Scientology helped shape Slatkin's life

Investor Reed Slatkin made millions for himself and others, at the same time staying active in his church as a minister and counselor. Then he lost everything.

Santa Barbara News-Press
7/8/01
By RHONDA PARKS MANVILLE
rparks@newspress.com
http://news.newspress.com/toplocal/sciencefor0708.htm

In 1985, Reed E. Slatkin and his wife, Mary Jo, were working as ministers for the Church of Scientology in Los Angeles when they realized that their growing family needed more money to live on.

Mr. Slatkin turned to a successful member of the church, Robert Duggan, to teach him the ins and outs of trading stocks and securities. An attentive apprentice, Mr. Slatkin excelled in the markets and offered to invest for fellow church members and friends.

In the 10 years that followed, Mr. Slatkin, who co-founded the Internet provider EarthLink, made millions for himself and investors, all the while remaining active in the church as a minister and counselor.

And then he lost it all.

Earlier this year, federal regulators charged Mr. Slatkin with defrauding hundreds of investors out of at least $230 million in an alleged Ponzi scheme, in which early investors are simply paid with money taken from more recent ones.

Mr. Slatkin has since filed for bankruptcy, and his assets -- including a home in Hope Ranch, expensive fine art and acreage in the Santa Ynez Valley -- have been frozen. R. Todd Neilson, the trustee appointed by the bankruptcy court, said that once an inventory is complete, he intends to sell the assets to pay creditors.

Those shocked, bewildered creditors include some 75 Santa Barbara County residents who lost millions in life savings, retirement funds, and money for their children's college education.

The financial collapse has Mr. Slatkin's friends and church associates, most of them from Los Angeles, wondering what his intentions were. Was his investment club part of a Ponzi scheme, as federal investigators allege? Or was he simply trying to share his good fortune with others, which he states in court records that his Scientology training taught him to do?

Worried local investors have flocked to Mr. Slatkin's hearings in bankruptcy court, anxious to learn whether they will ever see their money again.

Observers might expect that Scientologist investors would be most upset, since their relationships with Mr. Slatkin were forged, in part, through a shared religious philosophy.

But some Scientology church members say it would be unfair to judge his actions without talking with him first, and at present Mr. Slatkin is talking to no one but his lawyers. However, he is cooperating with investigators on the case.

"I really don't know what happened," said Santa Barbara businesswoman Gillian Christie, a member of the local Scientology church who met Mr. Slatkin through a mutual friend. "Nobody really knows, because he's not allowed to talk. But I have this policy of saying that if you point a finger at someone, what you get is a sore finger. Reed is not responsible for me. I am responsible for me."

Ms. Christie, who has studied Scientology since 1972, said the training has helped her deal with the situation and move on. Her losses, which include hundreds of thousands of dollars intended for the college education of her two children, are upsetting, she acknowledged. But she prefers to focus on the positive side of things.

"The work (Mr. Slatkin) did over the last year allowed me to give money to many local charities, including the zoo and Civic Light Opera," she said. "I know of others who did the same, and I know that (Mr. Slatkin) donated immense amounts. I would like to emphasize how much good came out of it. We don't consider ourselves victims."

Ms. Christie, who runs a successful communications and public relations firm, said that her losses are nothing more than "a blip on the horizon."

"I am not concerned about myself and my well being because I have the technology (through Scientology) to make it all better," she said. "I'm not slowed by this. I see that others need more help than I do, and that's where I want to put my attention."

Longtime Scientology practitioners Keith and Judy Code of Glendale, who also gave large sums to Mr. Slatkin, seemed similarly unfazed by their losses.

"A lot of people I know are not crushed by it," Mr. Code said, referring to Scientologists who invested with Mr. Slatkin. His wife added: "People in general tend to be pretty wacky on the subject of money, and people in Scientology seem not to be compelled to make a big drama out of it."

Although Ms. Christie was willing to speak about her investments with Mr. Slatkin, other local Scientology members who invested have declined News-Press requests to be interviewed or have not returned calls and e-mail messages requesting comment.

While the Church of Scientology puts great emphasis on success and reaching one's potential, the church and its teachings have nothing to do with the Slatkin case, several Scientologists said.

"Ethics play a significant role in Scientology," said the Rev. Lee Holzinger, who leads the 300-member Santa Barbara Church of Scientology, which meets at 524 State St. "The thing is that Reed has not been a parishioner of our church, so questions about his involvement are not applicable here. It is of course very upsetting when an investment goes bad, but it's doubly bad when there seems to be a personal relationship, and I understand that."

Mr. Slatkin's financial troubles have not affected the workings of the local congregation in any way, said the Rev. Holzinger, who noted that the church's focus is providing counseling and training sessions based on the writings of L. Ron Hubbard, Scientology's founder.

In Mr. Slatkin's life story, the influence of L. Ron Hubbard's teachings looms large.

In depositions given to federal Securities and Exchange Commission investigators in January, Mr. Slatkin spent considerable time explaining his religious beliefs and how they have benefitted him over the years. He told the investigators that he wanted them to understand the truth about his religion, which has been criticized over the years by some religious scholars and former Scientologists. Others defend Scientology's teachings and say that as a new religion, it has been unfairly maligned.

Mr. Slatkin, 52, noted that he had spent most of the past 37 years studying Scientology and carrying the teachings and principles of Scientology to others. He noted that the late Mr. Hubbard "is a person I really admire and venerate."

Mr. Slatkin asked the investigators to have an open mind while he explained in detail how his religion works. He showed them his copy of Mr. Hubbard's book "What is Scientology Doing in the World?" and asked them to listen as he quoted from it: "The aims of Scientology are civilization without insanity, without criminals and without war, where the able can prosper and honest beings can have rights, and where man is free to rise to greater heights."

"I've dedicated my life to those aims and I feel that the world .æ.æ. is not a pretty place," Mr. Slatkin told investigators. "There's a lot of trouble, a lot of bad things going on -- and I ... have been part of this movement ... I've seen tremendous changes happen in the areas where Scientology has been put to work."

Mr. Slatkin noted that he had been active in supporting Scientology-affiliated programs to teach reading to children in Compton schools, and to fight what the church views as abuses in the field of psychiatry.

Mr. Slatkin was introduced to the church's teachings by an uncle at age 14, just after his father died, an event that had left his family in "pretty bad shape," according to court records. He said that his uncle provided Scientology spiritual counseling to the family, which helped them recover from their grief and destitution.

Mr. Slatkin became an avid student of Scientology a short time later, after he nearly severed his finger with a saw in a junior high school accident. After getting his hand out of a cast and undergoing physical therapy, he was told that the finger could never be used again.

Mr. Slatkin told investigators that he was healed after his uncle used Scientology practices on his wound: "And almost miraculously, within a couple of days I had full use of my hand again. And it was a big moment for me. And at that point I said, 'Well, I don't know how this works but it works for me,' so I decided that I was going to find out about this."

Living in Michigan at the time, Mr. Slatkin began attending the Scientology church there. His commitment to the church led him to study at Hubbard-led Scientology colleges in England and Scotland in 1966 and 1968.

In 1971, while studying Oriental languages at UC Berkeley and volunteering at the church, he met his future wife, Mary Jo, a fellow Scientologist. They decided to quit school to pursue Scientology full time. They moved to Los Angeles, where both were ordained as ministers in 1975.

"And I went out on my own and began to disseminate, to proselytize Scientology, to friends, family members of people I knew. Because I was, at that point, a very highly trained counselor," Mr. Slatkin told investigators. Mr. Slatkin said he hung out his own shingle, working under the auspices of the Church of Scientology of Los Angeles. At the same time, the couple continued to volunteer "night and day" at the church.

Eventually Mr. Slatkin and his wife opened their own counseling center in their home. Between them, the couple never earned more than $45,000 annually, which they accepted in the form of donations for their work. At the same time, they were spending some of their income on new and continuing church training programs to keep their ministry and counseling certificates current, Mr. Slatkin told investigators.

Then, in 1983, their second son was born. They agreed that they needed more money: "And my wife and I were looking at each other and we said, well, we've been volunteering this stuff here for, you know, 20 years between us and it might be a good idea to see if, while we're doing all this volunteer work, that we have enough money to raise our family."

That's what led Mr. Slatkin to fellow Scientologist Mr. Duggan, a successful investor, to learn about investing, according to Mr. Slatkin's deposition.

During the next several years, Mr. Slatkin said he was an apprentice at Mr. Duggan's side, learning the intricacies of stock analysis, asset allocation, and how to buy and sell securities from a stock broker. He also studied books written by expert investors, he noted.

Mr. Slatkin put the same devotion into investing as he had into the church. When he started making money, he brought church members and friends on board, promising returns of up to 60 percent, according to court documents.

In 14 years, Mr. Slatkin made a fortune, and so apparently did his investors. And then he lost it all.