SECTION IV ------------ CHAPTER 10 THE NATURE AND AMOUNT OF REMUNERATION CHARGED OR RECEIVED AND THE MANNER AND METHODS BY WHICH THESE FUNDS ARE COLLECTED. 10.1. At least six sources of income are available to those associated with the practice of Scientology: (a) The charges levied for processing. (b) Royalties derived from the books and publications written to publicize Scientology. (c) Monies received from the sale of E-Meters and books. (d) Monies received from the sale of tapes. (e) Profits from Congresses. (f) Cash penalties or fines. _Charges levied for processing_. 10.2. (a) In aspiring to reach the objective of Total Freedom as a spiritual being held out as the ultimate objective of Scientology, an adherent has to embark on the basic courses at any one of the Hubbard Scientology Organizations scattered widely over the western world. In the Republic of South Africa there are five such Organizations viz. the Church of Scientology in South Africa (Proprietary) Limited situate at: (i) 99, Polly Street, Johannesburg. (ii) 2, Darter's Road, Cape Town. (iii) 224, Central House, Corner Central and Pretorius Streets, Pretoria. (iv) College House, 57, College Lane, Durban. (v) 119, Parliament Street, Port Elizabeth. (b) According to a submission handed in as an Exhibit by Mrs. Lacey, who testified on behalf of the Church of Scientology, the basic courses comprise five levels of training each consisting of a theory and practical section.* The training levels are: Level 0 Communication. Level I Problems. Level II Relief (Overt Acts and Withholds). Level III Freedom (ARC and ARC Breaks). Level IV Abilities (Service Facsimiles). _______ *Record of Evidence, Vol. 53, p. 4 - Mr.s J.P. Lacey. 157 ------------ At each level of training, auditors are produced. Thus, according to Mr. Hubbard,*^a an auditor in a particular class knows the technology to audit his preclears to the corresponding release level: The Class 0 Auditor (Hubbard Recognized Scientologist - HRS) audits to Grade 0 Release. The Class I Auditor (Hubbard Trained Scientologist - HTS) audits to Grade I Release. The Class II Auditor (Hubbard Certified Auditor - HCA) audits to Grade II Release. The Class III Auditor (Hubbard Professional Auditor - HPA) audits to Grade III Release. The Class IV Auditor (Hubbard Advanced Auditor - HAA) audits to Grade IV Release. (c) The cost for each level - theory and practical - is R80,00 per level i.e. a total of R600,00. If taken as a package, the total cost is R400,00.** (d) There are in addition five possible levels of awareness to be gained by what Mrs. Lacey termed "spiritual guidance or auditing".** In respect of each a contribution of R100,00 is made but, again, if taken as a package the total cost is R400,00.** (e) According to the submission referred to in sub-paragraph (b) supra by Mrs. Lacey** the Church of Scientology mainly derives its income from the training of auditors, ministers and Church executives. In addition to the courses for auditors, there are a supervisor's course, a minister's course, a class V staff member's course, a Dianetics course, an executive's course and an individual cramming course at contributions of R60,00, R60,00, R360,00, R250,00, R500,00 and R4 (per day) or R2 (per evening) respectively. There are also a number of beginner's courses - HAS course, Children's HAS course, Co-audit course and HQS course - at R10,00, R5,00,R10,00 and R20,00 respectively. (f) Processing monies are normally collected in advance by means of cheque or postal order.*^b A special 5% advanced payment discount is invariably offered. (g) The Church of Scientology also levies an annual subscription of R10,50. According to the audited accounts, membership, material and donations produced R3 261,09 in the Republic of Sough Africa in respect of the year ______ *The Auditor No. 65 World Wide, a) pp. 1, 5, 6 and 7; b) p. 9. **Record of Evidence, Vol. 53, p. 5 - Mrs. J.P. Lacey. 158 ------------ ended 31st December, 1969. (h) With the exception of a tithe remitted to a World Wide headquarters trust fund, all remuneration charged and obtained in the Republic of South Africa is received by the Church of Scientology in South Africa (Proprietary) Limited. (i) Upon completion of the basic courses, the scientologist in search of Total Freedom is expected to venture abroad to do the Saint Hill Special Briefing Course. Thereafter Power Processing leads to the conditions of Clear and OT. South African Scientologists receive their training for these courses at the Advanced Organization Saint Hill Denmark (AOSHDK), Jernbanegade, 6,.1608 Copenhagen V, Denmark.*^a As from July, 1970, an Executive Course - the Flag Executive Briefing Course - has been available aboard the Flagship Apollo. Prerequisites are the Organization Executive Course and that the student must be an OT III.*^b (j) The remuneration at the Advanced Organization Saint Hill Denmark Course is charged in United States of America Dollars. The services offered together with the remuneration charged are as follows.** _Services offered_ _Remuneration_ _U.S.A. Dollars_ _TRAINING_ Saint Hill Special Briefing Course 1,425 Solo Course 660 (Free for Saint Hill Special Briefing Course Students) Class VII 500 Class VIII Auditors Course 1,500 Class VIII C/S Internship 500 _PROCESSING_ New Power Processing^@ 864 (50% discount for Saint Hill Special Briefing Course Students) _ADVANCED LEVELS OF PROCESSING_ Clearing Course 800 OT I 75 __________ *The Auditor No. 64 World Wide, a) p. 1; b) p. 5. **Magazine: The World of Scientology, p. 15. ^@Power Processing is claimed first to have been developed by Mr. Hubbard in April, 1965. 159 ------------ OT II 500 OT III 875 OT IV 75 OT V 875 OT VI 350 OT VII 75 (plus any extra fees for auditing preparation and reviews). All the above services are stated to be subject to a special 5% discount if paid in advance. (k) Drug Rehabilitation Intensive courses are also offered by Scientology organizations at a fee of R1 070,00.* Since the date on which the above course was offered, the Abuse of Dependence-producing Substances and Rehabilitation Centres Act No. 41 of 1971 came into operation in the Republic of South Africa. _Prima facie_ the provisions of this Act now control activities of this nature. (l) In practice Scientology courses are costly. A witness** explained to the Commission that in a sense persons who embark on Scientology training get caught up in a trap. Initial auditing invariably aids them but not to the anticipated extent. The usual reaction is that something is lacking in the trainee and that more auditing may well overcome the shortcoming. There is ever present the dangling carrot of an attractively advertised further course to rectify the defect. Mr. Hubbard himself justifies this policy by declaring "the day that you decide that you know everything that there is to know is the day that you are dead."^1 (m) The following Schedule has been extracted from the record of evidence and serves as an example of expenditure actually incurred by persons who submitted to processing. _________ ^1Laurens, Sylvia: Editor: Understanding Magazine, Major Issue No. 109 (May 1971). Church of Scientology in South Africa (Pty.) Ltd., Johannesburg, South Africa, p. 10. *Newsletter No. 6 dated 26th August, 1971. The Church of Scientology in S.A. (Pty.) Ltd., Pretoria. **Record of Evidence, Vol. 6, p. 48 - Mrs. M.J. Nicholson. 160 ------------ _Name of witness_ _Service or Process_ _Cost of Service_ Mr. J.O.N. Schofield*^1 Level IV About R1 000,00 Mr. W.A. Cooke*^2a Power Release Over R1 000,00 Mr. G.V. Durow*^2b Power Plus Approximately R1 400,00 Mrs. M.J. Nicholson*^3 State of Clear R700 plus travelling expenses to and accommodation at St. Hill. Mr. A. Tannenbaum*^4 OT VI In the neighborhood of R5 000 - R6 000 Mr. R.G. Bester*^5 Level IV to OT VI R2 000,00 Mr. H.W.G. Herman*^6 State of Clear R450,00 Mrs. A.H. Carter*^7 Unknown^@ Over R1 000,00 Mr. D.F. Elliott*^8 Initial auditing over 5 days R150,00 Mrs. V.H. Moller*^9 State of Clear and OT VI R1 400,00 Mr. J.B. Carter*^10 State of Clear and OT VI R2 400,00 Mrs. M.R. McAll*^11 Unknown^@@ Over R3 000,00 Mrs. N. Kleyn*^12 State of Clear R2 000,00 for each of six members of the family. (n) According to the audited Revenue and Expenditure Account of Hubbard Scientology Organizations in South Africa (Proprietary) Limited services produced a gross revenue of R123 198,00 for the year ended 31st December, 1968. This figure includes advanced payments (refundable on demand in the event of the services not being rendered) of R4 724,00 received during 1968 in respect of services to be rendered during 1969. Percentage payments due to HCO World Wide of R2 532,00 are deducted therefrom. The most recent audited accounts submitted to the Commission are those for the Church of Scientology in South Africa (Proprietary) Limited for the year ended 31t December, 1969. These reflect a gross revenue from _________ *Record of Evidence: 1. Vol. 2, pp. 80-82 7. Vol. 12, p. 104 2. Vol. 3(A), a) p. 44; b) p. 59 8. Vol. 14(C), pp. 5 and 9 3. Vol. 5, pp. 19-20 9. Vol. 15, p. 101 4. Vol. 7, pp. 115 and 124 10. Vol. 16(A), pp. 1-3 5. Vol. 8(A), p. 17 11. Vol. 30(A), p. 39 6. Vol. 9(B), p. 71 12. Vol. 41, p. 2 ^@Mrs. Carter's evidence related to a course which her mother-in-law followed at East Grinstead. ^@@Mrs. McAll's evidence related to expenditure on Scientology by her former husband. 161 ------------ service in the sum of $73 230,16 which includes advanced payments (refundable on demand in the event of the services not being rendered) of R2 479,63. Percentage payments due to HCO World Wide of R7 086,31 are deducted therefrom. It should be stressed that the income from services mentioned above relate only to money spent within the Republic of South Africa and do not purport to reflect expenditure on the considerably more expensive advanced training overseas. (o) The tithe referred to in sub-paragraph (h) supra was referred to by Mrs. Lacey in evidence. She did not furnish detailed information in this regard. Her evidence should presumably be supplemented by adding thereto the following: "10%: Every Scientology Organization and formal activity pays to HASI in England 10% of its gross income. This is used for administration and research, and is supposed to but does not cover the cost of bulletins, cables, staff salaries, and the expenses of Scientology headquarters. LRH does _not_ receive this 10%. Reference Palmer & Co., 205, Chingford Mount Road, Chingford, London E.4., Chartered Accountants, and the books of HASI and its HCO Division worldwide. All student fees of the Saint Hill Course and contributions are likewise deposited to HASI Accounts as above and are used in operating expenses and are not received by LRH. LRH has his own personal income. Organizations pay his expenses when travelling and some research expenses. Organizations currently owe LRH considerable sums of moneys [sic] loaned to them by LRH - Johannesburg over #3,000, London #7,000, etc. LRH paid all the original costs of research out of his own pocket. The royalties of the first book, DMSMH, were all given to the first foundations. LRH owns Saint Hill as his own home, paying for it with his own monies received from the sales of a Virginia property and a yacht he owned. He receives no rent for Saint Hill partial use by HCO Division of HASI or the Saint Hill Course. There would be nothing wrong if LRH did make money from Scientology as Scientologists are perfectly willing to pay him for his services in administration and research. Boards and officers often express the hope of paying Ron book royalties and sums for good will and amounts loaned and LRH would be perfectly willing to accept them. LRH in 162 ------------ some Orgs has drawn a nominal salary in the past as Co- ordinator of Research and it has been well earned but he has drawn no pay for the past several years until lately when #25 a week was given him for his out of pocket expenses."^1 _Royalties derived from books and publications_. 10.3. (a) Mr. Hubbard is a prolific writer. There seems to be a ready and constant demand for most of his books which contain much repetitive matter. His first major work _Dianetics: The Modern Science of Mental Health_, a 428 page hard bound book, has frequently been reprinted and without doubt appears rapidly to have become a best seller as claimed. (b) Twenty nine basic books were recently listed as follows.* _Title_ _Price in_ _International Mem_- _U.S.A_. _bership Discount_ _dollars_ _Price_ 1. Dianetics: The Modern Science of Mental Health 5 4,50 2. The Creation of Human Ability 5 4,50 3. Scientology: 0-8 5 4,50 4. Science of Survival 7 6,30 5. The Phoenix Lectures 7 6,30 6. Dianetics: The Original Thesis 3 2,70 7. Dianetics 55 3 2,70 8. Scientology: 8-8008 3 2,70 9. Advanced Procedure and Axioms 3 2,70 10. Self Analysis 3 2,70 11. How to live Though an Executive 3 2,70 12. All about Radiation 3 2,70 13. Have You Lived Before This Life? 3 2,70 14. Handbook for Preclears 3 2,70 15. A History of Man 3 2,70 16. Child Dianetics 3 2,70 17. The Book of Case Remedies 2 1,80 _________ ^1HCO WW Staff for L. Ron Hubbard. Essential information every Scientologist should know. HCO Information Letter of November 24, 1963. Hubbard Communication Office, East Grinstead, Sussex, England. *The Auditor No. 67 World Wide. 163 ------------ 18. Book Introducing the E-Meter 2 1,80 19. E-Meter Essentials 2 1,80 20. The Book of E-Meter Drills 2 1,80 21. Notes on the Lectures 2 1,80 22. Scientology: A New Slant on Life 1,25 - 23. Axioms and Logics 1,25 - 24. The Problems of Work 1,25 - 25. Scientology: The Fundamentals of Thought 1,25 - 26. Scientology: 8-80 1,25 - 27. Control and the Mechanics of S.C.S. 1,25 - 28. Dianetics: The Evolution of a Science 1,25 - 29. Introduction to Scientology Ethics 1,25 - (c) All books are extensively and regularly advertised. The royalties appear to accrue to Mr. Hubbard. _Monies received from the sale of E-Meters and books_. 10.4. (a) The E-Meter is advertised as "... the most important tool in the technology of Scientology and Dianetics. ... is INDISPENSABLE."^1 and is available in the Republic of South Africa at a purchase price of R115,00.* (b) According to the audited accounts referred to in sub-paragraph (n) of paragraph 10.2 supra, there was a surplus of R5 842,40 on the sale of books and meters for the year ended 31st December, 1968 and of R4 770,29 for the year ended 31st December, 1969. _Monies received from the sale of tapes_. 10.5. Tapes on subjects of every day importance e.g. "CHILD SCIENTOLOGY."^2, "MARRIAGE."^2, "[?]."^3 and "MONEY."^3 are frequently advertised in Scientology publications. These tapes are advertised in glowing terms e.g. "Ron's tapes are priceless ... You definitely can't do without them"^2 and "Tapes, along with books, are one of the best ways of getting the data of Scientology."^3 A price of 30 United States of America Dollars with a 20% International Membership Discount appears to be the usual price for a tape containing lectures on two topics. _______ ^1Lionni Lucienne, Editor: The Auditor No. 65 World Wide. The Monthly Journal of Scientology. Dacha Publications Ltd., Kidlington, Oxford, U.K. (Copyright 1971), p. 10. ^2Lionni Lucienne, Editor: The Auditor No. 64 World Wide. The Monthly Journal of Scientology. Dacha Publications Ltd., Kidlington, Oxford, U.K. (Copyright 1971), p. 6. ^3Lionni Lucienne, Editor: The Auditor No. 67 world Wide. The Monthly Journal of Scientology. Dacha Publications Ltd., Kidlington, Oxford, U.K. (Copyright 1971), p. 10. *Understanding Magazine, Major Issue, No. 111, p. 3. 164 ------------ _Profits from Congresses_. 10.6. A potential source of income is profits derived from Congresses. An "Anatomy of the Human Mind Congress" was for instance, extensively advertised for the 4th, 5th and 6th September, 1971, to be held at the Zionist Hall, 84 De Villiers Street, Johannesburg, Republic of South Africa. An admission charge of R2,50 was levied. No information was given to the Commission as to whether or not Congresses produce profits. Expenses incurred in regard to Congresses total R1 628,64 and R1 724,66 in respect of the years ended 31st December, 1968 and 1969 for the Hubbard Scientology Organizations in South Africa (Proprietary) Limited and the Church of Scientology in South Africa (Proprietary) Limited respectively. _Cash Penalties or Fines_. 10.7. These are sometimes exacted for ethics contraventions but are unlikely to be a substantial source of income. 10.8. Scientologists frankly admit that the Organization is in affluent circumstances. Mr. D.B. Gaiman,* an important spokesman of the movement, told the Commission that the purchase of the bird sanctuary island of Lundy in Bristol Channel was vaguely contemplated during 1969. He was referred to a newspaper cutting which reads: "We are interested in using Lundy for a social experiment - as a place for sanctuary or retreat for people who are disturbed but not insane and who might otherwise be locked up in mental hospitals."^1 10.9. In regard to the proposed price of R172 000,00 (#100 000,00) he is reported to have told the reporter: "'Poverty is one thing we have never been accused of. We could buy ten Lundy's'."^1 10.10. When Mr. Gaiman was reminded of the cutting he said: "... I remember that. That was not that we intended buying ten Lundy's ... it was just that we have the capability of so doing."^2 10.11. The high cost of Scientology processing is no reason in itself to interfere with the activities of Scientologists. Many witnesses who have parted with substantial sums of money in return for receiving processing stressed during the course of their evidence that they had good value for their money. Furthermore Mrs. J.P. Lacey assure the Commission that any person dissatisfied with any training or spiritual counselling receives a prompt refund.** ________ ^1Article: The Pretoria News, Pretoria, Republic of South Africa, 17th April 1969. _Cult May_ _Buy Isle_. ^2Record of Evidence, Vol. 48(b), p. 131 - Mr. D.B. Gaiman. *Record of Evidence, Vol. 48(b), p. 131 - Mr. D.B. Gaiman. **Record of Evidence, Vol. 53, p. 6 - Mrs. J.P. Lacey. 165 ------------ 10.12. In respect of the year ending 31st December, 1968, the balance sheet and accounts of Hubbard Scientology Organisations in South Africa (Proprietary) Limited reveals that refunds totalling R1 555,00 were made, and in respect of the year ending 31st December, 1969, the balance sheet and accounts of the Church of Scientology in South Africa (Proprietary) Limited reveals that refunds totalling R1 813,65 were made. 10.13. No reasonable ground exists upon which sane persons should be afforded legislative or other assistance against their own indiscretions in regard to the expenditure of money on Scientology training. To minors, persons suffering from mental disability and persons incapable of appreciating the nature of a proposed transaction, the law affords effective protection. 10.14. The Commission is accordingly, of the view that no recommendation designed to control the charging, receiving or collection of remuneration or money is called for. 10.15. In a memorandum submitted as an Exhibit to the Commission and confirmed on oath in the course of evidence,* Mrs. J.P. Lacey describes the manner and methods by which money is collected as follows: "The money is collected almost invariably in the form of cheques, save that books are usually purchased for cash. It is an invariable rule of the Church to give receipts for all monies received. The various copies of the Invoice are distributed as per Hubbard Communications Policy Letter 16th February 1966 'Invoice Routing'. Once a week the total income for that week is deposited into the 'Main Account'. The following accounts are operated by every branch of the Church: 1) Main Account 2) Disbursement Account 3) Salary Account 4) Reserve Payment Account 5) Hubbard Communications Office Division Account 6) Public Executive Secretary Account 7) Building Fund Account 8) General Liability Account 9) LRH Goodwill Account The Johannesburg Church, the administrative headquarters of the Church in South Africa, has two additional accounts: ________ *Record of Evidence, Vol. 53, p. 8 - Mrs. J.P. Lacey. 166 ------------ a) The Administrative Account. This is the tithe-fund referred to previously and is held in trust by the Church in the United Kingdom. b) Guardian Reserve Fund. _PURPOSES OF THESE ACCOUNTS_ _MAIN ACCOUNT_: All monies which are taken in during one week are banked into this account but does not include monies set aside for the HCO Div. Account and the Public Executive Secretary Account. From the Main Account all monies are broken down as per standard formula into the various accounts. A form setting out the allocation is used. _DISBURSEMENTS ACCOUNT_: This account is used specifically for the disbursement of all administrative expenses including rent, light and water, telephone, stationery, equipment, etc. _SALARY ACCOUNT_: This account is only used for paying out the salary allocation for each week to individual staff members. _RESERVE PAYMENT ACCOUNT_: When a bill that is due for payment is questionable, the amount due is deposited into this account ensuring that when the account has been audited and verified, it will be met. _HCO DIV. ACCOUNT_: This account is used for the purchase of books and E-Meters for resale only. Advertisements for the sale of books and Mailing List purchase also comes from this account. _PUBLIC EXEC. SEC. ACCOUNT_: Into this account go Membership fees, Magazine sales, Congress Profits. These monies are used solely for broad public advertising. _BUILDING FUND ACCOUNT_: The purpose of this account is for the purchase of property. _GENERAL LIABILITY FUND/ACCOUNT_: These monies are used for Legal Costs, Defence funds, destruction of repute, uninsured risks to Building, lapsed Insurance Policies and Acts of God. _LRH GOODWILL ACCOUNT_: An account established to contribute to the establishment of advanced courses on each continent, this has not yet been ratified for South Africa at this date and the account is static. _S.A. HEALTH INSTITUTE_ S.A. Health is a company which was formed to obtain the property 27 Hancock Street. This property was sold in January 1969 but the company was retained. 167 ------------ When it was decided to transfer banking activities to the Netherlands Bank, an account was opened in the name of S.A. Health to ensure continuity while the transfer was being effected. It is now static and only holds the funds to guarantee the rent of the Church. All Branches of the Church of Scientology in South Africa have the above numbered 1 - 9 (one to nine) accounts and it is left to each of these Branches which Bank they deal with. This is usually determined by the Bank's proximity to the Church's premises and the services provided by the Bank concerned. Each Branch of the Church handles their Finance as stated above." 168 ------------