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DOCUMENT TITLE: Norton S. Karno representing CSC and GO vs. IRS SUBJECT: First known involvement of Norton S. Karno with Scientology organizations PARTIES: Norton S. Karno, attorney, conduit into Scientology organizations for Sherman and Stephen Lenske; James Q. Fisher, attorney for Karno's firm; United States of America; Robert H. Cluberton, IRS agent; IRS; Church of Scientology of California (CSC); Henning Heldt, Vice President of CSC and Deputy Guardian, Guardian Office U.S. BACKGROUND AND NOTES This ruling in favor ot IRS and against CSC and Henning Heldt of the GO comes just six days after a secret CIA report on spectacular results from Remote Viewing experiments in the CIA program using Scientology OT VIIs Hal Puthoff, Ingo Swann, and Pat Price. Without the Treasury Department and IRS having filed this suit, it's possible that Norton S. Karno, Sherman Lenske, and former Assistant Commissioner of IRS Meade Emory might never have had a route into the organizations of Scientology and the personal and business affairs of L. Ron Hubbard. But file suit IRS did, and so we find attorney James Q. Fisher, of the law firm Karno, Rudnick and Fisher, representing Heldt and CSC in this action brought by IRS.The Commissioner of IRS is Donald C. Alexander, who within a little over a year will take on Meade Emory as Assistant. Karno goes on to become an important insider with CSC and the Guardian Office., and also employer for Sherman and Stephen Lenske, who will play key and central roles in what follows. This ruling from the IRS-instigated suit, though, merely records the first known involvement of Norton S. Karno's law firm in matters related to the interests of L. Ron Hubbard and Scientology. It is of great interest to later events that Karno's involvement was brought on by a court-filed action precipitated by the United States Treasury Department and IRS. 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 [Church of Scientology of California (CSC) and Henning Heldt, of the Guardian Office], 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... |
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