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PRELIMINARY REPORT TO THE CLEARWATER CITY COMMISSION RE: THE POWER OF A MUNICIPALITY TO REGULATE ORGANIZATIONS CLAIMING TAX EXEMPT OR NON-PROFIT STATUS |
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V. APPLICATION OF MUNICIPAL LAW TO SCIENTOLOGY ACTIVITIES, POLICIES, AND PRACTICES A. APPLICATION OF THE PROPOSED CHARITABLE SOLICITATION ORDINANCE TO THE CHURCH OF SCIENTOLOGY The various corporate entities of Scientology in the City of Clearwater, are taken together, the largest fundraising organization in the City which claims charitable status. Heretofore, Scientology has operated in almost total secrecy with regard to its operations and finances in the City. The ordinance is intended to give the City a legitimate means of investigating the affairs of Scientology, and to restrict the activities of Scientology if it obstructs an investigation or refuses to cooperate. The ordinance also gives the City the authority to seek abatement of specific acts which Scientology regularly engages in, and to warn the public of certain facts. It must be noted that through many years of litigation with the Internal Revenue Service, the Food and Drug Administration, the United States Attorney's Office, the Pinellas County Tax Assessor, various agencies of foreign governments, and with private litigants, Scientology has consistently conducted itself in a profoundly rancorous, contentious, contemptuous and deceptive manner. It may reasonably be expected that Scientology will behave in the same manner with the City Consumer Affairs Commissioner. Every means of legal obstruction will be employed. Every subpoena will be resisted. No document or witness will be produced voluntarily. Witnesses will be instructed to commit perjury, or assisted in removing themselves from the State. Officers who are successfully subpoenaed will resign their offices. Accordingly, the city must be prepared to vigorously enforce the Ordinance. It is probable that effective enforcement could be a process that will take several years. In,view of the probable response of Scientology, the ordinance has been designed with several self enforcing mechanisms. Refusal to provide the Commissioner with requested information is itself grounds for restriction of solicitation activities. The notice and warning provisions of the ordinance also provide effective and easily implemented means of dealing with the probable intransigent response of the Scientologists. Also, the Commissioner is empowered to conduct investigations and receive information from other sources. Thus, the enforcement of the ordinance is not dependent whatsoever upon the receipt of any information from the Scientologists. In fact, it is anticipated that they will produce nothing. In all likelihood they will not even file a registration statement. As noted, the main features of the ordinance are 1) disclosure; 2) notice and warning to the public; and 3) power to abate prohibited acts. The following is a detailed description of how each of these provisions may be expected to affect the Church of Scientology and the issues that may arise in the enforcement process: 1. Disclosure - The ordinance requires the Church to disclose information it has never disclosed and has fought for years in court with the Internal Revenue Service and the Pinellas County Tax Assessor to avoid disclosing. [1] The information, if disclosed, would give the City the avenues to effectively investigate the financial affairs of Scientology. Since the principal corporate entity in Clearwater is the Church of Scientology of California, the activities of the entire corporation would be relevant to the registration and investigation. If such information had been truthfully disclosed in the past, it would have shown unequivocally that the Church devotes a substantial portion of its funds to non-charitable activities, specifically, the financing of a massive campaign of criminal activity including burglaries, infiltrations, illegal surveillance, perjury, kidnapping, and extortion. Inurement of personal profit to L. Ron Hubbard and members of his family is an issue of proof which the IRS met in the early 1970's and which the requested information, if produced, would undoubtedly demonstrate again. The requested information would also demonstrate the exact relationship between the Church of Scientology and its various commercial affiliates such as the World Institute of Scientology Enterprises. Scientology will either default and refuse to produce information, or will produce false information. There are several reasons for this. First, it cannot make an honest disclosure of the amount of money it funnels into Guardian's Office activities or open these records to inspection without incurring public scrutiny of the nature of Guardian's Office activities. As described elsewhere in this report, these are primarily criminal and tortious in nature. Second, Scientology cannot afford to make known to its own members the details of its finances. Full disclosure of the extent of Scientology's assets and the ways in which it spends its money would deprive it of all justification for the exorbitant prices it charge. for its "services." Finally, Scientology cannot reveal its connections to its commercial affiliates or to Hubbard and his family since these are evidence of non-charitable uses of funds. 2. Notice and Warning - Refusal by Scientology to register or cooperate with an investigation, or commission of prohibited acts, give the Commissioner authority to publish and post warnings to the public. The Commissioner is further authorized to seek permission of the Court to post warning notices on the premises of the Church in a manner calculated to give reasonable notice. This provision would have a significant impact on Scientology operations. Many of the people who come to Clearwater are relatively new to Scientology. Wealthy people in particular, regardless of where they make their initial contact with Scientology, are soon solicited by "Flag" agents who encourage them to go to Clearwater and make payments to the organization of thousands of dollars. Often these people are given a special "kid glove" treatment. They are always told that Scientology is a charitable, non-profit organization. A strongly worded warning from the Commissioner would give people an opportunity to reflect on the wisdom of their payment while they are still capable of making an intelligent choice. It would give them access to information which the Scientologists specifically conceal. More important, it would notify them that the City has jurisdiction and an interest in the affairs of the organization and can entertain complaints from individuals. This would give defrauded individuals a place to seek a remedy and counteract the fear and isolation which the Scientologists intentionally create. 3. Prohibited Acts - The prohibited acts section of the ordinance, if vigorously enforced, would have a far reaching effect on many of the normal operations of Scientology. The Commissioner is given the power to abate these violations by seeking injunctions and fines. All of the prohibited acts can be fairly characterized as practices which are a proper subject of regulation. In the past, the Church of Scientology has committed most of these acts. The following is a description of Church practices which fit the definition of each prohibited act. The letters correspond to the lettered acts in the ordinance. (See pages 162 - 164 , infra).
The following proposed ordinance is set forth in a preliminary form. It is intended to be consistent with modern Constitutional principle. Considerable effort was made to draft an ordinance which would withstand a Constitutional attack in court. The ordinance is also drafted in view of the Florida Solicitation of Charitable Funds Act (s. 469.02 et seq.) The proposed ordinance is intended to complement existing laws by addressing problems which are unique to the City of Clearwater and not adequately covered by state law. As previously stated, the main features of the ordinance are l) aggressive disclosure and warning provisions; 2) powers granted to a city official to investigate and abate specific prohibited acts. All of the contemplated prohibited acts are regularly occurring in the City of Clearwater. Commission hearings prior to the adoption of this ordinance could develop a record showing the widespread occurrence of the types of things which the ordinance seeks to prohibit, and would strengthen the ordinance against Constitutional attack and develop public support for its passage. THE PROPOSED ACT DEFINITIONS 1) "Solicitation" means the request directly or indirectly for money, credit, property, financial assistance, or other thing of value on the plea or representation that such money, credit, property, financial assistance, or other thing of value will be used for a charitable purpose as those purposes are defined in this part, including the following methods.
EXEMPTIONS The registration requirements of this Chapter shall not apply to a) charitable organizations which receive less than $100,000 per calendar year in contributions; b) collections or contributions during the regular worship services of any church or religious organization or the meetings or exercises of any lodge, fraternal order, or similar organization; c) the offering for sale or auction of any goods, services, or things of value upon the representation that the proceeds thereof are for a charitable purpose, where the proceeds thereof do not exceed $25,000 in any calendar year. Power of Consumer Affairs Officer to Register and Investigate Charitable Solicitations 1) The Consumer Affairs Officer of the City of Clearwater is hereby vested with the general authority, power, and jurisdiction to enforce the provisions of this chapter. 2) The Consumer Affairs Officer may make such rules as he deems necessary from time to time to implement the provisions of this chapter, and may require from any organization subject to this chapter any reports and information he deems necessary for the administration of this chapter. The Commissioner shall have the power to prescribe forms for registration, disclosure, and other purposes, to adopt procedures, and when necessary, to hold hearings and make adjudications as provided in this chapter and make recommendations to appropriate prosecuting attorneys for enforcement of any penal provision of this chapter. 3) In Addition to the authority granted the Commissioner by this Chapter, he may commence and maintain in a court of competent jurisdiction all proper and necessary actions and proceedings to enjoin and abate any act prohibited by this chapter, or to enforce any subpoena issued by the Commissioner or to seek any injunction authorized by this chapter. 4) the Commissioner, upon his own motion or upon the complaint of any person, may, if he has reasonable ground to suspect a violation of this chapter, investigate any charitable organization, professional fund raising counsel, or professional solicitor to determine whether such organization, counsel, or solicitor has violated the provisions of this chapter or the rules and regulations promulgated by the commissioner, or has filed any statement or information required under this chapter which contains false or misleading statements. 5) All financial records of any professional solicitor or charitable organizations which pertain to the solicitation and expenditure of contributions received shall, upon demand, be available to the Commissioner for inspection and investigation and the term "financial records" shall be deemed to include banking records and statements, checks, drafts, receipts, and papers of any description which indicate the receipt or expenditure of funds. However, names, addresses, and identities of contributors and amounts contributed by them shall be exempt from the provisions of s. 119.07(1) of the public records law; shall not be disclosed by the Commissioner; and shall be removed from the records and the custody of the Commissioner at such time that such information is no longer necessary for the enforcement of this chapter and shall not be disclosed by the Commissioner. 6) The Commissioner may enter into reciprocal agreements with the appropriate authority of any other government, entity for the purpose of exchanging information with respect to organizations subject to the provisions of this chapter. 7) For purposes of enforcing the provisions of this chapter and making investigations of any violation thereof, and for purposes of investigating the practices and business methods of any organizations to determine if there have been violations of this chapter, the Commissioner shall have the power to subpoena and bring before it any person in the state and may require the production of papers it deems necessary and administer oaths and take depositions of any such person so subpoenaed. The Commissioner shall have the power to effect service of process of subpoenas. Upon failure of a person without lawful excuse to obey a subpoena issued and served by the Commissioner, the Commissioner may apply to the Circuit Court for an order compelling compliance. 8) In addition to all other powers and duties created by this Chapter, the Commissioner is empowered to receive and investigate complaints from any individual who claims to have been defrauded, deceived, or injured by the commission of any act prohibited by this Chapter as a result of a solicitation or solicitation activities in the City of Clearwater by an organization subject to this Chapter. The Commissioner may conduct hearings regarding any such complaint, after notice in writing to all parties affected. The Commissioner may make findings and recommendations, fashion order and remedies, and seek enforcement of any such orders, in the same manner as provided for in the City of Clearwater consumer protection Act. (Draft copy of such act included with this proposal). Registration 1) Every charitable organization in the City of Clearwater which intends to solicit contributions in Clearwater, or to sell or render any goods or services in Clearwater in connection with a solicitation for a contribution, shall, prior to any solicitation, file a registration statement with the Commissioner of Consumer Affairs on the forms prescribed by him. The registration shall contain:
2) The registration required under this section shall be filed and signed under oath by the chief executive officer of the organization. If the chief executive officer of the organization does not maintain a residence of principal office in the City of Clearwater, the registration shall additionally be endorsed and signed under oath by the highest ranking officer of the organization who resides or maintains a residence in the City of Clearwater. If said registration statement contains information the knowledge of which, or the documentary evidence of which is possessed entirely by any person or persons who do not reside or maintain an office or residence in the City of Clearwater, the statement shall designate any such information, and include the name and address of any such person, and specify the information and documents which any such person possesses. 3) No organization shall withhold any information of documents required to be produced under this chapter or requested by the Commissioner during an investigation on the basis that the documents or persons who possess the information are not located in the City of Clearwater. Any refusal to produce documents or information for such reason shall constitute sufficient grounds for the Commissioner to seek and obtain an injunction against all solicitation activities by the organization within the City of Clearwater. 4) If there is any change in fact, policy, or procedure that would alter the information given in any registration statement, the registrant shall notify the Commissioner in writing thereof within ten days. 5) Except as otherwise provided in this chapter, registration statements and all other documents and information required to be produced under this chapter by the Commissioner shall become public records in the office of the Commissioner and shall be open to the general public under such conditions as the Commissioner may prescribe. 6) If the Commissioner determines that any organization subject to this chapter has failed to file a registration statement or has filed a statement which does not contain information sufficient for the purposes of this chapter, he shall notify said organization in writing and specify what information it has failed to produce. If any such organization fails for fifteen consecutive days after receipt of notice to provide such specified information without legal excuse, the Commissioner shall declare a default, and such default shall constitute sufficient grounds for the Commissioner to seek and obtain an injunction against all solicitation activities by the organization in the City of Clearwater. Maintenance of Records Every organization subject to the provisions of this chapter shall, in accordance with rules and regulations promulgated by the Commissioner, keep true fiscal records as to its activities in conformity with the principles set out in the "Audit Guides" published by the American Institute of Certified Public Accountants. Such records shall be maintained for a period of three years after the end of each fiscal year of the organization and shall be made available to the Commissioner upon request. Notice and Publication of Warnings Concerning Certain Charitable Organizations If the Commissioner finds that any charitable organization subject to this chapter has failed to file a registration statement, or has filed a statement containing insufficient or false information, or has engaged in any act prohibited by this chapter, he may, in addition to all other actions authorized by this chapter, publish and promulgate notice to the public containing the following information: a) that the particular organization is subject to the provisions of this chapter; b) that the Commissioner is authorized to receive and investigate complaints relating to fraud and violations of this chapter; c) that the particular organization has failed to register, or provide sufficient information, or has engaged on prohibited acts, as the case may be. The publication may contain a description of the prohibited acts found to have been committed. The notice and publication may be placed in electronic and printed media and may be publically posted in a manner calculated to give reason able notice to all persons affected. Said notice may be termed or entitled a WARNING. In addition to the above, the Commissioner may apply to the Court for an order that the Sheriff post such notice at conspicuous places on the premises of the organization. Prohibited Acts No organization subject to the provision of this chapter, and no agent, employee, or officer of any such organization, shall engage in any of the following prohibited acts: a) use, expenditure, or allotment of solicited funds for any purpose other than the charitable purposes of the organization. b) use of any portion of solicited funds to plan, support, or execute any conduct which is criminal or illegal under the laws of the City of Clearwater, the State of Florida, or the United States. c) use of any portion of solicited funds for the profit or enrichment of any person; provided, however, that payment of reasonable salaries to employees in exchange for substantial services shall not constitute a violation of this section, nor shall reasonable commissions paid to professional fund-raisers. d) making of any false statement or giving of any false information pursuant to the provisions of this chapter. e) commission of any act, acts, or course of conduct resulting in loss of the organizations tax exemption pursuant to s. 501(c) (3) of the Internal Revenue Code of 1954, or of any corresponding section of any subsequently enacted Federal Revenue Act. f) commission of any violation of the consumer protection laws of the City of Clearwater, Pinellas County, the State of Florida, or the United States, in the sale of any goods or services in connection with which any appeal is made for a charitable purpose, or the name of any charitable organization or purpose is used as an inducement for the sale, or any statement is made that the whole or any part of the proceeds from any such sale will be used for a charitable purpose. g) use of any scheme or artifice to defraud or obtain money or property by means of any false statement, representation, or promise. h) falsely representing that any contribution will entitle the donor to a Federal or State tax deduction. i) use of unconscionable pressure or threats to obtain a donation, or falsely representing to any person that a pledge or promise to make a contribution constitutes a legally enforceable obligation under circumstances in which no such legal obligation exists. j) promising any person that a contribution will be refunded upon request, and thereafter failing to promptly make a refund which has been requested. k) promising any person that refunds of contributions will be made upon request without pro viding such person, at the time such representation is made, with a written statement of the terms and conditions upon which refunds are made. l) promising any person that refunds will be made without maintaining adequate records and reserve funds to allow for prompt refunds upon request. m) receiving or disclosing confidential information about any person for purposes of engaging in solicitation of money or property, under circumstances in which the person who provided the confidential information was not aware that it would be used for solicitation purposes and did not thereafter consent to its use for solicitation purposes. For purposes of this part "confidential information" means information obtained upon a promise that it would be kept in confidence and shall include, inter alia, records of confidential information kept by attorneys, physicians, clergymen, and counsellors. n) failure to maintain any records required under this chapter. o) failure to make any disclosure required under this chapter or to report any change of condition as required by this chapter. p) solicitation by any person on behalf of any organization without written authorization of a presently active officer of the organization whose name has been disclosed pursuant to this chapter. q) obstruction of any investigation commenced under this chapter. r) willful failure to honor a subpoena duly issued and served by the Commissioner. Enforcement and Penalties 1) If, after investigation, the Commissioner has reasonable grounds to believe that an organization subject to this Chapter has failed to file a registration statement as required herein, or has filed a statement which is false or misleading, or has filed a statement containing insufficient information and has failed to correct such insufficiency after notice of default, he may bring an action in the District Court to enjoin any solicitation or solicitation activities by the organization in the City of Clearwater for a period of time sufficient to deter such failures but not to exceed one year. The Court, if it finds that such violations or failures have occurred, shall give injunctive relief accordingly. 2) If, after investigation, the Commissioner has reasonable grounds to believe that an organization subject to this Chapter has engaged in any of the acts prohibited herein, he shall apply to the District Court for injunctive relief to abate such violations. The Court, if it finds that such violations have occurred, shall assess a fine in an amount sufficient to deter future violations, but not exceed $2,500 per violation. In addition, the Court may award the Commissioner attorney's fees in an amount sufficient to cover costs of enforcement. As provided herein, the court may authorize the posting of notices in conspicuous places on the premises of any organization which has been guilty of prohibited acts sufficient to warn the public of commission or prohibited acts by the organization. 3) In addition to the foregoing, any person who willfully and knowingly gives any false information to the Commissioner in filing statements and reports required herein, or who willfully and knowingly obstructs an investigation of the Commissioner, or who willfully and knowingly leaves the State or assists any person to leave the State for purposes of avoiding the provisions of this part, shall be punishable (punishment is to be established by City Commission). If the Commissioner becomes aware of any such violation, he shall report to the appropriate prosecuting attorney and shall make available to the prosecuting attorney all records and documents which he may require. B. APPLICATION OF PROPOSED CONSUMER PROTECTION ORDINANCE TO OPERATIONS OF THE CHURCH OF SCIENTOLOGY The proposed ordinance may be expected to have a broad impact upon consumer affairs in the City. The most important parts of the ordinance, vis-a-vis Scientology, are the education, warning, and investigation provisions. Vigorous use of these provisions would give members of the public vitally important information, before they become deeply involved in Scientology, as to what they may expect. Use of the investigation provisions would enable the City to develop detailed information about ongoing violations, and provide members of the public who have been cheated and defrauded by Scientology a convenient forum to seek a remedy. There is a vital need for public action of this sort in Clearwater for two reasons. First, the Scientologists have announced and are apparently now moving ahead with plans to entice Clearwater citizens directly into paying money to them, whereas previously their Clearwater facility has only been a magnet for people from other parts of the country. Second, people who have been cheated by Scientology presently have a difficult time securing private legal counsel to assist them in getting redress, because of the well-known vicious and abusive litigation tactics of the Scientologists. Both of these situations create an urgent need for the type of remedies proposed in the ordinance. The ordinance has been intentionally drawn so that the above powers of the Commissioner are not dependent upon court action. This has been done in view of the anticipated legal hailstorm which the Scientologists will attempt to bring down on the ordinance as applied to them. Nonetheless, the specific enforcement powers of the ordinance are important. The Commissioner is given the power to seek declaratory judgments that certain practices are illegal as well as injunctions. These actions may be expected to take longer, for obvious reasons, and the Scientologists will obviously take any decision against them to the Florida Supreme Court. The City can reasonably expect that a number of people will come forward with complaints about practices that have long been recognized as consumer violations by State and Federal courts. Investigations and hearings into these complaints will develop more than adequate record for legal action. The following is a description of the types of practices which the Scientologists have engaged in which are well-recognized as consumer violations.
The following proposed ordinance is presented in a preliminary form. As presented, it is not suitable for inactment by the City Commission, and requires considerable refinement and addition of numerous technical provisions. The material that follows gives a basic outline of the proposed ordinance. The State of Florida as well as Pinellas County presently have consumer protection statutes in force. Both of these laws apply to transactions in Clearwater, but neither law precludes a more stringent or specific ordinance by the City. As noted elsewhere in this report, the City of Clearwater has a number of consumer protection issues which are unique to the City even as compared to other cities in Pinellas County. The proposed ordinance is modeled closely after the Pinellas County Consumer Protection Act. That statute was declared to be Constitutional by the Florida Supreme, and close attention has been paid to drafting said ordinance which will survive a similar constitutional attack. 1) Title - this ordinance shall be designated the "Consumer Protection Ordinance of the City of Clearwater". 2) Legislative Intent - the public health, welfare, and interest require a strong and effective consumer protection program to protect the interests of both the consumer public and legitimate business man. Toward this end, the position of Consumer Affairs Officer is hereby created in the City of Clearwater to enforce all state laws, county ordinances, and municipal ordinances relating to consumer protection. 3) Definitions: a) "consumer transaction" means a sale, lease, assignment, award by chance, or other disposition of an item of goods, a consumer service, or an intangible to an individual for purposes that are primarily personal, family, or household, or a solicitation by a supplier with respect to any of these dispositions. Said definition shall include, inter alia, transactions and solicitations relating to publicly offered vacation plans, courses of study or instruction, physical and mental self improvement courses, business and personal counseling services, but shall not include services rendered by licensed attorneys, physicians, dentists, or medical care practitioners. Said definition shall also include sales of goods and services by charitable organizations or solicitations for such sales, wherein a representation is made that the thing sold is of substantial value commensurate with the price charged as an inducement or reason for making such sale. b) "supplier" means a seller, lessor, assignor, or other person who regularly solicits, engages in, or enforces consumer transactions, whether or not the supplier is a natural person, partnership, association, corporation, charitable organization, or non-profit organization. c) "violation" means a violation at any state law, county ordinance, or municipal ordinance relating to consumer protection, whether civil or criminal in nature, including, but not limited to the Florida Deceptive and Unfair Trade Practices Act, as interpreted in light of the Federal Trade Commission Act and other Federal consumer protection acts, and the interpretations given them by the federal courts. 4) Powers and Duties of the Consumer Affairs Officer a) To enforce the provisions of all state laws, county ordinances, and municipal ordinances relating to consumer protection, whether civil or criminal, according to the procedures set forth herein. b) To receive and investigate complaints of alleged violations as defined in this ordinance. c) To initiate investigations where there is reason to believe, based on evidence presented to him by any person that a violation has occurred or is occurring. d) To refer complaints to the Office of the State attorney where there is reason to believe that a criminal violation has occurred or is occurring. e) To institute actions in the Circuit Court, according to the procedure set forth herein, to obtain a declaratory judgement that an act or practice constitutes a violation, and to seek injunctive relief against a supplier or other person who has committed, is committing, or is threatening to commit a violation. f) To effect service of process upon any supplier or other person charged as a respondent in a complaint. g) To effect service of process upon witnesses. h) To hold and conduct hearings, as set forth herein. i) To order a supplier or other person to cease and desist from committing a violation. j) To implement and administer consumer protection education programs and consumer warning campaigns. 5) Operating Procedures of the Commissioner a) Any person may make or file a complaint with the Commissioner stating the name and address of a supplier or other person alleged to have committed the violation complained of and the particulars thereof, and such information as may be required by the Commissioner. b) Upon this filing of a complaint, the Commissioner shall cause such investigation as he deems appropriate to be made. If the Commissioner determines that there are reasonable grounds to believe that a violation has occurred, he may attempt to conciliate the matter through conferences with all interested parties and such representatives as the parties may choose to assist them. c) If the Commissioner determines that there is no reasonable grounds to believe that a violation has occurred, he shall dismiss the complaint. Any person who has filed a complaint which has ultimately been dismissed by the Commissioner may appeal by way of certiorari to the District Court within 30 days thereafter. d) Whenever the Commissioner shall have reason to believe, based on evidence presented to him and based on his investigations, that a supplier or other person has committed or is committing a violation and if it shall appear to the Director that a hearing in respect thereof would be in the public interest, he shall issue and have served upon the supplier or other person a complaint and notice of hearing stating the charges and setting a hearing at a time and place certain. The respondent so complained of shall have the right to appear at the place and time so fixed and defend against the allegations contained in the complaint. e) After a hearing the Commissioner shall make written findings and may make appropriate orders. Said orders shall be enforced by the Commissioner as provided herein. 6) Service of Process - Service of process upon a respondent shall be accomplished at least fourteen (14) days prior to the date of hearing and may be affected by personal service by a duly designated agent of the Commissioner or by certified mail, return receipt requested. Service by certified mail shall be effective three (3) days after depositing the complaint and notice of hearing in the United States Post Office addressed to the owner at his last known address with postage prepaid thereon. 7) Procedures Governing Commissioner's Hearings - The following procedures shall govern the conduct of hearings before the Commissioner: a) Burden of Proof - The burden of proof shall be upon the complainant; b) Order of Proof - The complainant shall present its evidence and testimony first. Thereafter, the respondent shall have the right to present its evidence and testimony. The complainant shall then have the right to present rebuttal evidence and testimony; c) Admissibility of Evidence and Testimony - Any relevant evidence shall be admitted if the Commissioner finds it competent and reliable, regardless of the existence of any common law or statutory rule which might make improper the admission of such evidence. Hearsay evidence may be used for the purpose of supplementing or explaining any direct evidence but shall not be sufficient in itself to support a finding unless it would be admissible in civil actions. The rules of privilege shall be effective to the same extent that they are now or hereafter may be recognized in civil actions. Irrelevant and unduly repetitious evidence shall be excluded. At the hearing the parties may present testimony and evidence, and the right to cross-examine witnesses shall be preserved. All testimony and evidence shall be given under oath or by affirmation. The hearing record shall be public and open to inspection by any person; and upon request by a principal party to the proceeding, the Commissioner shall furnish such party a copy of the hearing record, if any, at such cost as he deems appropriate. Each party shall have the following rights:
d) Action by the Commissioner. If based upon the testimony and evidence presented in the hearing, the Commissioner determines that a supplier or other person has committed or is committing a violation, it may issue an appropriate Order or take any other action authorized under the provisions of this Act. Any Order or other action taken by the Commissioner shall be reduced to writing and shall specify the findings of fact upon which the order or other action is based. e) Service of Orders - Any supplier or other person affected by any order or other action by the Commissioner shall be notified either personally or by mail of such Order or other action, and unless waived, a copy of the final Order or action shall be delivered or mailed to such supplier or other person or to his attorney of record. 8) Judicial Review - Any person, firm, corporation, or agency aggrieved by any decision of the Com- missioner may appeal to the courts as provided by general law within 20 days from the date of the decision sought to be reviewed; provided, however, that only final orders of the Commissioner may be so reviewed. Interlocutory procedural appeals are hereby specifically prohibited. 9) Enforcement of Orders - If the Commissioner determines that a party has failed to comply with the terms of an order within the time specified, he shall have the authority to initiate an appropriate action in the Circuit Court to compel compliance, including action for declaratory relief and actions seeking injunctive relief. 10) Enforcement of Subpoenas - Upon failure of a person without lawful excuse to obey a subpoena issued by the Commissioner and upon reasonable notice to all persons affected, the Commissioner may apply to the Circuit Court for an order compelling compliance. 11) Penalty for Violation of an Order - Any supplier or other person who violates an order of the Commissioner after it has become final, and while such order is in effect, shall forfeit and pay the City of Clearwater a civil penalty of not more than two thousand ($2,000.00) dollars for every violation which shall accrue to the City and may be recovered by it in a civil action. Each separate violation of such order shall be a separate offense, except that in the case of a violation through continuing failure or neglect of obeying a final order of the Commissioner, every day of continuance of such failure or neglect shall be deemed a separate offense. 12) Penalties for Hindering or Obstructing Investigations - Any person who shall hinder or obstruct in any way the commissioner or an investigator in the performance of his official duties shall be guilty of a misdemeanor of the second degree punishable as provided in s. 775.082 or s. 775.083, Florida Statutes. 13) Statute of Limitations - No action may be initiated by the enforcing authority under this act more than two (2) years after the occurrence of a violation. 14) Other Rights and Remedies - Nothing herein shall prevent any person from exercising any right or seeking any private remedy to which he might otherwise be entitled, or from filing any complaint with any other agency. C. STANDARDS FOR DETERMINING TAX-EXEMPTION AS APPLIED TO SCIENTOLOGY There are two primary issues confronting the city of Clearwater in deciding whether the property and the operations of Scientology within the City are properly taxable. The first issue relates to defining the respective power or authority of the State, County and Municipal government to impose and collect the various types of taxes that may be applicable to Scientology. The second issue is whether Scientology has conducted its affairs within the City in breach of the standards discussed in Section III-C of this Report as to warrant the conclusion that Scientology has not operated exclusively for religious purposes as required by said standards. This latter issue appears to be more easily resolved in favor of the power of the State, County or City to impose and collect taxes from Scientology. The former issue is less capable of clear resolution and the financial considerations involved warrant the conclusion that the City should conduct public hearings with respect to the proposed ordinances; and provide the results of those hearings to the State and County taxing authorities for purposes of collecting appropriate taxes. Except in very limited areas of taxation, such as an occupational tax, the general power to levy and collect taxes lies within State and County jurisdiction. Taxation by a municipality must be expressly authorized by either the State Constitution or by legislature grant. City of Tampa v. Bridsong Motors, Inc., 261 So. 2d 1 (1971). The City may, however, petition the State or County through a writ of memorandums to compel collection of a tax. See, Opa Locka v. Metropolitan Dade County, 247 So. 2d 755 (1971). Oftentimes, a City joins with the County seeking collection of taxes. See Winter Park, et al v. Presbyterian Homes, etc., 242 So. 2d 133 (1971). In view of the traditional approach of the Florida appellate courts to vest taxing authority within the County and the State, the most rational and appropriate course for the City of Clearwater is to investigate and collect information regarding Scientology practices within the City and turn over such evidence to the State and County agencies. The hearings proposed in connection with the solicitation of funds ordinance and the consumer protection ordinance should provide the City a strong basis upon which to initiate State and County collection proceedings. These proceedings should include assessment and collection of sales, use, personal property, real property, meals and other taxes. In the event that the State and County taxing authorities resist collection, the City may petition the Court via a writ of mandamus to compel collection. The activities of Scientology within the City of Clearwater conclusively warrant the position that Scientology has carried on within the City such commercial activities of such magnitude, and for such profit making purposes, and of such non-tax exempt character, that the Corporation was not operated exclusively for religious or other tax exempt purposes. A large part of the earnings of the Church of Scientology within Clearwater have inured to the benefit of Hubbard as a private individual. The money and money's worth of benefits traceable to Hubbard include: a) salaries, b) royalties, c) large sums of cash, d) unrestricted control (amounting to ownership), over large amounts of funds in a corporate bank account, Savings and Trust accounts, e) free room and board at the corporation's expense, and unlimited access to, and use of castles, mansions, villas, seagoing vessels, automobiles, motorcycles, and other facilities owned or supported by Scientology throughout the world, f) a large retinue of servants, valets, messengers, secretaries, couriers, cooks, and other personal attendants, furnished and compensated by Scientology, g) the receipt, generally, in disguised form, of a substantial percentage of Scientology's earnings, and h) the diversion of large sums from Scientology to Hubbard to sham entities which are completely controlled and dominated by Hubbard. Also, the policies and activities of Scientology, some of which have been previously discussed in this Report, vitiate Scientology's entitlement to exemption, because the policies amount to substantial recurring violations of clearly defined public policy including:
The commercial activities of Scientology permeate its entire operation. They include things such as extensive advertising and solicitation of business; the payment of commissions to persons who can produce customers, the granting of discounts; an ever- increasing accumulation of earnings; granting first priority to customers who make the largest cash payment, rather than the one who is in the greatest need of Scientology services; the use of drastic, arm-bending and emotionally crippling procedures for the collection of delinquent accounts; the use of enforcement policies which are designed to extort from a customer his avenues of legal redress by threats of disclosure of confidential auditing information, and finally a a markup factor of as much as 789% on the sale of its goods. The .flagrantly commercial profit motivated activities of Scientology are in violation of F.S.A. § 196.195(4) which requires that all religious organizations maintain a non-profit character. Although the following examples intend to be typical illustrations of Scientology commercialism, and hardly exhaustive, such examples constitute compelling evidence of a profit motivated scheme.
Each of the acts designated above constitute violations of the statutory criteria for non- profit religious organizations. Specifically, the cash purchases of courses and the hotel room rentals constitute violations of F.S.A. § 196.195(e), regulating a nonprofit corporation's charge for services. This statute states that the taxing authority may examine,
Again, all religious organizations are required to remain non-profit and must comply with the statutory criteria for non-profit organizations. F.S.A. § 196.195(1)-(4). The mercenary motives of the Scientology organization, illustrated by the unreasonable cost of services (supra), constitutes a per se violation of F.S.A. § 196.195(4) and should invalidate the religious exemption. Likewise, Scientology's use of Clearwater as a central communications link for its incredible world-wide pattern of criminal activity including Operations "Goldmine", "Snowwhite", "Freakout," "Project Owl", and hundreds of other such operations, all carried on through the use of tax exempt funds, clearly demonstrates the non tax- xempt purpose. The recommended public hearings will provide the City Commission a solid basis to enact the proposed ordinances as well as create a documented record of Scientology's breach of the standards applied to determine tax-exempt status as set forth in Section III-C of this Report. The City's right to know whether Scientology is keeping adequate tax records, and whether it is using its funds exclusively for religious purposes is a compelling governmental interest. The recommended hearing and ordinances will provide a legitimate basis to secure this information. If Scientology fails to provide it, or if the documentary evidence acquired as a result of enforcement of the proposed ordinances indicates use of money for non-exempt purposes, the City may provide that evidence to the appropriate taxing authority. The recommended hearings, possibly in conjunction with other proposed legislation, to examine the nature and extent of Scientology's activities in the City, would demonstrate the fraudulent, commercial and criminal activities carried on by Scientology in Clearwater, all of which are devoid of religious content. This evidence would demonstrate Scientology's failure to comply with the following tax regulating statutes:
The City could then present written findings together with exhibits to the County property appraiser with the recommendation of the City Commissioners and also to the State Sales and Use tax authorities, that Scientology properties be taxed, and that the organization present accurate and detailed records of its financial activities for each year it seeks qualification for exemption. It is important to note that the long and detailed English inquiry (covering 182 printed pages) into Scientology ended with the following recommendations:
These recommendations should not go unheeded by the residents and officials of Clearwater. VI. CONCLUSIONS AND RECOMMENDATIONS The provable facts relating to Hubbard's background, the creation, operation, policies and activities of Scientology, the findings made by formal inquiries and courts or both foreign nations and the United States, as well as the serious implications - financial, mental, emotional and societal, for Scientology's victims, all suggest that it is necessary, and legally permissible for the community of Clearwater, where Scientology maintains worldwide headquarters, to take appropriate action. This action must be reasonably related to legitimate public interests and it must be narrowly defined in order to avoid interference with the beliefs or doctrine of Scientology. Such beliefs, although ostensibly fanciful, dangerous or absurd, arguably fall within the domain of "religious beliefs", as that term is most broadly interpreted by American Courts. In the final chapter of her work, "The Nazis and the Occult", the author draws many parallels between the Nazis, Hitler, Sun Myung Moon, Hubbard, and Scientology. Quoting from Sravepalli Radha Krishnan who stated, "If we believe absurdities, we shall commit atrocities", the author traces the development of irrational doctrines being enhanced by presumably sane and rational youth such as the "Hitler youth", leading to the abandonment of individual conscience, loss of objectivity and pathologically anti- social activity. Scientology's '"OT III level" material, for which proselytes [pay] tens of thousands of dollars, and which represents for some the culmination of Scientology dogma, suggests that Hubbard is leading his followers into belief of "absurdities". OT III material states that a Scientologist is a specially chosen "Thetan" from a civilization on the planet Helotrobus destroyed 40 trillion years ago by evil forces; and that Hubbard has united them on Earth where he is destroying evil through his "technology". Hubbard's "technology" exhorts his followers to do anything against an "enemy" of Scientology including destruction. These and similar doctrines are employed in a sufficiently rational and enticing sales technique to enlist the support of many rootless, unstable and troubled people. Many of these people, although not having yet committed atrocities akin to Jonestown or to Auschwitz, have engaged in a pattern of widespread and prolonged criminal activity challenging the fundamental precepts of our society, laws, and our government. It is certain that the City of Clearwater cannot seek to prohibit or regulate Scientology beliefs or doctrine, including OT III, R-2-45, or "Fair Game", however fanciful and dangerous such doctrines may be. However, "The Constitution is not a suicide pact" and the First Amendment "embraces two concepts, -- freedom to believe and freedom to act. The first is absolute but, in the nature things, the second cannot be." Cantwell v. Connecticut. Where Scientology belief culminates in activities which are fraudulent, mentally, emotionally, and physically destructive, and violative of recognized civil and criminal law, then the City of Clearwater is free to act in order to protect its citizenry. For example, if Scientology "scientifically guarantees" the cure of physical and mental ailments, which it does on a daily basis in order to make money, then such a representation is secular, not religious, and the City may prohibit or regulate such a fraudulent misrepresentation. See United States v. Article or Device, discussed herein. Or if Scientology employs the "disconnect" policy, or the "Freeloaders Debt" policy, or the "Attack the Attacker", or "Fair Game", in the face of representations that it is a religious, educational, charitable, non-profit organization, promoting family unity, etc. then the City may regulate or prohibit such activity. Or if Scientology violates the educational laws, the fire code, etc. then the City may investigate and regulate. In the past, Scientology, under Hubbard's direction, has demonstrated flagrant disregard for the laws of our Society. It has instilled and encouraged this disregard in its followers. Although Scientology may eventually evolve to the point where it accepts traditional societal tenets and laws, Hubbard's "tech" is fanatically adhered to by many, including those who currently run the organization, and the "tech" absolutely forbids acceptance of "wog" or societal rules. A fervent Scientologist views himself, Hubbard, and the "tech," each as a law unto itself. For example, one defector, who was "imprisoned" in the "R.P.F." in the Cedars of Lebanon complex in Los Angeles describes the following frightening sequence:
It is apparent that the Clearwater community has a legitimate public interest in prohibiting activity such as that described above and cited throughout this Report. The authors of this Report have been involved in the investigation of Scientology for approximately two years and have collected thousands of documents proving that anti- social, criminal and tortious activity has been a daily event within Scientology. Although Scientology may claim that the perspective of the authors of this Report is biased and prejudiced, it is submitted that any sane, rational, human being, adhering to fundamental values, would be both repelled and "biased" upon having hundreds of individuals and parents relate facts describing how Scientology "processing" encompasses a type of patently commercial fraud, causes severe mental illness occasionally resulting in institutionalization and death, and fosters a pattern of criminal activity to destroy all those seeking to investigate it. Based on the foregoing perspective, and the facts and analyses set forth in this Report, as documented in the Appendices, the authors recommend the following to the City Commission:
_______________ Notes: 1. It should be noted that neither of those agencies ever had as much information available to it as is presently available to the City of Clearwater. The availability of information to the City results from the criminal convictions in Washington, D.C., the large number of defections from the ranks of Scientology which followed those convictions, and the good communications which now exist for the first time among the many private citizens and government agencies around the world who are involved in litigation with Scientology.
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