OPERATION CLAMBAKE: SCIENTOLOGY COURT FILES

Part of a public library containing court papers related to lawsuits involving Scientology in some way. Collected to help lawyers and critics of Scientology in future lawsuits from or against this cult. Please report back if this has been of help, or send new contributions to the collection. Thanks. Andreas Heldal-Lund (heldal@online.no)




    United States of America and Robert H. Cluberton, Internal Revenue Agent,
                      Internal Revenue Service, Petitioners
                                       v.
     Church of Scientology of California and Henning Heldt, Vice President,
                                  Respondents.
                                 No. 73-2100-HP
                 United States District Court;  C.D. California.
                                    11/15/73

  PREGERSON, District Judge.
                     Findings of Fact and Conclusions of Law
                            Statement of Proceedings
  *1 On September 5, 1973, petitioners filed their petition to enforce an
 Internal Revenue Service summons with the supporting affidavit of Robert H.
 Cluberton, Internal Revenue Agent.
  On September 5, 1973, this Court issued an Order to Show Cause ordering that
 the respondents show cause why they should not be required to obey the Internal
 Revenue Service summons served upon the respondents on February 9, 1973.
  On September 19, 1973, the respondents filed a notice to take the depositions
 of Regional Commissioner of Internal Revenue, Homer Croasmun;  Internal Revenue
 Service Group Manager, James Argue, and Internal Revenue Agent, Robert H.
 Cluberton, also requesting that these deponents produce at these depositions
 certain records and documents, as more particularly described in the notice.
  On September 25, 1973, the petitioners filed a motion to quash the notice to
 take the depositions of Messrs. Croasmun, Argue and Cluberton, and to produce
 the documents requested.
  On October 9, 1973, the respondents filed their memorandum of points and
 authorities in opposition to the petition to enforce the Internal Revenue
 Service summons at issue, to which the petitioners filed a reply on October 26,
 1973.
  On November 1, 1973, the respondents filed their memorandum of points and
 authorities in opposition to petitioners' motion to quash, to which the
 petitioners thereafter filed a reply.
  On November 5, 1973, the petitioners' motion to quash and this Court's Order
 to Show Cause came on regularly for hearing before this Court.  Appearing for
 the petitioners was Assistant United States Attorney, Arthur M. Greenwald and
 on behalf of the respondents, James Q. Fisher, a member of the law firm of
 Karno, Rudnick & Fisher, a professional corporation.  No witnesses or
 documentary evidence were offered during the course of this hearing.  Counsel
 for the parties presented oral arguments as to both the motion to quash and
 order to show cause.
  This Court having considered all of the pleadings, memoranda, exhibits
 attached thereto, affidavits and arguments of counsel and thereafter on
 November 9, 1973, having ruled that petitioners' motion to quash the notice to
 take the depositions of Messrs. Croasmun, Argue and Cluberton, and the
 production of documents thereto and the petition to enforce the Internal
 Revenue Service summons are granted;
   This Court now makes the following FINDINGS OF FACT AND CONCLUSIONS OF LAW:
                               I Findings of Fact
   1. The petitioner, Robert H. Cluberton, is a duly commissioned Internal
 Revenue Agent of the Audit Division of the Internal Revenue Service with post
 of duty in Los Angeles, California, performing his duties under the District
 Director of Internal Revenue, Los Angeles, California.
   2. In his capacity as an Internal Revenue Agent, he was assigned to
 investigate and ascertain the correct tax liabilities of the respondent, Church
 of Scientology of California, (hereafter referred to as the respondent, Church)
 for each of the taxable years 1968 and 1969.
   *2 3. Pursuant to this assignment and in accordance with Sections 7602
 and 7603 of Title 26, United States Code, an Internal Revenue Service
 summons, Treasury Form 2039, was served on February 9, 1973 upon the
 respondents.
   4. This summons called for the respondents to produce certain books and
 records in the possession and/or control of the respondents, as more
 particularly described in the summons, which were then and are now necessary to
 the determination of the correct tax liability of the respondent, Church, for
 each of the taxable years 1968 and 1969.
   5. The issuance of this summons was the culmination of almost two years of
 negotiations between the respondent, Henning Heldt (hereafter referred to as
 the respondent, Heldt) and representatives of the Internal Revenue Service,
 wherein the Internal Revenue Service attempted to secure the respondent's
 cooperation in commencing the examination of the respondent.  Church's taxable
 years 1968 and 1969, and in this regard, have an opportunity to audit the books
 and records described in the summons.
   6. As required by the summons, the respondent, Heldt, appeared on February
 20, 1973, before the petitioner, Internal Revenue Agent, Robert H. Cluberton,
 (hereafter referred to as the petitioner, Cluberton).  He advised the
 petitioner, Cluberton, that on February 16, 1973, he, the respondent, Heldt,
 had resigned as a director and Vice President of the respondent, Church, and as
 he did not have possession or control of the records sought in the summons
 because of his resignation, he could not produce the records sought.
   7. At no time during the course of the negotiations between the respondent,
 Heldt, and representatives of the Internal Revenue Service (including a
 conference held on the date the summons was issued) did the respondent, Heldt,
 state to representatives of the Internal Revenue Service that he contemplated
 resigning as a director and Vice President or that, as respondent, Church's
 representative, he, on the date called for in the summons for the production of
 the books and records requested, i.e., February 20, 1973, would not have
 possession or control of the requested books and records.
   8. The respondent, Heldt, during the period of negotiations consistently held
 himself out to be the representative of the respondent, Church, who either had
 control of the books and records requested or was in a position to effect their
 production.
   9. To date, the respondents have failed to produce the books and records
 described in the summons.  No testimony has been taken from the respondent,
 Heldt, or any other representative of the respondent, Church, relative to the
 determination of the respondent, Church's tax liabilities for 1968 and 1969.
   10. Any conclusion of law deemed as or properly constituting a finding of
 fact is hereby adopted as a finding of fact.
                              II Conclusions of Law
   1. This Court has jurisdiction to enforce judicially an Internal Revenue
 Service summons in accordance with Sections 7402(b) and 7604(a) of Title
 26, United States Code.
   *3 2. Petitioners issued the summons for a lawful and proper purpose,
 i.e., to determine the correct tax liabilities of the respondent, Church, for
 the years 1968 and 1969.  Section 7602 of Title 26, United States Code.
 United States v. Powell [64-2 USTC P 9858], 379 U. S. 48 (1964);
 Boren v. Tucker [57-1 USTC P 9246], 239 F. 2d 767 (9th Cir. 1969);
 United States v. Salter [70-2 USTC P 9648], 432 F. 2d 697 (1st Cir.
 1970).
   3. The administrative steps required by the Code have been met by the
 petitioners.  United States v. Powell, supra.  The resignation of the
 respondent, Heldt, does not constitute adequate grounds for the respondent,
 Church, to refuse to turn over the books and records requested.  On the date
 the summons was served, the respondent, Heldt, was a Vice President of the
 respondent, Church, having held himself out as a representative of the
 respondent, Church, who either had control of or was in a position to effect
 the production of the books and records requested.
   4. The information sought in the summons is relevant to the determination of
 the respondent, Church's tax liabilities for each of the years 1968 and 1969.
 United States v. Powell, supra.
   5. The information sought in the summons is not already within the
 petitioners' possession.  United States v. Powell, supra.
   6. The respondents have failed to meet their burden of showing good cause for
 the allowance of the discovery requested;  their allegation of harassment is
 not supported by the record.  (HP) Petitioners' motion to quash the notice to
 take the depositions of Messrs.  Croasmun, Argue and Cluberton, and production
 of documents thereto is granted.  Kevin L. Donaldson, et al. v. United
 States, et al. [71-1 USTC P 9173], 400 U. S. 517 (1971);  United States
 v. National State Bank [72-1 USTC P 9168], 454 F. 2d 1249 (7th Cir. 1972);
 United States v. Ruggerio [70-1 USTC P 9381], 425 F. 2d 1069 (9th Cir.
 1970);  United States v. Ahmanson [69-2 USTC P 9572], 415 F. 2d 785 (9th
 Cir. 1969);  United States v. Salter, supra.
   7. Respondents have failed to meet their burden of showing good cause for not
 enforcing the Internal Revenue Service summons issued by the petitioners.  The
 petition to enforce the summons is granted.  United States v. Powell, supra.
   8. Any finding of fact deemed as or properly constituting a conclusion of law
 is hereby adopted as a conclusion of law.
          Order for the Enforcement of Internal Revenue Service Summons
  In accordance with this Court's Findings of Fact and Conclusions of Law:
  IT IS HEREBY ORDERED that the respondent, Church of Scientology of California,
 by and through its authorized representative, shall appear before the
 petitioner, Robert H.  Cluberton, Internal Revenue Agent and/or any other
 authorized representative of the petitioner, United States of America, at the
 offices of respondent, Church of Scientology of California, located at 5930
 Franklin Avenue, Los Angeles, California, on December 17, 1973, at 10:00 A. M.
 and produce for examination and/or copying by any means of reproduction the
 following records in the matter of the tax liability of the respondent, Church
 of Scientology of California, for each of the years 1968 and 1969.  Said
 records shall be made available from day-to-day until the examination is
 completed:
   *4 1. All bank statements and cancelled checks in the possession and/or
 control of the respondent, Church of Scientology of California, which reflect
 all transactions in all checking accounts of the respondent, Church of
 Scientology of California and/or any and all of its divisions located at the
 Crocker National Bank, Wilshire-Westlake Branch, Los Angeles, California, for
 each of the calendar years 1968 and 1969.
   2. All documents and records in the possession and/or control of the
 respondent, Church of Scientology of California, necessary to the determination
 of the correct Federal income tax liabilities of the respondent, Church of
 Scientology of California, for each of the taxable years 1968 and 1969.
   3. All documents and records in the possession and/or control of the
 respondent, Church of Scientology of California, necessary to the determination
 of the correct employer's annual Federal unemployment tax liability for each of
 the calendar years 1968 and 1969.
   4. All documents and records in the possession and/or control of the
 respondent, Church of Scientology of California, necessary to the determination
 of the employer's quarterly Federal employment tax liabilities (consisting of
 income and F. I. C. A. taxes withheld from employees' wages, as well as the
 employer's liability, applicable to taxable F. I. C. A. wages paid) for the
 four quarters applicable to each of the calendar years 1968 and 1969.
  IT IS FURTHER ORDERED that the respondent, Henning Heldt, and any other person
 or persons who may be designated by the respondent, Church of Scientology of
 California, appear before the petitioner, Robert H. Cluberton, Internal Revenue
 Agent and/or any other authorized representative of the petitioner, United
 States of America, at a time and place agreed upon mutually for the purpose of
 giving testimony concerning the Federal tax liabilities described in paragraphs
 2, 3, and 4 of this Order, reserving their right to assert any constitutional
 privilege with respect to any question propounded.
  In the event agreement cannot be reached upon a time and place, the
 respondent, Henning Heldt, and any other person who may be designated by the
 respondent, Church of Scientology of California, shall appear before the
 petitioner, Robert H. Cluberton, Internal Revenue Agent, or any other
 authorized representative of the petitioner, United States of America, at a
 time and place designated by the petitioner, Robert H. Cluberton, Internal
 Revenue Agent, or any other authorized representative of the petitioner, United
 States of America.  Notice of said time and place shall be given to the
 respondent, Henning Heldt, and any other person who may be designated by the
 respondent, Church of Scientology of California, by means of a letter sent by
 certified mail to the respondents, Henning Heldt and Church of Scientology of
 California at their last known addresses at least ten (10) days prior to the
 date set by the petitioner, Robert H. Cluberton, Internal Revenue Agent, or any
 other authorized representative of the petitioner, United States of America.

End of file...