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Excerpts from Church of Scientology IRS 1023 Tax Exempt Application


These excerpts were taken from Scientology's Form 1023 Submission to the Internal

Revenue Service on which the organization's tax exemption granted by the IRS in 1993 is based.


Much of this information has been covered before or is covered in more detail in the

responses to specific subparts of Question 10 that follow. Consider the following:

* The decision in "Gerry Armstrong as a CID operative"

Gerry Armstrong's case is one of those described in detail in response to Question 10.e.ii.

Armstrong's fanatical hatred of Scientology ingratiated him with the LA CID and earned

him the status of IRS operative in an unlawful scheme to infiltrate and destroy the Church

through, among other things, the seeding of Church files with forged or manufactured

documents. Armstrong was a link between the CID and Michael Flynn, whose multi-

jurisdictional litigation campaign against Scientology was encouraged and assisted by

the CID. (See pages 10-8 to 10-16 of our response to Question 10 of your second series

of questions). The allegations, first manufactured by Armstrong and Flynn, have been

adopted and parroted by many of the other tort litigants whose cases are described in the

response to Question 10.e(i). In exchange, Gerry Armstrong has been insulated from liability

for his theft of Church documents and encouraged to continue and to expand his nefarious efforts.


Church of Scientology v. Gerald Armstrong:

We have included some background information here and an epilogue to the decision in

question. That is because the Service has continuously thrust the Armstrongcase at us,

demanding an explanation. The Armstrong case decision was so inflammatory and

intemperate that it was used to stigmatize the Church in the legal arena and make other

outrageous decisions possible. As we shall demonstrate below, all this decision ever

involved was Armstrong's state of mind, which subsequently obtained evidence proved

conclusively to be one sordid, sado-masochistic nightmare. Furthermore, Armstrong's

state of mind horror stories have fallen on deaf ears in recent litigation. Relying on

Armstrong or the Armstrong decision is wholly unjustified.

During the later years of his tenure as an employee of the Church, Gerald Armstrong was

placed in charge of a huge quantity of documents that belonged to Mr. Hubbard that

contained private and personal information regarding Mr. Hubbard. Part of his duties

included research to support the work of an author who had been retained to write an

authorized biography of Mr. Hubbard.

In late 1981 after the initial clean out of the higher levels of the Guardian's Office, and when

investigations were turning toward identifying those in alliance or sympathy with the GO,

Armstrong suddenly vacated Church premises and left its employ, taking with him huge

numbers of confidential documents that belonged to Mr. Hubbard or his wife which the

Church was holding as bailee. It was no coincidence that Armstrong left at that time because

he had repeatedly expressed his ambition to join the GO and work in Bureau 1 (Information

Bureau), the same area of GO that had been responsible for the criminal acts of the 70's.

Armstrong also had been a long-time friend and confidant of Laurel Sullivan. Just prior

to the take over the GO taking place, Sullivan had made a proposal to place convicted GO

members into corporate positions of control throughout the top of the ecclesiastical

hierarchy. She was also found to be spying on the CMO for the GO during the early days

of the CMO's investigation into the GO. Armstrong assisted and supported Sullivan in

her efforts.

In the summer of 1982 the Church received evidence that Armstrong had stolen thousands

of documents from archives when he left the Church. Church counsel wrote to Armstrong,

demanding that he return them. Armstrong denied the theft. Once the demand for return of

documents was made, Armstrong turned the stolen documents over to Michael Flynn,

with whom Armstrong decided he could make a lot of money.

In August 1982, the Church sued Armstrong for conversion, breach of fiduciary duty and

confidence, and invasion of privacy based on Armstrong's theft of extensive amounts

of private papers owned by the Church or the Hubbards. The Church sought return of the

papers and the imposition of a constructive trust over them, and any proceeds derived from

them, as well as preliminary and permanent injunctive relief against dissemination or

disclosure of the private documents.

In September 1982, Armstrong, represented by Flynn, answered the complaint and raised

the defense that he was justified in stealing the documents entrusted to him as a fiduciary

because he wished to make public information about Mr. Hubbard and the Church out of

fear for his safety and well-being. His defense was stricken on four different occasions by

three different judges.

In April 1984, the case was assigned for trial before Judge Paul Breckenridge, Jr. At that

time, the Church presented motions in limine to prevent Armstrong from introducing the

stolen, confidential documents since their introduction into evidence would vitiate the

very rights of privacy the action sought to protect. The Court not only allowed Armstron

to introduce the confidential documents, but also allowed him to raise his four- times stricken

defense with a new perverted twist. He would not have to prove there was anything to fear

from the Church, but only his state of mind when he stole the documents. The Church

was completely ambushed in the trial by these documents, as in most cases Armstrong

had stolen the only copy that existed. Then, after he and Flynn had ample time to prepare

their case from them, the documents were placed under seal in the Court. Although the

inflammatory allegations that Armstrong made and purported to support with these

documents could have been shown to be false or grossly distorted by other evidence, the

Church had no chance to prepare and put on that evidence before being hit with the

documents in court.

During the trial, Armstrong presented testimony from numerous witnesses who testified

for the purpose of establishing Armstrong's supposed "state of mind" with regard to his

alleged justification for stealing the documents. Each of the witnesses was hostile to the

Church and, in fact, was a plaintiff against or taking a position adverse to the Church in

other litigation in which Flynn was the counsel. Each witness gave general testimony

about his or her own viewpoint on relationships with the Church in an effort to bolster

Armstrong's state of mind justification defense.

The Court did not allow the Church to put on evidence to rebut the testimony of those

witnesses. The Court also declined to allow the Church to put on evidence explaining the

confidential documents and precluded the Church's proffered rebuttal evidence on the

ground that the adverse testimony was admitted only for the purpose of establishing

Armstrong's state of mind and not for the truth or falsity of the matter testified about.

On July 20, 1984, Judge Breckenridge issued a Statement of Intended Decision which

became final a month later, which held that the Church had "made out a prima facie case

of conversion....breach of fiduciary duty, and breach of confidence" (as the former

employer who provided confidential materials to its then employee for certain specific

purposes, which the employee later used for other purposes to employer's detriment).

Judgment, however, was entered in favor of Armstrong.

The Statement of Decision adopted as the facts of the case the allegations which Armstrong

had made in his trial brief. These allegations included the statements on which Armstrong

premised his justification defense; i.e., that defendant "... became terrified and feared that

his life and the life of his wife were in danger, and he also feared he would be the target of

costly and harassing lawsuits." The judge went on to pontificate on the psychological

mind-set of not only Mr. Hubbard, but Scientology at large. The only lawsuit that there

was to fear was the one that was ultimately filed for return of the stolen documents. It

never would have been brought had Armstrong voluntarily returned the documents

when asked, despite the theft.

The IRS CID, however, absorbed Breckenridge's findings as the definitive statement of

what Scientology is, and used this decision and the Flynn witnesses who testified at the

trial as the nucleus of their investigation. The Church tried repeatedly to explain to the

IRS that the Armstrong decision was nothing more than a statement concerning Armstrong's

state of mind. The CID and EO weren't interested, as they found in Armstrong a kindred

spirit who echoed their own sentiments.

They therefore embraced Armstrong and the Flynn witnesses and used their fabrications

as the basis for their investigations and denials of exemption.

Evidence found after the Armstrong trial proves not only that Armstrong never was

afraid of the Church as he claimed at trial, [...]


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