IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA

IN AND FOR THE COUNTY OF MARIN

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CHURCH OF SCIENTOLOGY INTERNATIONAL, a California not-for-profit religious corporation, Plaintiff, vs. GERALD ARMSTRONG; MICHALE WALTON; THE GERALD ARMSTRONG CORPORATION, a California for profit corporation; DOES 1 through 100, inclusive, Defendants. AND RELATED CROSS-ACTION.

) ) ) ) ) ) ) ) ) ) ) ) )

NO.157-680

DEPOSITION OF:

LYNN R. FARNY

Wednesday, July 27, 1994

VOLUME IV

Reported by: PENNY L. GILMORE CSR NO. 4724

PENNY L. GILMORE & ASSOCIATES DEPOSITION REPORTERS P.O. BOX 862 ROSS, CALIFORNIA 94957 (415) 457-7899

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I N D E X

EXAMINATION BY MR. GREENE MR. WALTON		PAGE 461 572
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DEFENDANTS FOR IDENTIFICATION
No. 21	HCO Policy Letter of 2 April 1965, Administration Outside Scientology	461
No. 22	Photocopy of a document entitled Magazine Articles on Level O Checksheet, by L. Ron Hubbard	462
No. 23	Mutual--Release Agreement of Vicki Aznaran	517
No. 24	Mutual Release Agreement of Rick Aznaran	517
No. 25	Document entitled False Report Correction, Breckenridge.	532
No. 26	November 7, 1984 Authorization to Eugene M. Ingram from Phillip Rodriguez, LAPD	538
No. 27	Document entitled Public Announcement by Daryl F. Gates, Chief of Police, Los Angeles, dated April 23, 1985	541
No. 28	Letter from Robert N. Jorgensen, Deputy District Attorney, to Rev. Ken Hoden, et al., dated April 25, 1986	544
No. 29	Three-page document entitledGerald Armstrong, dated April 4, 1991	547

DEFENDANTS FOR IDENTIFICATION		PAGE
No. 30	Document entitled False Report Correction, Gerald Armstrong	551
No. 31	Nine-page document entitled Gerald Armstrong, bates stamped 200048 through 200056	556
No. 32	Declaration of David Miscavige	560
No. 33	Declaration of Kenneth Long	561
No. 34	Affidavit of Gerald Armstrong	563
No. 35	Religious Technology Center Executive Directive No. 450, entitled The Scope of Scientology - Auditor's Day 1991, Announcement of a General Amnesty	563
No. 36	Affidavit of Helen Margaret Barlow	565
No. 37	Letter to Carol- Fracassa; Producer, Entertainment Television, Heber C. Jentzson, President, Church of Scientology	566

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BE IT REMEMBERED that on Tuesday, July 26, 1994, commencing at 9:47 a.m. thereof, at the Law Office of William R. Benz, 900 Larkspur Landing Circle, Suite 185, Larkspur, California, before me, SUSAN M. LYON, Certified Shorthand Reporter #5829, personally appeared

LYNN R. FARNY,

called as a witness, who having been first duly sworn, was examined and interrogated as hereinafter set forth.

A P P E A R A N C E S

LAW OFFICE OF WILLIAM R. BENZ, 900 Larkspur Landing Circle, Suite 185, Larkspur, California, appeared as the referee.

LAW OFFICES OF BOWLES and MOXON, 6255 Sunset Boulevard, Suite 2000, Hollywood, California 90028, represented by TIMOTHY BOWLES, ATTORNEY AT LAW, appeared as counsel on behalf of the Plaintiff Church of Scientology.

LAW OFFICES OF FORD GREENE, 711 Sir Francis Drake Boulevard, San Anselmo, California 94960, represented by FORD GREENE, ATTORNEY AT LAW, appeared as counsel on behalf of the Defendants Gerald Armstrong,

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et al.

LAW OFFICES OF MICHAEL WALTON, 700 Larkspur Landing Circle, Larkspur, California 94939, represented by MICHAEL WALTON, ATTORNEY AT LAW, appeared as counsel on behalf of DEFENDANT MICHEAL WALTON.

ALSO PRESENT: Gerald Armstong.

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Wednesday, July 27, 1994
9:47 A.M.

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(Defendant's Exhibit No. 21 marked.)

EXAMINATION RESUMED BY MR. GREENE

MR. GREENE: Q. Good morning, Mr. Farny.

A. Good morning.

Q. You're still under oath, aren't you?

A. Yes.

Q. I have handed you a two-page document that's been designated Defendant's Exhibit No. 21, which is an HCO policy letter of 2 April, 1965.

You've had a chance to look at that, haven't you?

A. Yes, I have.

Q. And does that appear to be what it says it is, an HCO policy letter of 2 April, '65?

A. Doesn't appear to be the current version of it.

Q. It does appear to be a version that was published at that time; correct?

MR. BOWLES: Objection.

THE WITNESS: I don't know if this was published in 1965.

MR. BOWLES: All right.

MR. GREENE: Q. You've seen this policy letter before, haven't you?

A. In some version, yes.

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Q. There's a version of it now -- strike that. Let me ask you this. Do you know whether or not this policy letter has been rescinded --

A. I believe this --

Q. -- or canceled?

A. -- revised in the current version of the organization executive course volumes.

Q. And that's the '91 version; correct?

A. That's correct.

Q. Do you know whether or not the revision in the '91 volumes changes -- what changes it makes to this policy letter that's Exhibit 21?

A. There would be no references at all to fair game, rather than having the references in the 1965 policy letter of fair game and a note at the end to say to see the 1968 cancellation.

Q. Okay.

A. Beyond that, I'm not certain.

Q. Now, the note here, this says "See the 1968 cancellation," that would refer to what's previously been marked as Exhibit 17; correct?

A. Yes.

MR. GREENE: I'd like to mark this next document as Exhibit 22.

(Defendant's Exhibit No. 22 marked.)

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MR. GREENE: Q. Exhibit No. 22 is a four-page document, the cover or first page of which says "Magazine Articles on Level O Check Sheet by L. Ron Hubbard," and thereafter follows with photocopies of pages 50 through 55.

Have you seen this document before?

A. This is an incomplete document. The last page ends mid-sentence.

Q. Okay.

A. The page 52 has material missing from --

Q. Excuse me?

A. -- missing from the top.

It purports to be an excerpt of a magazine article. Beyond that, I can't say.

Q. Do you know whether or not a magazine article that has the title here "Dissemination of Material" was at any time published by L. Ron Hubbard?

A. I would have no personal knowledge of that.

Q. Do you have any knowledge pursuant to your experience as a Scientologist?

A. I've read something similar to this, but it's, as I said, incomplete.

Q. Okay.

A. And whatever I already said. I don't need to repeat myself.

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Q. You certainly don't.

Aside from the incompletenesses which you have noted, does this appear to be the same as that which previously you have read?

A. I have to compare it. I don't think so. There's material here that's different.

Q. Now, going back -- well, before we do that, with respect to the period of negotiations that resulted ultimately in the December '86 settlement agreement with Gerald Armstrong, were there any drafts of the settlement that went back and forth between your side and Flynn?

A. You mean, other than during the period of the negotiations?

Q. No. That's what I mean, during.

A. Oh, during the period. Because I thought you said except for during the period of negotiations.

Q. If I did said that, I misspoke.

A. Yes. There were drafts that went back and forth.

Q. Do you recall how many?

A. No.

Q. Do you recall whether there were more than five?

A. I just don't remember. I remember there were several drafts done. And I'm having a difficult time separating in my mind the changes that may have come back from the lawyers on our side and the charges that came

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back from Flynn. I know that there were several of both.

Q. So if I understand you correctly, what you're saying is that there were drafts that went back and forth between your people and your lawyers on one hand; right?

A. Well, not necessarily among the lawyers and staff on our side. It didn't break down between staff and lawyers.

Q. Okay.

A. It was just among the group on our side and then from that group to Flynn and back.

Q. Okay.

A. And there were -- my recollection is quite a few drafts before it was finalized. I just couldn't tell you how many resulted from which. It's been so long.

Q. All right. Are you able to differentiate between the drafts that circulated in-house and those, if any, that went to Flynn?

A. Only to the degree that I remember several drafts going back and forth with Flynn, as well.

Q. Okay.

A. That part I definitely remember, but as far as how many those were as opposed to how many were internal circulations, I just remember there were several drafts, a lot of them.

Q. Do you recall in terms of the duration of the

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process, with a starting point of somewhere in the summer of 1986 proceeding through time up until December 1986, where in that spectrum approximately the first draft was submitted to Flynn?

A. No, I don't remember.

Q. You're not able to estimate whether it was at the beginning, the middle, or towards the end?

A. Well, my sense is it was more towards the beginning but not right at the beginning.

Q. Okay.

A. Beyond that I'd have to guess.

Q. Did Flynn communicate to your side whether or not he -- strike that. Let me go back.

The draft that went to Flynn, was that draft a generic draft or were there different drafts for different people?

A. Towards the end, we had individual ones for individual people. At the beginning, we had one draft that would form the model.

Q. Now, and at the beginning when you had the model draft, that was submitted to Flynn; correct?

A. At some point it was. It resulted from a conversation he had had, or several conversations he had had with Micheal Hertzberg, and that a discussion draft based on the things that they had been discussing was put

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together --

Q. Okay.

A. -- to form the basis of further discussion.

Q. So he and Hertzberg talked first and hammered out the rough parameters of what would be involved and then those were translated into writing, as far as you know?

A. Yes. That's how it went down. And the terms evolved and changed and different things over the next -- quite a few weeks.

Q. Right. However, the basic idea in terms of putting a stop to the Flynn dog and pony show was in place from the outset?

A. Certainly, the basic idea of settling all these cases was. As far as how it manifested itself in the agreements, I can't distinguish one draft from another right now.

Q. It wasn't just limited, the concept, I mean, wasn't just limited to settling cases because there were individuals who signed agreements that didn't have cases that were just witnesses; right?

A. Well, they had -- we settled disputed claims with them. Whether they had gone to litigation or not, some hadn't.

Q. Okay.

A. But everyone, at least, on their side at least

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thought they had some sort of claim.

Q. Whether or not it was timely or anything else.

A. Timely, meritorious, whatever. I mean, you know, how often one wins a statute of limitations summary judgment in civil litigation. So those sort of questions are somewhat irrelevant.

Q. Well, I'm not going to ask you any questions about that, I don't really care.

A. No. I was just remarking on your timeliness part of your question.

Q. All right.

A. But --

Q. Now, after the initial model draft was submitted to Flynn, did it come back to you guys from Flynn?

A. Are you asking me if we got one back with handwritten changes or something on it or --

Q. Anything?

A. -- as opposed to verbal?

Q. Let's start there, written as opposed to verbal.

A. I just don't remember. My sense is that we got back verbal changes.

Q. Do you have a sense of what the general nature was of the verbal feedback you received from Flynn in response to the submission of the initial draft of the agreement?

A. No. I just don't remember.

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Q. With respect to the initial draft of the agreement, did it include -- strike that.

My recollection of your testimony is that at the outset Scientology's side had in mind non-assistance provisions, no testifying absent compulsion provisions. And I'm not trying to ask you the question twice --

A. I understand it's foundational to your next question. We had the concepts in mind. And my recollection is somewhere towards the beginning of the drafting process, some sort of expression that reflected those concepts occurred. I just don't remember at which part of the process the words that we now have on the page --

Q. Came into existence.

A. -- came into existence, that's right.

Q. At the outset, also did you have in mind the silence provisions, that don't talk about Scientology provisions except to members of your immediate family?

A. In some form or another, yes.

Q. And the reason for that would be because there were at least two -- the primary objective with this was to stop the flow of false data from these professional witnesses, whether it be in litigation or otherwise; right?

A. That was certainly a significant concern, yes.

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Q. Now, do you recall at any point the nature, generally, of feedback which you got from Flynn regarding the provisions that your side had propounded?

A. No. I just remember it was an arduous process going back and forth constructing something, and it took quite a bit of time. Beyond that, I don't remember.

Q. So then is it accurate to say that substantively you don't have any recollection of what the sticking points were?

A. Well, except as I testified yesterday, there was a sticking point towards the end on the lack of mutuality on speaking about -- particularly with Gerry, he had a problem towards the end that -- or at least it was communicated to us towards the end -- that he couldn't say anything about us, but yet we were free to say things about him. And that was subsequently resolved, to my understanding.

Q. When you say towards the end, would it be an accurate estimate to define that term towards the end to be within a week of the signing?

A. No, because I wasn't there within a week of the signing.

Q. Okay.

A. I left around the 25th of November or so, and it was about a week before that, is my sense. Shortly before

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that.

Q. So it was before Thanksgiving 1986?

A. I remember hearing not about the resolution of it but about that there may be difficulty with it before Thanksgiving.

Q. Aside from that point where you heard prior to Thanksgiving '86 that there was difficulty with Armstrong accepting the provision that he could not speak but Scientology could, were there any other sticking points that you can recollect?

A. I remember there being some. I don't remember in any particulars what those were, because none of those have been -- being talked about have been the subject of litigation for the past eight years. This one sticks in my mind because we've been talking about it for at least the past couple of years. So I remember that there were. I don't remember specifically what they were.

Q. Did you keep notes regarding your participation in this process that started in the summer of '86 and ended in December of that year?

A. No, no, not to the present. At the time I was keeping track of the various drafts, but when I left, I turned them over to Tim. And there would -- in the usual course, drafts aren't kept beyond the time the final is arrived at.

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Q. Is that what the current status is with respect to the drafts, is namely that all of them have been destroyed, to your knowledge?

A. To my knowledge, yes, they would have been in '86. There would have been no reason whatsoever to keep drafts.

Q. Would there be a record of their destruction?

A. No.

Q. Who would have been responsible for so destroying them?

A. Well, I destroyed some along the way. I certainly didn't keep every single draft I was working on and the pile of notes. I kept the current working draft and maybe some of the earlier ones. I had a few when I left.

Q. Now, these drafts were done on a computer; right?

A. Yes.

Q. Were back-ups made of the hard drive on the computer?

A. Not that would have retained the copies, because each generation was done from the earlier generation.

Q. So you saved over --

A. Saved over --

Q. -- the prior draft?

A. -- on top of it, yes.

Q. You didn't give the new draft a new name with whatever number it was in a row on the drafting process?

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A. No, no, didn't save the -- didn't save the old ones. I saved over the top of them.

Q. Replace and save?

A. Whatever, yeah, that's the concept.

Q. Now, at the very outset of the settlement negotiation process, and at the point where your side was formulating the concepts of what you wanted, what your objectives were, did you consider how you were going to be able to enforce the provisions were you successfully able to negotiate what you wanted?

A. Yes.

Q. And what was your thinking process with respect to enforcement?

A. That if all went well, both sides would go their own way. But if not, we needed to have some sort of procedure in the settlement agreement that would enable us to -- enable both sides, actually, to enforce the terms so that the agreement that was reached, whatever it became, because at that point it hadn't been yet, would be the agreement would remain in place.

Q. And what were the mechanism or mechanisms that you considered for that purpose?

A. Liquidated damages, continuing jurisdiction in the court that had the case to begin with, attorneys' fees provisions, the ability to get injunctive relief as to

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certain paragraphs, and general damages for others.

Q. The purpose of the continuing jurisdiction provision was so that the court that was familiar with the litigation would be the one to enforce the settlement thereof?

A. Not necessarily, because there's no way of knowing how long in the future something like that would occur and whether the judge that was on the case was still on the case.

In terms of Armstong's, which is the one we're talking about, didn't want to go traipsing all over the country when the case was originally in Los Angeles. So it was simpler to have that court continue to have jurisdiction.

Q. There was a component of keeping it in the department where Armstrong's litigation had been tried, though; right?

A. I don't remember specifically. I mean, it was definitely in that courtroom, certainly in that courthouse.

Q. In that courthouse?

A. Right, absolutely.

Q. And, in fact, in that particular department?

A. Probably. I think so.

Q. And that's the reason why in the initial effort to

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enforce the settlement agreement actually what happened was a motion was brought in the department where Judge Breckenridge had before sat; right?

A. Right. I'm just not certain if the settlement agreement says that specific department or it just says Los Angeles Superior Court. I think it just says Los Angeles Superior Court.

And once you get there, I don't think we would have been able to file it in department one. We would have had to go to the judge that inherited his case load. We could look at the agreement and see if it says that department or just Los Angeles Superior Court.

Q. Let's take a look.

A. Sure.

Here it just says Los Angeles Superior Court.

Q. It does say L.A. Superior Court?

A. Yes. It's paragraph 20 .

Do you want to look at it? It's at the bottom of the page to the top of the next one.

Q. Do you recall there being specific discussion with Flynn regarding the provision whereby any enforcement would take place in L.A. Superior Court?

A. What I recall is he and Michael went over that agreement with a fine-tooth comb. I don't have a specific conversation in mind where that paragraph was discussed,

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but my general recollection is the whole thing was being nitpicked quite severely.

Q. And the primary individuals who were involved in the nitpicking was Hertzberg on your side and, of course, Flynn on the other?

A. In terms of the interface between the two, yes.

Q. Right, right.

Now, were there any project orders pertaining to the settlement of these cases?

A. No.

Q. And there were no mission orders either?

A. No.

Q. Now, yesterday you indicated that, your testimony was that Scientology had never had any kind of policy or practice that has been dubbed fair game; right?

A. That's not what I said.

Q. That's what I understood it. If you didn't say that, then I misunderstood what you meant.

A. That's not my problem.

Q. No, it isn't. That's my problem, isn't it?

MR. BOWLES: Next question.

THE WITNESS: Do you have a question?

MR. GREENE: Q. Of course I have a question.

A. Okay.

Q. And my question is, with respect to Exhibit 16 --

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A. Yes.

Q. -- has Exhibit 16 at any time been a policy of the of Scientology, to your knowledge?

MR. BOWLES: Asked and answered.

THE WITNESS: Not in my experience.

MR. GREENE: Q. In your experience, has that issue which is Exhibit 16 ever been published within the Church of Scientology?

A. Issues with later dates on them bearing this title have. I have not seen this one outside of being handed it in litigation by the other side.

Q. Now, you are familiar with the case known as Allard versus Church of Scientology; right?

A. Yes.

Q. And in Allard versus Church of Scientology, the court makes -- in the published appellate opinion, the court makes a finding that one of Scientology's policies is that of fair game as is stated in Exhibit 16, doesn't it?

A. It discusses, one, what fair game was and, two, gives it the same misinterpretation and false reading that you've been trying to give it.

Q. Okay.

A. And that was one of the earlier cases that people have latched onto and used as what they think a ticket to

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big bucks in litigation. It's just a litigation ploy. And that's one of the earlier cases concerning that.

Charlie O'Riley was able to create the false idea that fair game, as defined by your side, was continuing to be in existence and be practiced in the 1970's.

Q. Okay.

A. When it had never been -- actually been as defined as your side has defined it. So that was one of the cases where it started. And once it's published in opinion, and passed around and used by the next litigant that wants to create trouble by the church, create prejudice and ill will.

Q. So then what your view is that fair game, in the sense of the language that's used in Exhibit 16, has never existed as a policy or practice in Scientology and only is the origination of litigants adverse to the church who are trying to smear it?

A. My view is this, that in the brief time that the term fair game was used in the church, which was '65 to '68, fair game meant that if you renounced the church, if you declare against it, even, you've abandoned any recourse you can seek to the church's internal justice procedures, that you're indeed fair game for whatever society hands you.

That doctrine was misinterpreted as an admonition,

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misinterpreted as opponents to Scientology as an admonition to go out and mess with people's lives. It was never that. That's what I'm defining as that which never existed. It was never an admonition to go out and mess around with people's lives.

Then in 1968 the term itself was canceled because it was subject to that misinterpretation. That's what I'm talking about.

Q. And the cancellation in '68 is Exhibit 17 here; right?

A. Yes.

Q. Now, the same mistake was made by the Court of Appeal in Wollersheim versus Church of Scientology, wasn't it?

A. Charlie O'Riley was the same lawyer on Allard as Wollersheim and he used that to convince that court of the same thing, yes.

Q. And he used fair game prior to any litigation in the Court of Appeal in the trial courts; right?

A. He certainly did.

Q. And the Wollersheim litigation has been to the U.S. Supreme Court twice; right?

A. No.

Q. There have been two petitions for cert, have there not?

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A. Yes, but it's been to the Supreme Court three times.

Q. Three times, okay.

A. They originally stayed the enforcement, the execution of the judgment.

Q. Okay.

A. Prior to it's wending its way up to the appellate process.

Q. And at this point, Wollersheim is final, right, according to your knowledge?

MR. BOWLES: Objection to relevance. You're now exploring the Wollersheim case.

MR. GREENE: I'll tell you what, I'll withdraw the question.

THE WITNESS: Okay.

MR. GREENE: Q. Now, fair game was also used in the Armstrong litigation before Judge Breckenridge false by the opponent to Scientology Gerald Armstrong?

A. It's been a litigation ploy that has been being used against the church for a long time.

Yes. Gerry used it to procure a false verdict, that he was so-called in fear of his life and such that.

See, what enables people to make all those wild outlandish charges is because they know it's not true. You don't see anybody walking up and down the

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street making those kind of claims about the mafia because those people really do kill people, and nobody would have the courage to say something like that because they know they'd start their car and it would blow up.

But they can make those sorts of statements about Scientology with reckless abandon because they know nothing is ever going to happen to them. And they're secure in that knowledge and can sit there and carp and yap, yap, yap, yap all they want because they know that nothing like that is ever going to happen because nothing like that has ever happened to anybody.

Q. Okay.

A. So that's why it's been used as a litigation ploy. It's been very effective, obviously because of the things the guardian's office did.

But none of those included that sort of conduct. It just enabled people to make those sort of outlandish charges confident that they could start their car every day and not have a care in the world. Which is true, nobody would need to worry about anything like that.

Q. And the guardian's office never engaged in any conduct that would support people being in fear thusly; right?

A. Not in fear of their lives, no. They did some stupid things. They broke into government offices. They,

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you know, did some stupid things with people. And that's why they were disbanded. But killing somebody, being in fear of their lives, to make them in fear of their lives was never even what those crazies did.

Q. What about people being set up for criminal prosecution, does Scientology or any element of Scientology ever engage in conduct like that pursuant --

A. I don't remember if the guardian's office did.

Q. Now, the Court of Appeal in Armstrong affirms Judge Breckenridge's finding that fair game was a practice carried out by Scientology, isn't it, as to Armstrong?

A. They affirmed the result. They made statements about some of the comments that Judge Breckenridge made on evidence that was supposed to have gone in for state of mind saying that Breckenridge's comments really didn't go to anything but that. And to a large degree these sort of electrifying but nonsensical statements went to and were allowed in on the basis of state of mind.

Q. Now, the fair game policy as erroneously claimed

and used by people who have been in litigation with the church is not only limited to activity that might have the consequence of physical destruction, is it?

A. What's your question?

Q. My question is this. When, in your view, fair game has been falsely and spuriously used against the church in

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litigation, included within the definition is lying to people; right?

A. That's not the definition of fair -- that's not in the definition of fair game. I don't know -- what's your question? Have people falsely claimed that they were lied to and that's fair game? Yeah, people have falsely claimed that, including him.

Q. Okay. Including Armstrong?

A. Right.

Q. And that's one of the reasons for the settlement agreement, is to make sure he doesn't do that anymore; right?

A. We've talked about that enough. Go on to another subject, you know.

Q. And also suing is included in that definition that's falsely used by people like Armstrong?

A. I've heard the asking of deposition questions be called fair game, you know. Were I on the other side right now, and were you a Scientology lawyer right now, the mere asking of questions, innocuous, relevant, completely fine questions I've heard described, "Oh, you're just fair gaming me because you responded to this discovery, because you propounded discovery designed to establish the elements of a claim that, you know, that you have."

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Yeah, I've heard just about everything be dubbed that because it's so electrifying sounding, people think they can create prejudice with it. I've heard just about everything described as being fair game, including the phone being disconnected because you didn't pay the bill.

"Oh, Scientology disconnected my phone. Fair game. Fair game."

It's just nonsense, man. You know it. See, and -- whatever. Go on.

Q. So, in your view, then, a lot of times people that have falsely made statements about fair game as to Scientology really is a consequence of their own paranoia?

A. There is certainly that element to it, certainly.

Q. And there's no reason for them to be scared of Scientology, they're just bigoted; right?

A. In some instances, yes.

Q. In Armstrong's?

A. Either wrong or bigoted or they're just using it cynically as a ploy to manufacture some sort of litigation advantage.

Somebody has a valid claim, those things usually get settled pretty easily. We're not unreasonable people. It's somebody who, for example, takes $800,000 in a settlement, gives it away to his friends and says that he doesn't have to abide by any of the terms of the

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settlement, but he gets to keep the money. That is criminal. That's dishonest.

If he didn't want to make the deal, he shouldn't

have. If he does, fine. But if he didn't, give the money back and we'll start over, that's perfectly okay, just give the money back.

See, but he doesn't want to do that. He says, I get to keep what you gave me but I'm not bound, I have no honor. I'm not bound by anything I agreed with you.

Q. Okay.

A. Yeah, I consider that pretty dishonest and cynical.

Q. And that's how you consider Armstrong; right?

A. That's not the totality of my consideration about Armstrong. It merely is some conduct he engaged. You seem to have the impression I go around with this, like, "Oh, God, Gerry Armstrong, Gerry Armstrong." No, we have a dispute. If it's possible to resolve the dispute, I'm willing to do that.

And the church is perfectly willing and I'm willing to have him live his life and we'll live ours.

But when you ask you me about particular instances of conduct on his part, yes, he has engaged in that conduct, but that's not my total view of Gerry Armstong.

Q. Oh, I didn't mean to imply that it was.

A. I mean, I don't --

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(Discussion off the record.)

MR. GREENE: Q. Wait a minute. I artfully asked you the question and thank you for calling that to my attention.

A. Okay.

Q. I will thusly qualify it that that's part of how you view Armstrong is as you described somebody who took $800,000 and gave it away to his friends and said, I'm not going to honor the terms of the agreement, right, you're talking about Gerald Armstrong?

A. He did that. My view of that is irrelevant to him having done that. I mean, that's conduct he engaged in.

Q. According to you. That's your characterization of his conduct.

A. That's his conduct. It's not necessarily my opinion. He has expressed it. He's expressed it similarly and differently. You know, It's not an opinion I have. It's just the conduct he engaged in. It's up to him to live with the conduct he's engaged in.

Q. And part of what he has to live with in consequence

of engaging in such conduct is really that that's -- it's criminal in nature because it's so dishonest; isn't that right?

A. Well, it's certainly dishonest. I don't know if it violates any criminal statutes that one would be able to

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get a prosecution concerning, but it certainly is dishonest.

Q. According to Scientology's ecclesiastical tenants, it's criminal as well, isn't it?

A. Whatever characterization.

Q. I'm asking --

A. I'm not putting characterizations on it.

Q. I'm asking you.

A. My personal opinion is that it is a dishonest act. It is a dishonest act to have done that.

The honest course of action would be -- would have been to ensure that he kept his word.

MR. WALTON: I'm sorry, I missed part of that. Was that church's position or the deponent's position?

THE WITNESS: Who cares?

MR. WALTON: Well, it makes a difference to me.

THE WITNESS: Ask a question.

MR. GREENE: You can ask a question when you examine him, please.

MR. WALTON: Would you tell me what the question was?

(Record read by the reporter.)

THE WITNESS: Sounds like my opinion, Mike.

MR. GREENE: Q. Is that the opinion of CSI as well?

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A. Insofar as a corporation can have an opinion of how it feels about Mr. Armstrong's conduct insofar as the settlement, I think it's expressed in our causes of action that we've alleged seeking relief from his tortious action, well, actually, not tortious action, but his breach.

Q. Now, so according to the definition of fair game as it's given in Exhibit 16, it's really Armstrong that's engaged in fair game because you feel that he's lied to you?

A. That question makes no sense to me. Yes, I feel he has lied to us.

Q. And you feel that he's used you; right?

MR. BOWLES: Objection, vague.

THE WITNESS: In what manner?

MR. GREENE: Q. By taking your money and telling you to go jump.

A. He's done that, certainly.

Q. And wouldn't you say that that is being abusive?

A. Yes, certainly it's abusive. Yeah.

Q. Now, before the settlement agreement you considered that such a possibility could occur, didn't you?

A. What?

Q. Prior to the settlement you considered that in the realm of possibility was the scenario that Armstrong could

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take the money and spend it and then not keep the terms of the agreement, that was within the spectrum of your thought, wasn't it?

A. I don't know how realistic a possibility I considered it. I attempted, and other people I was working with attempted, to guard against that possibility by making the settlement document as complete as we could. Our anticipation was that if we arrived at an agreement, that agreement would remain in place because we had no doubts that both sides were entering into it with an honest desire to work out an agreement. But that doesn't mean that in the agreement that's worked out, you don't guard against all possibilities, even if you don't consider them necessarily realistic.

Q. Right. And even though you didn't necessarily consider the scenario that brings us here to be realistic at the time, you saw it as a possibility, didn't you?

A. It was contemplated in the settlement document out of a belt and suspenders approach.

Q. Describe what you mean.

A. A very complete document that provides for all possibilities, even though some may be remote just so as to insure there is a complete end to the hostilities.

Q. I see what you mean. So when you say belt and suspenders, what you're talking about, if I understand

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correctly is, that if the objective of the settlement is the functional equivalent of the pants, it's better to have both a belt and suspenders in order to keep the pants on and up; right?

A. Sort of, because -- and that doesn't presuppose that the belt is going to fail. You don't have a view in mind that the belt will fail.

Q. Right.

A. You just are making sure that that which you've bargained for, which is the pants staying up, will remain in place.

Q. Okay.

A. So that all the decisions that need to be arrived at are arrived at before the settlement agreement is signed.

It's the same way with any contract, you make sure everything is known and understood and agreed upon before you sign rather than afterwards.

Q. So then you have both belt, a belt and suspenders so that if the belt fails, you got backup by suspenders; right?

A. Well, both sides has the belt and suspenders.

Q. Okay. Now, when you were looking at the contract with Armstrong, the pants was the contract itself, right, as you said?

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A. To continue the analogy, yes.

Q. Okay, to continue the analogy.

So then belt and suspenders were enforcement by injunction; right?

A. Which one do we want?

Q. I don't know. I don't know.

A. It was this --

Q. I think we --

A. -- belt and suspenders was merely a comment, okay?

MR. BOWLES: One at a time.

MR. GREENE: Q. It's a good analogy.

A. Okay, fine. But as with any analogy, you can extrapolate it to point where it becomes somewhat nonsense.

Q. I'm just trying to get the idea with you. And so in terms of the protections to keep the pants of the agreement on, there was injunctive relief; right?

A. That's among the remedies for a breach; right.

Q. Okay. Attorneys' fees and costs?

A. Yes.

Q. Liquidated damages; right?

A. Yes.

Q. Enforcement in L.A.?

A. Yes.

Q. Nothing else aside from that; right?

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A. Whatever is said in the agreement.

Q. Those are the enforcements, to your knowledge, those are the enforcement provisions of the agreement that you bargained for and negotiated to be able to protect yourself in case the pants started to come off; right?

A. Those are among them, yes. We'd have to consult the settlement agreement to make sure we got all of them. I'm reciting it from memory as I sit here.

Q. So then now as you sit here today, when Armstrong now talks about the content of his experiences in a knowledge of Scientology, it doesn't do any real harm to Scientology in the larger picture, does it?

A. In the larger sense, I don't know. It depends on who he's doing the talking to, in what form. Continuing to ferment litigation is a violation of the agreement.

Q. I understand that.

A. That's right.

Q. I understand that.

A. You're asking me to give an opinion on whether a certain hypothetical activity on his part would hypothetically damage the church in any way. We have alleged damages in the case in L.A. We have alleged damages we have sustained on the basis of his breaches. I'd be happy to talk about those. But in the hypothetical trying to say that in the

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larger sense something he does doesn't damage the church, it opens too much leeway for misinterpretation and I don't think you want to do that.

Q. Certainly you wouldn't want to do that. And so my next question to you --

A. I guess not.

Q. -- is what damage did the church suffer from the quote of Gerald Armstrong's that was published in Newsweek magazine?

MR. BOWLES: Objection. We're getting into relevance here, Mr. Benz.

MR. BENZ: What? Is that claimed as one of the items of damage?

MR. GREENE: Yes.

THE WITNESS: It's claimed as one of the items which is an improper disclosure that gives rise to the liquidated damages provision.

MR. BOWLES: In the other litigation.

THE WITNESS: In the other litigation. And that liquidated damages provision was put there because of the difficulty of assessing how much exact damage is for one statement or this statement or the other statement.

MR. GREENE: Q. Okay.

A. So my answer would be given all of the factors, 50 K.

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Q. And what are the factors that go into that assessment?

A. Gerry's, at that time we believed, honest whole hearted promise that if he said something like, that it would be 50 K. And excuse me if I'm wrong for having taken him at his word.

Q. I see. So what you're relying on is the representation in the contract itself that the plaintiff acknowledged that the estimate would be $50,000?

A. For that specific type of disclosure that you've mentioned.

Q. A experience/knowledge type of -- a 7-D disclosure?

A. If it's D. I believe it is D.

Q. It's D, okay.

A. Let me see.

Q. Why don't you take a look and confirm it?

A. It's D.

Q. Okay. Aside from the language in provision 7-D of the contract whereby it states, "Plaintiff acknowledges that $50,000 is a reasonable estimation of the damage," what other considerations, if any, went into arriving at that number?

Actually --

A. Go ahead.

Q. I'll withdraw that question and ask you this

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question instead.

The figure of $50,000, that originated from your side of the table; right?

A. It was agreed upon by both sides of the table. I don't remember which side originated the exact amount.

Q. Okay.

A. I think we originated the concept of liquidated damages.

Q. And the purpose of the concept was to make sure that the agreement had some teeth in it so that Armstrong would respect and keep the agreement; right?

A. The purpose of that clause was a recognition of how difficult it would be to prove individual items of damage on individual disclosures. And it was a formulation based upon an estimate of how much it would cost us to fix them.

Q. And when you say how much it would cost you to fix them, then you're not actually referring to damage that -- well, let me ask you, when you say how much it would cost us to fix them, is what you're referring to court costs and attorneys' fees?

A. Not necessarily.

Q. What are you referring to?

A. Although, not -- may I finish my answer? I said not necessarily, but I don't mean to necessarily exclude that.

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Q. Well, what do you mean to say?

A. What I mean to say is that anything we would have to spend to fix it. You know, the concept of liquidated damages presupposes, at least, what the contract says is there's a difficulty calculating the precise damages, attorneys' fees -- perhaps in terms of attorneys' fees in consultation to fix the disclosure with the source it was given to. I mean, the receive point, not the source.

Q. You mean, for example, we'll use the KFAX where Armstrong was going to go on the radio. And there was a letter from Bartilson threatening so sue the radio station if they let Armstrong on because that would be a violation of the settlement agreement, is that what you mean by consultation with lawyers. Would that be an accurate example?

A. No, that would not be an accurate example. That would be a completely inaccurate example.

Q. And then litigation expenses would be a completely inaccurate example, as well; right?

A. I don't think that that's necessarily the case.

Q. Then what is the case?

A. What is the case is what is put in the contract exactly as it's put in the contract reflects the viewpoint of both sides of the contract, because both sides freely and voluntarily and willingly agreed to it. And a lot of

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the things in the contract, there's a provision for liquidated damages to avoid just the sort of word games that you're trying to play with me in terms of calculating damages.

Q. Well, the truth is is that there was no base line of damages that you could calculate; right?

A. The truth is as expressed in the settlement agreement and in that paragraph because the paragraph describes what factors go into liquidated damages, I mean, and the need for them there; that's the truth.

Q. There is no base line of damage assessment that you have arrived at which relates to a 7-D disclosure, is there, aside from what's in the actual body of the contract?

A. The amount of liquidated damages that was agreed upon to be put in that contract for these improper disclosures was based on a reasonable calculation.

Q. Okay.

A. It is a reasonable amount. It is an effort to quantify that which is difficult to quantify. It is certainly not punitive in nature. It is the classic liquidated damages.

Q. Well, I really appreciate all of your contractual construction, Mr. Farny, but I'd like to get some direct answers from you.

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A. You just did.

Q. And so far you want to make comments about word games and this and that. I'm sorry, sir, you're the one playing word games here.

MR. BOWLES: Objection.

MR. BENZ: Objection is sustained.

THE WITNESS: We're taking a break.

MR. BENZ: And I'd admonish Counsel and the witness to engage in question and answer instead of personal comments.

MR. WALTON: Just from my perspective, I think that maybe that admonishment can be given -- as to waiting until we're at this level -- maybe earlier on a lot of that stuff coming from that side of the table.

(Short recess.)

MR. BENZ: Let me again repeat the admonition that we want to return to the questions and answers.

And I have made it a practice, and would prefer this, but I will change it if necessary, and that is I don't insert into the deposition until such time there is an objection and a request for a ruling, since I prefer to allow leeway for the questioner to question and the answerer to answer. But if it does appear to be getting out of line, I will step in earlier. And if you want me to step in earlier and I haven't, please ask.

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MR. GREENE: Okay.

MR. BENZ: Okay.

MR. BOWLES: Mr. Greene, I would remind you that you're going to take the morning -- this morning to wrap up. And so far I haven't heard any relevant questions yet. So why don't you proceed with something that actually has something to do with the fraudulent conveyance suit.

MR. GREENE: Thank you for your suggestion, Mr. Bowles.

MR. BOWLES: Okay.

MR. GREENE: Would you read back the last question and answer?

(Record read by the reporter.)

MR. GREENE: Q. Would you describe for me, please, the reasonable calculation to which in your last answer you made reference?

MR. BOWLES: Objection. Calls for a legal conclusion and it is irrelevant to the lawsuit in which we are engaged.

I've let this witness go on for some time now back and forth with the attorney. And I think we've beaten this to death. And I think this had gone way off the track, so let's get on to a new subject.

MR. BENZ: I'll sustain the objection at this

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point.

MR. WALTON: May I?

MR. GREENE: No argument? I don't get to respond?

MR. BENZ: I'll give you my ruling and then you can respond.

MR. GREENE: That's fine.

MR. BENZ: See if you can change my mind. Go ahead. Mr. Greene first, then Mr. Walton.

MR. GREENE: All right. The reason that I think your ruling is wrong is that the entire basis, as you know, and in fact the basis of the fraudulent conveyance action is the claim that's asserted in L.A. The lion's share of the claim that's asserted in L.A. in terms of monetary damages is predicated on the claimed entitlement to liquidated damages.

And in order to be able to determine the enforceability of that liquidated damages provision as reflected in the claims made in the L.A. lawsuit upon which the claim that the Marin lawsuit is based, I'm completely entitled to go into how it was that this figure was arrived at.

I mean, the principles of law are very, very clear with respect to liquidated damages. And I'm, simply based on what those principles are, inquiring of this witness what is the basis of the calculation that the liquidated

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damages should be $50,000 a pop. How was that arrived at.

The law is very, very clear that there's got to be some reasonable calculation, as Mr. Farny knows, those were the words that just came out of his mouth. And now that I'd asked him to explain -- and I think that it's a complete denial of Mr. Armstrong's right to obtain evidence that's relevant to defend himself in the Marin lawsuit because, as you know, the lion's share of the affirmative defenses in the Marin lawsuit are an attack on the agreement upon which the Marin lawsuit is based.

And one of those affirmative defenses is that the liquidated damages provision is not a reasonable calculation, but is a penalty. And your ruling, his answer, my question, the objection, my question -- his -- it's a denial of Armstrong's right to due process. It's a denial of Armstrong's right to obtain discovery on an issue that is so material.

And I'll add that during the first session of this witness's deposition, he admitted when Mr. Walton questioned him that just insofar as adding up the numbers of liquidated damages there was a mistake of $100,000. So when you take claims predicated on the entitlement to iquidated damages, that Scientology is saying, hey, this transaction was in -- and transfer was fraudulent and designed to gyp us and cynically deceive us out of that to

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which we are entitled, and they're standing on the contract, I certainly have the right to find out how that term was arrived at on the contract. And I respect any submit that your ruling is incorrect.

MR. BENZ: Mr. Walton.

MR. WALTON: It seemed to me that you partially ruled on this when I was doing my brief stint, your Honor.

I was talking about -- I was trying to get some information regarding what these damages were, as you recall.

I'm not party to this Los Angeles lawsuit.

However, by alleging a conspiracy, plaintiff is trying to hold me responsible for whatever the damages are that they've alleged in this other lawsuit to which I'm not a party.

So I think my explanation and your ruling last time is that I am entitled to find out what is the damage. I mean, since I'm not -- I don't have any rights in this other lawsuit, but I need to know what the damages are and how the plaintiff came up with the damages in order to be able to get some sort of defense together to protect myself from this $3.8 million claim.

All I know is there's this claim, and I don't know how they came about it. I look at the -- as we were sort of going through the complaint, and as you recall I was

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asking questions, sort of boring everybody, but I really need to know what the particulars are in order to be able to defend myself.

MR. BENZ: Okay, Mr. Bowles.

MR. BOWLES: Are you inclined to change your ruling?

MR. BENZ: Somewhat.

MR. BOWLES: All right.

MR. BENZ: I take advantage of this opportunity.

MR. BOWLES: Because if you weren't, I wasn't going to say anything.

MR. BENZ: No, I understand.

MR. BOWLES: Mr. Greene has gone on at great length on the liquidated damages clause already. This is a lawsuit today that involves Mr. Armstrong's fraudulent conveying assets of his own in order to go judge proof.

That issue, I haven't heard questions related to that issue related all day today.

The issue as to whether or not liquidated damages were calculated in a proper manner, or the contract down in Los Angeles was at issue in Los Angeles was worded in a proper way, or the intention behind it was proper are matters for the Los Angeles court; they're not matters for this litigation. It doesn't matter a whit how much comes out of L.A. What matters in this case is whether or not

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Mr. Armstrong gave away assets without adequate exchange and for which the plaintiff, if it prevailed in Los Angeles, will have some access to satisfy a judgment.

So again, I think what Mr. Greene is doing is spinning his wheels and wasting all of our time by getting into minutia of another piece of litigation.

MR. BENZ: Submitted?

MR. WALTON: I was just going to point out one more thing and that is that the issue as to the amount of damages is certainly critical because, if it turns out that Scientology, the plaintiff, has proven $12.80 worth of damages, then certainly Mr. Armstrong's conveyances are not -- they have no relevance because he can probably come up with the $12.80.

So I think it's really crucial for us to try to find out as closely as we can what the damages are and how did the plaintiff get to this position where they're claiming $3.8 million. I submit.

MR. BOWLES: Mr. Benz, excuse me, we're already beaten this issue to death.

Mr. Farny has testified already as to what the basis for the liquidated damages was. So in addition to my prior objection, I think it's already asked and answered as well. We've already taken more than enough time in this area.

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MR. GREENE: I would -- if based on what Mr. Bowles says here, I would be satisfied if what the witness says, and I'll ask the question is if there were no other factors that went into the calculation of what liquidated damages should be aside from what he said, then we can move on.

But unless he's willing to adopt what his attorney says and, you know, give us a base line so that we know what we're dealing with, then I've got to find out. And it's an affirmative defense. The issue is joined. It's in this lawsuit.

MR. BENZ: The problem I have with it is the

complaint. The first two causes of action are fraudulent conveyance, which is no problem, I would be able to rule easily if the lawsuit were limited to that. However, the third cause of action, we have a conspiracy cause of action requesting $1.8 million in general damages and also requesting $3 million in punitive damages on the conspiracy count. Consequently -- and the question of whether punitive damages is --

MR. ARMSTRONG: Liquidated.

MR. BENZ: Excuse me -- liquidated damages are proper or a penalty is raised by an affirmative defense, that it's still at issue. I'm going to allow some additional questioning on that issue on how they were

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arrived at to the extent the witness knows.

MR. GREENE: Thank you.

Q. Mr. Farny, aside from what you have told us thus far with respect to how the $50,000 liquidated damages amount was arrived at, are there any other factors that went into that determination aside from the fact that in the agreement the reasonableness of that amount was acknowledged by plaintiff?

A. Well, as I said earlier, it was an effort to approximate what it would take to fix any, you know, any improper disclosure.

Obviously, some would take more than that amount, but it was an effort to calculate as best we could at that end of it what it would take to fix the results flowing from an improper disclosure --

Q. I understand that --

A. -- that's what I communicated as the base line.

Q. I understand that that was the intention. What I'm trying to find out from you is what is the $50,000 in proportion to?

A. It was in proportion to what it would take, what it would cost us to fix.

Q. And I'm asking you how did you determine the cost that would be incurred to do --

A. Well, it was --

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Q. -- such a fix?

A. It was an estimate of staff time, attorney time, any other actual expenses that might go into it. I mean, it was an effort to quantify what it would take.

Q. Staff time --

A. Recognizing that it would be difficult to do.

Q. Staff time to do what?

A. To fix whatever resulted from the improper disclosure, whatever that would have been.

I mean, I think you're seeing the line of reasoning that both sides engaged upon, at least insofar as Gerry's lawyer in arriving at an agreement that liquidated damages would be appropriate.

It was an effort to estimate what it would take to fix an improper disclosure in terms of correcting the information at the receipt point and the other factors I discussed.

Q. Let me ask you this. You're familiar with the, I believe it was May 6th, 1991 Time magazine article entitled "Scientology, the Cult of Greed"; right?

A. I'm familiar with the article, yes.

Q. And in your view, that was a very damaging article; right?

A. Yes.

Q. And in order to remedy the damage, Scientology took

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out a series of full page ads over a number of days in USA Today; right?

A. In part, but that didn't completely recompense this.

Q. So then would that be what you're talking about?

A. Do you mean would those precise ads be what I'm talking about or that type of activity?

Q. That type of activity.

A. That type of activity is among the possible types of activity that would fit within the considerations at the beginning before anything happened.

Q. So then at the beginning, what was the estimation of staff time that you made?

A. It wasn't broken down. All the factors were combined, all the possible factors of what it would take were combined and an amount was arrived at that seemed to approximate what all those factors would be. But an arithmetical calculation of this much in staff time, this much in media time, this much in attorney time, no, it was just based on the experience in dealing with that sort of activity.

Q. What was your experience in dealing with that sort of activity that you relied on?

A. It wasn't merely mine, it was --

Q. I know. I'm speaking of --

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A. -- of the entire group at the table, including the lawyers.

Q. So what was it?

A. That $50,000 would be reasonable.

Q. Was there an actual quantification of staff time?

MR. BOWLES: Asked and answered.

THE WITNESS: Only as a component of the entire matrix.

MR. GREENE: Q. And how much was that?

A. It was a portion of the entire matrix. As I said, I didn't quantify this much for staff time, this much for attorney time. It was, well, what would go into it?

Well, we'd have staff time going into it, attorney time going into it, and other factors --

Q. All right.

A. -- you see. And we arrived at, well, what would be a fair number, and what was arrived at after negotiation was that this number would be the correct, the best number.

Q. And what specifically was the staff time estimated to address?

MR. BOWLES: Objection, that's asked and answered, Mr. Benz. We're just going around in circles here. He's already answered the question, and Mr. Greene is now repeating himself.

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MR. BENZ: I think this question is a little bit different from the standpoint he's asking whether -- not the amount of staff time or the quantification of staff time, but what it was --

MR. GREENE: The purpose.

MR. BENZ: All right.

THE WITNESS: Engaging in the activity of correcting whatever resulted from an improper disclosure as opposed to the normal duties. That was the general consideration.

MR. GREENE: Q. And what about attorney time?

A. What about it?

Q. What would that be? What would be the purpose of attorney time?

A. Attorney work needed and in rectifying that which flowed from the improper disclosure.

Q. Does that include attorneys fees to litigate?

A. Doesn't necessarily exclude them, although there is a separate provision in the settlement agreement for collecting attorneys fees in prevailing in any enforcement action.

MR. GREENE: Mr. Benz, I would request you direct the witness to answer the question directly rather than by giving me an evasive recitation back to the settlement agreement.

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MR. BOWLES: I object to that. He's answered your question.

MR. BENZ: I think he has answered the question.

If you want to ask him another question.

MR. GREENE: Okay.

Q. Are you saying then that since attorneys' -- there's an attorneys' fees provision in the contract, that attorneys' fees to rectify a 7-D violation are not included, or were not included in the assessment of the $50,000 as being a reasonable calculation?

A. No, that's not what I said. That's actually not what I'm saying, because there's different types of attorneys' fees for different types of activity the attorney would be engaged upon in rectifying a 7-D disclosure.

There may be, for example, hypothetically, other litigation necessary to correct a 7-D disclosure that Armstrong would not have been a party to, for example. And it wouldn't be a litigation designed for enforcement. And calling into play that provision of the settlement agreement. But it would be other --

Now, one of the factors entering into the consideration giving rise to liquidated damages is whether or not one would want to put directly at issue the attorneys' bills from the other litigation that may result

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from an improper disclosure.

So instead of doing that, a number is arrived at that includes as a component part the best estimate possible of what might be the attorneys' fees, you know, that would have to be spent. Do you see what I'm saying?

Q. No, I don't.

A. I can't help you then.

MR. BOWLES: It's clear to me. Next question.

MR. GREENE: Q. Were there attorneys' fees -- I mean, excuse me.

Were there liquidated damages provisions in the other contracts?

MR. BOWLES: Okay. Objection, that's going into the confidential content of the other agreements.

MR. GREENE: Number one, we have a waiver. This witness yesterday testified at length about what we did with respect to them and the provisions in their contracts.

Number two, the question whether or not the liquidated damages provision at issue here is a reasonable estimation or a penalty is directly the question of whether or not there were similar provisions for other people, and if so what the amounts of those provisions were, will provide relevant evidence directed at that issue.

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And again, that's the affirmative defense, is that the purpose of this liquidated damages provision is to act as a penalty, not as a reasonable assessment. And certainly one way of determining whether or not this liquidated damages provision is a penalty is what its amounts are in comparison to the other people who were all part of this universal settlement.

MR. BENZ: Well, I don't think the question was quite --

Could you read that question back again?

(Pending question read by the reporter.)

MR. BOWLES: This goes to the content of the other agreements. There has been no waiver. Yesterday's testimony dealt with initial considerations on the overall negotiation with Mr. Flynn. We've objected to the content of the other agreements. That objection has been sustained yesterday and this is no different.

MR. BENZ: I'm going to sustain the objection with this comment, that if plaintiff intends to defend on the grounds that this was the same provision in all of the contracts, or to respond to the affirmative defense that everybody in the whole world agreed to that, I mean, everybody in connection with the settlement agreed to a similar -- to a liquidated damages provision, and to a similar liquidated damages position, I will recommend that

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discovery be reopened and/or that the court prohibit admission of that evidence if so offered by the plaintiff.

Obviously, I can't rule on it. But with that in mind, I will sustain the objection.

MR. GREENE: Well, then can we -- would the referee inquire of the plaintiff whether or not that's going to be their position so that we can take the action that we need to to get the discovery we need, if we need it? I mean, if they're willing to enter into that stipulation, then that's fine. But if they're not, then we need to know that so that we can take the appropriate actions because trial is coming right up quick.

MR. BENZ: Well, I can't ask them to -- I don't believe I have the power to ask them to so stipulate. My ruling is based upon the fact that there's nothing to indicate that is part of their defense. I mean, excuse me, not a defense, but response to the affirmative defense. If they take that position, then my ruling would obviously be different and I would ask the trial judge to take that into consideration in ruling on the admissibility of whatever may be offered.

MR. GREENE: Okay.

Q. Aside from Armstrong's agreement and staff time and attorney time required to correct, as you say, a 7-D violation, are there any other factors that went into your

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calculus in consequence of which you arrived at the $50,000 liquidated damages figure?

A. I believe I gave two other factors, which was any other expenses that we would have to pay in order to fix the result of that, and I believe you introduced the concept of whether that could include payments for advertisements to fix it. And I agreed that that could include that.

And then, of course, there's the general consideration, which I've testified to more than the other specific components, which was a sense from the group discussing what to put in the agreement, what would be reasonable based on our experience of what it would take to fix some sort of improper disclosure. Those are the ones that I'm aware of as I sit here.

Q. At the time of consideration, you did not think about advertisements, did you?

A. I don't remember whether we did or not. But it would be the sort of expense that would be within what we did consider.

Q. And what would need to be fixed and corrected would be false information coming from Armstrong about Scientology; right?

A. Well, that provision of the agreement isn't limited to an assessment of whether what he says is true or false,

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but that would be a factor.

Q. And that was a very important factor, wasn't it?

A. It was an important factor, certainly.

Q. Were there negotiations with Flynn with respect to what the amount of the liquidated damages would be?

A. I believe so.

Q. And how did those negotiations go? Did you guys first say, "Well, what we want is $100,000 per violation," and he came back and say, you know, 25?

A. No, I don't remember it being that way.

MR. BOWLES: This is also asked and answered, Mr. Greene, about an hour ago.

MR. GREENE: Q. Were any numbers discussed back and forth between your side and Flynn in consequence of which the $50,000 amount was arrived at?

A. At least $50,000 was one -- was a number discussed. I don't remember whether there were other numbers discussed. I just don't remember one way or the other.

Q. You are familiar with two individuals named Vicky and Richard Aznaran, are you not?

A. Yes.

Q. And they executed settlement agreements with CSI, did they not, among other entities?

A. They have, yes.

MR. GREENE: I would like to mark as Exhibit 23 an

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eight-page agreement entitled Mutual Release Agreement, and then as 24 one with the same title, with 23 pertaining to Vicky Aznaran, 24 to Richard Aznaran.

(Defendant's Exhibit Nos. 23 and 24 marked.)

MR. BOWLES: Have you got extra copies?

MR. GREENE: No.

Q. Would you take a look at Exhibit 23, please.

A. I've looked over it.

Q. The last page has got somebody who has signed on behalf of CSI; right?

A. Yes.

Q. And you were in CSI legal at the time -- or in OSA legal within CSI at the time this agreement was executed, weren't you?

A. Not really. I was officially posted there, but this was during the time period when I was on the RPF.

Q. This was when you were on the RPF?

A. Yes.

Q. Subsequently, you have seen these agreements, have you not?

A. Yes.

Q. And Exhibit 23 is an accurate copy of Vicky Aznaran's settlement agreement, is it not?

A. If you say so. It appears to be complete, but I don't know.

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Well, wait a minute.

The number is Xeroxed off the bottom of page five, but otherwise it appears to be complete.

Q. And would you conduct the same examination with respect to Exhibit 24.

A. Yes.

Q. And Exhibit 24 appears to be a true and correct copy of Richard Aznaran's settlement agreement with CSI; does it not?

A. It appears to.

Q. Now, Richard Aznaran worked for the Scientology organization as the head of security worldwide, did he not?

MR. BOWLES: I'm sorry, can you read back or restate it?

MR. GREENE: Q. Yes. Richard Aznaran worked for the Scientology organization as head the head of security worldwide, did he not?

MR. BOWLES: Objection, vague.

THE WITNESS: No. He worked for us. He worked in security for a time, a brief time, but I wouldn't describe his position as that.

MR. GREENE: Q. Richard Aznaran actually conducted or designed the security in Gilman Hot Springs, didn't he?

A. I'm aware of him saying he did, yes.

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Q. And you're aware of the fact that he did so do that, aren't you?

A. Some, but I couldn't say which.

Q. And Vicky Aznaran was the inspector general for Religious Technology Center; right?

A. Yes.

Q. She was directly under David Miscavich; right?

A. Well, that was one of the issues in the suit, whether she was or wasn't. I don't know what she considered herself. She was the president of Religious Technology Center and the inspector general, which was a senior position in that entity.

Q. And she was privy to a tremendous amount of information having to do with day-to-day Scientology operations, wasn't she?

A. I don't know what she availed herself of. I have no idea.

Q. Do you have any explanation why the liquidated damages provisions in Exhibits 23 and 24 is $10,000 per violation?

A. I don't know. I wasn't involved in the process that led to these documents.

Q. Do you know whether or not -- strike that.

Richards and Vicky Aznaran left the Scientology organization in April of 1988, to your knowledge, didn't

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they?

A. No.

Q. Or 1987, excuse me?

A. Again, no. They originally left in March.

Q. March of 1987?

A. That's correct.

Q. And they routed out of Scientology, didn't they?

A. They routed off staff.

Q. And one of the conditions of their routing off staff was the execution of Exhibits 23 and 24; isn't that right?

A. I don't know if it was a condition of their routing off staff. It was a document, to my knowledge, that was signed so as to document the relationship with them at the time, but it wasn't necessarily a condition of their routing off staff. It happened to have been done, as you can see, because it's sitting on the table.

Q. Aside from the loss that you attributed to having

to pay for attorney time, staff time, expenses, is there any other component of loss which you included in your calculus that resulted in the $50,000 liquidated damage figure?

A. There may have been. There were several people involved from our side in the group that resulted in the settlement. I could only speak from my point of view of

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what we discussed and what my recollection of that is and what I had in my mind at the time.

Q. As you sit here today on behalf of CSI, is there any other component of the calculus aside from those which I just mentioned?

A. An anticipation of like actual monetary damage that may flow from an improper disclosure.

Q. And what was such monetary damage anticipated to be?

A. See, that's the whole point of it, you don't know.

One of the factors it takes into account is what such an improper disclosure may cost us in some other way, you see --

Q. Right.

A. -- and not just staff time. No, you didn't know.

That's why you make your best effort to figure out what would be fair .

Q. I would like to direct your attention now to Exhibit 20.

Okay. Have you got Exhibit 20 there?

A. Yes.

Q. All right. Now, Exhibit 20, you have seen that issue before, haven't you?

A. I've seen a version of it, yes.

Q. And Exhibit 20 appears to be a true and accurate

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copy of what it says it is, namely, the HCO policy letter of 11 May '71; isn't that right?

A. It appears to be.

Q. It appears to be?

A. That's what I said.

Q. Okay. Thank you very much.

A. I said I don't know. It appears to be.

Q. That's what I'm trying to clarify.

Do you have any reason, looking at that, aside from whatever the underlines are there that that is not a true and correct copy of what it purports to be?

A. I have to compare it to an original. It's not the right size. It's not the right color. To be absolutely certain, I'd have to compare it to the original. As I sit here, it appears to be, although I can't be certain.

Q. All right, that's fair. All right. Now, you are familiar with the concepts of intelligence on one hand and black PR in the other as discussed in Hubbard's writings, aren't you?

A. Generally.

Q. And the general idea is that intelligence is something that happens covertly; right?

A. That's one of the things he discusses in this policy letter.

Q. And that public relations is something that happens

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overtly; right?

A. Yes.

Q. Now, the term black PR means black public relations; right?

A. No, it means black propaganda.

Q. Okay. And black propaganda refers to the dissemination of false information, right, in part?

A. That's how it's used here in this issue.

Q. Okay.

A. As a covert campaign against, for example, the church, using lies and spreading them behind the scenes. This was written in an effort to enable people to deal with the effects of one such campaign if it's being waged against you.

Q. It talks about, in essence, ferreting out the source of black propaganda; right?

A. Yes.

Q. And that that's part of the purpose of intelligence, is to ferret out the source of black propaganda; right?

A. I would assume so, as a general proposition.

Q. And then one of the techniques that Hubbard discusses for dealing with a source of black propaganda is to dead agent the source; right?

A. By that is meant prove the lies as being lies and

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the source ceases to be a credible source, that's what is meant by dead agent. I think we talked about this in the last round --

Q. Okay.

A. -- before I was here.

Q. Now, looking at what's page 133, you see where there's a discussion about how black propaganda is a cross between PR, which refers to public relations; right?

A. In that --

Q. And intelligence. It's the third paragraph down from the top.

A. Yes.

Q. And when you've used the term black propaganda, that's what you've meant, isn't it?

A. Well, not exclusively because I have not necessarily differentiated whether the campaign is being waged against us covertly or overtly.

I have used it colloquially also to apply to an overt campaign to spread lies about us, but the more technical, precise definition would be the one expressed here.

Q. All right. Now, in this more broad sense that you have used the term black propaganda, that would include Gerald Armstrong, wouldn't it?

A. In terms of what he has done in the past?

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Q. Yes.

A. Yes, but he hasn't always necessarily been hidden about it.

Q. That's what I mean.

A. Which is why I've given it the broader definition than the purely technical definition here.

Q. I understand.

A. It's grown up in slang to refer to broader definition.

Q. Right. Anybody who is disseminating in fatua about the church?

A. Or about anybody else. I mean, there's been public officials who have been subjected to black propaganda campaigns, like Martin Luther King.

Q. Right, but we're taking here about you guys and Gerald Armstrong.

A. All right. Fair enough.

Q. Gerald Armstrong has never been covert about the black PR that you view him to have disseminated about the church?

A. No. We did this yesterday.

Q. That's right. We did.

A. I said no, that that's not the case.

Q. I'll withdraw the question. I'll withdraw the question. Okay.

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Now, going down here on the same page, where -- I think it's four kind of paragraphs down where it says "in the meantime, the dead agent caper is the best tool to counter it."

Is it your understanding of what Hubbard refers to is that the best way to counter black propaganda is to dead agent the source thereof?

A. We need to interject some definitions of terms here.

Q. Okay.

A. Because that's not exactly what he says and --

Q. Okay. What definitions do you desire to make?

A. Dead agent caper, for one.

Q. All right.

A. Because that's merely disproving the source -- proving that the source of a false statement made a false statement.

Q. That's one definition.

A. Or is not credible and, therefore, the statement he makes is not credible.

Q. That's another.

A. It's to prove the lie, disprove the lie.

So one way of countering a black propaganda campaign while one endeavors to find where the real source is is to meet with people who are forwarding it, knowingly

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or unknowingly, find out where they got the information and show them that that which they're saying and the source of it isn't true.

Q. Right. Now, that's one method of dead agenting. And another method of dead agenting is showing simply that the source of the black propaganda intrinsically is not credible; isn't that right?

A. The best way of dealing with it is to show that the specific statement is also not cred- -- it's just a lie, is a lie.

Q. I understand that, but that wasn't my question.

A. Well, I don't know if it would be effective merely to say that the person can't be believed without some sort of nexus to the lies he's spreading.

Q. Well --

A. I mean, if that's all one has, that's all one has.

But generally, if somebody is flapping around about false statements, you can usually fairly quickly prove some at least to be false, enough so that you can put his having said this to the individual in proper prospective for them.

Q. Indeed. And if, in conjunction with that, you can find other defects in the character of the source of the statements, those would assist the dead agenting effort as well, wouldn't they?

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A. I don't know. We're getting awful hypothetical.

Q. But if you would answer the question.

A. Well, it depends. If it's so far removed, it's a so what. Mario Andretti is a great race driver, but if he's speaking on a completely disrelated subject, who cares, or they don't relate.

Q. --Well, let's say Mario Andretti molests three-year-old children, that would matter, wouldn't it?

MR. BOWLES: Objection. We're getting way far afield, Mr. Benz.

MR. BENZ: It's hypothetical. Sustained.

MR. GREENE: Q. Going down another paragraph when you say, or when the statement says, the exhibit says, "A good policy when faced with a black propaganda campaign is to defend as best you can (dead agent and legal restraints) while you find out (intelligence) WHO," in capital letters, "is doing it, then confrontation can occur. Finding and suing false who's being make things much more involved."

One of the ways that you have dealt with the black propaganda coming from Gerald Armstrong has been an effort to legally restrain him; right?

A. No. You know, various churches have sued him initially for stealing the documents from the Hubbard archives. And since then for breaching his settlement

529

agreement and fraudulently conveying his assets. That's what the suits were designed for recompense for.

Q. Well, the initial Armstrong litigation also sought injunctive relief to prevent him from talking about his knowledge regarding Scientology, didn't it?

A. We talked about this yesterday.

Q. Well, I'm --

A. I don't remember. It was keyed towards his having stolen and improperly disclosed the materials he was entrusted not to steal and not to improperly disclose.

Part of the injunctive relief sought was against verbal disclosures of the same materials. But it flows back to Armstrong having stolen them in the first place.

Q. Now, the purpose of seeking to legally restrain Armstrong based on the contract is to prevent Armstrong from disseminating black propaganda in part, isn't it?

A. No. The purpose of the suit is to get back that which we bought and bargained for, solely and only, as to the L.A. suit.

The purpose for this suit is to establish and freeze the fraudulent conveyances so that we're able to collect any damages as they may be awarded against us in the Los Angeles suit. It's apples and oranges.

Q. And the purpose of the contract is to prevent the dissemination of black propaganda, falsehoods about

530

Scientology, from Armstrong; isn't that right?

A. The purpose is as I've said.

Q. Would you please answer the question, Mr. Farny?

MR. BOWLES: He has.

THE WITNESS: The answer to your question is no, Mr. Greene. The purpose of the lawsuit was to seek the legal remedies we seek in the lawsuits.

MR. GREENE: Q. I see. But Mr. Farny, actually -- I'll restrain myself.

Referee Benz, my question of Mr. Farny was, isn't it true that the purpose of the settlement contract was to prevent the further dissemination of black propaganda, lies about the church, from Armstrong.

His response was not responsive. He goes into talking about --

THE WITNESS: Time out.

MR. GREENE: -- the purpose of the lawsuits was.

THE WITNESS: That's what I thought you asked me. What I thought you asked me was about the suit.

MR. GREENE: Q. Okay. Would you care to answer that?

A. Because you've asked me five times about the suit, and that's what I thought you were still asking me.

Q. The purpose for the settlement agreements was, as you've said many times here, is to end the then existing

531

disputes between the churches and Armstrong, that was the purpose for the settlement agreement. So the answer to your question is no.

As you phrased it, that's so incomplete as to be misleading.

You're trying to pigeon hole it into this issue or some legal game you're going to play, but you just want to make sure the answer is complete. We settle the dispute then and that's what the settlement argument reflected.

And the dispute was his cross-complaint?

A. Not solely. And I don't even -- the major part of it.

Q. Now, Exhibit 20 constitutes ecclesiastical tenants of Scientology, does it not?

A. Yes.

Q. Now, directing your attention to Exhibit 19, would you peruse that and tell me whether or not you've seen it before and whether it appears to be an accurate copy of what it purports to be, namely an HCO policy letter of 21 November, 1972.

A. It appears to be, yes. Same caveats as the last one.

Q. And Exhibit 19 also constitutes ecclesiastical tenants of Scientology, does it not?

A. Ecclesiastical tenants, I mean, it's writing within

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the body of material that's ecclesiastical in nature, certainly.

Q. Okay.

A. But not anything in either of these two exhibits, 19 or 20, expresses tenants. Some illustrative examples and things like that. So it's ecclesiastical material, certainly.

Q. Okay. And it's considered by Scientology to constitute part of the body of its scripture; right?

A. In a general sense, sure.

MR: GREENE: Okay. I'd like to mark this as Exhibit 25.

(Defendant's Exhibit No. 25 marked.)

MR. GREENE: Q. Showing you Exhibit 25, which is a document entitled false report correction Breckenridge that's been produced in discovery, do you recognize this document?

Oop, let me change it. I'm giving you the one that -- I do that almost every time.

A. Do you want to --

Q. May we withdraw this particular exhibit? I'll give you Tim's. I think you can have this one.

A. Let me see if I can get this --

Q. Okay. What is Exhibit 25?

A. It appears to be a document written in or about

533

June of 1984. It makes an effort to deal with some of the false statements in Judge Breckenridge's decision.

Q. And did you participate in the writing of this?

A. Not that I recall.

Q. Okay. For the record, this is what's been Bates stamped, the last three numbers 357 through 370 in discovery produced by CSI.

A. Oh, wait a minute. Hang on, a second. I don't think the date in front reflects the date the document was prepared. That reflects the date of the decision. This looks like it was prepared much later.

Q. Indeed it does, because there are references at the end to 1992, aren't there?

A. Yeah, there are. So this appears to have been put together sometime in or after 1992.

Q. Okay.

A. Yeah.

Q. Do you know who put this together?

A. Public relations bureau.

Q. Of CSI?

A. Yes.

Q. And --

A. No, let me amend my answer to an earlier question that you asked whether I participated in it. I know I didn't participate in putting any of this together in '84.

534

I have to look at this again to see if I participated in putting it together in the '90's --

Q. Do it.

A. -- to be complete because I was operating off a wrong date.

I'll just look this over. Some of this information here is similar to that which is in Exhibit 1 that I did assist on.

So, yeah, I did assist in putting this together in that regard.

Q. Who else participated in putting this together?

A. Somebody in the public relations area.

Q. Who was that?

A. I just don't remember.

Q. When did you participate in putting this together?

A. Probably sometime within the last year.

Q. And you worked with somebody in the public relations bureau in doing so, didn't you?

A. No. My recollection is a draft was given to me and I provided additional materials for it and sent it back to them, so I don't remember who it came from.

Q. Who is the department head of the PR bureau of OSA at the time this was put together?

A. Probably Coreen Pouw.

Q. Do you how spell the last name?

535

A. P-o-u-w.

Q. And what was the title of her post?

A. She was a public relations aide, a-i-d-e.

Q. And where was her office located?

Q. 6331 Hollywood Boulevard.

Q. And that's the same location of the public relations division generally of CSI, right, of OSA, within CSI?

A. Within the Office of Special Affairs, yes.

Q. And who was her immediate senior?

A. Currently, that would be Edith. No, sorry, Jacqueline Kevenaar, K-e-v-e-n-a-a-r, who is the deputy commanding officer for production.

Q. And who was it at the time that Exhibit 25 was originated?

A. It may have been Klaus Buchele, B-u-c-h-e-1-e.

Q. Now, directing your attention to page 360, third full paragraph down from the top, would you read that paragraph into the record, please.

A. "The police authorized the investigation and videotapes, at which point Sherman embarked on an effort to ascertain the full intend of Armstrong's intentions."

Q. This makes reference to Scientology's view that Gerald Armstrong endeavored to take over the Church of Scientology; right?

536

A. That paragraph pertains to a police authorization and videotape.

Q. Right, I understand that, but that also refers to something broader, doesn't it, Mr. Farny, according to your knowledge?

A. Why don't you ask a question?

Q. I am.

A. Well, I don't know. I mean, there's reference to that which you're talking about elsewhere on this page, but this sentence refers to something else.

Q. I'm asking you about your knowledge, Mr. Farny. Isn't it the view of Scientology that at one point Gerald Armstrong endeavored to take over the church?

A. Oh, that's a different question. Yes.

Q. And one of the ways that he so endeavored to take over the church was by conspiring to plant false documents within the church?

A. Yes.

Q. And that in conjunction with so doing he was in cahoots with agents from the Internal Revenue Service?

A. Yes.

Q. And that false documents would be planted within the church and then the IRS would be tipped off as to their location and all of this would result in somehow a takeover of the church; right?

537

A. That's what's revealed in the videotapes, yes.

Q. So the paragraph I had you read into the record, that makes reference to the police authorizing the investigation and videotapes, that's what the investigation and videotapes were all about as referred to in that paragraph; isn't that true?

A. That's a different question, yes, that's what it was about.

Q. Now, the police investigation was authorized by Phillip Rodriguez ; correct?

A. That's correct.

Q. And that investigation was authorized in 1984, wasn't it?

A. Yes.

Q. And the investigation was in conjunction with efforts by Eugene Ingram, was it not?

A. In conjunction with efforts by Eugene Ingram?

Q. Yes.

A. Well, he obtained the authorization from Phillip Rodriguez.

Q. And Eugene Ingram is a private investigator; right?

A. Yes, he is.

Q. And he has been a private investigator for the Scientology organization for many years; isn't that true?

A. He's worked for counsel that we've retained for

538

many years, yes.

Q. And he still does, doesn't he?

A. Yes.

Q. And he did prior to the commencement of all of the Armstrong litigation, didn't he?

A. I'm not certain of that because they commenced around the same time. First Armstrong litigation was in, I believe, August of '82, and he came on sometime in the early '80's, perhaps right around there.

Q. All right. I'd like to mark the next exhibit as Exhibit 26.

(Defendant's Exhibit No. 26 marked.)

MR. BENZ: About how long do you plan to go?

MR. GREENE: About half an hour.

MR. BENZ: Why don't we take just a short break.

(Short recess.)

MR. GREENE: Q. Mr. Farny, what was the purpose of Exhibit 25?

A. To communicate the truth about that situation.

Q. And that was because falsehoods had been disseminated; is that right?

A. Yes.

Q. Therefore, everything, all of the factual statements in Exhibit 25 that are made are true and correct statements, aren't they?

539

A. To the best of my knowledge, but do you want me to read through the whole thing here? To the best of my knowledge they are, yes.

Q. In fact, you took extra careful effort in the production of this document to ensure its truthfulness and accuracy because you were challenging the opinion of a superior court judge; right?

A. Well, we always try to be accurate in our utterances.

Q. To whom was this document distributed?

A. I don't know.

Q. Were there any discussions about where this document would be distributed?

A. Not that I remember.

Q. Was this document given to the press?

A. I don't know.

Q. Who would know to whom this document was distributed?

A. Perhaps Coreen Pouw.

Q. Anyone else in addition to Coreen Pouw who would have such knowledge?

A. Well, if someone got it, they certainly would know.

Q. I understand that, but coming from CSI?

A. I don't know. She'd probably be the best person to say.

540

Q. Now, directing your attention to Exhibit 26, do you recognize that document?

A. Yes.

Q. How do you recognize it?

A. It appears to be a copy of the police authorization for the investigation we've been talking about.

Q. And to the best of your knowledge, is that a true and correct copy?

A. It appears to be.

Q. And you've seen it many times before, haven't you?

A. Yes.

Q. When was the first time that, you saw it, approximately?

A. I think in the spring of '85.

Q. And Exhibit 26, that was the authorization for this videotaping of Armstrong; right?

A. Yes.

Q. And therefore, in the past in declarations you have stated that the police have authorized the investigation and videotaping of Gerald Armstrong; correct?

A. I may have covered that.

Q. Do you recall covering that?

A. Probably is the best I can say, I probably covered that.

Q. Rodriguez, in fact, did not have authorization to

541

issue Exhibit 26, did he?

A. That's false.

Q. That's false, okay.

A. If you want to ask me the next question, I can explain what happened, but that's false.

MR. GREENE: Well, let's mark another exhibit as Exhibit 27.

(Defendant's Exhibit No. 27 marked.)

THE WITNESS: Ah, you are going to ask me the next question.

MR. GREENE: Q. Exhibit 27 purports to be a public announcement by Daryl F. Gates, Chief of Police, Los Angeles, April 23, 1986.

Q. Have you seen this document before?

A. Yes.

Q. And did you first see this document in 1985 about the same time you saw Exhibit 26?

A. No, I saw Exhibit 26 before I saw Exhibit 25.

Q. And Exhibit 27 is a repudiation by the Chief of Police of Los Angeles of the purported authorization made to Eugene Ingram by Rodriguez, is it not?

A. Well, it's an attempt to rewrite history and claims Rodriguez was not authorized in his act, which Gates wrote after a couple of CID agents from the IRS paid him a visit and threatened him, and also stemming from his, what most

542

charitably can be described as ill will against Eugene Ingram. But that doesn't -- you know, rewriting history with this doesn't change the fact that at the time it was performed, the videotaping was properly authorized.

Q. Has, to your knowledge, Chief Gates' public announcement ever been retracted?

A. Not by him. That guy wouldn't repudiate anything.

No, but he can't rewrite history after the fact.

Q. Now, what did the CID agents say to Gates when they visited him that caused him to disseminate Exhibit 27?

A. Well, it's been reported in the press is that they said something to the effect that the train is leaving the station, you better be on it with regards to not acknowledging the validity of the investigation that resulted in our finding out the attempt on the part of these two CID agent to infiltrate the church using Gerry as a pawn.

Q. And the press in which that was reported, did that happen to be Freedom magazine or Freedom newspaper?

A. No, it happened to be the NBC news, I believe it was.

Q. So then your view is that this Exhibit 27 by Gates is false?

A. The statements in there that purport to indicate that the videotaping was not properly authorized or that

543

the authorization for the videotaping was not proper are false.

Q. Now, you considered Armstrong's intentions with respect to the loyalists to be criminal, did you not?

A. I considered what he was doing to be, and I considered his intentions to be wrong. I don't have a particular criminal statute in mind in terms of his intentions. He was not of pure heart, no.

Q. The videotapes in this regard were submitted to the court in the initial Armstrong litigation, weren't they?

A. Not the first trial in '84, no.

Q. After, as part -- preliminary to the litigation or during the course of the litigation of the cross-complaint?

A. I think that was one of the places they were submitted. They were also put on a public record in other cases.

Q. In Christofferson?

A. That was one certainly.

Q. That was important.

A. The copies were sent to Congress.

Q. You sought to have Gerald Armstrong criminally prosecuted for this alleged plot, didn't you?

A. I don't remember if a specific criminal complaint was filed on that or not. If it was, it was.

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Q. That's not the question.

A. Well, that's how one would seek to have somebody prosecuted criminally is filing some sort of complaint with law enforcement about specifically, you know, violations on Armstrong's part.

I know we tried to have the CID agents involved admonished, certainly, and got them to cease their improper activity.

Q. Now, in 1986 you were within the legal division of CSI; right?

A. Yes.

MR. GREENE: All right. Let me just mark this quickly as Exhibit 28.

(Defendant's Exhibit No. 28 marked.)

MR. GREENE: Q. Showing you Exhibit 28 --

A. Oh, okay.

Q. Why don't you look at the exhibit there. This is a 13-page document. It's a letter dated April 25th, 1986 on a letterhead of the Office of the District Attorney, County of Los Angeles, to Reverend Ken Hoden, Kathleen Gorgon, Heber Jentzsch, John Peterson, David Butterworth, Church of Scientology.

Q. You've seen this document before, haven't you?

A. Yes, I believe I have.

Q. And when did you first see this document?

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A. Would have been around the date it bears.

Q. And this document is a response of the L.A. DA's office to the charge that Armstrong had conspired with Flynn and others to engage in these acts that were videotaped that you said the videotaped showed proof of; right?

A. No. The videotape shows proof of the acts. This is a response to a criminal complaint on whether the district attorney's office is going to prosecute --

Q. Right.

A. -- on the basis of the acts, so this refreshes my recollection that such a complaint was made.

Q. That's right. In fact, Scientology sought to have Armstrong criminally prosecuted for the crime of conspiracy to obstruct justice; right?

A. Let's see, I see other offenses listed here. I don't see that one listed with regards to Armstrong.

Q. Take a look at what's enumerated on page one as paragraph one.

A. Oh, I see. All right. That pertains to Chief Gates and IRS Agents Lipkin and Ristuccia.

Q. And Gerald Armstrong and Michael Flynn.

A. I see Gerald Armstrong there.

I was looking at point three which lists the offenses, particularly with respect to Armstrong.

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All right, yes, the answer to your question is yes.

Q. And also with respect to Armstrong that he was, I believe in your words, a pawn who conspired with Internal Revenue Agents Ristuccia and Lipkin to prepare false evidence; right?

A. Well, this document discusses the preparation of false documentary evidence, yes.

Q. And the solicitation of certain other crimes; right?

A. Yes.

Q. And in addition, that Armstrong committed extortion?

A. Yes.

Q. Burglary?

A. Well, solicitation of burglary.

Q. Solicitation of receiving stolen property?

A. Yes.

Q. And forgery; right?

A. Yes. Well, I think the receiving stolen property and forgery also apply to solicitation of him.

Q. Okay.

A. Yes.

Q. And finally, that Micheal Flynn aided Armstrong in such violations?

A. Yes.

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Q. So this is what the Scientology organization sought to have Armstrong prosecuted for having violated; right?

A. Yes, on the basis of the evidence disclosed on the videotapes.

Q. And the district attorney's office declined to prosecute --

A. They certainly did.

Q. -- Armstrong.

And this letter is an explanation to the Scientology organization why they so declined; right?

A. Well, it's what they said to us. I don't know that if it explains why they declined.

MR. GREENE: I'd like to mark next a three-page exhibit that's Bates stamped pages 669 through 671, dated August 4, '91.

(Defendant's Exhibit No. 29 marked.)

MR. GREENE: Q. Before I go to this exhibit, you were aware of the Christofferson case in Portland; right?

A. Yes.

Q. And you were aware that the record in that case was sealed; right?

A. Yes, after the settlement.

Q. Okay.

A. But as I said, these tapes were publicly disseminated elsewhere.

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Q. And also the record in Armstrong One was sealed, as well; right?

A. That's right.

Q. And you were aware of Judge Launder's ruling regarding the videotapes as well, weren't you?

A. He ultimately allowed cross-examination of Gerald Armstrong concerning them --

Q. Now, directing your attention to Exhibit 29.

A. -- that doesn't make them sealed documents, Ford.

Besides, the copies that went to Congress, the copies that went other places--certainly were not sealed.

MR. WALTON: Is there a question pending?

MR. BOWLES: He's clarifying his answer.

MR. GREENE: Q. Directing your attention to Exhibit 29, do you recognize that document that's been produced in this litigation pursuant to discovery?

A. Yes.

Q. And is that what you might call a dead agent document with respect to Gerald Armstrong?

A. I would call it a briefing sheet.

Q. Is that part of an effort to dead agent Armstong?

A. It's part of an effort to communicate the truth.

Q. And in such communication of the truth, did that include an effort to dead agent Armstrong?

A. It was an effort to communicate the truth about his

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lies. If you want to use the characterization, you are free to do what you wish.

Q. And I'm asking you whether or not my use of that characterization is a fair use.

A. No, because it's cynical and you're trying to twist things around to make it sound nefarious. I'm trying to clarify and just say what this is, which is an effort to communicate the truth. So no, I wouldn't say it's a fair use, Ford.

Q. Is the way I'm cynical and trying to twist things around similar to the way that Armstrong was cynical in signing the settlement agreements and giving away the proceeds?

MR. BOWLES: Objection.

THE WITNESS: I have no idea what you're talking about.

MR. BENZ: Sustained.

MR. GREENE: I would ask the referee to direct the witness to answer my question rather than engage in an ad hominem attack on me in response.

MR. BOWLES: Mr. Greene, you're engaging in a unprofessional ad hominem attack on the witness. Therefore, I object. And you're badgering the witness. I would prefer and appreciate it if you would ask professional questions dealing with the issues in this

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case.

MR. GREENE: The question having to do with whether or not Exhibit 29 is fairly characterizable as an effort to dead agent Gerald Armstrong. What I got back was no, it's not because you're cynical and you're trying to twist things and blah, blah, blah, blah, blah. That's not an answer.

MR. BENZ: Okay. Why don't you ask the question again and will the witness answer it?

MR. GREENE: Q. All right. Mr. Farny, is Exhibit 29 fairly characterizable as part of an effort to dead agent Gerald Armstrong?

A. As phrased, that would not be fair.

Q. Why not?

A. Because I don't consider it to be a fair characterization of what the document as a document is.

Q. The purpose of the document is to rectify Armstrong's lies; right?

A. A couple of them.

Q. And part of what the purpose of dead agenting someone is is to confront or expose that person's lies, isn't it?

A. That's also correct.

Q. Okay. Directing your attention to Exhibit 1 -- oh, excuse me, going back to 29 just for a second.

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Everything set forth in Exhibit 29 is accurate, true and correct, isn't it?

A. I don't see anything in here that I would have disagreed with at the time.

Q. Okay. So is the answer yes?

A. Sounded like it to me.

Q. Okay. Who drafted this document?

A. I don't remember.

Q. Was it drafted within the public relations division of OSA within CSI?

A. I don't know. Either there or legal, one or the other.

Q. And you don't know to whom it was distributed either, do you?

A. I don't remember.

Q. Was it distributed to CNN?

A. I don't know.

Q. Is there any record kept of the distribution points of Exhibit 29?

A. Not that I'm aware of.

MR. GREENE: I'd like to mark this as Exhibit 30.

(Defendant's Exhibit No. 30 marked.)

MR. GREENE: Q. Have you seen Exhibit 30 before?

A. Yes.

Q. And what is Exhibit 30?

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A. A false report correction concerning Gerald Armstrong.

Q. Is the purpose of it to correct the lies that were disseminated by Gerald Armstrong?

A. Yes.

Q. And also was the purpose of Exhibit 29 to correct the lies that were disseminated by Gerald Armstrong?

A. That's what I just said.

Q. I asked about 29.

A. Oh, 29.

Q. Don't get hot.

A. Would seem so, yes.

Q. Did you participate in the drafting of Exhibit 30?

A. There are a lot of parts of 30 that are very similar to Exhibit 1, so I think so.

Q. And without reading every word so that it takes five minutes, would you skim through the subject matter of 30, tell me whether or not there's anything in there that you see to be inaccurate or false?

A. I can do one or the other, but if you want me to say if there's any -- if you want me to say if there's any statement here that I can absolutely attest is true or false, I've got to read it.

Generally, I recall being satisfied with it, with what I put into it. I don't want to waste your time

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reading every page.

Q. That's fine. I appreciate that. We don't need to do that.

And when you say generally you were satisfied, is it correct that what you mean is you were satisfied as to the truthfulness and veracity of the representations set forth in Exhibit 30?

A. I would not have knowingly said something that wasn't.

Q. What is the source of 30 besides you, who else drafted it?

A. The documents referred to. Probably somebody in PR. Again, a draft would have been sent to me that I would have edited.

Q. And approximately when was it prepared?

A. This, I don't remember. Sometime within the last couple of years, I would think.

Q. To whom was it distributed?

A. I don't know.

Q. Is there any record kept of the distribution points of Exhibit 30?

A. Not that I'm aware of.

Q. Who ordered its preparation?

A. I don't know.

Q. Is there any record of who would have ordered its

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preparation?

A. I don't know that anyone did order its preparation.

Q. Did somebody tell you to prepare it?

A. No.

Q. Did you seek approval for your efforts in so preparing it?

A. It would have been run by counsel to be checked over. Aside from that, no.

Q. With respect to Exhibit 30, someone who received it would not know who the source of that document was, would they?

MR. BOWLES: Objection, calls for speculation.

THE WITNESS: Certainly, certainly they would. They would know who has handed it to them or who mailed it to them, if it was in the mail.

MR. GREENE: Q. If it came in the mail in an envelope without an address and without a cover letter, nobody would know who wrote it, would they?

A. That's not generally how something like this would be used. Usually something like this would be used to brief a staff member or sitting down in conversation with media and just walking them through this. So the source of the information here would be very much disclosed.

Q. Are cover letters disseminated with packets like Exhibit 30 when they're distributed?

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A. If something like this is sent in the mail to someone, our general practice would be to have a cover letter on it.

Q. And your general practice would be to keep a copy of it, as well, wouldn't it?

A. Of the pack, certainly.

Q. Of the cover letter?

A. Not necessarily.

Q. So is it your testimony that when you send out a 10-page false report correction, the intention of which is to cure the lies by Gerald Armstrong, not to mention the exhibits that go with it; that your practice would not be to keep any record of having done so?

A. There would not be a list kept of who got copies of this, that's what I'm saying, yes. The majority of the time this would be used in a one-on-one-meeting with somebody, and there would be no need necessarily to keep some sort of log or index of it.

Q. And likewise there would be no system whereby any track would have been kept of when or where or with whom such meetings transpired; is that right?

A. I don't know. Perhaps the staff involved in the meetings would keep some sort of record of who they met with, although, I don't know.

Q. Who are the people on staff that would have so been

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involved with such meetings?

A. I don't know because we're hypothetically describing the general useage of a pack like this. So, hypothetically, I don't know.

Q. I'm asking you about Exhibit 30, to be specific.

A. And I said about five minutes ago I don't know who -- to whom it was distributed. Now, you've been challenging on it, that's your right. That's fine. I just said I don't know.

Q. Who would know?

A. We've already answered that. I don't know.

Q. Is the reason why you don't know these things so that the source of the distribution of this packet can remain secret?

A. No. Give me a break. What a stupid question.

MR. WALTON: Objection.

MR. BENZ: Sustained.

THE WITNESS: I'm sorry.

MR. GREENE: I don't mind.

Please mark this as Exhibit 31.

(Defendant's Exhibit No. 31 marked.)

MR. GREENE: Q. Exhibit 31 is Bates stamped page 48 through 56. It's undated.

Have you seen this document before, Mr. Fanny?

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A. Probably. Looks to be another false report correction on Gerald Armstrong. I can't tell what the differences are between this one and one of the earlier exhibits.

Q. This document is undated; isn't that right?

A. Oh, I see. Yes, it is undated.

Q. And there's no indication of the source of this document, is there?

A. It's pretty obvious when you read it it's from the church and not from Mr. Armstrong.

Q. Would you answer the question, please.

A. I think that's an indication of who it comes from.

MR. GREENE: I would request the referee to direct the witness to directly answer the question. It's susceptible of a yes or no answer.

MR. BOWLES: He's answered.

MR. BENZ: I don't know that it is. I think the answer could be clearer, as could the question, and that is if the question is does the document state a particular source, I think the document speaks for itself. If the question is does the content of the document indicate its source, then the witness's answer is correct, I mean, has application.

MR. GREENE: So are you making or sustaining the objection to the first question?

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MR. BENZ: I am saying that why don't you clarify the question.

MR. GREENE: All right.

Q. Mr. Farny, there is no explicit indication on this document from whom it comes, is there?

A. As opposed to the content indicating who it comes from?

Q. That's right.

A. That's correct.

Q. This document was prepared within the Office of Special Affairs; right?

A. That's correct.

Q. Who prepared it?

A. I don't know.

Q. Did you participate in its preparation?

A. Yes, I'm certain I would have because there's material in here I recognize from these other documents that I worked on.

Q. Who ordered its preparation?

A. I don't know.

Q. When was its preparation ordered?

A. I don't know that it was ordered.

Q. Do you ever engage in the preparation of any documents such as Exhibit 31 without being told to do so by someone who is your senior?

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A. Yes, of course.

Q. And if you do so, do you then get approval for its dissemination from a senior?

A. Not necessarily. If, for example, a pack is needed to assist one of the public relations officer's for a meeting upcoming, I wouldn't necessarily get approval from that, you know, approval on that. I would assist them to put the pack together to use at the meeting. It wouldn't require anybody's approval.

Q. Is a false report correction run through any kind of review procedure before it is disseminated?

A. Counsel reviews them.

Q. In addition to being reviewed by lawyers?

A. Various staff would review them internally.

Q. And who would those staff members be?

A. It includes me and it includes Coreen Pouw, the PR aide, in most instances. I don't know if she reviewed this one or not.

Q. Would anyone senior to you be involved in such review?

A. Well, it depends on whether or not they were the individuals that requested the information for their own use in a meeting.

If an individual senior to me did and wanted to use a pack of information in a meeting, they would of course

560

review it before they used it in a meeting.

Q. With respect to all of the false report correction materials, is it your testimony that none of them were produced in response to a directive from one of your seniors?

A. I just don't remember. So no, that would not be my testimony.

Q. If any of these were the result of a direction from one of your seniors, would there be any written record of such an order?

A. No.

Q. I'm sorry, I didn't hear your answer, Mr. Farny?

A. I said no.

Q. Okay. Thank you.

Mark this as next.

(Defendant's Exhibit No. 32 marked.)

MR. GREENE: Q. You have before you, Mr. Farny, Exhibit 32, which is entitled declaration of David Miscavige, which is 41 pages in length, and dated February 1994.

Do you see that?

A. Yes, I see that.

Q. And that is a declaration that was filed in litigation to which CSI is a party, or was a party; right?

A. That's correct.

561

Q. And you've seen this document before, haven't you?

A. Yes.

Q. And this appears to be a true and correct copy of what you've seen before, isn't it?

A. If all the pages are here, yes. I haven't counted them.

Q. And you're familiar with David Miscavige's signature, aren't you?

A. Generally.

Q. And that appears to be his signature on page 41, doesn't it?

A. It appears to be, yes.

Q. David Miscavige is the -- there is no one senior to David Miscavige in the Scientology organization, is there?

A. In the Scientology religion, there is not.

Q. He doesn't take orders from anybody, does he?

A. Not that I'm aware of.

Q. Are you aware of whether or not any of the false report corrections were submitted to David Miscavige for review before their dissemination?

A. I'm not aware that any were.

MR. GREENE: Exhibit 33.

(Defendant's Exhibit No. 33 marked.)

MR. GREENE: Q. Before you you have a three-page

Exhibit 33. That's a declaration of Kenneth Long.

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And Kenneth Long is a paralegal in your bureau; right?

A. That's correct. And are you familiar with this declaration?

A. Let me just glance over it.

Q. Sure.

A. All right. What was your question?

Q. All right. Does this appear to be a true and correct copy of the declaration of Kenneth Long, dated March 26th, '90, that you're familiar with?

A. It appears to be, yes..

Q. And would this declaration have been submitted to you for review with respect to truth and veracity prior to its execution by Long?

A. I don't remember if it was or not.

Q. Are you Long's senior?

A. Not at the present.

Q. Have you been Long's senior in the past?

A. Yes.

Q. When did that change?

A. About a month or so ago, he transferred to a

different department within the legal bureau.

Q. And what department is that?

A. He handles pre-litigation matters.

Q. That's right. You've told me that before.

563

A. That's right.

MR. GREENE: Like to mark this as Exhibit 34.

(Defendant's Exhibit No. 34 marked.)

MR. GREENE: Q. Exhibit 34 is a two-page document entitled Affidavit of Gerald Armstrong that is dated December 6th, 1986.

Do you recognize this document?

A. Yes.

Q. And this document was one of the documents that was included in, the settlement package wherein the agreement was executed; right?

A. That's correct.

MR. GREENE: And I'd like to mark Exhibit 35.

(Defendant's Exhibit No. 35 marked.)

MR. GREENE: Q. Okay. Exhibit 35 is an 18-page document entitled Religious Technology Center Executive Directive No. 450, 16 September 1991.

A. No, it says 6 September on my copy.

Q. Oh, you're right. I misspoke.

MR. BOWLES: Do you have a copy of that?

MR. GREENE: You have to use your witness's, I'm afraid. Sorry.

Q. Now the chairman of the board of Religious Technology Center is David Miscavige; right?

A. Yes.

564

Q. So this issue emanated from Mr. Miscavige; correct?

A. Yes.

Q. And you have seen this before, haven't you?

A. Yes.

Q. And this is disseminated to all Scientologists; correct?

A. An effort is made to make it available to all Scientologists.

Q. And how is that effort made?

A. Copies sent to all the organizations and missions so they have plenty of them there to pass around to people.

Q. Okay. Directing your attention to page 12, and under the portion that's headed attacks against Scientology, and directing your attention to the third and fourth paragraph, particularly the fourth, the reference that's made therein is to Armstrong's efforts to take over Scientology, that is the subject of the Exhibit 26, which is the authorization, 27, Gates' --

A. Press release.

Q. -- press release, and 28, the DA's letter; right?

A. It's the same investigation, yes.

Q. Okay.

A. Obviously, focuses on the IRS's complicity.

Q. It's the same subject matter; right?

565

A. Generally.

MR. GREENE: And I would like to mark finally, this is Exhibit 36.

(Defendant's Exhibit No. 36 marked.)

MR. GREENE: Q. Directing your attention to Exhibit 36, this is a 24-page document entitled Affidavit of Helen Margaret Barlow.

Have you seen this item before?

A. Yes, I have.

Q. And when did you first see it?

A. In February.

Q. Of 1994?

A. That's correct.

Q. And did you review it in your capacity as -- what's your job title again, handler for legal affairs?

A. CSI litigation handling officer.

Q. Close. Did you review it in your capacity as CSI litigation handling officer?

A. Well, I reviewed it in my capacity as someone having knowledge of some of the material she covers in here.

Q. All right. And when you did so, was there anything in this declaration that you felt was false?

A. I was only looking at specific things concerning litigation that occurred in the United States and those

566

things that I saw, I was fine with in the final signed version of the affidavit.

Q. Did you review the portion that refer to the videotaping of Armstrong?

A. Yes.

Q. And inasmuch as you were concerned, all statements made with respect thereto were true and correct; is that right?

A. Yes, they seemed to be.

MR. GREENE: I'd like to mark this next exhibit as 37.

(Defendant's Exhibit No. 37 marked.)

MR. GREENE: Q. Directing your attention to Exhibit 37, have you seen this document before?

A. Yes. When we produced it to you.

Q. And you have not seen it prior to that?

A. I don't remember if I saw it before it was sent out or at any time prior to compiling the document production.

Q. And at that point, did you review it?

A. At which point, when we --

Q. When you first saw it in reference to the document production.

A. Yes.

Q. And in your review of it, is there anything in this letter that you considered to be false?

567

A. There's nothing in here that I have a problem with.

Q. Do you know for a fact that Armstrong in the photo referred to in the last paragraph was nude?

A. He appears to not have any clothes on. He's sitting behind a global that covers his crotch, so I can't tell behind that, but that is certainly what it appears to be, yes.

Q. Now, why do you consider the statement that Armstrong has no relationship to art or artists as true as stated in Exhibit 37?

A. That's Eber's opinion. That's not a factual representation, that's his opinion.

Q. All right.

A. Although, I've seen his art, so I don't necessarily think I disagree with Eber's opinion.

Q. You think that Mr. Armstrong is a lousy artist?

A. Oh, I don't know. I like the like the big dogs in the shapes of E's, the letter E, but I don't, from what I've seen, consider it serious art in any fashion whatsoever.

Q. Now, with respect to the false correction packs, did any of them go to Entertainment Television?

A. They may have. I know that Eber communicated with them even beyond this letter, and that the letter itself seems to indicate that there is some sort of documentation

568

attached, so it very well may have.

Q. Did any of the false correction packs go to CNN?

A. They may have, because there was communication with CNN at least in March of '92, but I'm not certain what may or may not have been given them at that time.

Q. Do you want to modify your testimony that there's no record of the points to which any of those packets were directed?

A. No, not at all. You were asking if we keep some sort of organized index or list or set of documents which would keep track of where they were sent as opposed to a random copy of a letter, so no. The way I understood your question was, do we keep records of where we've sent so that we can then tell somebody we've sent them here, here, here and here, no, I don't want to amend that at all.

Q. Is there any record whatsoever of the location to which any of the false correction packets were sent?

A. I have no idea. obviously, this letter you just showed me is one such that would fit under that.

Q. Were false correction packs sent to the San Francisco Chronicle?

A. I don't know.

Q. The San Francisco Examiner?

A. I don't know.

Q. To the Marin County Independent Journal?

569

A. Maybe.

Q Are you familiar with a computer system called Incomm?

A. Yes.

Q. And Incomm is a part of CSI, isn't it?

A. Yes.

Q. And Incomm is a computer bank, is it not?

A. It's a computer system, it includes a computer bank.

Q. And Incomm is a state of the art computer system, isn't it?

A. It's a sophisticated computer system. I don't think I would describe it necessarily as absolutely state of the art, but within our means it's certainly as good a system as we could create.

Q. And that system has the capability of conducting searches, doesn't it?

A. Yes, within certain of the data bases, yes.

Q. And all of the data bases of the various departments within Scientology are components of Incomm; isn't that right?

A. No, that's not right at all.

Q. Legal is hooked up to it; is that correct?

A. That's correct.

Q. And public relations is hooked up to it, isn't it?

570

A. Yes.

Q. And, therefore, it would be possible to run a search on Armstrong through the system and be able to come up with records that pertain to him; isn't that right?

A. What records would be there, you could come up with them, certainly.

Q. And when letters are written, they're written on the computer, aren't they?

A. They are written usually on a computer. Whether it's on that system or not, not necessarily.

Q. The letters having to do with a major project, such as false report corrections of lies disseminated by Gerald Armstrong, that's something that would be kept on Incomm, isn't it?

A: Not necessarily, no. The letters may not have even originated on the Incomm system.

Q. When letters are sent to public media having to do with Gerald Armstrong, are they transferred to the Incomm system?

A. You mean, for storage, that sort of thing?

Q. Yes.

A. No.

Q. Or otherwise?

A. Or otherwise transferred onto the Incomm system?

Q. Yes.

571

A. Not necessarily.

Q. Are they ever transferred to the Incomm system?

A. If for some reason the system it was written on couldn't print it, it would be transferred to the Incomm system to print.

Q. Are there any entries pertaining to Gerald Armstrong on the Incomm system?

A. Yes.

Q. And finally, who is the head of the --

A. Wait a minute, do you want to find out what they are?

Q. Do you know what they are?

A. Yes, it's copies of the pleadings in litigation, the docket of the cases is on there.

Q. What are the other systems in addition to Incomm?

A. A lot of the staff have IBM PC's for specialized word processing fonts, things that are not available on the Incomm system.

Q. Are they networked?

A. Some of them are networked together, yes.

Q. And included as a node in the network is Incomm?

A. Included as a note on the network?

Q. Node, n-o-d-e.

A. Oh, a node on the network, no, it's a separate system.

572

Q. And who is the head of the OSA bureau of investigations?

A. Linda Hamel.

Q. And who controls the data within that division?

A. What do you mean?

Q. Written information.

A. It would be her ultimate responsibility.

Q. And where is the location of Linda Hamel's off-ice?

A. 6631 Hollywood Boulevard.

Q. How do you spell her last name?

A. H-a-m-e-1.

Q. Does she have records regarding Gerald Armstrong?

A. She has copies of a number of things, of pleadings and such, and of probably some of these documents as well.

MR. GREENE: Thank you, and thank everybody else for being patient with me.

MR. BENZ: All right. Want to break for lunch?

MR. BOWLES: Yes.

MR. WALTON: Can we make it a short one?

THE WITNESS: An hour is the shortest.

MR. GREENE: Mr. Benz, I will not be here after lunch and I waive my appearance.

MR. BENZ: All right. That's on the record.

(Lunch recess.)

EXAMINATION RESUMED BY MR. WALTON

573

MR. WALTON: Q. Good afternoon, Mr. Farny.

A. Good afternoon.

Q. I'm going to show you a document which is issued in the Court of Appeal, the State of California, Second Appellate District, Division 7. And it's an appellate opinion in the Religious Technology Center v. Yanny. At page 29 I've underlined a paragraph: Would you please read that into the record.

MR. BOWLES: Do you have a copy this?

MR. WALTON: No, I'm sorry, I don't. It's not going to be an exhibit.

THE WITNESS: I'm going to decline to do that and interpose an objection because this page is part of the document that was not adopted by the majority of the court. In fact, it's in a section that was specifically rejected by the majority and it's part of the dissent in an unpublished opinion in a case that doesn't involve Armstrong.

MR. BOWLES: We're going to object to that on the basis of relevance and the document speaks for itself.

MR. WALTON: I'd like to read it into the record.

MR. BENZ: Are you going to ask a question on it?

MR. WALTON: I am.

Q. And you're not really in the position to make objections, sir. It's your attorney who makes the

574

objections.

A. Yes, but I can raise a --

MR. BOWLES: What's your question?

THE WITNESS: -- concern if I have a concern, sir, and I will do so.

MR. WALTON: Q. Fine.

It says, "A review of this record as a whole leads to this conclusion. This appeal court and the trial court below was used as a means in Scientology's pursuit of the fair game policy of punishing those who leave Scientology without Scientology's approval. This appears to be a continuation of the fair games procedure of Scientology to discredit and to destroy and ruin an adversary by whatever means available, see Church of Scientology v. Armstrong, 1991, 232 Cal Ap 3d, 1060, Wollersheim v. Church of Scientology of California, Allard v. Church of Scientology of California."

I've omitted the citations. Is it the plaintiff's position that the court in Church of Scientology v. Armstrong was wrong in its assessment of fair game?

A. Yes. It is our position.

And also what you read doesn't form the opinion of even that panel, because that specific passage was rejected by the majority later in the portions of the

575

document you have not read.

Q. Is it plaintiff's position that the court in Wollersheim v. Church of Scientology of California was wrong in its assessment of fair game?

A. Yes.

Q. And is it plaintiff's position that the court in Allard v. Church of Scientology of California was wrong in its assessment of fair game?

A. Yes.

Q. Has plaintiff reviewed the sworn testimony that was provided in this case by Mr. Armstrong and by myself in the form of depositions?

MR. BOWLES: Objection to the form of the question.

THE WITNESS: Who from the plaintiff? I'm sorry.

MR. WALTON: Q. Pardon me?

A. Who from the plaintiff?

Q. Has plaintiff. I don't know who from the plaintiff.

MR. BOWLES: Objection to the form. It's vague and ambiguous.

MR. BENZ: I'm not quite sure what you mean by that either.

MR. WALTON: What I'd like to know is if the plaintiff in this case has looked at the depositions that its noticed and taken.

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MR. BENZ: The plaintiff is a corporation. I'm not quite sure that they can answer that way. If it's any person, officer or something of the corporation.

MR. WALTON: Q. Well, I include in that anybody who would represent the corporation, somebody authorized. Obviously, a piece of paper can't review the thing, but somebody -- I'm asking if somebody that represented plaintiff looked at these depositions.

A: Insofar as the transcripts have been produced, as in May, I'm positive somebody has reviewed them, certainly. I've read some.

Q. Have you, sir?

A. Yes.

Q. Have you looked at my deposition?

A. I've read portions of your deposition. I haven't read the whole thing.

Q. And have you read Mr. Armstrong's deposition?

A. I think I've read most, if not all of that.

Q. Do you know if Scientology has initiated any other discovery in this case?

A. Other than the deposition of yourself and of Mr. Armstrong?

Q. Yes.

A. We've propounded a document request and interrogatories and I believe a request for admission.

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Q. To Mr. Armstrong?

A. And his corporation.

Q. And did Mr. Armstrong respond to those requests?

A. There have been responses to requests. I'm not certain as I sit here whether there are still any outstanding responses due. There may still be some outstanding responses due.

Q. Other than what you've delineated, are there any other discovery requests that plaintiff has made in this case?

A. We have noticed some depositions still to be taken, that's what I remember as I sit here.

Q. Whose are those?

A. I don't remember.

Q. You've already noticed those depositions?

A. Either in this case or in the Los Angeles case, they're depositions to be taken up here. They may be in the Los Angeles case, as I think about it.

Q. Well, think about them a little more carefully because I'm not really asking about the Los Angeles case. I'm just interested in the discovery that's been obtained in this case.

A. We're not talking about that. We're talking about discovery to be obtained. And if there's depositions noticed, there are. I just don't remember as I sit here

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which of the two Armstrong cases the upcoming depositions have been noticed in. I think it's the Los Angeles case. I'm not certain.

Q. Who is ordinarily responsible for reviewing the discovery that plaintiff initiates in the organization?

MR. BOWLES: Objection to the form.

THE WITNESS: Counsel has ultimate responsibility.

MR. WALTON: Q. Does anyone in plaintiff organization have the responsibility of assisting counsel?

A. Myself and another individual, yes.

Q. So would one of you be the individuals who would be reviewing the discovery?

A. All the discovery would be reviewed by one or more of us, but I don't know if all of us would at this stage prior to trial have read all of everything. But between the three of us, we will have, yes.

Q. Which three of you?

A. I was only including one of the lawyers. I was including Ms. Bartilson, but there are other attorneys in the case, Mr. Wilson and Mr. Moxon. I'm not certain what of the discovery Mr. Wilson has read or Mr. Moxon.

Q. So there could be facts that have been discovered that are known to your attorneys through this discovery process that I'm talking about that plaintiff doesn't know yet, is that --

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MR. BOWLES: Objection to form. It doesn't make any sense when you say corporation.

MR. WALTON: Q. Does it make sense to you, sir?

A. No, doesn't make any sense to me.

Q. All right. Let me try and do it a different way.

Let's say that in, specifically, Mr. Armstrong's deposition, you've only read part of, you said?

A. I said I may have read all of that. I've read at least most of that.

Q. Okay.

A. And I've read excerpts of yours.

Q. Is there anybody that represents the plaintiff other than its attorneys that would have read the entire deposition?

A. By the time the case goes to trial, everybody would have read everything, just depending on what stage.

Q. What do you mean everybody who would --

A. Everybody who would be working on the trial, counsel and people assisting counsel would have read all of the discovery. I don't know what stage.

Q. Other than you, who else in the organization has responsibility for reading these things?

A. The individual assisting me. His name is Howard Gutfeld, G-u-t-f-e-l-d.

Q. Well, is the plaintiff organization aware that Mr.

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Armstrong testified under oath that God directed him to divest himself of his worldly goods?

A. I'm aware of him making that statement.

Q. And does the plaintiff organization reject that claim?

MR. BOWLES: Objection to the form.

THE WITNESS: I don't consider it responsive to our claim in the case that he divested himself of his assets with lack of consideration in order to avoid paying the judgment.

If he believes --

MR. WALTON: Q. We'll get to that.

A. If he believes that, fine. I just don't consider it an adequate response to the allegations we've raised.

Q. So the plaintiff doesn't deny the possibility that God spoke to Mr. Armstrong?

A. I have no idea what he thinks in his head. I don't considerate it an adequate justification for making himself judgment proof. I don't consider it meaningful at all.

Q. Does the plaintiff reject the idea that it's a possibility?

MR. BOWLES: Objection to form, vague and ambiguous.

MR. BENZ: I'll sustain that and also, I'm not sure

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what the relevance of this is.

MR. BOWLES: Objection as to relevance.

MR. WALTON: Well, the relevance is, your Honor, that Mr. Armstrong under oath has sworn that the reason he divested is he had a vision or conversation or communication with God, his God.

MR. BENZ: Right.

MR. WALTON: And the plaintiff has apparently disregarded that in the testimony and continues to allege that Mr. Armstrong divested for other reasons.

So I'm trying to find out if the reason that plaintiff has rejected Mr. Armstrong's sworn testimony is because they don't believe that it's possible that he would have spoken to God, or they believe it possible but he's just flat out lying about it.

MR. BENZ: Well, I don't think that's something we can determine in a secular court. So, and I don't think the court is going to determine it. So I will -- as far as I'm concerned, that's not relevant.

MR. WALTON: Okay.

Q. Who are the co-conspirators in the conspiracy?

A. Armstrong, yourself -- at least.

Q. Who else?

A. Anyone else that received some of his assets, such as the Douglases, such as perhaps even Salina, who is now

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the named owner of the house, and then the other individuals who received either cash payments or forgiveness of loans.

Q. And is there a time period within which that may have occurred? Let me just ask it in a better way.

If Mr. Armstrong would have given away cash or personal property or any other of his materials two months after the settlement -- two months after he received the money from the settlement, would those persons also be part of the conspiracy?

MR. BOWLES: Objection, calls for a hypothetical.

MR. BENZ: I'll sustain that.

MR. WALTON: Q. How far back has plaintiff gone to ascertain the members of the conspiracy?

A. I believe the allegations in the complaint go back to the beginning of 1990. Although, as background information, his creation of the Gerry Armstrong corporation in 1988 pertain to a certain degree, but the acts we've alleged go back into 1990.

But obviously, if those acts require something earlier in order to be understood, such as, for example, I don't recall as I sit here when the original construction of the Fawn Drive property was, but that's certainly a fact that would pertain to its ultimate disposition.

Q. All right. So plaintiff is alleging, at least as

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we sit here today, that Kima Douglas, Micheal Douglas, Gerry Armstrong, Michael Walton, perhaps Salina Walton, Andrew Armstrong?

A. He received funds.

Q. So he would be --

A. Let me just, if I can, ask for some clarification.

Because you asked on the one hand who we considered as part of the conspiracy as I sit here. And now it is being phrased in terms of who we are alleging.

Now, I want to make a distinction as who we've named as a defendant and who we haven't, because at this point only yourself, Armstrong, his corporation and, I believe, Salina are the named defendants.

Q. No. I believe it's Bambi Sparks --

A. That's correct, yes.

Q. So the other conspirators then --

A. Um-hum.

Q. -- are Andrew Armstrong?

That's a question.

A. To the degree he received some of the proceeds, yes.

Q. The people in the Dawson family?

A. I'm sorry?

Q. The people in the Dawson family?

A. I'm not sure who you mean.

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Q. These are people that Gerry mentioned when he had at his deposition taken that had received things.

A. Do you have first names?

Q. No. I think he just mentioned the Dawsons.

A. All right. Then to that degree, yes.

Q. Laurie Eaton --

A. Yes.

Q. -- she is a conspirator.

Nancy Rhodes is a conspirator?

A. Yes.

Q. And how does plaintiff know that these people are conspirators?

A. Well, they're part of the whole activity. And I may be being imprecise in the way I'm using the word conspirators, in that they received part of the proceeds without compensation.

Now, we haven't discovered into the degree of the participation that they had, or what they knew ahead of time so as to give rise to a cause of action against them if one exists. We've only named the people we've named and conducted the discovery we've conducted.

So I would be able to say beyond that --

Q. Let's just use me then, because you've conducted your discovery with me.

A. Right.

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Q. How does plaintiff know that I'm a conspirator, a co-conspirator with Armstrong?

A. It's our position that you were involved in arranging Armstrong fraudulently conveying the money and the house you received.

Q. And how was I involved?

A. You worked it out with Armstrong. I'm sure it was at his direction but the two of you worked it out.

Q. But worked what out? Could you be more precise?

A. Him divesting himself of his interest in the house to hide the fact that he has those assets. He continued to live in the house for at least a year after that. There's documents produced in this case, correspondence between the two of you, where Armstrong is saying that, you know, even though he's divesting himself of these assets, nothing really is going to change.

Q. Anything else?

A. Those are what I can recall sitting here.

Q. What are the details of the conspiracy?

A. Beyond what I've said?

Q. Yes.

A. Well, as simply put as I can, Armstrong had the intention to disregard the settlement agreement that gradually increased in intensity, I'd say, from around '88, '89, through the beginning of '90.

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He then took steps to make himself judgment proof, allowing him to breach with impunity, without fear of the consequences of us trying to collect on the liquidated damages.

Whether in the future he has the right to reacquire some of those assets is what we're seeking to determine.

Certainly his correspondence to you indicated that even though he had given up interest in the house, nothing changed, as he said in his document, and he indeed continue to live in it for a year.

Q. Anything else?

A. I think that sums it up, yes.

Q. With respect to the other co-conspirators, what facts does the plaintiff have that showed that they entered into this course of action with Mr. Armstrong?

A. There's the sequence of property deeds showing the transfer first to you, then to you and Salina jointly under her maiden name, then jointly under her married name, and then to her singularly, which we consider an effort to -- on your part not -- have an interest in the house when judgment time comes, but I don't think that will be of any effect whatsoever.

As to the others, there's the evidence produced in the case showing how much money they received, with lack of consideration.

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Q. So it's actually, I'm afraid we're sort of crossing over here.

There's really two parts to this, there's the conspiracy part and there's the fraudulent conveyance part.

A. Right.

Q. And certainly I understand when you say if they received something for no value, that's what the proof is that they were involved in the fraudulent conveyance; is that right?

A. That's certainly a signature element of the proof, yes.

Q. And what's the proof that they conspired to hide Mr. Armstrong's assets from Scientology?

A. Well, insofar as yourself is concerned, the correspondence I'm talking about. Insofar as any others that haven't been named as defendants, at this point it's merely the receipt of it that give rise to a belief on my part that they were part of it.

Q. I'm not asking for beliefs. I'm asking for facts.

What facts does the plaintiff have?

A. As to people who are not named defendants in the case?

Q. Yes.

A. The fact that they received the funds is the fact,

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and Armstrong's testimony concerning his -- how do I complete unwillingness to abide by any of the terms in the settlement is a very significant portion.

Obviously, Armstrong is the driving force behind this. Those are the facts that we have at present concerning the people who are not named as defendants in this action.

Q. Anything else?

A. That's what I'm aware of as we sit here.

Q. And other than the letter that Mr. Armstrong wrote to me in which he said nothing has changed, and other than the deeds that transpired among the family -- my family, with my wife, et cetera, are there any other facts that the organization relies on that supports its claim that I was involved in conspiracy with Mr. Armstrong?

A. I think Armstrong's deposition testimony leads to that conclusion. There's also the records of the funds that he got both before and after the transfer. I mean, I don't want to exclude those from it because it wasn't just the house. There was money before the house, approximately $25,000, but the documents speak for themselves in litigation. I don't mean to recharacterize them in any way.

And then there's the maintenance account for the house which had about 35 to $40,000 in it at the time.

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Q. And what about those monies?

A. They went from him to you without fair consideration, with no consideration.

Q. Well, that may speak to a claim of fraudulent conveyance in the way that the law defines that term, but I'm now asking about the conspiracy aspects.

A. I understand. I understand. And I think the acts that were taken go a lot -- toward a decision ahead of those acts to take those acts.

Q. That's what you think I'm asking for, facts.

A. I've given you facts.

Q. Do you have any facts that --

MR. BOWLES: Objection, badgering the witness.

THE WITNESS: I've given you facts for 20 minutes. Come on, man.

Look, I'm giving you the facts.

I just thought of another fact. There was a fact in your deposition where you excuse is you Armstrong was going to kill himself, so fine, you'll take the house ahead of time. That doesn't wash with me, doesn't ring true to me. And that fact indicates that you were withholding information.

Obviously, you had confess to it in your deposition, but that bit of testimony didn't ring true to me. That's another fact that I had that indicates to me

590

that you were knowingly a part of the conspiracy with Armstrong to help him make himself judgment proof.

MR. WALTON: Q. Please explain that a little further.

A. Guy tells you he's going to give you a $400,000 house free and clear. Apparently, you didn't ask any questions about that, at least according to your position.

That doesn't ring true to me.

When you're challenged on it in deposition you say, "Well, I thought he was going to kill himself," or words to that effect.

Now, to me that would inspire in me some sort of effort on my part to talk this individual out of killing himself, not just say, "Whoopee, I'm getting a $400,000.

See you later, pal. Hope you have a nice death."

To me that didn't ring true as the complete explanation. And the objective facts of the acts that took place indicate that there was some -- and the correspondence with Armstrong, indicates there was some discussion ahead of time concerning what was going to occur.

So the short answer is your explanation when challenged didn't wash.

Q. Did you read the deposition or did you read someone's characterization of the testimony?

591

A. No. That portion of the deposition I read. I read sections of the deposition. I didn't read all of it. I flipped through. There was some material in there that I didn't consider necessarily, you know, pertinent to the ultimate issues, background material and such.

Q. And you just said that the house was a $400,000 house free and clear; is that correct?

A. Well, in terms of his interest in it, yeah. I didn't say the house was free and clear. It was a $400,000 house. I believe there was a mortgage on it. But he had a substantial portion. He had half ownership in the house.

Q. Yes. Do you know what the market value was of the house at the time of the transfer?

A. 390 something, if I recall correctly. And then subsequent was 400. It was in the high 3's, if I remember.

Q. The market value was in the high 3?

A. I think so. It's in the property records. It's not a matter of any mystery.

(Discussion off the record.)

MR. WALTON: Q. As you sit here, do you know what the market value of the house was at the time of the transfer?

A. Somewhere in the vicinity of $400,000, I think.

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Sorry, I think slightly less.

Q. And do you know what mortgage was on the house at the time of the transfer?

A. Perhaps a couple hundred thousand or less. I think Armstrong's down payment was well in the high one hundreds, something like that.

Because he got 170 out of the Charing Cross property, which he put into, at least most of it, maybe 130 some odd or 140, there's differing records which had somewhat inconsistent, which he put into the construction of the Fawn Drive property. And then -- you know, with another partnership. And then when the property values crashed, he reacquired the other partner's interest in it. He turned it from an investment property to something he owned.

So I think when all was said and done, there was maybe a couple hundred thousand of it was mortgage.

Q. So the house wasn't free and clear?

A. I didn't say the house was free and clear. I said his interest in the house you got free and clear. That's what he I meant, like with nothing in exchange for it and no strings attached.

Q. I see. Do you know when the -- or does the plaintiff know when the conspiracy was conceived?

MR. BOWLES: Objection to form.

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MR. BENZ: Do you want a ruling on that, because the witness answered.

THE WITNESS: I'm not sure I can answer that. I mean, sometime in the early '90 period or late '89 period.

MR. WALTON: Q. And how does plaintiff know that?

MR. BOWLES: I'm sorry. What was the question?

MR. WALTON: Q. How does plaintiff know that?

MR. BOWLES: That's why I objected to the form.

Are you asking him as a representative of the Church of Scientology International how he personally knows?

THE WITNESS: No, he is not.

MR. WALTON: Well, I'm interested in what the plaintiff is alleging, what the plaintiff -- what the plaintiff's position is.

And he's here talking for the plaintiff because the plaintiff is a piece of paper and an abstract concept, but to the extent that it is an entity and he represents the entity, so I'm just interested in what the plaintiff organization's position is here.

MR. BOWLES: Okay.

THE WITNESS: The best I can give is at some point prior to August '90.

MR. WALTON: Q. Okay. I know that, but I'm asking you how the organization -- how the plaintiff knows that?

594

A. By the acts that subsequently took place.

Q. And those are the acts that you've already alluded to the transfers without adequate consideration?

A. That's right.

Q. Any other facts other than the transfers?

A. Well, your involvement with Armstrong goes before this time period we've been talking about a considerable number of years that you'd rendered assistance in the past, worked with him in the past on several things. It wasn't like he walked up to a stranger in the street and said here's $100,000 and walked on, where there wouldn't be any prior contact with the individual to give rise to it being an agreement that the two of them worked out.

So I think those facts need to be added into the equation that -- the fact that you did have a previous relationship with him, wasn't just a stranger on the street and came up handed you money and walked off.

Q. So the fact that I've known Mr. Armstrong and worked with him off and on for a number of years before '89 is evidence of the fact that there was a conspiracy conceived around late '89; is that your testimony?

A. Not precisely, no. I'm just saying it's background material that adds to the picture. I think it's background material that's necessary to understand the

595

whole picture. I don't think it by itself is evidence of anything other than that you did know him.

Q. I did know him. Do you know or does the organization have any other facts that would prove or tend to prove that this conspiracy was conceived in late 1989?

MR. BOWLES: Objection, misstates his testimony. He didn't say that the conspiracy was conceived in late '89. He said sometime before August '90.

MR. WALTON: Sorry.

MR. BENZ: Sustained. I think that's what his testimony was.

MR. WALTON: Sometime before August '90. I thought he said sometime before August '90 or late '89, but let's use before August '90.

Q. Can you be any more precise about when the conspiracy was conceived other than to say before August '90?

A. Obviously, it was after December '86, but no, I cannot, not as I sit here.

Q. And whose idea was the conspiracy?

A. Armstrong's as far as the idea. As far as the mechanics goes of how to if effectuate the idea, I don't know.

Q. We'll get to that.

A. Yeah, I don't know the answer to that one, but

596

Armstrong, certainly his idea.

Q. And how does plaintiff know that?

A. Well, he has admitted it was his idea. He's just giving different reasons for doing it.

Q. He's admitted the conspiracy was his idea?

A. Getting rid of his assets, that's what I'm talking about.

Q. No, I'm not talking about getting rid of his assets.

Everybody knows he got rid of assets.

A. Right.

Q. I'm talking about conspiracy.

A. To get rid of his assets. That's what we're talking about, the fact --

Q. There's two different things here.

A. I know, but they concern the same acts in the physical universe, which is getting rid of his assets. It's not a conspiracy in air somewhere.

Q. So is it plaintiff's position that every time someone gets rid of assets, he or she enters into a conspiracy?

A. No. It's our position that Armstrong and yourself and maybe others entered into a conspiracy to make himself judgment proof, which allowed him the freedom to go breach the settlement agreement with impunity.

Q. And whose idea was the conspiracy?

597

MR. BOWLES: Asked and answered.

MR. WALTON: I believe --

MR. BENZ: Just to clarify it.

THE WITNESS: I don't understand the difference, okay? Whose idea was it for Armstrong to talk to you about it? Whoever originated the conversation. I would think Armstrong's.

MR. WALTON: Q. Does the organization, the plaintiff organization have any facts to support the allegation that Armstrong initiated the idea of a conspiracy?

A. He initiated the idea of divesting himself of the assets.

Q. That's not my question, sir.

A. You helped him do that.

That was the thing that occurred, that's what the acts that took place are. There is, to my view, no conspiracy other than to do the acts that took place. So that's how I'm having to refer to this, was with reference to the acts that took place.

And then, of course, the correspondence back and forth.

Q. What correspondence?

A. "I am changing nothing" -- between you and Armstrong, where he says this changes nothing.

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Q. And then what was my correspondence back?

A. You haven't produced it.

Q. But it's there?

A. You tell us.

Q. I did.

A. You tell us.

Q. Does your organization know if the co-conspirators ever met together?

A. I believe they have all met with Armstrong at least once, who is the hub of this.

Q. And how does the plaintiff know that?

A. My recollection of deposition testimony and documents leads me to that conclusion.

Q. Do you remember when those meetings occurred?

A. No.

Q. Do you remember where they occurred?

A. In the San Francisco area, generally. Just for clarification, I would include where we're sitting to be in the San Francisco area, generally.

Q. Okay. And how precisely was this conspiracy to work, how was it -- you've already said that Armstrong was going to give his assets to these people and he was not going to get consideration. And then what was going to happen?

A. I think the nothing changes document leads to the

599

inference that after prevailing in an action concerning enforcement of the settlement Armstrong would somehow reacquire.

Q. Reacquire what?

A. Some or all of the assets, or still have use of them without having title to them, such as his living in the house for a year, at least a year. I think until we pointed out in litigation, he was still living there.

Q. With respect to -- that's speaking specifically about Fawn Drive now?

A. Right.

Q. What about with-respect to any of the other assets or co-conspirators? How was the conspiracy to work with respect to those things?

A. It is our position the money was, is -- or no, was intended to hide there with those individuals so that there wouldn't be any with Armstrong when we came to collect for the settlement breaches.

Obviously, the presence of the suit concerning that may change with the original intended outcome on Armstrong's part was.

Q. I'm sorry. I didn't understand that. Could you --

A. Sorry.

Q. Sorry. Could you rephrase it?

A. There was a different factor -- a factor intervened

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which is we sued him for the fraudulent conveyance. We took his deposition in the breach action, found out he was doing this and filed a suit to stop it.

Now, with that suit present, Armstrong's conduct may have been different than had the suit not been present.

Q. Well, I just want to know what the sort of terms of conspiracy initially were. I'm not really interested in what happened later. What was the conspiracy? What was it?

A. It was a conspiracy to divest Armstrong of his assets to make himself judgment proof, hide the assets with others. Nothing changes, as Armstrong said in his letter.

Q. Okay.

A. That's what it was to do.

MR. BOWLES: Mr. Benz, this seems to be grinding on with repetitive questions in the same area. Can we move on to a different area?

MR. BENZ: I don't want to foreclose questions. I think we're reaching that point.

MR. BOWLES: Okay. Thanks.

MR. BENZ: But I'm not going to sustain anything yet.

MR. WALTON: Thank you.

601

Q. And when I asked you last time, had an opportunity to talk to you, why I was the only co-conspirator named and served, you answered basically because I got the lion's share.

A. You're talking when we initially filed the case, because we've subsequently named a couple of the Does.

Q. You've not served anyone. I said named and served.

A. All right. I did answer that you had the lion's share.

Q. And do you remember Mr. Armstrong testifying that he forgave approximately $100,000 debt to Michael and Kima Douglas?

A. Yes, that's testimony that's occurred in the case, this case.

Q. Do you remember him testifying that he'd forgiven a several thousand dollar debt to Miss Lori Eaton, E-a-t-o-n?

A. Yes, I remember that.

Q. Do you remember him testifying that he'd forgiven a debt of approximately $30,000 to the Dawsons in Massachusetts?

A. Yes, I think so.

Q. Has the plaintiff filed and recorded another lis pendens against Fawn Drive?

MR. BOWLES: Objection, vague.

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THE WITNESS: What do you mean by another?

MR. WALTON: Pardon?

MR. BOWLES: Objection, vague.

THE WITNESS: What do you mean by another?

MR. WALTON: Q. Are you aware that the a lis pendens against Fawn Drive?

A. Yes.

Q. Are you aware that that lis pendens was removed?

A. I'm aware of it temporarily removed to allow a refinancing of the house and put back on.

Q. So it is on now?

A. Yes, it is. My knowledge it is, yes.

Q. And it's been recorded?

A. To my knowledge it has, yes.

Q. Has the plaintiff produced to Mr. Armstrong any documents pursuant to his document request?

MR. BOWLES: In this case, Mr. Walton?

MR.WALTON: Yes, this case. I'm only talking about this case.

THE WITNESS: Yes, we produced documents.

MR. WALTON: Q. And do you know how many documents were produced to Mr. Armstrong?

A. Quite a few, not with precision.

Q. Dozens?

A. In terms of individual pages, yeah, I think it

603

would be.

Q. Hundreds?

A. I don't know. I saw them individually. I didn't see them all sitting together in one place, so I don't know. My sense is dozens, certainly. Which would also be, would also be hundreds because -- maybe, you know, this, maybe that much, maybe a little more.

Q. Indicating the exhibits Mr. Greene --

A. Which is this.

Q. -- put in evidence today? Put in not as evidence, but as exhibits today.

A. Which is a stack about an inch and a half.

Q. Did the Scientology organization, the plaintiff organization purposely not copy me those documents?

MR. BOWLES: Objection. This is irrelevant.

MR. BENZ: I think this goes with other matters. As I understood it last time we were here, plaintiff was to furnish, make certain that you got documents.

Have you received those?

MR. WALTON: No, I haven't, your Honor. And counsel here has told me that I'm not entitled to them. Only as a -- by right, I'm only entitled to them as a courtesy.

THE WITNESS: Well, we sent you copies of the supplemental production we made.

604

MR. WALTON: I did get those. I'm talking about the initial production.

MR. BOWLES: Well, that's my position. Document production goes to the party that has requested them. We gave them to Armstrong. As I understand it, Ms. Bartilson has made some commitments to Mr. Walton, so I'm checking those out.

Why do we have to waste time in the deposition?

MR. WALTON: To me it is relevant.

MR. BOWLES: Let's do it off the record.

MR. WALTON: If they weren't relevant --

MR. BOWLES: This is ridiculous. Do it off the record.

Mr. Walton, as you know as an attorney, maybe you don't -- let's just get on with it. Next question.

MR. WALTON: So you're finished?

MR. BOWLES: Next question.

MR. WALTON: Q. I was waiting for an answer to the other question.

A. The answer to the other question is I gave the documents to Ms. Bartilson and what she did with them she did with them. I gave them to her for the purpose of responding to the document request. I was also here last time when she said she would try to get you copies of them.

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I don't disagree with you having copies of them. It's a small enough universe of documents that my natural suspicion that for some reason you're not able to go the mile to Ford Greene's office to look at these documents seems to indicate -- it's just, okay, fine, you want one? It's a small enough universe of documents, fine, we'll give you a set.

But it seems to me that it's kind of strange that you would still be contending you hadn't seen them since you're no more than a mile or two from Ford Greene's office where these documents have been sitting. If you'd really been interested in looking at them, you could have gone down the hill and looked at them. But there's no grand design to do you out of the documents, sir.

Q. Good.

A. We said we would send you them. I'm a little bit surprised that you haven't received them.

Q. I'm surprised, too. And frankly, I'd really like to have a copy of the lis pendens and I'm sure my wife would be very interested in having a copy of it too.

MR. BOWLES: Objection, that's not a question. We're wasting time.

A. Lis pendens is a public document. You can go down to San Rafael and get it.

MR. WALTON: Needs to be served to be effective.

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MR. BOWLES: So here we are.

MR. WALTON: Q. Do you know if the co-conspirators met in advance to formulate this plan, or did it sort of just formulate as it went along?

A. Which co-conspirators?

Q. Well, all the co-conspirators.

A. I'm unaware of a meeting involving everyone who is a co-conspirator, one single meeting.

I'm aware of communication between you and Armstrong concerning the disposition of his assets, the hiding of his assets.

I am not necessarily aware of what other co-conspirators who may not be parties to this action did.

Q. Has the plaintiff, either itself or through its agents or employees or attorneys, ever investigated me or my family?

A. We obtained the property records concerning the Fawn Drive property, so to that degree the answer is yes.

Q. Anything else?

A. Not that I'm aware of.

Q. There have been no private investigators involved in investigating either me or any member of my family?

A. Are we having problems communicating here?

Q. Is that a no?

A. The private -- no, no, that isn't a no, because

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private investigators obtained the property records.

Q. Anything other than the property records?

A. That's what I'm aware of.

Q. And does the organization or any of its representatives maintain a file on me or any member of my family other than this litigation file?

A. No.

Q. When we last spoke again you indicated that you would look over the verified second amended complaint.

Do you recall that?

A. Yes.

Q. You were going to look at it for detail to make sure that there are no other hundred thousand dollar or any other amount errors in it.

Did you have an opportunity to do that?

A. Yes.

Q. Did you, in fact, do that?

A. Yes, I did it the day you asked, that night.

Q. And other than the one error that your attorneys made in the -- I don't recall which cause of action it is right now, are there more than one errors, is there any more than one error in the document?

A. I didn't find anything when I read it again, no.

Q. So I can safely rely on all these dates as being accurate?

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A. Certainly, within reason. I mean if it says day A and it was a day or so either way, to the best of our information and belief the dates are accurate, yes.

Q. I'm going to ask you a couple of questions about this complaint.

Do you have a copy of it or --

MR. BOWLES: Which complaint, the complaint in this case?

MR. WALTON: The verified second amended complaint.

MR. BOWLES: Yes, we have a copy.

MR. WALTON: Okay.

A. Here, not Los Angeles; right?

Q. Yes.

A. Okay.

Q. We made it to the seventh cause of action.

A. Wait a minute, there is no seventh cause of action.

MR. ARMSTRONG: L.A, Armstrong Two.

MR. WALTON: L.A.

THE WITNESS: No, that's why I was asking do you have another one.

(Discussion off the record.)

MR. BOWLES: April 5th, 1994, verified second amended complaint?

MR. WALTON: That's the one. That would be Case No. BC-052395.

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THE WITNESS: Yes, I have one.

Did you say seventh cause of action?

MR. WALTON: Yes.

MR. BOWLES: Okay. We're there. Next question.

MR. WALTON: Yeah. I'm getting to it. I'm getting to it.

Q. I'd like to know, in this case of action it's difficult for me to understand what the damages are. I see the number amount, the $250,000, but I don't understand what gave rise to the sum $250,000.

Could you tell me what the plaintiff's position is with respect to its damages in this case of action?

A. The conversations of February 21st, 1992; February 23, 1992, as indicated in paragraph 51 --

Q. So those are $250,000?

A. I'm not done. I'm not done. You want me to finish my answer?

Q. You hesitated and I took that as you HAD finished for the moment?

A. That's two out of five right there. The other three are the March 3rd disclosure in paragraph 52; the March 12th disclosure in paragraph 54; and then the March 4 production of documents in paragraph 53. That's five.

Sorry, sorry, sorry. It's paragraph 55 I'm talking

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about for the fifth one.

March 12th, right; March 3rd, right.

So you have the two in February and the three in March, both of 1992.

Q. Of the ones in March, is this a single deposition?

A. No. This is two different days.

Q. But is it the same deposition? Is it the same session?

A. Different session.

Q. Different section?

A. Yes.

Q. So it was a deposition that was continued from one day to another?

A. Yes.

Q. Yes. And that the organization is claiming separate $50,000 liquidated damage injuries each of those days regardless of the fact that it was a single deposition?

A. And we are only claiming the few that we are, regardless of the fact that each day had multiple, multiple, multiple disclosures, yes.

Q. But that's -- that was a yes, I'm not sure.

A. No, it's not quite a yes or no because it -- yes, we are claiming that each day is a different violation.

I'll just read out of the question the implication in it.

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Q. And producing documents for those depositions is a separate breach?

A. There was a separate document production separate to his testimony at the depositions. They were different acts. So I guess that means yes.

Q. Okay.

MR. BOWLES: We've been going about an hour. we take a break?

MR. WALTON: Sure.

(Short recess.)

MR. WALTON: Q. We're at the eighth cause of action, page 14.

The plaintiff is claiming $50,000 damages because Mr. Armstrong attached the settlement agreement to a deposition transcript; is that accurate?

A. Yes.

Q. Are we talking about the same settlement agreement that was already public in the public?

A. No, it wasn't in the public. It's a confidential

settlement agreement and he improperly disclosed it.

Q. I thought it had been made public back in 1990, isn't that true, in the appeal matter?

A. Not without our permission. Armstrong may have -- Armstrong disclosed it more than once, yes, and each disclosure of that document gave rise to the liquidated

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damages.

Q. You testified that you were aware that Mr. Armstrong had attached a copy of the settlement agreement under seal to the Court of Appeal.

A. Did I say that?

Q. Yes, you did. We were talking about why plaintiff had not -- decided to call Armstrong's participation in the appeal a breach.

A. No, that wasn't why. The reason why was because the circumstances in the appeal had changed from that at the time of the settlement in that they called for the appeal to be rebriefed. That's why we didn't include it in this case.

Q. But was it the testimony that the settlement agreement had been included; had been provided to the Court of Appeal under seal?

A. May have been.

Q. Well, do you know if it was?

A. I don't remember if I testified that or not. And I think if you're really asking the question, that it might have been, but that would still mean it wasn't a public disclosure. It could have been attached under seal.

This is not, this instance in the eighth cause of action wasn't under seal.

Q. Was the settlement agreement attached to the

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complaint that plaintiff filed against Mr. Armstrong in the Marin action?

MR. BOWLES: Objection. Vague as to vagueness.

What do you mean by the Marin action?

MR. WALTON: I believe it's the first Marin action.

THE WITNESS: The first Marin action being what became the L.A. action in terms of the breach action.

MR. WALTON: Q. In 1990, I think.

A. No, wasn't 1990, it was February of '92.

Q. February of '92. Was that --

A. I just don't remember.

Q. Okay.

A. I seem to recall efforts to have portions of that record sealed. I don't recall the outcome.

Q. Well, do you know if the Court of Appeal in the Armstrong appeal unsealed the settlement agreement?

A. I'm not certain.

Q. Well, do you know if it's the plaintiff's position that Mr. Armstrong providing a copy of this agreement on or about April 7th, 1992, if that providing was actionable because the document was still under seal?

A. It was actionable because we had agreed as part of the settlement agreement for it to be confidential and we had not voluntarily disclosed that agreement and Armstrong was obligated to keep that agreement to not publish that

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agreement. So, yeah, that's what we're asking, that's what this one concerns is his attaching it on an open public record like that.

Q. What I'm wondering is if the Court of Appeal earlier had unsealed the document and it was now in the public domain, if Scientology's position would still be the same with respect to Mr. Armstrong providing a document that was already in the public?

A. Any document, are we talking about confidential settlement agreement.

Q. This confidential settlement agreement.

A. I wouldn't be able to draw that legal conclusion.

I could consider circumstances where we would be entitled to recovery under that.

Q. If the settlement agreement had been an unsealed exhibit to your Marin complaint, the original one that ended up down in L.A., would Scientology still claim damages for this eighth cause of action?

MR. BOWLES: Objection, calls for speculation and legal conclusion.

MR. BENZ: Can the witness answer the question or --

THE WITNESS: This is the best I can answer it, any time Armstrong makes a disclosure of that settlement agreement, there's still the contractual provision that

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he's bound not do that, so that would be our position.

MR. WALTON: Q. So it doesn't turn on whether or not it was still hidden from the public, it turns on whether or not he did it, whether or not he produced the document?

A. Generally, yes.

Q. Ninth cause of action, "Armstrong failed to return a letter written by L. Ron Hubbard to the FBI." That's not to say that Armstrong failed to return the letter in -- to the Federal Bureau of Investigation, but it apparently is a letter that Mr. Hubbard wrote to the FBI.

Do I know what that letter was about?

A. Alerting the FBI to a situation that existed in his organization at the time.

Q: And was it Armstrong's failure to return the letter that gave rise to the damages?

A. That was a breach. What gives rise to the damages here in this cause of action is attaching them to his declaration in the Aznarak case.

Q. So it's not the declaration, it's attaching the document to that declaration; is that right?

A. It's the declaration as well. You didn't ask me that. You were talking about just the documents, certainly it's the declaration as well.

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Q. Where are the documents that -- did Armstrong return any documents -- well, it's hard for me to ask because it's incomplete.

Armstrong failed to return a letter. Where was Armstrong supposed to return the letter, to what entity was it to go, who was he supposed to return it to?

A. The plaintiffs in the original Armstrong case, CSC.

Q. Were there any other documents that Mr. Armstrong was supposed to return?

A. Certainly. There were the archives documents themselves that were impounded in the court at that time that were supposed to have been returned.

Q. Where are they now?

A. They were returned to the owner of those documents.

Q. Who was that?

A. It was the estate of Mr. Hubbard.

Q. Do you know where those documents are now located physically?

A. I have no clue.

Q. Tenth cause of action, "Mr. Armstrong voluntarily provided aid and advice to Bent Corydon and Corydon's attorney."

What advice did he give, do you know?

A. As I sit here, what I recall is assistance on the

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litigation in terms of information and documentary support.

Q. Now, how did Scientology, the plaintiff in this case, how did they find out about this?

A. Seeing Armstrong together in court with Toby Plebin and Bend Corydon on a number of occasions, and through information that came up during the Corydon litigation.

Q. Can you think specifically of anything that came up during the Corydon litigation?

A. What I recall is it was either, I believe it was Corydon or Armstrong himself saying that he was helping on that case, Corydon's case, that's, what I recall right now.

Q. I'll try to do this as best I can. Again, we're at such -- this is so vague that it's hard to ask specific questions without sounding vague.

MR. BOWLES: Can we ask a question rather than make speeches?

MR. WALTON: If you remember that, I'll remember that.

MR. BOWLES: I can make speeches. I'm going to be objecting to any --

MR. WALTON: You can object, but there's no improper question here so --

MR. BOWLES: There's no question.

MR. BENZ: Let's get on with the question.

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MR. WALTON: Q. If Mr. Armstrong, if he sits in the courtroom and hands document to Ms. Plebin, is that giving aid and advice?

A. It's certainly giving aid and assistance to her, yes. He's acting in that capacity as her assistant, certainly that would be.

Q. What if he's just sitting there providing moral support, is that giving aid and advise?

MR. BOWLES: Objection, vague.

THE WITNESS: Calls for conclusion, it's a hypothetical.

If he is just sitting there in the courtroom and has no discourse with her whatsoever, the courtrooms are public forums, he can show up wherever he wants.

But when he comes with them, carries their bag, helps them on the case, provides documents to her, hands her stuff, passing notes, giving arguments, that sort of general activity, I would say he's helping them. It's not something he is allowed to do under the settlement agreement.

Q. Is that what he did in this paragraph 67, is that the allegation in paragraph 67, he did those kinds of things?

A. That's the allegation in paragraph 67.

Q. Handed notes, he carried her bag, he handed her

619

documents?

A. And other things that I -- and the other things that I said, yes.

Q. Do you remember specifically what hearing or what court appearance that was at?

A. I remember that there were more than one during the Corydon case.

Q. And you were there, you saw it?

A. Yes.

Q. We've already gone over, I think -- maybe we haven't. Oh, yeah. Okay. Let's move onto the twelfth cause of action.

We don't have a number here, do we? We don't have a specific amount, but I would like to know just about this substantial paralegal assistance to Mr. Greene in the Ed Roberts and Denise Canteen matters.

So Mr. Armstrong interviewed Mr. Roberts at least seven times --

MR. BOWLES: Is that a question?

MR. WALTON: Q. -- from November '91 until the time of the filing of this complaint; is that right?

A. That's right.

Q. Did all these interviews take place in Colorado?

A. I have no idea where they took place. I don't know where they took place.

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Q. How do you know that they occurred?

A. Armstrong said he did. He said he went to Colorado and interviewed Roberts in November '91. I don't know where the other interviews took place.

Q. How do you know there were six more?

A. My recollection is Armstrong said that that was how many times he had interviewed Ed Roberts.

Q. Okay.

A. He said it in a deposition, as I recall.

Q. Other than Armstrong's testimony, is there any other information you have regarding the six other interviews?

A. Well, there was a letter that Armstrong wrote, as well, concerning his work on the Ed Roberts case, which is also discussed elsewhere in this complaint.

Q. Could you show me where?

A. The Ed Roberts case is discussed in Exhibit E to the complaint --

Q. Okay.

A. -- which is the December 22nd letter we've talked about.

Q. Oh, yes. Okay. We'll get to that.

Thirteenth cause of action, starting on page 19.

So Mr. Armstrong willingly spoke to approximately 50 people --

621

MR. BOWLES: Is that a question?

MR. WALTON: You keep interrupting me. You didn't interrupt Mr. Greene like you're interrupting me.

MR. BOWLES: He asked questions.

MR. WALTON: I will. Just give me the opportunity, sir.

MR. BOWLES: Okay.

MR. WALTON: Q. "Mr. Armstrong spoke with approximately 50 people willingly and disclosed to them experiences."

Is that the act that gave rise to $150,000 in damages?

A. That's one of them.

Q. Well, I don't understand how we got to $150,000 in liquidated damages here. Perhaps you can help he.

A. We got to $150,000 in liquidated damages. The first $50,000 is as set forth in paragraph 81, which is the videotaped interview to the programming specialist Jerry Witfield.

The second is distribution of the videotape to people other than Witfield and giving rise to a second.

The third is the discussions that took place at the Cult Awareness Convention in November 1992.

All three of these sequences of action concerned that November 1992 Cult Awareness Network conference.

622

Q. I see. And representatives from Scientology were at this convention; is that correct?

A. Yes. In a manner of speaking.

Q. What does that mean?

A. That people were out front. People were participating in discussions with some of the other attendees in front of the convention right in the registration area. And several Scientologists were allowed to attend on court order allowing them to attend.

Q. Do you know what Mr. Armstrong, other than the claimed experiences, what he spoke about? What were these claimed experiences, do you know?

A. They're probably best summarized in the videotape with Jerry Witfield when he talked about his experience in the church, his having left, a bit about the case, his first case.

Q. So the videotape actually is a tape of Gerry disclosing his claimed experiences?

A. It's a videotaped interview about his claimed experiences, yes.

Q. And that's the same claimed experiences that is listed on line two, page 20?

A. That's the same Gerry. He had the same experiences. I'm not sure I'm tracking with your question.

623

Q. Sorry. Let me try again.

We have the two videotape disseminations, gave videotape to two separate entities, that's $100,000.

MR. BOWLES: I don't think that's his testimony.

THE WITNESS: The giving of the videotaped interview, the distribution of that interview and then Gerry's discussing his experiences all at the convention in November '92.

MR. WALTON: Q. I see. So what I'm asking is do you know what he talked about specifically? What do you know what the experiences were he talked about?

A. His experiences as the archivist for LRH's archives. His opinions about the organization. Those are the things that I recall.

Q. Were those opinions negative?

A. Yeah.

Q. Was his experiences as archivist negative?

A. I don't know if he would consider the entire experience negative. It ended badly.

Q. Just one more question about this --

A. Um-hum.

Q. -- so I get it clear.

The giving of the interview to Witfield and the dissemination of the interview to other parties are two separate claims; is that correct?

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A. They're two separate acts within this cause of action, yes.

Q. The fifteenth cause of action is really pretty much the same idea as thirteen, right, he was with the group and he talked about his experiences in Scientology?

A. Fifteenth, you say?

Q. Fifteenth, yes, page 21, 40 to 50 people were present and Gerry talked about --

A. No, that's a different event than the November '92 convention.

Q. I mean, pretty much the same idea?

A. You mean, in terms of the type of conduct that he engaged in you're talking about?

Q. Yes.

A. Yes, it's similar.

Q. Do you know what he talked about to those 30 or 40 people?

A. I don't remember.

Q. Was anybody from Scientology there?

A. I don't remember that as well.

Q. Do you know what the event was?

A. It was one Armstrong himself described.

Q. Was anybody else from Scientology there?

A. Again, I don't remember.

Q. Other than any testimony Gerry may have given on

625

his appearance at this event, does Scientology have any other information regarding the event?

A. We may. I'm just not certain as I sit here.

Q. Do you know anybody who would have the information, any information?

A. I'm certain I could find out, yes.

Q. Where would you go to find out?

A. Silly me, I prepared for a deposition in this case rather than the Los Angeles case.

Q. Where would you go to find out?

A. I would review the litigation file in terms of any evidence collected or documents produced in the case, or ask counsel for her witness that she has on this and reacquaint myself with this particular instance.

I'm sure from that I would find the information and the name of the individual or individuals that would be called upon to be a witness for it at trial. I'm obviously not a witness for this case of action.

Q. Sorry?

A. I'm obviously not the witness for this particular cause of action.

Q. In the sixteenth cause of action, is the actionable event the giving of the interview by Mr. Armstrong in Newsweek?

A. Insofar as it concerns the subject of -- a subject

626

that is prohibited under the settlement agreement, yeah. If he merely gave an interview to Newsweek about art, for example, it wouldn't be, but it's because the interview is concerning a certain subject, yes.

Q. Well, the quote, "rich Scientologists," you see that line, line five?

A. Yes.

Q. It says, "Armstrong stated that the founder of the Scientology faith L. Ron Hubbard wanted rich Scientologists to buy huge quantities of The Way to Happiness," -- underlined, because it's a book, I guess -- "for distribution. He wanted to go down in history as a scientist or philosopher or both."

Is that quote, does the plaintiff consider that quote actionable?

A. Yes.

Q. Does Scientology perceive this as a negative comment?

A. In the context it was placed in the article, yes, because it was -- I'll just add in the end the answer with yes.

Q. And to the extent it's negativity caused harm to Scientology.

A. Yes.

Q. Would you consider this an inaccurate statement?

627

A. I think it's a very misleading statement.

Q. Would you consider it an inaccurate?

A. Yes, I would.

Q. What part of it is inaccurate?

A. The way he expresses LRH's intention, I mean, Mr. Hubbard's intention that he go down as a scientist or philosopher or both. From my knowledge of what Mr. Hubbard has written, he considered himself a writer, nothing more than a scientist.

It's also inaccurate in that this isn't the only The Way to Happiness is distributed, with rich Scientologists buying it.

Major corporations by large quantities of them, governments, police forces, distribute them.

And to me when I read what his comments were, it was an effort to somehow say there's something wrong with promulgating a non-religious moral code that's based on common sense that people can use to improve their lives regardless of whether they become Scientologists whatever, it's off on a different plane than that. And he seems to -- the context of this is that there's an implication that there's something wrong with this, there's something wrong with doing something like this. So to that degree it's misleading as well as inaccurate.

Q. Is your answer predicated upon your knowledge that

628

there were other -- that this is within a context of other things?

A. Yes, the article.

Q. Just this sentence, though, do you find just this sentence objectionable?

A. Yes, because it's very misleading, it's very misleading. The implication here is that The Way to Happiness is some sort of money making thing, "Rich Scientologists to buy rich huge quantities of The Way to Happiness for distribution." And it's purely an effort to stop the decline of society enough so that people can maybe adopt some moral values that they don't otherwise have.

Q. The seventeenth cause of action claims damages due to a -- and my question is does it claim damages due to the -- no, let me strike that.

What is the damage in the claim in 17?

A. You mean, what did he do?

Q. Yes.

A. He interviewed Entertainment Television.

Q. So it really doesn't have anything to do with " One Hell of a Story"?

A. Well, that was part of what he gave to Entertainment Television. He gave the interview and gave the document as part of the interview.

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What is this document, this manuscript?

A. It's supposed to be, to my understanding, Armstrong's story of his experiences in Scientology --

Q. Have you read it?

A. -- and afterwards.

Q. Sorry. Have you read it?

A. Perhaps parts of it, only little parts of it.

There was about a page of it that was on the television. I don't remember if we've subsequently gotten it in discovery or not. There was litigation back and forth on whether we could have it.

Q. Do you remember if the part that you read included detailed descriptions of Gerry's experiences in Scientology?

A. It concerned Scientology. It was just one page.

Other than the title page, there was the title page and one other page that was shown on the screen that you can read when you slow it down.

That's why this is all just one breach, provision of the interview which included the provision of this manuscript concerning his experiences in the church.

Q. The part of the manuscript that you -- the little bit that you did read, was it accurate?

A. I don't really remember.

Q. What about Gerry say to the Entertainment Tonight

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people that Scientology finds objectionable?

A. Well, there was portions of the interview that were aired. There were several negative comments concerning Scientology that made it onto the air that would be reflected in the transcript of that interview, I mean, the transcript of the broadcast.

Q. That were attributed directly to Mr. Armstrong?

A. Well, they were him on camera giving the statements, yes.

Q. So that's $50,000.

All right. Well, I'm afraid I'm in the same position with the nineteenth cause of action. I can't quite pull out which is the part that is the actionable part, so perhaps you can help me. Which part is the actionable part, is it the authentication of the document?

MR. BOWLES: We're on 19 now?

THE WITNESS: Oh, 19, not 18.

MR. WALTON: Q. I'm sorry.

A. It's the provision of the declaration in the Fishman litigation which contains disclosures.

Q. This was a declaration, that the attorneys attached some legal document?

A. It wasn't attached, it was just filed on its own.

MR. WALTON: Okay. Why don't we just take a couple minutes here, take five minutes. I'm almost done. Thank

631

you very much.

(Short recess.)

MR. WALTON: Q. Do you know how many separate cases Scientology or any of its organizations have been involved in as plaintiff --

MR. BOWLES: Vague and ambiguous.

MR. WALTON: Q. -- in the past since 1975?

MR. BOWLES: Objection, vague.

THE WITNESS: CSI wasn't in existence in 1975.

MR. WALTON: Q. Not just CSI but Scientology under any of its -- I don't want to say guises, but any of its corporations or entities?

A. As plaintiffs since '75, no, I don't know how many.

Q. Since '80?

Not including all of the churches and missions and groups in the world. There are like 1400 to 1600 of them.

I have no idea.

Q. Well, a lot of this, I think you guys have covered.

With respect to Defendant's 35, is that an ecclesiastical directive?

A. Yes.

Q. And I think this was Exhibit 1. Yes, Exhibit 1.

Back to Exhibit 1. We were talking about the fifth full paragraph.

A. The one with the squiggle next to it?

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Q. Yes. Remember we talked about that briefly in our first section?

A. Right.

Q. I was trying to ascertain, as I recall, to whom this document has been disseminated. Do you know?

A. And what did you find out in that regard.

Q. I didn't. I think there was an objection and we went back and forth and it was overruled. And I said I'd come back to it. So now I'm coming back to it.

A. All right. I don't know. This one in particular?

Q. Yes.

A. I don't know. I don't remember.

Q. But you do recall working on the document?

A. I recall, yes.

Q. And that particular paragraph, the one I've referenced noted as a squiggle?

A. Um-hum.

Q. What evidence, what facts does Scientology or plaintiff have for making those allegations?

A. Well, we'd have to break it down.

Q. Okay.

A. It says, "One of the recipients of Armstrong's assets was an attorney named Micheal Walton."

That's never been disputed. That first was disclosed to us by Armstrong in a deposition in the breach

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case.

It's been conceded by you, testified to again by him, and the property records concerning the transfer of the house would also go toward that sentence.

"Prior to signing the settlement agreement with the church, Walton had advised Armstrong about the terms and the conditions of the agreement."

That is from deposition testimony by Armstrong that you were one of the people he talked to about the terms of the settlement agreement prior to signing it, in addition to Micheal Flynn. He testified that he sought advice from you.

"Walton also knew of Armstrong's intention to breach the agreement and was thus fully aware of the fraudulent nature of the conveyance."

The material after the thus is the conclusion that follows from all of the premises above. The first part of the sentence was, and I think that we covered this in my last deposition, but your presence in the March '90 hearing in the Yanny case where all that was discussed concerning his effort to appear there. That was there was a rather lengthy argument concerning Armstrong's intention to breach the settlement agreement and his activities in that regard, which you observed. I know we at least had that.

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Q. "Walton knew of Armstrong's intention to breach the agreement."

You're saying -- I'm trying to understand your testimony. My attendance at the Yanny hearing -- at a Yanny hearing was what Scientology is saying is the evidence that I knew of Armstrong's intention to breach?

A. Well, not just any Yanny hearing, a hearing that was devoted to Armstrong's avoidance of his obligations under the settlement agreement.

It was discussed in open court. You heard it.

Now, there may be other bits of deposition testimony that one goes and pulls out that lead to that conclusion as well. That happens to be one thing that I observed myself.

Q. Any other facts?

A. Those are what I have in mind right now.

Q. And it was -- this is a question -- is it because I was in attendance at a Yanny hearing and observed those proceedings that I also was fully aware of the fraudulent nature of the conveyance?

A. No, it's not just a conclusion based on that one part of the sentence. It's based on all of the facts in that paragraph that will lead to that.

Q. Other than the facts alleged in that paragraph, is there anything else that Scientology has concluded is

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factual basis for making that allegation?

A. And the record in this case which discloses the bits and pieces of the disclosure -- of the assets transfers that we've talked about at length through the deposition, I have to say the sum total of all that.

Q. Do you have any recollection of what Yanny hearing you saw me in attendance at?

A. Yeah, it was the day he wanted Armstrong to testify. And we argued that he shouldn't be allowed to, and to do so would violate a settlement agreement.

There were discussions in the hallway right before that with Vansickle where we were all standing around of why are you having, this guy come, it's a violation of the settlement agreement.

I think Joe and I exchanged some words over that.

I don't remember whether Gerry and I did or not, I don't think so.

Q. Do you remember the date?

A. No, but it would be pretty easy to find out. It's on the record of the trial.

Q. How would you know which day it was, which hearing it was?

A. Because it was transcribed, at least the hearing itself was transcribed as part of the trial record.

Q. Was it a motion or --

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A. No, it was during the trial. Joe was intending to call him as a witness and we objected to his testifying because, one, he didn't have anything relevant to say, and because of that to do so would violate a settlement agreement.

And the judge for reasons known only to himself declined to allow Armstrong to testify. I mean, the reason I say that is because he didn't articulate the reason, he just declined to let him testify.

That was where you and I first met, at that hearing.

Q. Did we meet formally?

A. Well, we were introduced.

Q. Who is Zenu.

MR. BOWLES: Objection. Mr. Benz, Mr. Walton is broaching on ecclesiastical subjects that this witness is not going to answer questions on.

MR. BENZ: Do you have some offer of proof? Who is Zeno?

MR. WALTON: Zenu.

Mr. Benz, you know, it's very difficult when you're trying -- to have all these allegations and you're trying to deal with an entity that not only is protected by a series of corporate entities, but also claim of religious privilege, trying to get to the heart of some of these

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matters.

And what we're looking at here is a claim by a defendant who divested because he says that he was in contact with his God.

Now, as you said, that's something that maybe a court can't figure out. But we do have on the other side a plaintiff religious organization who has their own religious beliefs. And if their religious beliefs teach that others' religious beliefs and experiences are invalid, then I think I'm entitled to know that.

If the reason that this religious organization is discounting Mr. Armstrong's sworn testimony is because they have factual information that he did something, that's one thing. If they rejected it because of their religious beliefs and then refuse to discuss their religious beliefs, that certainly puts me and any other potential defendant at a disadvantage.

MR. BENZ: They haven't alleged any religious beliefs as the basis of any cause of action.

What they're alleging are basic civil causes of action, fraudulent conveyance and conspiracy.

So I don't see that who Zeno -- I may have the name wrong -- who or what this is or isn't, or whether or not what their religious beliefs are have anything to do with the basic --

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MR. WALTON: So long as --

MR. BENZ: -- defense.

MR. WALTON: Sorry. It's along the same idea as the black PR and what a number of courts have called fair game.

There have been at least, and prance not in -- I'm not suggesting necessarily in this instance is the case, but certainly in a number of jurisdictions across this country courts have found that this organization does engage in fair game, that is to say, that it tries to get people through litigation.

And I think I'm entitled to find out if I'm being subjected to some of this fair game activity. And I think I'm entitled to know if the reason that they're doing this, the reason that they're suggesting that Mr. Armstrong is lying, which is what they're saying, that he's lying under oath, is a religious as opposed to a non-religious reason.

MR. BENZ: Well, whether it's fair game, if it exists, is an act. Fair game, if it does exist, and if it's a motivating force, has some relevance to the question of malice and abuse of process claim under the cross-complaint.

Other than that, I don't see that the question of fair game is relevant. We've talked about that.

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If you have anything further on fair game, fine.

But as far as going behind fair game, which is an announced policy, as to what their religious belief may be, the answer is it's irrelevant.

MR. WALTON: Then I have no more questions.

MR. BOWLES: All right. So we'll stipulate as was done in the first two sections as to how the transcript will be dealt with and use the documentation of counsel at that time as a guide.

MR. WALTON: Documentation? Sure.

MR. BOWLES: I'm just saying the same stipulate --

MR. WALTON: Right. Same stipulate.

MR. BOWLES: -- to this transcript as was agreed to by the first two sections of the deposition.

Is that agreeable to you?

MR. WALTON: That's agreeable.

MR. BOWLES: Okay.

MR. BENZ: Off the record.

---o0o---

(Whereupon, the deposition was adjourned at 4:14 p.m.)

______________
LYNN R. FARNY

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I, SUSAN M. LYON, a Certified Shorthand Reporter in and for the State of California, do hereby certify:

That the witness named in the foregoing deposition was present and duly sworn to testify the truth in the within-entitled action on the day and date and at the time and place therein specified;

That the testimony of said witness was reported by me in shorthand and was thereafter transcribed under my direction into typewriting;

That the foregoing constitutes a full, true and correct transcript of said deposition and of the proceedings which took place;

That the witness was given an opportunity to read and, if necessary, correct said deposition and to subscribe the same;

That I am a disinterested person to the said action;

IN WITNESS WHEREOF, I have hereunto subscribed my hand this 8th day of August 1994.

[signed Susan M. Lyon]
SUSAN M. LYON
CSR #5829