the cult. It is merely a possible scenario, one of several.  I’ll detail others in future blog posts, until we have a range of possible outcomes.

This scenario is not going to happen overnight. I believe that litigation for repayment of deposits would take a minimum of three years and more likely five years to wind its way through the courts, either to resolution or to a point where we can predict confidently that the cult will lose. The dénouement from there could take another couple of years. It is thus unwise to get one’s hopes up that the cult will collapse soon, even if the best case articulated here comes to pass.  I believe it will happen in our lifetimes, but I would advocate against holding out hope that it will be in the next year or two.

This scenario is one in which the cult’s ability to operate is extinguished due to external circumstances that bring about its end. Other scenarios would have the cult somehow able to operate as a shadow of its former self, which leaves the potential for it to continue to do evil in the world, diminished but not extinguished.  

104 thoughts on “One Scenario for the End of Scientology

  1. media_lush

    nice job; I’ve often thought the best thing for the cult to do would be to hire an evil “John P” and show them your reports and say…. “see this… do what he suggests we should do”

    Reply
    1. FromPolandWithLove

      Whoa a lot of reading, I’ve finished my 1/3 bottle of martini, I’ll beter prepare dictionary, just in case…

      Reply
  2. Eclipse-girl

    Do you need datapoints from a small software firm that has been in business for 30 yrs to help you?

    I also believe the downfall will come from lawsuits that deplete the reserves in two ways. There is the cost of litigation and then there is the cost of the fines, sanctions, loss of the case.

    Recently, at 22 lawyers, I figured legal expenses at 75K / day when they all appear in court. I was wondering how far off my estimate was.

    Reply
    1. John P.

      We love us some data points. Bring ’em on!

      You’re probably not far off when you figure that the 22 attorneys are billing at least $750 per hour apiece (Wallace Jefferson, Eric Lieberman and a couple of the other ones are probably quite a bit more expensive), and that 4-5 hours in court on a given day engenders another 7-8 hours of trial prep billings on court days. Also, there’s travel time and all sorts of in-office research before they even get to Comal County. So you’re probably not far off when you take into account total billings for a given portion of the trial such as hearings for a single motion divided by number of days in court.

      The mandamus filing for the Supreme Court was probably billed on a blank check basis, without any thought to hourly rates, given the urgent time frame.

      Reply
    2. Kid Charliemain

      75K per day is probably too high because not all of those 22 lawyers are being paid by the CSI or RTC. A third, or maybe a fourth of them represent the named individual private eyes and squirrel busters.

      Reply
      1. Eclipse-girl

        But who is paying their bills?

        I would assume that scientology has to because they do not want the PIs , or the squirrel busters to actually tell the truth.

        Reply
        1. Kid Charliemain

          Good point.
          Yeah….I can see them doing that in order to keep everyone on the “reservation”.

          Reply
  3. Sir_Real

    Excellent article. The part mentioning, to paraphrase, a cottage industry of lawyers waiting in the wings to sue the cult is very encouraging to read. I hope they are sharpening their knives.

    Reply
  4. Derek

    My personal take.

    I honestly believe that Miscavige has invested funds and most of the cash money spent today is interest and dividends on investments. Hubbard had policy letters demanding that precious metals be purchased with donations and if that’s the case Lord only knows what those investments have ballooned into by now. The price of gold from the 70s to now… Lord can only imagine.

    I could see Miscavige hiring a successful crisis PR firm and converting the entire empire into a successful religious business model a la the LDS Church. I would not be surprised to find that he’s already looking into the possibility and/or has already been approached by some. Although they did potentially irreparable damage to their relationship with the PR industry when they successfully sued their PR firm back in the day, the PR industry is similar to lawyers in that for the right price and with the right contract terms including plenty of indemnification, there’s always a firm that will take on a crisis. In that light their lack of PR representatives may not be for lack of trying on Miscavige’s part. Maybe he just needs to get broken down enough to hand over a large enough prepayment and sign a contract favorable to said PR firm.

    Reply
    1. Eclipse-girl

      I remember one comment (was it John P?) about David making a disastrous investment when Hub – tub was still alive.

      Oil in Oklahoma?

      It lost a good deal of $. David was in a bit of a pickle trying not to take the blame for such a magnificent loss.

      I want to know why you think David has invested the funds of $cientology. I know you are an accountant and clearly that is the wisest decision to make with extra funds. However, this is David we are talking about.

      Reply
      1. John P.

        Yes, I had read about the Oklahoma oil deal. Losses on that one may have approached $50 million. There were several other fiascos including some money placed with the Feshbach brothers when they opened their ill-fated large cap funds. I think they finally got their fingers burned enough and retreated to straight cash.

        Reply
      2. Derek

        The only reason I think the money must have been invested is because money that doesn’t earn interest constantly loses value to inflation. The only appreciable assets that the cult owns are real estate at this point and they don’t borrow money. The only other way to make any potential real estate equity liquid is to sell the buildings. Up until the ideal org program most of not all of the “lower” orgs were in rented spaces anyway.

        Reply
    2. John P.

      I believe, after talking to several knowledgeable people around in those days that while the cult bought a lot of gold back in the day, Miscavige panicked and sold most of it at a loss when gold went from, say, $400 to $250. I am quite confident that the cult was out of the game long ago and did not participate in the gold rally of the last couple of years. I strongly suspect that Miscavige actually believes that Scientology gets you an unbeatable edge in the market and that all this investing stuff is easy. And when guys like that have the market crush their brilliant foolproof strategies, they panic. Hubris plus stupidity always equals road kill in my business.

      I continue to believe that the cult funds are held offshore in “demand deposit” accounts where the cult pays interest to the bank to get liquidity so they can stay ahead of the feds. If they had the money in US interest-bearing demand deposit accounts, at the current 0.01% rate (!) for demand deposits, they’d be making about $1 million per year, not even enough for Miscavige’s food bills and the salaries for his wog personal chefs. I suspect they’re actually paying 0.5% or more to offshore banks for liquidity and for being beyond the reach of civil seizures.

      PR guys won’t have the expertise needed to convert their empire into a for-profit archipelago of companies as the Mormons have done. Took them a century of hard work from relatively smart guys to build their empire, not some quick work with a couple of consultants. The right guys to hire would be the investment bankers at Global Capitalism HQ, but even then, with Miscavige’s micro-management, they’d all walk out and refuse to work with the cult. It’s hopeless.

      Reply
      1. Derek

        But even if that were the case, with the offshore deposits, considering how much of those reserves is “old money” from the cults heyday, how could it still be worth anything after 40, 30, or even 20 years of inflation?

        Reply
        1. John P.

          Inflation in the last 20 years has not been that bad. From 1970-1990, it did eat up a lot of the money.

          I’m somewhat knowledgeable about economic history — one has to be, to avoid making mistakes from the past all over again. One thing that stands out is that financial fraud and complex crime is incredibly inefficient.

          Example: the Madoff fraud cost investors tens of billions of dollars, but Bernie himself bagged only a few hundred million in management fees over that time. Money launderers sometimes take as much as 50% off the top. When you burglarize a house, the diamonds you steal will typically sell to a fence for 5 to 10 cents on the dollar. So from the standpoint of a criminal, taking a 50% haircut on old money due to inflation isn’t all that far out of the profile of other criminal activity.

          Reply
          1. Derek

            That’s an interesting point. I don’t have near the financial knowledge that you have. I just pause at the fact that you’re Proposing a scenario that involves a level of financial management where I would think the cult should already be broke by this point.

      2. Bea

        I just love this phrase “hubris plus stupidity always equals road kill in my business”. It’s one I will try to remember!

        Reply
      3. Robert Eckert

        Are you sure that Miscavige hasn’t invested and panic-sold a few more times since? If so, he may have cut the reserves in half, or worse, without much effort.

        Reply
  5. TheHoleDoesNotExist

    It’s late for me, so I’m just going to drop off my notes on this subject, as it’s near and dear to my heart. I’ll read again tomorrow.

    The cult has already failed utterly to attract new members and has for 15 years, not recently. The only new names on the rosters are 2nd and 3rd gens or foreign recruits for servitude only in countries with virtually lawless horizons.

    There is so much pent up anger and confusion that has stewed for so long that not even the most competent staff member could avoid the onslaught of blowback if Miscavige is suddenly not there to enforce the madness. Lord of the Flies comes to mind.

    Admin tech may be the straw of weakness, but it is ethics tech that cannot be removed, surgically or otherwise. Without SP’s and crimes and naughty thinking, there is no distraction or explanation for service and/or product failures.

    Miscavige is going to have to decide this year if he’s going to release reserves to keep the orgs operating. Maybe not all of them this year, but many and almost all but two or three by next year. If he then has to sell off real estate, the orgs disappear. I think if he ever gets to that point, the whales are going to finally start asking about financials and pulling out when they start researching.

    I agree on the fixed cost business platform, but those enviable profit margins … remember when CEO’s were standing in line to pay Anderson for their secret to envialbe profit margins? In scientology it’s even worse. For instance can’t be “laying off staff to gain efficiency, they are prohibited by “religious” requirements. What happens is one delirious, on their last leg employee now has to do the job of 3 other major department jobs. $6,000 per year per person seems far too high to me. Figuring in food cost for example is not going to be normal. This is already happening. Have to include computation of when these poor slobs are literally going to collapse or blow.

    Money on account. The Basics hoovered up much of this at first inception and now with GAT2 and do overs including materials and meters, any remaining will be wiped off the books. Some of the orgs don’t have enough to buy the meters to sell. Public have to pay first then wait for the meters to be delivered to the org.

    Interesting that you suggest non interest bearing accounts. I had always thought of interest being the main tool of keeping the reserves high over the years. That would change everything.

    A note on real estate sales. One thing you left out: asbestos. Might be tough for sales when you include the factor having to retrofit tiny auditing rooms and the expenses involved.

    Other than that, it’s a fascinating overview and of course, you’re on the money on the scenarios. The only major point I would really throw in is the staff. I don’t think they will make it another year. Some will blow, but most will collapse physically or mentally or both. With no one to service the Patrons in the style they are accustomed, and with the snap your finger instant gratification they feel they have paid for, they’ll patronize other new age establishments that will.

    Reply
    1. Free Minds, Free Hearts

      THDNE thank you for bringing up the SO and staff. I wonder how this will play out.

      I cannot imagine the public staff staying during the implosion of regging and lost whales and empty buildings. They live in the real world so they may have other options.

      Thinking of the SO, I really wonder how long they can physically hold on – I have been told that the old timers are loyal to LRH, not so much to Captain Miscavige, and that is why they hang in there. But as they get older and sicker they will need to be offloaded.

      So then the cult is left with the Russian youngsters and otters from countries where they have no hope for a better future, so Clearwater or Hemet may not seem so bad. Their passports are locked up, they may not know anyone in the country, may not speak much English.

      Reply
    2. John P.

      Thank you for a very insightful and informative post. There are multiple golden bits of wisdom in here that are worth noting and amplifying.

      The cult has already failed utterly to attract new members and has for 15 years, not recently. The only new names on the rosters are 2nd and 3rd gens or foreign recruits for servitude only in countries with virtually lawless horizons.

      I know this to be correct, and the time frame you suggest is about right. I was not intending in the post to suggest that this is a recent change; I was just reiterating this is a fundamental assumption across all scenarios for the cult’s future that won’t change.

      There is so much pent up anger and confusion that has stewed for so long that not even the most competent staff member could avoid the onslaught of blowback if Miscavige is suddenly not there to enforce the madness. Lord of the Flies comes to mind.

      That is indeed part of the problem of trying to do a corporate turnaround by “firing” Miscavige and replacing him. Even if a supremely competent replacement were to exist, to be discovered among staff and to be appointed to the top spot, that person would still have to “sell” the staff on his legitimacy. It would be a bloodless coup, and he would be sabotaged at every turn.

      Admin tech may be the straw of weakness, but it is ethics tech that cannot be removed, surgically or otherwise. Without SP’s and crimes and naughty thinking, there is no distraction or explanation for service and/or product failures.

      I agree that “ethics” is an integral part of the organization. I have said before on many occasions that the indie movement won’t thrive to any significant degree long-term because they are so careful to avoid any organizational structure at all because of the fear of falling into use of “ethics tech” to retain members. And without coercion, people will eventually stop doing the basic self-help practices. In doing corporate strategy, I tend to look at things from the standpoint I’m most familiar with: corporate strategy, economics, finance, etc. In that mode, I view “ethics tech” as an economist would: as a “switch-out cost” that keeps customers from going to a competing supplier. Microsoft has a massive switch-out cost with Windows: if you wrote your applications using Windows programming tools, you’d have to start from scratch and re-program everything, which is unthinkable. With the cult, switch-out costs include sunk costs from ethics handlings, the threat of disconnection, and the loss of your “eternity.”

      Miscavige is going to have to decide this year if he’s going to release reserves to keep the orgs operating. Maybe not all of them this year, but many and almost all but two or three by next year.

      This is consistent with my guess that the cult comes close to operating losses for the first time in Miscavige’s tenure by the end of 2015. I think the membership takes a big leg down in 2014 in the wake of GAT 2, the e-meter fiasco, etc. And most of that is older longer-term members, which will impact the financials significantly.

      If he then has to sell off real estate, the orgs disappear. I think if he ever gets to that point, the whales are going to finally start asking about financials and pulling out when they start researching.

      This is why I believe he’ll never sell off orgs, unless it is to sell off pre-renovation buildings like Battle Creek, New Haven, Chicago, Philadelphia and Detroit. If that happens, he’ll use the excuse that he did in Portland: find some excuse that it’s not suitable for their needs, and he’ll claim to start fund raising for a new building in those locations. He will not be able to sell Ideal Orgs that have opened recently because the donors will be pissed. And remember, it’s not just the local publics that contribute to a given org; I strongly suspect that whales are recruited to put a stalled Ideal Org campaign over the top. So if you sell off the Chicago building, but an LA-based whale donated the last 20%, you piss off that whale.

      That argument leads inevitably to what you said: Miscavige may have to start spending reserves to keep the doors open in certain Orgs. This may have happened already in places like Buffalo or even NYC. Interestingly, this may lead DM to start pushing some small amount of services back to Orgs that have been moved to higher-level orgs in the past couple years. That’s about the only way to keep it quiet that Orgs can no longer cover their utilities on the paltry GI coming in. So that’s a trend I’m watching for (but haven’t seen any evidence of it yet).

      In scientology it’s even worse. For instance can’t be “laying off staff to gain efficiency, they are prohibited by “religious” requirements. What happens is one delirious, on their last leg employee now has to do the job of 3 other major department jobs.

      Exactly right. The cult continues to keep the same stupid org structure, just requiring each remaining employee to wear “multiple hats.” The ED is now also the “particle speed flow officer” (mail clerk), cramming officer, estates officer and bookstore cashier. But nobody examines the stupidity of continuing the bureaucracy assuming each of those jobs was done by a full-time person with plenty of time to waste.

      $6,000 per year per person seems far too high to me. Figuring in food cost for example is not going to be normal. This is already happening. Have to include computation of when these poor slobs are literally going to collapse or blow.

      I spent some time thinking about the $500 per month figure. In talking to people I know who are social workers, it turns out that it’s pretty hard for a single adult to make it on food stamps, which amount to about $175 per month for a single adult. Eating beans and rice in communal kitchens cuts the food cost a bit below that, but then there’s the expense of all that kitchen equipment, real estate, and more slaves to run it. I stand by the estimate of $200 of that $500 per month going to food. There’s transport expenses between Hacienda Gardens and Flag. $100 per month of that $500 for transport assumes $3.00 per day. At 5 miles each way from Hacienda Gardens to Flag, you’re paying $0.30 per person per mile, which seems in line with fully loaded private buses, even if they’re decrepit rattletraps rather than nice new models. And that leaves $200 per person per month for housing, which is reasonable given the cost of utilities, security guards, repairs to the spiked fences pointing inwards, etc. The “actual” number may be only $415 or it could be $583, but $500 per month is directionally correct for a rough cut estimate across an employee population this large. I’ve also budgeted only $5 million for DM’s lifestyle expenses, but those could be substantially higher since I’ve been conservative in estimating the amount of jet time he uses each year; if he’s constantly shuttling between LA and Flag, that number could be double. You do the best you can on each number in these exercises, and the accumulated error usually cancels out.

      Money on account. The Basics hoovered up much of this at first inception and now with GAT2 and do overs including materials and meters, any remaining will be wiped off the books. Some of the orgs don’t have enough to buy the meters to sell. Public have to pay first then wait for the meters to be delivered to the org.

      I think there’s still a lot of money on account, based on multiple conversations with ex’s who have significant deposits that they’ve walked away from.

      The cult has long wanted it both ways: to have your cash in its vaults, and to keep bringing more cash in. They’ve set up arbitrary rules to keep your existing cash; some people have told me that when they were getting regged for The Basics, they were told that advance payments were for courses only and couldn’t be used for books, so they had to find new cash for books. This relates to why the orgs can’t afford to carry inventory of e-meters, and are requiring people to come up with net new cash for their meters instead of being able to use deposits. It’s partly greed and partly an artifact of a loony financial system.

      Interesting that you suggest non interest bearing accounts. I had always thought of interest being the main tool of keeping the reserves high over the years. That would change everything.

      US interest rates have been extremely low for at least 20 years, so just in the last 20 years, the contribution of interest income to growing reserves would be minimal. And as I have said repeatedly, offshore accounts pay less than US demand deposits, and you usually end up paying them.

      A note on real estate sales. One thing you left out: asbestos. Might be tough for sales when you include the factor having to retrofit tiny auditing rooms and the expenses involved.

      It’s likely that the Ideal Orgs done in the last 10-12 years have already had asbestos removal in the equation. Big Blue is perhaps the last remaining property with asbestos problems. I doubt there’s much at Int Base, and (though you would know better than I), I suspect that the only Flag building with potential significant asbestos exposure would be the Ft. Harrison because of its age. I doubt that Hacienda Gardens, say, would have asbestos since it probably has in-wall electric heaters rather than a central boiler and radiators for heat. And Big Blue’s resale value will be limited more as a function of location and age rather than due to asbestos.

      The only major point I would really throw in is the staff. I don’t think they will make it another year. Some will blow, but most will collapse physically or mentally or both.

      I agree. That’s the subject of another blog post coming up in a couple days: another scenario is what happens if there are no bodies left to man the orgs. I don’t think the current tactics of recruiting members’ kids for staff or SO or grabbing foreigners will work for much longer.

      With no one to service the Patrons in the style they are accustomed, and with the snap your finger instant gratification they feel they have paid for, they’ll patronize other new age establishments that will.

      From talking recently with a lot of older ex’s, I don’t think the cult really knows how to cater to donors with money in a positive way. Sure, the food at the Sandcastle and some of the other Flag restaurants is better than it was years ago, and the CC brunch in LA (where wogs are allowed) is supposed to be pretty good. But most ex’s I have talked to say that the regging, abuse, and pressure is no better for them than it is for the rank and file. If that doesn’t count as crappy service that makes you want to bolt, then nothing will. People stay invested in the cult for many reasons, including the belief that they get value from all the auditing, and even from the upper OT levels. Crappy service hasn’t been that effective at turning them away. I suspect that only the signs of failure that penetrate the information deficit that they now suffer from will do the trick.

      Reply
  6. Unloyalofficer

    I’d like to point out also that the cult does get a signifigant portion of their income from Hubbard’s residual income from his fiction works. Everytime a science fiction fan decides they want to tackle the Mission Earth series, or someone buys any of his many books the cult gets a cut. I really haven’t looked at it, but I would bet the cult could live off Hubbard’s royalty checks for a long time.

    Reply
    1. Eclipse-girl

      I would like to disagree with that, for two separate reasons.

      I am a huge sci fi fan and I love the “golden age”. I look for books by Henry Kuttner, Alfred Bester , Frederick Poul and a number of others. Ron never made the cut.

      Now, I try not to buy new. I purchase a lot through Alibris. No money goes to the author when purchasing second hand.

      Reply
      1. Get Chutney Love

        They donate reprints of LRH non-science fiction pulp material to libraries, along with a radio drama done in “Multi-Cast” of one of his stories with Ms. Cartwright as one of the performers, which we received and I put in the freebie bin, as were all the shrink-wrapped LRH hardcover books we received as well.

        Reply
          1. Get Chutney Love

            Yes, I think the training of the librarians was the only thing that kept them from throwing them away outright instead of passing them on to us.

            It’s just another CoS con, slimy, wasteful and highly profitable for them.

    2. Panopea Abrupta

      Most Hubbard sales were/are artificially inflated by culties buying the books.
      That’s how they artificially made him a “bestseller.”
      They buy their own books.
      I’ll bet Hubbard royalties are a pittance.

      Reply
    3. John P.

      I don’t think residual income from the science fiction books is all that great at this point. And royalties are at most 20%, probably a bit less.

      Given that most of the books are sold to Scientologists, this is a very inefficient scam compared to the IAS, since the cost of printing reduces the margins on any money that comes in for books (even printed by Bridge Pubs) versus the margins on straight IAS donations, which are probably around 80% after event costs and reg commissions are factored in. Margin on books is probably closer to 50%. So every dollar raised from a cultie on sci-fi book sales is lower-profit than IAS donations. Oops!

      I strongly suspect the only reason they keep selling the sci-fi books is that Miscavige has managed to name himself (personally) as the beneficiary of the ASI royalty stream. That’s the only for-profit enterprise in the cult, and he can thus get paid there without charges of inurement. That’s why they pissed off so many people on “The Basics.” They could have pulled in as much as $200 million in revenue in three or four years (25,000 members times 3 sets apiece times $3,000 per set = $225 million), and Miscavige could have grabbed $40 million of that, personally.

      Reply
      1. Anonymous

        I agree with this.

        It is probably the darkest, most protected secret in Scientology and is probably what will land Sea Org Captain David Miscavige in jail.

        Reply
    4. HartleyPatterson

      I’m a long time SF fan, so I know fans don’t buy Hubbard’s books nor have they ever. Fans pick authors by the Hugo and Nebula Awards and word of mouth, not advertising. Many fans believe that ‘Mission Earth’ was ghost written and that ‘Battleflop Earth’ was Travolta’s personal project that went wrong because he is just an actor not a producer, that neither happens to be true is not something I’m rushing to correct!

      Reply
    5. Anonymous

      Actual non-cult sales of Hubbard’s fiction are extremely small. The general public is not interested in any of his fiction…the stuff that is actually offered under that category or his also (but not admitted) fictional works that comprise The Basics library.

      A quick walk through any 20 public bookstores of ones choosing makes it clear that there is almost no stock of any of Hubbard’s books on hand…the clear reason being that there is no substantial demand.

      Amazon has them listed and available, but look at the sales rankings. That crowd sourced information (especially when added to the pricing Hubbard’s books command on global flea markets like eBay) shows the actual demand for his written works.

      Reply
    6. ze moo

      Sales to the public of Lroon’s ‘fiction’ are probably very poor. As the loyal clams are required to go buy copies and hype the numbers for the bestsellers lists, the numbers are suspect.

      What isn’t suspect is that all royalties go to Author Services Inc, a corporate entity that Miscavige controls totally. When Battlefield Earth was published, the clams went out and bought it and then returned them. This inflated the original sales numbers but destroyed the mass market for Lroons literature. By using Bridge Pubs to actually print (or most probably contract out the printing), the costs of the returned books came back to haunt them. Actually, book sellers don’t return books, they just rip off the cover and send that back. Freight costs fill up many landfills and paper recycling plants.

      Any central organization left from the collapse of Clamdom Inc. would want the Lroon copyrights, they are the only portable assets left. And you can’t control Clamdom Inc without enforcing the copyrights. The only question is do you include GAT 1 and 2 or just go for the Super Powerz stuff?

      Reply
      1. Anonymous

        Just before Battlefield Earth was first published by St. Martin’s Press Hubbard issued a PL bragging that “a publisher had a million dollar advance for his latest fiction work.”

        Of course, what he forget to also mention was that an entity controlled by the Church of Scientology (and therefore Hubbard) promised to buy 40,000 copies of the first printing of that work as part of the publishing agreement.

        Thus once again, Hubbard personally profited off the proceeds generated by church activities that were arguable under his control.

        Now there is no pretense and what very, very few copies of Battlefield Earth are still sold are in fact published by Bridge and Galaxy Press.

        The proceeds from both of the copies of that book that get sold each month (he he he) go into church coffers.

        Reply
        1. John P.

          Thanks for the reminder about the personal “vanity press” scam for having a “million dollar advance.” Talk about stupid lies: If the deal was for 50,000 hardback copies at $20, the gross revenue (to the reseller) would have been $1 million, and the royalty to Hubbard or the cult would have been approximately $150,000. Advances are against royalties not gross sales. So it’s unlikely that Hubbard would have gotten an advance of $1 million against a sales guarantee of 50,000 units.

          Once again, Hubbard and Scientology lie even when the truth would serve them adequately well…

          Reply
          1. Anonymous

            He could not resist the urge to gild the lily. In some cases the actual truth of events in Hubbard’s life is interesting enough, but after the embellishments he just looks weak.

  7. Penny

    Great write up. Looks like your analytical mind is in full force:) On your percentages
    of those leaving, I believe they are higher. As an ex, I have now been contacted
    by more than one former friend that is “out” but under the radar. Also, with the
    coming required deposition on Monique’s lawsuit, I would not be surprised if DM
    bolts before this occurs. If he does, things could move forward exponentially
    and the fear factor for those in the trap would be gone.

    Loved this line, “Hubris plus stupidity always equals road kill in my business.” which applies equally to many of his recent public responses such as Leah leaving and other PR catastrophes.

    In reference to your wonderful and honest post about a tough winter, so sorry you
    were not feeling up to par. Hear you. The first year I left the cult was tough
    going so my empathy on that. Glad you are feeling better. Not that you asked
    but this helped. Good food, lots of fresh organic Vegetables (I’m in CA, what can I
    say?), fresh air and exercise. Relatives and friends that give you a hard
    time…just chill, no I do not believe in disconnection but sometimes, less is
    more. Sorry, I’m just a mother hen. GREAT to have you back.

    Reply
  8. Missionary Kid

    I have postulated that the collapse would happen this year, 2014. What I wasn’t aware of, and didn’t believe was the amount of money that you said the whales have been providing. I was wrong on that account.

    I am sticking by the collapse of Co$ this year – operationally. Why? Because the defections of the middle-class public members, who provide the bodies to show up at events is, I believe, rapidly increasing.

    This will have several effects.

    There will be fewer Sea Org and staff recruits, and, with people leaving posts, the number of those workers will be reduced. That will reduce somewhat the overhead.

    On the other hand, Co$ has never made efficiency a goal. Commitment to Mi$cavige/$cientology and willingness to work seems to be more important than professionalism or abilities.

    To accomplish tasks, Co$ operates on the old Chinese method: if a task needs accomplishment, throw bodies at it. With fewer staff and Sea Org members, those costs will go down, but fewer events can be put on in the style they used to be, because the bodies won’t be available to put on or participate in events. That definitely means that revenues will go down.

    There has been, in spite of moving people around to all sorts of different “hats,” (which has, in the past, meant a certain amount of cross-training), a loss of knowledge of everyday operations because of staff and sea org losses. It looks like many of the orgs are facing such a paucity of staff that they are having problems keeping the doors open for much of the day, or having a greeter at the front door if a clam walks in.

    In addition, there is, I believe as illustrated in invitations issued for the re- re- re- dedication that took place in L.A., a level of paranoia that is setting in. The public $cientologists, who could be depended on to show up, are now, I believe being vetted to see who really is active. Davy Mismanage doesn’t know who to trust. He doesn’t want pictures to get out of events that show how few really attend, because that would put the lie to his straight up and vertical expansion story.

    Davy’s trust for those in upper levels of Co$ management, I believe, has been seriously eroded. To start with, he never has trusted people who he felt might take his place, or who are smarter than he is, so he’s worked hard to keep them in fear of him. With the defection of Rinder and Rathbun, he really has to be restimulated over the thought of betrayal.

    I don’t believe he knows how to get suspected defectors or inactive members back in the fold. His method of management is based on fear, and the publics are starting to lose that because they’ve been regged to death for money to the point that, while they don’t want to be declared as SPs, they can’t stand the pain that Co$ causes. They’ve turned passive and are drifting away.

    DM wants pictures of masses of people in attendance to keep the illusion of a full house for the faithful. In Portland, they did it by restricting access, chasing Mark Bunker and anyone else away, then photoshopping wide angle shots. At the two events in Florida, both the banner towing and helicopter flights disrupted daytime events, putting the lie to the crowd count. Massive amounts of money were spent at all of those events to keep the regular public out.

    The last several events have been failures from an outside point of view. They were disrupted, either by clever exes or by Mismanage himself, by his paranoia. The whales must have noticed somewhere in the back of their minds.

    The public defection of Debbie Cook, then Leah Remini, regardless of what shore story that has been spread, are having a corrosive effect on “publics.” Debbie Cook’s had more effect on people still in. Coupled with GAT 2 and the insistence on the purchase of new E-meters, as well as the fact that many are apparently defective because they were not stored properly, those two campaigns to raise money haven’t pulled in the revenue Davy dreamed of.

    Sales of materials, courses, and e-meters are apparently dismal. I believe that’s a measure of distrust that is growing among the publics who are tapped out, or at least tired of paying for SOS: Same Old Shit.

    Fewer workers also means that there will be fewer people to massage the egos of the whales, provide personal service, and monitor their behavior. It’s been the personal touch that has kept a lot of them in line, I believe. It has required people thoroughly committed to Co$. With fewer committed people, there will be fewer whales sticking around, or donating the amounts they have been.

    In addition, David Mismanage has apparently been occupied with the Rathbun and other lawsuits, to the detriment of the rest of Co$ operations, including the care and feeding of whales. He has always met defection with persecution, and now that is coming back to bite him. I believe it consumes him. Control freaks hate it when people leave, especially people who’ve been close. That, to them, is treason, and must be acted on as such.

    When the whales start getting less service, they will slow down their giving, and that flow of money will slow. That’s just the financial end of things.

    For the total organization, just for people “on lines” I believe the number of $cons that was quoted in the $cientology Celebrity website. That is only a belief, but their willingness to put a name to the quote may only be an attempt to sabotage the person named.

    One other factor will certainly accelerate the demise of the organization: A major defection of a celebrity. If JT or TC blows, it will rock the foundation of Co$ to its core. If one of their second rank celebs, like Priscilla or Lisa Marie Presley or Beck, or further down the pecking order, Juliette Lewis, comes out and publicly blows, there will be another avalanche of defections, and even more public joking and degrading than exists now.

    Leah Remini, while well known in the U.S., doesn’t have the international name recognition of the first 4 named above. Her profile has risen since she defected, and the slow drip drip drip of information from her or her friends and relatives has had an effect on the public, as well as the publics.

    In short, the smaller population of $cientologists means that the care and feeding of whales will not be as attended to as before.

    I wrote this 50 years ago, and it applies here:
    In the sea of sharks and little fishes,
    Ultimately, it is the little fishes,
    Who determine how many sharks there will be.

    The same type of ecology goes for $cientology whales. Fewer $cientologists to support them means fewer whales.

    Reply
    1. John P.

      Missionary Kid, you raise a number of excellent points here, some of which should be amplified. Others deserve additional comment and digestion.

      I have postulated that the collapse would happen this year, 2014.

      It is certainly possible that the cult will implode in any given year going forward. In the endgame for the Soviet Union, the final collapse happened quite quickly once events were set in motion. In looking at scenarios where you have a vested interest in the outcome, however, it’s important to be conservative in your thinking, avoiding the trap of conflating what you want to see versus what’s actually going on. While I agree that this is possible, it’s unwise to bet too heavily on this sort of outcome.

      I suspect many people said “With Mary Sue Hubbard and a dozen other top managers in jail for ‘Snow White,’ the cult will surely implode in a year because there are no qualified leaders to take over.” Of course, they all said that in 1977, nearly four decades ago.

      So while you could be right, I strongly recommend that we take a more conservative view on the course of the implosion. We won’t be able to call the endgame for the cult all that far out.

      I am sticking by the collapse of Co$ this year – operationally. Why? Because the defections of the middle-class public members, who provide the bodies to show up at events is, I believe, rapidly increasing.

      Indeed, the middle-class public are the backbone of the organization, paying far more for services, books, etc. than the “whales.” One subtle thought: the defections of the middle class are likely to move the cult from profitability to a series of operating losses which would be difficult to recover from. However, I would characterize that as financial impairment, not operational impairment. Operational impairment would happen when there are no longer enough staff members to open the doors in the morning, to “reg” people for events, to process accounts payable checks, etc. While the one would lead to the other, given the size of the reserves, it could be several years apart.

      I will explore in a blog post I’m planning for this week what the operational impairment scenario looks like, but I don’t have any clear conclusions at this point.

      There will be fewer Sea Org and staff recruits, and, with people leaving posts, the number of those workers will be reduced. That will reduce somewhat the overhead.

      “Somewhat” is the operative word here. If the staff goes down by half they can’t let leases on apartments expire and cut costs that way. They’re saddled with half-empty apartment buildings, where the maintenance cost for a half-empty building is not a lot less than the maintenance cost for a full one. This reason is an example why a fixed-cost business model has nastier negative leverage than positive leverage. In other words, when the shit hits the fan, the negative implications of the fixed cost business model are more severe for every dollar of revenue shortfall than the benefits from every dollar of revenue upside.

      Commitment to Mi$cavige/$cientology and willingness to work seems to be more important than professionalism or abilities.

      Well said!

      To accomplish tasks, Co$ operates on the old Chinese method: […] throw bodies at [anything that needs to be done]. … Fewer events can be put on in the style they used to be, because the bodies won’t be available to put on or participate in events. That definitely means that revenues will go down.

      We’re already seeing this with the cancellation of the Auditor’s Day and Maiden Voyage events last year and the laughable failures of the Portland opening, Super Power opening and now the AOLA (ASHO?) opening earlier in March.

      There has been, in spite of moving people around to all sorts of different “hats,” (which has, in the past, meant a certain amount of cross-training), a loss of knowledge of everyday operations because of staff and sea org losses. True enough. But I would advocate caution in estimating the speed of impact on the organization. What you describe would be devastating where you’re laying off experienced people in a rapidly changing industry — if a biotech startup laid off 30 biochemists, it would be hard to replace that expertise. On the other hand, given that Scientology works really hard to not evolve, maintaining its current level of incompetence with new staff is relatively easier than it would be for other companies. In other words, staffers are much closer to interchangeable parts than they are in other companies, since the upside from a great hire in Scientology is not terribly significant.

      The public $cientologists, who could be depended on to show up, are now, I believe being vetted to see who really is active.

      Yes, but the people who are out don’t answer the phone. I met with one under-the-radar former member recently who showed me his cell phone and invited me to count the number of inbound calls in the previous 24 hours. I personally counted 52 calls in that period from cult phone numbers.

      I don’t believe he knows how to get suspected defectors or inactive members back in the fold.

      Yes, but it’s not just a function of not knowing: increasingly, ex members are resolute in their unwillingness to be recaptured. In the past, some may have waffled and have been open to being seduced back in. I haven’t met any recent departures who were willing to listen to the cult once they reached their limit. In other words, the recent departures are more likely to be enemies than those who left long ago, who merely walked away to have a great life.

      His method of management is based on fear, and the publics are starting to lose that because they’ve been regged to death for money to the point that, while they don’t want to be declared as SPs, they can’t stand the pain that Co$ causes. They’ve turned passive and are drifting away.

      Exactly right. They now don’t answer the phone to tell cult staffers to bugger off, they just don’t answer the phone at all. That’s a lot easier with cell phones, by the way, than it is with land lines.

      The last several events have been failures from an outside point of view. They were disrupted, either by clever exes or by Mismanage himself, by his paranoia. The whales must have noticed somewhere in the back of their minds.

      It’s true that even the most deluded whale is likely to have some nagging feeling something is wrong. However, as I wrote in a comment on Tony’s blog within the last two weeks, the cult has hooks into some of its biggest members that are not dependent on whether the cult member is disaffected. I had come across credible stories that suggest #1 whale Bob Duggan is being “helped” by the cult in an area of his life where it doesn’t matter whether he likes being in the cult; there’s a symbiotic relationship that can continue for a while. So even if he fully knows Miscavige is evil and the cult is doomed, he won’t stop giving for at least a few more years.

      Sales of materials, courses, and e-meters are apparently dismal. I believe that’s a measure of distrust that is growing among the publics who are tapped out, or at least tired of paying for SOS: Same Old Shit.

      Exactly right. All the items you cite are “exceptional items” (i.e., one-time campaigns that will not work incrementally well the next time around). The bread-and butter recurring business (auditing services, IAS donations, Flag, Freewinds) are well on their way to becoming irreversible death spirals. Miscavige doesn’t have a pipeline of “exceptional items” that will amount to anything. Almost by definition, he’s fired his best bullets already.

      Fewer workers also means that there will be fewer people to massage the egos of the whales, provide personal service, and monitor their behavior. It’s been the personal touch that has kept a lot of them in line, I believe. With fewer committed people, there will be fewer whales sticking around, or donating the amounts they have been.

      I’d disagree here. This problem can be solved by putting your top FSM’s (“regs”) on the whales. Paying 10% commissions on IAS donations ensures that the FSM’s interests are aligned with the cult’s. This is already the case for the most part. And I don’t think there’s a lot of bodies in this game; it has fairly nice leverage. The FSM’s are going to stay loyal as long as they get their cut and probably for a while afterwards.

      In addition, David Mismanage has apparently been occupied with the Rathbun and other lawsuits, to the detriment of the rest of Co$ operations, including the care and feeding of whales. He has always met defection with persecution, and now that is coming back to bite him. I believe it consumes him. Control freaks hate it when people leave, especially people who’ve been close. That, to them, is treason, and must be acted on as such.

      Every CEO I have ever talked to will tell you in some way or other that revenue is the first priority, expenses are second, finances are third, and other stuff is fourth on the priority list of how top management should spend its time. Miscavige probably can’t bear to look at how he has screwed up the organization, so he retreats to micro-managing the legal cases as a way to hide from the mess in other parts of the business.

      When the whales start getting less service, they will slow down their giving, and that flow of money will slow. That’s just the financial end of things.

      I think it more likely that economic circumstance of the whales or disaffection from external reasons will be what kills the whales off individually or collectively. I spoke with one longtime member who said that the way the church related to them was always crappy. As a result, any deterioration in service had no real effect on their decision to leave. Remember, the whales are getting older, and some (Richie Acunto of Survival Insurance among many others) are busted and don’t have any more to give. The fact that Craig Jensen’s company makes products people no longer really need is a bigger issue than whether they don’t put enough crab meat on the Caesar Salad at the Sandcastle Restaurant.

      For the total organization, just for people “on lines” I believe the number of $cons that was quoted in the $cientology Celebrity website. That is only a belief, but their willingness to put a name to the quote may only be an attempt to sabotage the person named.

      It’s certainly possible that the number is accurate. I’ll stick with my higher number for purposes of conservatism until I have a good model of under-the-radar versus actually believing in the cult, which I don’t have just yet. As I had commented elsewhere recently, I agree with your idea that naming Blake Silber as the source of that shockingly low number was a “psyop” designed to get him in trouble with Miscavige where he may not have already deserved it.

      Reply
      1. Missionary Kid

        To be sure, my estimation of the collapse of $cientology is more
        in the form of an entry in an office pool picking the score of the
        Super Bowl. I should have made that clear. You are right that I
        should be more conservative in my estimations. $cientology won’t be totally toothless for years in the future, even if it collapses
        because of the economic resources it has. There’s too much social inertia, for better use of a term, for it to stop functioning
        entirely. What I mean by social inertia (a term I’m making up) is
        that the organization has been functioning in a particular way for
        over half a century, and there are going to be true believers who
        will keep working for Dave and $cientology in the same way because they can’t conceive of doing anything else.

        I do, however, believe that the downward spiral has already started and is accelerating. If indeed, the reports surrounding Jillian Schlessinger are true that there were 12 sea org workers who
        defected virtually at the same time, that is, I believe, unprecedented.

        The difference in the environment between the Operation Snow White period and now is substantial. There were many more $cientologists. Hubbard was still the leader, and much better at playing the great Oz than Mismanage ever was or is. The average $cion was younger than now, IMO, and and not as disaffected. People said it was fun.

        The internet was not a presence, and as time has passed, a huge
        store of information is available with the click of a mouse that
        didn’t exist or was hard to find when Hubbard was alive. The number of Independents and Exes online are easily contacted, and it appears that their numbers are growing as more defect It appears those in are aware of where to contact them. The Independents can function as intermediates on a $cion’s way out, and they and the Exes are connected to each other in ways that were nearly impossible in previous times. Hubbard depended on a divide and conquer strategy. Many $cientologists who are flying under-the-radar, who previously would silently slink away now have forums where they can use avatars to hide themselves, such as Marty & Mike’s as well as the Bunker. If they’re careful, $cientology won’t be detect them, and will expend substantial efforts to find them.

        My reasoning about the loss of the middle-class Scientologists was not focused on the financial aspect, but to point out that they have always been present to provide a sense of community. It always means much more for a person’s ego to have a large crowd to stand up and applaud or to go along with their fervor. The whales whose “ruin” is public acclimation do not have the audience they had in the past. Part of rallies, be it for a football game or der Fuhrer, depend on a large group of enthusiastic, vocal, supporters. Each person fees off of the group. People get the feeling that they belong. The group also helps to enforce conformity. The fact that Co$ has had to have staff and sea org members from distant locations or hired actors to make it appear that the number of $cientologists is large is a measure of how far the active membership has fallen.

        Davy has created Potemkin Village audiences for his own followers. IMO, that is not a good long range strategy. As the membership flees, it will be harder to provide the seat fillers without becoming even more obvious.

        In terms of group dynamics, the loss of a sense of community is
        bad enough in a business, but it’s even more devastating to any
        “voluntary” organization. The sense of community is what keeps
        churches and organizations like the Optimists, VFW, and AA together. When that is gone, or the members are depleted because of age, they start to fade away. I’m seeing that happen in local chapters of the VFW. For Co$, where there’s a rising tide of discontent because of all of the demands for money, it is becoming easier to stay away, and the lower attendance soon becomes even more evident and even more of the sense of community will be lost.

        I believe that David’s fear that an audience will leak information to people he considers the enemy is what caused invitations to the re-re-re opening to be culled. There are reports that local $cientologists who would usually be invited weren’t. That could be explained to the attendees that the event is exclusive. At future events and celebrations that usually included large crowds will subconsciously be compared with past ones.

        I believe that the tent will never go back to England. The figures on completions and people who have signed up for advanced courses is dismal there. To call anything Saint Hill Size is a joke if they’re talking about present attendance. I also believe that all of Europe would have a hard time filling it any more.

        The fact that your friend who is laying low got 52 calls in a 24 hour period is an indication, to me, of the desperation and fear of the people who are still in. Even if his treatment wasn’t all that good in the past, it’s sure to cause him and many others in his situation to distance themselves even further from Co$. It will also mean that there will be many more on staff and in the sea org to be frustrated and/or assigned to lower conditions, where it seems that ultimately defections and suicides will will come to pass. Reduced
        staff and sea org members will mean that there will be more work for those left. This will also mean that those left will notice departures.

        You are correct in assessing the minimal loss of knowledge from
        defections. Sophisticated talents and abilities and education are
        not needed for a position in Co$. However, with people leaving, there is bound to be people elevated to positions that they are inadequate for. The Peter Principal will take over for those people and even if they grow into a position, I believe they won’t have much time to do it because they will be faced with fewer workers for the same tasks. Psychologically, moving a clam from one position to another will be disorienting, and if it’s done to replace someone who’s blown, they will be even more aware of the loss of people around them.

        I’m willing to bet that your friend who is passively not participating looks at every celebration, meeting, ball, or gathering as simply a tool for regging or high pressure sales. There are probably reasons that he has not openly declared his separation from Co$, such as what is in his files, or relatives who would be forced to disconnect from him. I feel for him. On the other hand, he is probably only one of many. He may well be representative of the great majority of Publics.

        From stories of the intense sales efforts that were made at the release of the original GAT materials, it appears to me that the
        present efforts at sales were just as intense, but the results today
        are much poorer. That can’t make Mismanage happy, and when he’s unhappy, I believe he strikes out and makes more mistakes. He doesn’t have any coping skills, IMO. That will lead to further
        defections of the executives around him. I’m sure he’s looking
        around, thinking, “Who’s next?” He will also try to instill more
        fear in the ones left by punishing them, his modus operandi.

        Even if the FSMs get 10%, or even 15%, 15% of much less won’t
        make them happy, because their income will be going down. They may be unhappy, but they may not be able to move to wog jobs with anything close to the income they’re used to. A defection of an FSM will only mean more money for those left. I’m sure that some boiler room operation will welcome them.

        While a business model may be applied to $cientology, it never has operated on a true business-like basis. The goals have always been to control the followers, make them work to enrich the COB, and to make money for COB. You’re right that it has a huge amount of fixed cost that cannot be reduced.

        The whole of $cientology is operated for one thing: to feed the ego of david miscavige. Looking at the operation from that viewpoint
        will make his supposedly irrational decisions logical.

        Reply
  9. piper

    I love your scenarios. However, pissing off connected insiders could move things along at blinding speed…2-3 months with the sway of public opinion and just a little political push could not only have the cash frozen but all assets seized, as well. They are just arrogant enough to bring this into being!

    Reply
  10. Missionary Kid

    Davey Mismanage has always depended on fear, chaos, and hard-nosed money raising to keep the income flowing. IMO, there is now a huge, pent-up dam of resentment and donor fatigue that he is unable to see. Fear loses it’s power when people feel they have nothing left to lose. I’ll call it the Janice Joplin or Kris Kristofferson effect.

    DM is so out of touch with the average clam because he’s so convinced of his own brilliance, and surrounded by sycophants, he doesn’t realize the extent of the erosion of the membership, and I don’t just mean in numbers, but in loyalty. Nothing has been his “fault” for years, so why would he listen to anyone now who might point out some of his errors and change his course?

    I maintain that it will only take a possibly small trigger event or series of events to start the final landslide of defections. When that happens, his ire can only be directed towards a limited number of people, because, while he will have money, he won’t have the staff to carry out or supervise the fair game policy on everyone who’s departed. His micromanagement style will further work against him. DM will be nearly powerless.

    The trigger could already have taken place. Gat 2 or the Easy Bake Oven E-meter could or the Flag opening or the Ideal Org program or all of them together could have been the triggers. We will only see it in retrospect because everything about Co$ is so secretive.

    Planned obsolescence only lasted for Detroit for about 40 years, IMO, and that’s the policy Davy depends on. He, like Detroit, didn’t realize that the market had changed, and people wanted better, long lasting quality. Unfortunately for Davy, the product he’s been selling over and over with sheet metal changes has little or no value or quality to start with, while the latest changes are being viewed as nearly valueless or beyond the reach of those close to bankruptcy.

    The loud, public defection of one of the major whales or celebritards will certainly cause a landslide, if not the fatal one. Debbie Cook started one, and, while the recent defection of Leah Remini may not have registered as large with the Kool-Aid drinking crowd, the fact that her career has been even more high profile and seems to be flourishing can’t make Co$ look powerful to many of those left.

    Reply
  11. Drat

    Never a dull day in Scientology.

    Given the stats Mike published on occasion of his blog’s 1st anniversary, I think a large share of the English speaking (native and non-native) members of the church as well as indipendents are reading it. I believe that the cumulative effect of lawsuits and blogging will cause more and more people to re-evaluate their participation. It is a painful process to realise what you have contributed to, and it can take a while to work through that betrayal. However, I believe the tipping point regarding disconnection is almost reached.

    In other words, I don’t think it will be entirely a financial downfall.

    Hubbard himself said something along the lines of “without a person’s willingness you have nothing”. That willingness is quickly transmuting into a willingness to change the direction of the group.

    To my knowledge, “money on account” is largely spent despite policy stating otherwise, so is not in reality on account.

    I don’t believe for a minute that the Ideal Org project is designed to get in new people. Perhaps I am overly cycnical, but after a better part of a lifetime of PR directed inwards, I see it as simply a campaign to add to the illusion of expansion and group unity. I initially believed the Div 6 digital signage set-up to be a response to a growing awareness on the part of management of staff being subjected to hostility when encountering new people. I saw it as a way to keep staff on board while allowing them to bow out of unpleasant experiences and avoid difficult questions (Xenu who?). Actually, I still think that’s its primary purpose, while promising staff and public it would flood the org with new service starts like never before (promises are the carrot that is always included in Scientology wherever you turn).

    Reply
  12. Bea

    Wow – great read and excellent analysis. Lots to ponder over.

    I’d be willing to be patient to see the complete anahilation of the cult.

    In my opinion, the best case scenario is for the governmet to freeze their assets and make its practice illegal. However, for that to happen Co$ would need to do something so awful even politicians could no longer ignore them as there would be a public demand for action.

    The most obvious thing that comes to mind is an act of terrorism. Not that I am advocating such drastic action but I think it would take something as major as that for the government to have the mandate to act against them.

    Reply
  13. Kid Charliemain

    I am so glad I found this blog. Thanks JPC!! I appreciate how you are using your business and financial expertise to analyze the past, current, and future situation with the CoS.

    Over the years as I’ve watched Ideal Orgs open around the country, I’ve been surprised that the Class V training org in Austin, TX has yet to get the “Ideal” focus by Int Mgmt. Contrary to several other cities, the Austin Org sits on prime real estate. A very strategic location on the corner of Guadalupe St. and 22nd, directly across from the University of Texas. Talk about foot traffic! Every day thousands and thousands of students and others walk right by the org. Over the past few years the “strip” is booming even more with higher quality shops and eateries opening up. And yet, of course, this org is struggling.

    The size of the building is already what they used to call “St. Hill size”. Counting the basement there are 3 floors of approximately 12,000 sq. ft. each. The basement is only used for central files and storage, but could easily accommodate more offices, course rooms, even a kitchen. In fact there used to be an operating kitchen down there before the CoS bought the building. BTW….Mary Sue Hubbard herself chose this building and location in the late 70s. I’ve also heard from old timers and Ron approved it.

    There’s been a ten or more year long fundraising project to raise the money to completely renovate this building to make it “Ideal”. At first they had a four million dollar target. Now I understand it’s up to six. The building right now is appraised by the local taxing district at 3.4 million. I don’t think they have yet raised even half that amount, and there are some fairly big whales in the area. But they’ve been regged to death for Super Power and the IAS. Plus, the local whales do their services in CA and FL.

    To get back to my earlier stated surprise regarding the Austin org, I’ve heard that DM has used money other than that which is locally raised to fund some other Ideal Org projects. In other words, Int money, for lack of a better term. I heard that that was the case in Buffalo. If that’s true then that’s a real head scratcher. Buffalo? Pretty stupid if you ask me. But I guess that’s why the hypnotic effect of Hubbard didn’t stick long with me. I don’t understand their logic.

    Austin is a growing, vibrant city with one of the three largest Universities in the world right in the heart of it. This org is across the street. It’s also within easy walking distance to the Capitol building, Governor’s mansion, and downtown.

    Now I don’t think making this org “Ideal” would bring in new members, but they do. Oh, and a few years ago they turn the Dallas Celebrity Center into a regular org and move it to an Irving business park with no shops and no foot traffic. Yes, that’s a brilliant move.

    Oh DM, you’re not a very smart man. Thankfully. In fact, you are quite the dumb ass. But hey…..keep on keeping on sluggo! We’re counting on you!

    LOL……

    BTW, on the tax records the owner is listed as “Church of Scientology, Texas”. But where it says “percentage of ownership” it’s 0.00000000 %. I was surprised to see that a private person owns one of the “suites” on the basement level. It’s a copier shop that caters to students. “Jenn’s Copies”. I thought the CoS leased that space to her.
    There used to be an arcade on the street level, but it is gone and used by the CoS now. There’s another taxable space that I don’t understand on the appraisal site. Like I said, it’s a very big building. A lot bigger than they need of course.

    http://propaccess.traviscad.org/clientdb/SearchResults.aspx

    Reply
    1. John P.

      Dear “Kid,”

      As a longtime Steely Dan fan, I am delighted to see your handle here. Great analysis on the scene in Austin. This is exactly the kind of research that can help the community I’m trying to build on this blog develop useful predictions for what will happen to the cult. That, in turn, can help guide activists to take the most effective actions.

      Reply
  14. Kid Charliemain

    I wanted to do a quick comment on this paragraph:

    “Plaintiffs in a suit for refund of deposits would have to convince a judge to pierce all of these corporate structures in order to lay hold of assets to recover something for the victims of this fraud. When that corporate structure was laid down a third of a century ago, it was extremely difficult for courts to order that complex corporate structures be collapsed to get at the money.”
    You then described the different world we are now in due to the Patriot Act, which is true. I’ll also add that the Rathbun case is mostly about “piercing the corporate structures”. DM knows it and that’s why he’s particularly obsessed with this case. Even enticed a State Supreme Court Justice to step down and join his team.
    Judge Waldrip has expressed confusion with the “corporate structure” of Scientology, but he’s hanging in there. And now the addition of Leslie Hyman to the Rathbun legal team is making the effort to navigate through the confusion of the corporate structure much easier.
    If DM refuses to settle and he lets this case go on due to his stubborn hatred of Rathbun…..well, it will be devastating and could speed up the fall of the empire. Talk about law firms lining up around the country to have their turn!

    Reply
    1. Anonymous

      It won’t be Miscavige who “refuses to settle.”

      My guess is there have already been numerous settlement offers from Miscavige / Scientology, all of which have been rejected and will continue to be rejected by Monique’s legal team.

      After discovery is completed (for real) to include full depositions from all named defendants, anything is possible but by then the damage will be done.

      Monique’s team is looking for a verdict, not a settlement.

      Reply
      1. Kid Charliemain

        Yes I agree that Monique’s team is looking for a verdict, not a settlement. Absolutely. I don’t know why I said, “If DM refuses to settle…”, because I’ve believed since September that Monique is in this fight to the end and that DM can offer his lame settlements all he wants. Mosey ain’t signing no damn gag order agreement. And Marty won’t have to sign it anyway because he’s not technically suing. LOL!!!
        Oh DM…..You are truly boxed in this time you punk!

        Reply
    2. richelieu jr

      Just a point: The Judge wasn’t convinced to step down, he already had and was practicing privately.

      Reply
      1. Kid Charliemain

        Well, no he didn’t step down until after the Rathbun hearings started. I know someone who is well connected with the lawyer world here in Texas who actually predicted last September that Lamont’s brother Wallace would step down from the Supreme Court and join the Miscavige team. In late October he did just that very thing. (The person who “predicted” this posts regularly on ESMB btw).
        It had been known that he’d been wanting to make a lot more money to pay for college for his two almost college age kids. So he had been planning on going back into private practice, but the timing of his stepping down and joining his brother after the Rathbun hearings started is…..well whatever one wants to make of it I suppose.

        Reply
          1. Kid Charliemain

            You don’t have to believe any anecdotal evidence of course. I am careful to take such evidence with a grain of salt myself until I see more proof. I am satisfied that what I posted earlier is true. But I can’t prove it on a blog. So it’s a FWIW.
            But here is proof that he stepped down from the Supreme Court on Oct. 1st….

            http://trailblazersblog.dallasnews.com/2013/10/wallace-jefferson-joining-appellate-law-firm.html/

            Note that Wallace didn’t start working for the firm until mid-Nov. Very shortly thereafter he was announced as additional counsel for RTC and DM. Very shortly as in that same week.

            http://www.star-telegram.com/2013/09/03/5131395/texas-supreme-court-chief-justice.html

            Wallace announced he was stepping down on Sep. 3rd. The Rathbun lawsuit was already filed and his brother Lamont already retained as RTC’s and DM’s counsel by this date.

          2. richelieu jr

            Well, you’re clearly right about he date,a s to motive? Seriously?

            If he were in Miscavige’s pocket, wouldn’t it have been better for him to stay where he was so he could vote on appeals and persuade his colleagues, even authoring an eventual opinion?
            As you say, FWIW.

          3. Kid Charliemain

            I said that he wanted and needed to make a lot of money. Eventually he will argue the appeals before his former colleagues. So he gets rich quick and gets to potentially use his influence to help his client.

  15. Anonymous

    John,

    Wow – what an excellent piece. I appreciate the enormous amount of data gathering, number crunching and hard work that went into presenting this information so that it can be understood by a wider audience.

    I have not read all the comments so others may have made this point already. An anomaly within the Scientology “bookkeeping” system, such as it is, renders what you are calling an asset (deposits) into an actual liability, regardless of naming conventions.

    The advance payment cash that you estimate to be approximately $15 – $25k per disaffected ex-member is NOT sitting somewhere in an account. That money is long gone, spent or otherwise disappeared. There is no enormous pot of money ($600 million is your estimate) of “deposits”, but there may very well be a $600 million liability for money (not cash) “on account” for services that have never been taken. That liability will eventually be mined by a gaggle of plaintiff attorneys as it becomes increasingly clear that the church is vulnerable. There is no cash to pay that money back. Thus, if “deposits” are in fact a liability and not an asset (in the real world) the church is already effectively upside down on a cash accounting basis (forgetting their real estate holdings.)

    For clarity and accuracy sake, I think it is important to account for the above at least in some proportional manner (say 40%) so that the rest of the math makes more real world sense as a basis for further outcome projections.

    Glad you are back doing analysis – your work greatly enhances the aggregate quality of the group conversation.

    Reply
    1. Eclipse-girl

      Anonymous,

      I do not disagree with you.
      Where did the money go?
      Has it just been dribbled away on expenses? (for Dave?)
      Has it been spent on upgrades to Int / Gold?
      Was it spent on the hidden bases?

      Reply
      1. Anonymous

        Short of an independent forensic audit it is impossible to know where the money went…even then, Scientology has been adept for decades at hiding sources and destinations of large amount of cash, thus chances are it will never be known with certainty what happened to the cash from advance payments.

        It varies by Org and decisions on what to do with those funds are driven by expediency. In most cases, after whatever share is taken off the top for Sea Org reserves, mandatory book stocks and other cash grab nonsense, the monies are used for general purposes such as rent, utilities, postage, staff pay, etc.

        There may be a few Orgs, possibly to include FLAG, where some small cash reserve is held, but in most cases, that cash is gone and will never be recovered.

        This practice of immediately spending (and NOT holding in reserve) “advance payments” paid in by parishioners against future services can be verified by checking with folks that have acted as FBO’s (Flag Banking Officers) or Org ED’s.

        It is part of the ongoing fraud of Scientology.

        Reply
        1. Eclipse-girl

          The individual Orgs do not have the money to refund the reserves.

          I don’t doubt that Davey has a spending habit.

          If all the money went up the lines, then wouldn’t those corporations that received the money be responsible for providing the money, if a class action suit were won?

          Reply
          1. Anonymous

            It is hard to know.

            The labyrinth that is the corporate structure of Scientology was designed from the beginning to facilitate deception and fraud.

            It has worked pretty well for decades but the cumulative effect of decades of litigation is beginning to crack the armor.

            It will take someone (or several someone’s) with a great deal of knowledge of the inner workings of the church as well as the patience / resources to endure the legal roadblocks the church will put up to ultimately pierce the corporate veil and unwind the tangle of lies that has held the monster together so far.

            That process is underway on several fronts…time will tell.

    2. John P.

      Thanks for your perspective and your comments.

      My understanding is that the bulk of all monies collected are immediately sent “uplines” as various charges including royalties, “film charges,” etc. According to some sources, this amounts to at least 75% and perhaps even as much as 85% of revenues. In the cult’s idiotic accounting approaches, the royalties and other money sent “uplines” are expenses in the view of the local org.

      In real-world accounting, they’re inter-divisional or inter-company transfers when considered from the viewpoint of the consolidated books, with accounts for all entities rolled up as one. And in that view, which is the view I’m taking (hardly surprising, since we in Global Capitalism only invest in consolidated companies, thus only care about consolidated financial reports), once the money lands uplines, it is stashed wherever and becomes reserves. I believe that this is true whether the unit taking the revenue in is a local org or if it is Flag — it’s all sent uplines to CSI, RTC or some other concealed entity.

      I continue to assert that there are significant reserves on a consolidated basis within the organization. I base this on the strong possibility that banking officers at field units all have an un-consolidated perspective, and view money as expenses to their unit that would be bookable as deposits (perhaps by way of being treated as operating income first before hitting the balance sheet) in a consolidated view.

      Secondly, I believe there are significant reserves because they would be a function of aggregate profits over the course of, say, the last 20+ years. We can come up with a model that shows profits peaking in 1990-1991 (around the time that Jeff Hawkins, who was in at the time, says membership peaked) and declining thereafter. Integrate under the line in that graph to get aggregate profits, and that should come reasonably close to reserves. I continue to believe that they haven’t spent much out of the reserves, in large part because the Ideal Org scam has been profitable from the get-go, and that replaces what would be capital expenditures in a normal company, and CapEx is what would normally eat into reserves.

      Lastly, while you could be right in that reserves are far closer to zero than I estimate, the (accounting) principle of conservatism says that I should not lower my estimates of reserves until I have clear and convincing evidence that they are closer to a number that turns out to be favorable to my side of the argument (i.e., lower deposits mean the cult is at risk for bankruptcy sooner, which is what I prefer to see).

      Reply
      1. Anonymous

        Makes senses, from a consolidated viewpoint….sort of.

        There are significant reserves held in aggregate, but not that will be labelled “advance payments” for undelivered services.

        The hall of mirrors that is the deliberately fraudulent corporate structure of Scientology works hand in glove with the methodology for hiding the source and the destination for large piles of cash.

        On an individual Org basis, cash reserves for contingencies like the return of unused advance payments are virtually nil.

        On an aggregate basis for the entire Scientology business enterprise, that money went somewhere and it may be possible that some portion of it is in pile, but that pile of money most certainly will not be connected in any way, shape or form to its actual source, because that would make it traceable and potentially recoverable via litigation.

        On an individual Org accounting basis, the advance payments monies will almost certainly be shown (fraudulently) to have been spent on traceable vendor invoices (rent, utilities, staff pay etc.) and OTHER monies will be shown to have been sent “uplines.” This again is part of the ongoing fraud built into the design of the system from the beginning to make it harder for someone to pierce the veil, track monies and hold individuals accountable on an enterprise wide basis.

        Hubbard had minions work hard on this scheme for years. Sea Org Captain David Miscavige has tweaked the scheme to keep it current and this scheme is what facilitates his billionaire personal lifestyle while the rest of Sea Org staff live in squalor.

        Reply
  16. Mighty Korgo of Teegeeack

    Thanks for the cold analysis. I believe.

    I hope it comes soon through the lawsuits. I hope Miscavige ends up in the slammer for a long time in the process.

    I am sure you have considered the scenario that the cult splits into a dozen different warring minicults. I know the split is there now but the wars are just minor skirmishes. That would speed things up.

    I can also see a business plan that keeps the money in the money earning centers like Clearwater and L.A. and abandons places like Toronto where they can’t seem to make a minion. I hope so.

    How about Miscavige goes truly mad and takes his followers to Belize and gives them poison Kool Aid.

    How about Janet Reno attacks Gold Base.

    How about the high command lops off their own balls, puts on really nice suits and then ties plastic bags around their heads.

    Subway bombing followed by government reprisals.

    Tom Cruise wises up.

    Miscavige wises up.

    They take Heber out of the hole and give him some real power. Miscavige retires.

    Miscavige disappears just like L.Ron did. Chaos ensues like when Tito left.

    Somebody really gets angry, maybe pals of the Unibomber or Timothy McVeigh.

    One by one the little cult offices can’t find enough fools to keep them operating. They actually have to pay people to keep the buildings going.

    Reply
    1. John P.

      Korgo, some fun ideas in this comment!

      The idea that Scientology splits up into warring factions (what I’d call the “Life of Brian” scenario, with the People’s Front of Judea versus the Judean People’s Front) is novel. Essentially, you’re suggesting that the cult would implode and after the dust from the implosion settled, there would be several different “indie” movements. While that could happen among true believers, if the money is gone, then there’s not much worth fighting over. Doctrine, if they have no money to use in a fight, is pretty thin grounds for a war.

      J. Swift has advocated for your third scenario, where the cult only has locations in LA and Clearwater, and abandons the rest of the world. That is certainly an area where the polite and down-to-earth denizens of Toronto are ahead of the rest of the US. Torontonians are known for logic and reason, except for when they are overtaken with those peculiar delusions about being a separate country from the rest of the US with its own language and everything. J. Swift calls this “Monastery Scientology.” His original post on the subject is interesting, though I don’t agree with all of it.

      I snorted with derisive laughter at the rest.

      Reply
      1. Mighty Korgo of Teegeeack

        Thanks for reading my comments and for your reply. Feel no need to reply to this one. I am just glad you are spending your time on serious research and thoughtful speculation and I don’t wish to be a distraction.

        My comments were meant to be lighthearted but if they were amusing it is because they are so many butterfly effects around Scientology. It is hard to predict their future, though, you did a great job pointing out that financial collapse is not around the corner for them. This makes me very sad. I really hoped that it was. It did seem like the most likely scenario.

        No one saw the Jim Jones massacre on the horizon. The People’s Temple had even been publicly supported by Bella Abzug and Walter Mondale. It could be that something unforeseen will crush Scientology, though I don’t suggest it will be in the same manner as Jonestown. What I will bet on now though, is that the word is out. It cannot go on as it has. It will either change dramatically or it will die slowly, not with a bang but a whimper.

        Just to mention it, I have a dear friend, pushing sixty, who left Scientology several decades ago; I am guessing thirty-five years ago. She still continues to practice a version of it though, and sells her Hubbard based services to others. Her situation shows me how intensely Scientology can cling to people. She is a health care professional and has a doctorate (but is not a physician– I don’t want to say so much that I identify her). With my dear friend as an example I see that the spell of Hubbard will not be shaken off quickly. What we can hope for is a far less pernicious version.

        Canada is good at watching the United States. For that reason we didn’t get crack, AIDS or Scientology as badly as you did. By the time they caught on in the US we were reading about them and didn’t let them progress as far here.

        It is impossible for me to know just what is going on at the Toronto Org but the signs are bad. No one seems to go in or out. No one is on the street promoting. The main building is now closed awaiting ideal org treatment but not much seems to be happening there. When a friend toured the org he said the classrooms were all but empty. The smart people have left. The person running it now does not exude leadership, at least to the people I know who have talked to him. They claimed in 1991 that a million dollar fine (demanded by the courts) would kill them. At the same time the mortgage on the building was held by the L.A office. Yet, more than twenty years later they keep on truckin’. They have had as their office a large building. They send out mailings. They promote on occasion. It is hard for me to make heads or tails of it but I am absolutely sure it has shrank over the years. Of that I have no doubt.

        Anyway, that is it for me.

        Reply
  17. Mark

    Superb work John. You obviously used some of your time recuperating in the sun to good purpose!

    A couple of thoughts: I wonder if DM’s recent re-re-re-dedications of AOSHEU in Copenhagen and Big Blue in LA indicate other financial strains inside the cult that have yet to emerge? Of course these are meant to gull the whales into forking out more money, but if these last two times all Miscavige was celebrating was essentially a lick of paint and some new furniture in existing orgs, maybe there’s just not enough cash left to do full “reno’s” as of yore?

    These non-events may merely have been last-minute expedients to bulk up DM’s next lot of boasting videos, after the disastrous FLAG opening last year – but I get a sense that things are increasingly being done on the cheap. The non-progress on so many moribund Idle Morgues elsewhere, together with noticeably increased IAS regging, makes me suspect a recent and growing cash-flow problem somewhere in there.

    Secondly, I think it will be worthwhile keeping a close eye on the quality of the cult’s printed output in future – an unusual aspect of Co$’s practices is the huge quantities of bumf it still produces in accord with outdated LRH policy.

    The rapid demise of another supposedly prosperous cult, Herbert W. Armstrong’s weirdo Worldwide Church of God, was all too apparent when its flagship Plain Truth magazine palpably withered away after the hypocritical old pervert finally died – fewer pages, then less colour, and finally low-quality non-glossy paper. Apparently anti-Jehovah’s Witness campaigners have been much heartened lately by the visible shrinkage of that cult’s Watchtower and Awake magazines – alongside the JWs suddenly selling off much of their considerable New York property portfolio.

    So if we suddenly see the Co$ transferring all LRH’s books to electronic formats, it may not be Miscavige finally catching up with the 21st century, but a sure sign that the end is at hand! (Fingers crossed).

    Reply
    1. Kid Charliemain

      LOL!! I have some experience with the wacky Worldwide Church of God. Did you know that Herbert W. Armstrong and Hubbard both died in southern California in January of 1986? I had an acquaintance who was in both cults at the same time during that month. Wild.

      Unfortunately several splinter groups formed as the WCG fell apart. None of them are doing that well today, but a few do still seem to rack in the dough through their onerous tithing policies. One of them even has a small college named after Armstrong, patterned after the old WCG’s Ambassador College in Pasadena, CA.

      This website chronicles that whole Armstrongian Church of God scene….

      http://exitsupportnetwork.com/

      It also has some good cult recovery info in general.

      Reply
      1. Mark

        Thanks for the link. To paraphrase Wilde about your acquaintance: “Belonging to Scientology may be regarded as a misfortune; also belonging to Armstrongism looks like madness!” I hope they survived both the tithing and the regging (relatively) unscathed.

        I saw something of the WCG’s demise back in the 1980s, as I used to subscribe to everything they put out in the fond hope that it might help bankrupt them – little realising that it was money blackmailed out of often impoverished WCG members which funded all the “free” magazines and booklets – and HWA’s obscenely sybaritic lifestyle: executive jets, Steuben crystal, gold-plated tableware, a trophy wife 50 years younger than himself, &c.

        Later went down a WCG rabbit-hole in my early Internet days when John Trechak’s pioneering Ambassador Report newsletter was posted online (it’s still available at http://hwarmstrong.com/ar/) which helped fill in much of the background with its exposés.

        Reply
        1. Kid Charliemain

          Oh yes I’ve spent lots of time reading the Ambassador Report. John Trechak is da’ man! When I said I had “experience” with the WCG I was understating. I was in it for 6 years, then several more years in one of the splinter groups. The first post-HWA group. My Scientology time came later. So at least I wasn’t in them concurrently. LOL…. (Actually my acquaintance wasn’t supposed to be doing Scientology while in the WCG. But he was a maverick, even for a cult member).
          I have some letters and at least one essay on that Exit and Support site. It was almost ten years ago though and I doubt I could even find them now. I didn’t use my real name so I can’t do an easy search. The lady who owns and runs that site is a real hero. She has some help and they’re all heroes in my book.
          I joined the WCG when I was quite young and basically afraid to enter into and deal with the real world. You know, the old “I just don’t fit in” mindset. I was prime, textbook cult bait.
          I guess if one good thing came out of being in the WCG its the fact that it helped me to see pretty quickly that Scientology was also an abusive, dictatorial cult. I recognized the fanatical devotion to the founder I had previously experienced. When a staff member told me one day, “If LRH said it then it’s true”. Suffice it to say warning bells went off in my head.
          I only gave Scientology a try because a good friend introduced me to it. He didn’t seem so “brainwashed”. Seemed to enjoy it and to get a lot of “gains” out of it. LOL… I guess that was my weakness, I had to be in it before I recognized the brainwashing and all of the other key traits of a cult.

          Reply
          1. Mark

            Well, at least you seem to have avoided the Church Universal & Triumphant/Summit Lighthouse, and the dread Elizabeth Clare Prophet – a sort of gun-toting Mme. Blavatsky – but that’s a whole other rabbit-hole 😉

          2. Get Chutney Love

            When I was at undergraduate school at Washington University, St. Louis, MO, a fellow Californian from Palo Alto invited me to his room to talk. He offered me tea from Darjeeling, saying that it was a spiritual place, did I know that? He was into her, and this was back in 1977-79, so there was no gun-toting going on yet. We talked about various people, and he pointed out one professor who he claimed was on the “Dark Side”.

            I thought that was was ridiculous(not that I would’ve been surprised to find someone in the Music Department from said Side), this was a old piano teacher who told slightly ribald stories about his last piano teacher whose assistant he was for a while as well.

            All the California “fruits and nuts” stereotype come to life(He was from Palo Alto, FWIW). I think he dropped out later on to become more active in the cult.

      2. Robert Eckert

        A friend of mine who was raised in the WCG (third gen, his family got in when it was the Radio Church of God) had a nearly-complete run of Plain Truth. The first issue was great: dated March 1933, it had screaming red headlines “A GREAT WORLD DICTATOR IS COMING!” which seemed prescient since Hitler would become Chancellor of Germany that month– until you looked at the subheadline, “Will it be Stalin? Mussolini? Or ROOSEVELT?”

        Reply
        1. Kid Charliemain

          Yes, Armstrong was quite the Prophet….er….I mean Profit.
          A fun little trivial question: What famous person was a “co-worker” of the WCG in the late 60s and early 70s, as well as being a brief member?
          Hint: He played in matches and tournaments, but he wasn’t an athlete.

          Reply
          1. Lurkness

            Bobby Fischer. And he said about them:

            “(The Worldwide Church of God) cleaned my pockets out frankly. I have some money left, but not that much. I’ve got some assets. It’s amazing they didn’t get everything. Now my only income is a few royalty checks from my books. I was really very foolish, but I thought I was doing what I had to do. When I sent those checks off, I really didn’t have the slightest qualms, no regrets, not the slightest. I don’t really regret it that much, to tell you the truth, even now.”

    2. John P.

      These non-events may merely have been last-minute expedients to bulk up DM’s next lot of boasting videos, after the disastrous FLAG opening last year – but I get a sense that things are increasingly being done on the cheap. The non-progress on so many moribund Idle Morgues elsewhere, together with noticeably increased IAS regging, makes me suspect a recent and growing cash-flow problem somewhere in there.

      This is an excellent point. One important thing to bear in mind: the Ideal Org scam has always been a positive cash generator — they don’t buy a building until they have more than enough cash donated (with some rare exceptions like the Auckland NZ org). As a result, if these data points are indications that the Ideal Org scam is no longer effective, that does not necessarily mean that its failure is generating losses on its own account — it’s still somewhat profitable, it’s just not generating enough revenue.

      Thus, a slowdown in revenue from the Ideal Org scam slowing does not necessarily mean the cult has moved to losses. Here’s a hypothetical model: the cult is currently bringing in $40 million a year from the Ideal Org scam and spends $20 million of that on buildings and renovations. It’s currently making $30 million per year in total profits. If the Ideal Org donations immediately go to zero, revenue would go down $40 million (which is a lot) and $20 million of the $30 million in profits disappear, but it is still profitable.

      The point of the above example is that the cult will crash and burn and will not be able to fix itself if more than one business unit enters long and slow, but ultimately irreversible, decline. It won’t fail if one business implodes. Many things have to go into the tank at once. The good news: this is what’s happening.

      Reply
      1. Mark

        Agreed – gradual (but irreversible) decline on more than one front, rather than the sudden implosion of just one scam, will seal the Co$’s fate far more conclusively.

        You mention a couple of reasons for what I called DM’s recent “on the cheap” approach near the end of your article: the potential deluge of of class-action refund cases and an increasing chance of IRS investigations. Large sums may be being diverted from their usual uses even as we speak – either into a contingency fund for when the cult finally has to pay up – or more likely salted away even more securely from possible discovery.

        Reply
  18. Cece

    John, Thank you. I have no time to read all this now but about the ‘deposits’ APs. In the weekly allocation there is no funds set-aside for the undelivered services. So in an week of say 350K income and 120 VSD (Value Service Delivered) there is a difference of 230K deposit. The weekly financial planning did not save this unused deposit. It was spent and the only sign of this was a stat called Un-used APs which was rarely known! One could not get this amount weekly truly except by taking the 230K and adding it onto what ever was counted last week (probably starting 10-20 years earlier!). This would also not be correct due to book sales off account and the VSD being counted/miss-counted because someone was going to be sent to RPF if the stats were not ‘up’.
    Anyhow, I love what you are doing. I wish there was some way I could get the correct figures for you but even with their ‘state-of-the-art’ computer system – I doubt even the church has it correct. It was kinda unimportant.
    I do have several yrs (77-92?) of AOLA GI graph printed and somewhere very buried in DOS some FPs :) This is back from the days the prices were going up monthly.

    Reply
  19. Sunny Sands

    The paradox of scientology incorrectly accounting for monies on account, which should include the liability of deferred income, is that they are a tax-exempt religion. No other religion needs to record deferred income, because they do not sell the knowledge of their religious principles.

    Churches in the U.S. are not required to keep books for the tax man. Some of the Co$ corporate layers are considered charities, which do require reporting to the IRS. Other Co$ entities are for profit.

    I think it’s accurate to say the IRS doesn’t have the resources or the inclination to get into a years long drag out fight with the Co$.

    Reply
  20. Science Doc

    I’m in a remote location so I have to be brief. If scientology becomes an utterly tarnished pariah brand they may need to outsource 1000 jobs at $50000 per job wages plus benefits, and then they are looking at another $50M a year just to keep the doors open. I think John has underestimated the impact of pariah level PR. I think it could all come apart in 5 years even the cash reserve is still significant.

    Reply
    1. John P.

      To generate $180 million in revenue (my current estimate), most normal, competently-run companies would need about 600 to 800 employees, below what you posit. At $50,000 per employee, that’s about $30 million to $40 million in payroll costs per year, which is not significantly above the $30 million staff costs I estimate for what I believe to be about 5,000 employees today. Not disastrous for the cult.

      A post later this week on “the neutron bomb scenario” will detail how the cult could do exactly what you suggest: implode without actually running out of cash and losing the real estate portfolio.

      Reply
  21. Spackle Motion

    Pure excellence. Thank you for this great analysis.

    I just sent you an email about some other things.

    Reply
  22. BareFacedMessiah

    I think the cult will not fail because of money.
    There will be two key factors:
    – upset members
    – David Superstar has to leave
    There might be a reformation then. A new name, a new game 😉
    The Mormons do still exist, don’t they?

    Reply
  23. Sunny Sands

    Bob Duggan is the #1 whale, estimated to have donated $100 million.

    His new cancer drug is going to be marketed by Johnson & Johnson. An article at clambake reports that J&J paid $2.2 billion in fines in 2013 regarding their drug Risperidal.

    My own research shows an article from Nov. 2013 saying J&J will pay $2.5 billion regarding bad hip implants, with another $500 million in medical fees to replace the hips.

    To summarize, J&J has marketed a defective product, and been fined for kickbacks and illegal marketing tactics, to the tune of $5.2 billion in 2013. Just wondering how it will go with marketing Duggan’s drugs.

    Reply
  24. Banonow

    Awesome John P.
    Your analysis is epic.

    ‘Karma’ is the term I keep arriving at – whether financial or spiritual.
    You’ve basically given COB the blueprint for success. That’s true LULZ.

    Reply
  25. cdub

    A post-Scientology world.
    Most likely it will take the course of EST/Landmark and take on a life of its own. EST/Landmark, as I read it, is out of business but offshoots spring up, as our bloggers uncovered one in New York posing as a lifestyle coach.
    Post-Scientology splinter groups will be with us forever, I think.

    Reply
  26. SeattleSkeptic

    “How did you go bankrupt?” “Two ways, gradually and then suddenly” -Ernest Hemingway, from The Sun also Rises.

    Thank you JP for reminding us that it is always slow before it is fast. And welcome back. You were sorely missed.

    Reply
  27. EnthralledObserver

    I like how you engage in discussion about your posts and commenter’s replies… unlike at Tony’s where we rarely hear from him in any conversation. He tends to let his story speak for itself unless there is a grievous misunderstanding. I like your way, as I said, but don’t let it burn you out again… I know from commenting myself just how much time and effort it takes. :)
    Great analysis… I look forward to reading the other possibilities as you get to them, and particularly when more information comes in.
    Thanks, JP!

    Reply
  28. Anon Y Mouse

    John, excellent analysis.

    Have you considered the possibility of an upturn in cult recruitment from the developing/third world?

    Lots of Eastern Europeans in the Sea Org – some cult success in the Far East IIRC – generally speaking the conditions outside the USA are more favourable for cult recruitment than within, IMO. They’re more similar to the USA in which Hubbard’s cult originally flourished.

    Reply
  29. Jane Doe 2

    Excellent article John Q Public. I love your mind and your writings. I think based on what I just read, that we should do a class action lawsuit to get our money on account as a way to weaken the financials of the church and bring about the demise sooner rather than later. Who is with me on class action lawsuit?

    Reply
  30. Elar Aitch

    Revisiting this article today in light of the Oklahama Narconon grand jury. While hoping for indications of a hastier decline (hopes dashed sadly) 2014 is certainly mounting on the evidence that Scientology is stuck in the groove of its own decline and there is nothing apparent to change this situation. As Agent Smith said ” You hear that Mr. Anderson?… That is the sound of inevitability…”

    Reply

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