Assets and Timeline
Santa Barbara News-Press
3/31/02
http://news.newspress.com/topsports/033102timeline.htm

TIMELINE

* January 22,1949: Born in Detroit, Michigan.

* 1963: Father commits suicide; Mr. Slatkin turns to Scientology.

* 1966: Studies with L. Ron Hubbard at St. Hill school in East Grinstead,
Sussex, England.

* 1973: Moves to Los Angeles with wife Mary Jo and begins working and
studying with the church full time.

* 1975: Ordained as a minister in the church, begins training other
Scientologists.

* 1983: After second son is born moves from Los Angeles to Goleta and
begins learning about investing through friend and fellow Scientologist
Bob Duggan.

* 1984: Starts investing money and says he has a couple of years with 100
percent returns.

* 1987: After helping convicted felons Chris Mancuso and Ron Rakow invest
money they made in the Culture Farms scam, he gets a note from Mr.
Mancuso, who is serving time in from Lompoc Federal Prison. "Another day
at Club Fed!" the note begins and then goes on to say, "I know we will do
great things in the future together."

* 1988 confesses in a note to himself that he lied about what he was
doing. "Instead of working on stocks -- I was working on fabricating
statements."

* 1990: A business associate, Patrick Gallagher, concerned about the
nature of Mr. Slatkin's trades, and his computer program dissolves any
involvement with Mr. Slatkin. saying, he is fearful that a review of Mr.
Slatkin's business would "reveal unsavory characteristics of a scabrous
nature involving, among other things, irregularities with respect to the
exchange rules and conduct, which under closer scrutiny, may subject one
to prosecution by various government agencies."

* 1993: Buys two estates in Hope Ranch.

* 1994: Has a meeting with Sky Dayton and Kevin O'Donnell and Decides to
invest $75,000 in EarthLink. Within three years his share in the company
is worth more than $200 million.

* 1995: Tells the 383 investors in his club that the $133 million fund has
made $67 million in profit and is now worth $210 million, but in actuality
the fund made less than $420,000.

* 1997: The Securities and Exchange Commission begins an informal
investigation into Mr. Slatkin's business dealings.

* 1998: In one set of bank accounts he reports to investors that he has
more than $50 million, but in reality has less than $3 million.

* 1999: Tells SEC that he is liquidating his club and return the money to
investors.

* January and February 2000 repeats claim to SEC that he is in the
"process of liquidating accounts," and that "I am not accepting any new
accounts or any money from existing accounts."

* February 2000: Associate Chris Mancuso helps set up a telephone line
with a fake Swiss number that, "when you dial the number the line has been
conditioned to provide a truly genuine European ring (nice touch, huh?)"

* January 2000 to May 1, 2001: Mr. Slatkin takes in more than $100 million
from investors instead of closing accounts and returning money as he
promised the SEC.

* November 2000: Gets a $10 million unsecured personal loan from Sidney
Azeez.

* December 2000: Convinces John Poitras to invest an initial $5 million;
he later adds another $10 million to the pot.

* March 30: Mr. Slatkin produces a memo from a Swiss financial firm, NAA,
showing he has $380 million in investment account. Mr. Steadman and his
attorneys make a few phone calls and discover there is no such firm as NAA
in Switzerland.

* April 7, 2001: Sends letter to investors saying: "We are experiencing
delays in our ability to meet your request for withdrawl of funds... Rest
assured your funds are safe and the delay has nothing to do with the
current fluctuation in the market."

* April 13, 2001: Frustrated that he hasn't had his money returned, John
Poitras files suit and Mr. Slatkin's assets are frozen.

* April 20, 2001: Texas foundation manager Stuart Steadman files suit to
get his and his foundation's money $18 million returned. From the
quarterly statements generated by Mr. Slatkin, Mr. Steadman thought the
account had grown to $34 million.

* April 27, 2001: Denise Del Bianco, Mr. Slatkin associate and wife of Ron
Rakow, receives $1.9 million, court records show.

* April 30, 2001: In a meeting at the office of his Los Angeles attorney,
first informs his investors that there's a problem with the money.

* May 1, 2001: Files for bankruptcy.

* May 11, 2001: FBI and IRS raid and search Mr. Slatkin's homes and
offices.

* May 11, 2001: The SEC sues Mr. Slatkin for violating federal securities
laws.

* May 29, 2001: Mr. Slatkin agrees to a consent decree to stop any
investment activity.

* May 30, 2001 FBI searches the New Mexico offices of Mr. Slatkin's
bookkeeper Jean Janu.

* June 1, 2001 a early attempt at a plea bargain is stopped.

* June 24, 2001: FBI and IRS agents raid and search the home of Slatkin
associate Ron Rakow.

* July 30, 2001: The U.S. Bankruptcy Trustee tells 800 investors that
their money is mostly gone. He's assets total perhaps $30 million on debts
that exceed $250 million.

* August 8, 2001: The trustee begins to put Mr. Slatkin's homes and
property up for sale.

* December 14, 2001: The trustee says Slatkin's investment club was a scam
from the start.

* February 28, 2002: The last day for creditors to file claims against the
estate.

* March 25, 2002: More than 500 people and institutions have filed claims
against the estate totaling $817 million.

* March 26, 2002: Reed Slatkin agrees to sign a guilty plea, taking
responsibility for $254 million in losses and admitting to orchestrating
one of the largest Ponzi schemes in history over a 15 year period.

ASSETS

An accounting of Mr. Slatkin's assets listed a value of just $30 million
for the estate, including:

* Hundreds of bottles of wine including four bottles of Mountain
Rothschild valued at $300 each.

* One million shares of EarthLink stock, which has ranged in price from
$4.75 to $18.92 in the past year.

* Three country club memberships: El Caballero Country Club, The Alisal
and La Cumbre Country Club.

* Vehicles: A 2001 Porshe Turbo, 2000 Volvo C70, 2001 Toyota Prius, 1967
Chevrolet Corvette, 1969 Pontiac Firebird, 1998 Lectr golfcart, 1994 Volvo
960, 1995 Jeep Grand Cherokee.

* Properties: Hope Ranch homes at 4480 and 4484 Via Esperanza estimated to
be worth $6 million. Goleta home at 890 N. Kellogg Avenue estimated to be
worth $775,000. Solvang property 3125 Riley Road worth about $400,000.
Undeveloped property in Santa Ynez 1275 Roble Branco Road, Santa Ynez
Valley 100 acres estimated to be worth about $1.6 million. Newport Beach
property 6 Sea Greens, Newport Beach, worth about $1.14 million.
Undeveloped parcels in Ashland, Ore., on Strawberry Lane worth about $5.25
million. Interest in three malls in Tennessee, Florida and Louisiana,
worth about $14 million.

Millions 'lost in a financial black hole'
Santa Barbara News-Press
3/31/02
By SCOTT HADLY
http://news.newspress.com/toplocal/033102slatday1.htm

A full year before his investors first learned there was something rotten
in Santa Barbara, Reed Slatkin was already feeling the heat. Securities
and Exchange Commission investigators brought the friendly and
smooth-talking 53-year-old to Los Angeles for questioning in January and
February of 2000. They wanted to know more about the investment deals Mr.
Slatkin spun from the suburban Goleta home he had converted into offices
from which he operated his "investment club."

But instead of confessing to any financial sins, the EarthLink co-founder
and former ordained minister of the Church of Scientology began to
proselytize about the teachings of the late science fiction writer and
Scientology founder L. Ron Hubbard. "It's important to me, and it's been
the basis of almost everything I've done in life," he told them. Mr.
Slatkin then pulled out his copy of Mr. Hubbard's book "What is
Scientology Doing in the World?" and started reading: "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."

Mr. Slatkin rose to great heights -- an estate in Hope Ranch, a jet at his
command, a half dozen vehicles, properties in Oregon and the Santa Ynez
Valley, and personal wealth that was once pegged at $200 million. Now
comes the fall.

In a 33-page plea agreement with federal authorities Tuesday, Mr. Slatkin,
now bankrupt, admitted he is guilty of 15 counts of fraud, money
laundering and conspiracy.

The former Hope Ranch resident and private investor now faces up to 105
years in federal prison, but will likely only serve between 12 to 15 years
if he cooperates, authorities said.

Mr. Slatkin is taking responsibility for operating one of the largest
Ponzi schemes in history, fleecing at least $254 million from more than
800 investors since 1986. He has agreed to pay restitution, to the extent
of his ability, and to completely divulge his assets.

He must follow through with the agreement and help investigators track
down any co-conspirators and locate his investors' missing money.

The money came from Internet moguls, actors and big-time Hollywood
producers, but Mr. Slatkin also acknowledges that he took in cash from
dozens of his longtime friends and neighbors in Goleta, Hope Ranch and
Montecito. But the full story -- what happened to the hundreds of millions
of dollars Mr. Slatkin took in, and how it was either lost on bad
investments or siphoned off for the benefit of his friends, family and
associates -- has yet to be told.

Even federal prosecutors concede that Mr. Slatkin had an uncanny ability
to make people feel at ease handing over their cash for his care, and a
knack for slipping out of tight spots.

"Early on, he had everyone so snowed that they thought he just screwed up
and lost some money on a dot-bomb, and they just hoped they would get most
of their money back," said John Poitras, of Santa Ynez, who lost $15
million. "Now the most frequent question I get from creditors and the
public is 'Why is he not in jail?' They all want him to go to jail now,
like yesterday, and for a long time. They don't even ask me how much money
they might get back. They want him gone."

HIGH ON A HILL

Mr. Slatkin, facing the prospect of spending much of the rest of his life
behind bars, is waiting out the inevitable in a $4,000-a-month rental high
above Hale Park in Montecito, with a view of the craggy peaks of the
Channel Islands.

He's been living off borrowed money from family and friends and has paid
his attorneys up front, according to sources. His creditors want to know
more about where the money is coming from, and have filed requests with
the court asking for an accounting. They want to make sure the money is
not from cash he's hidden away somewhere that really belongs to his
estate.

Investors who heard about how he's living or spotted him over the last few
months -- noshing at the Paradise Cafe, pumping iron at Gold's Gym
downtown, or swatting a tennis ball around the court at the Cathedral Oaks
Country Club in Goleta -- want him put away as soon as possible.

"They should put him in jail and make him suffer like the people he hurt,"
said a frail 83-year-old widow and former neighbor, who contends she was
made desperate in her golden years after she lost more than $113,000 from
her life savings.

But friends and neighbors say Mr. Slatkin hasn't been living a life of
luxury, oblivious to his fate and the consequences of what he has done.

He told investors this summer that he "isn't hiding," but since then, he
has been silent. He has denied requests for interviews. And he won't even
talk to friends who believe that he was "taken in by the wrong people."

Mr. Slatkin tells them he's "taking the Fifth," whenever asked about what
happened, they say.

"He doesn't want to talk about what happened to me or explain it," said
one associate, who did not want his name used because he, like other
sources interviewed by the News-Press, may also face both criminal and
civil liability. The only thing Mr. Slatkin tells his friends is this: His
life isn't easy now, and it will soon get worse.

He is borrowing money from his parents and in-laws to cover the rent,
sources said. His wife is working again. To get around town, he drives his
sons' Toyota Prius or Jeep Cherokee. His own cars will soon be auctioned
off by the U.S. Bankruptcy Trustee.

His family may not be immune to scrutiny either.

To recover more money for creditors, the court is considering requests
that his sons turn over their cars, that his wife hand over her engagement
ring, an Ebel watch and a tourmaline broach.

One of his sons, who is struggling to get into the music business,
recently petitioned to have his name changed from Justin Slatkin to Justin
Michael, court records show.

Mr. Slatkin, who once estimated his net worth in the hundreds of millions,
has been working part-time as a landscaper, sources said.

"He's not living a lavish lifestyle, far from that," his criminal defense
attorney Brian Sun said. "He's living pretty much in isolation. Here's a
guy who was respected, loved by hundreds of people a year or so ago, who
is now a pariah, shunned by his church and his lifelong friends, whether
it is deserved or not."

The Church of Scientology, where he first turned for help as a 14-year-old
boy after his father committed suicide at their Detroit home, will no
longer be a refuge. Earlier this month he was excommunicated for his
deeds. Any hope of leniency from the court may hinge on his willingness to
implicate others.

He promised to cooperate with federal prosecutors and bankruptcy
investigators, said Mr. Sun, a former assistant U.S. Attorney who is now a
partner in a Santa Monica law firm.

"He has been and continues to cooperate with the trustee," said Mr. Sun,
who led the team that successfully defended Los Alamos National Laboratory
nuclear scientist Wen Ho Lee against espionage charges. "Reed sincerely
believes he can provide valuable assistance to maximizing the recovery for
his creditors."

Last week, his defense team said, "Mr. Slatkin's agreement with the
government is a reflection of his decision to accept full responsibility
for his conduct and move forward by continued cooperation with both
government authorities and his creditors."

However, some still have a hard time believing Mr. Slatkin's commitment.

In the plea agreement the U.S. Attorney's Office says as much: "The
government currently questions the veracity of certain information
provided by (Mr. Slatkin) regarding, among other things, the alleged
transfer and the alleged legitimacy of transfers of certain assets
including real estate, artwork, and gold, the existence of foreign assets,
and the potential destruction of computer evidence."

The story of Mr. Slatkin doing manual labor as a landscaper is hard for
some of his former investors to swallow.

"I'm at the point where if Reed told me that the sun rose in the east and
set in the west, I'd have to go out and check that," said Michael Azeez, a
New Jersey businessman who, along with his father, mother and sisters,
lost all the $42 million they gave to Mr. Slatkin to invest.

'GREED SLATKIN'

Described by some as a cross between Gordon "Greed is Good" Gekko in the
film "Wall Street" and the trustworthy Mr. Rogers from the PBS children's
television show, Mr. Slatkin's standing as a stock market sage was pumped
up by claims that he got his small group of investors out of the market
just before the crash in 1987.

Then, in 1994, he turned a $75,000 investment of seed money in the nascent
Internet-provider EarthLink into a $200 million share in the company. His
reputation and personal wealth soared.

Despite dips and dives in the market over the years, the regular quarterly
statements Mr. Slatkin sent to his investors never showed a loss.

He told his investors he kept it all in a Swiss account to ensure its
safety.

He told the ones who wanted high returns that he would get them profits in
excess of 25 percent. He told those who wanted to be more cautious that he
was very conservative.

"He was a good listener," said Mr. Azeez. "He gave different people
different stories or different solutions to their investment based on what
they wanted to hear."

He told the Azeez family that most of their money was in T-bills. But it
was all a sham, according to R. Todd Nielson, the U.S. Bankruptcy Trustee.
In fact, most of the money he took never was invested, and much of the
rest of it was "lost in a financial black hole," Mr. Nielson said in his
December 2001 report on the case.

The plea agreement spells it out clearly: There was no Swiss account. The
stunning returns in the quarterly statements were pure fiction. All of
them.

Mr. Slatkin's scheme was "built upon the shifting sands of lies and
misrepresentations," said Mr. Nielson.

Mr. Slatkin used "investor funds to operate a massive Ponzi scheme whereby
he defrauded his investors by paying them returns largely with funds
raised from other investors," states the plea agreement.

The bankruptcy investigation was paralleled by the work of the U.S.
Attorney's Office, the IRS and the FBI.

The trustee alone amassed more than 3 million pages of financial documents
and evidence, but there still are holes in what happened with the money
and whether some of his associates share guilt.

So far, the bankruptcy investigation alone has cost his estate about $4
million, a bill that could climb to as much as $15 million before all is
said and done. This is from an estate that right now only has about $30
million in assets. The trustee expects to recover tens of millions more by
suing for the return of false profits and digging up any money that might
be hidden someplace else.

Almost a year after the collapse, even long-time friends have been itching
to see payback for the man they've nicknamed "Greed Slatkin."

"You couldn't have scripted a better movie," said investor Thomas Rook, a
Santa Barbara chiropractor whose family and business lost more than
$600,000, according to bankruptcy records. "Why it happened and what
happened is an interesting story that makes good copy, but the bottom line
is the money's gone."

Although the evidence against Mr. Slatkin is damning, Mr. Rook said he is
reserving judgment.

"Only a very few people knew what went on here and they're not talking
yet," he said. "I want to hear what they have to say."

DISAPPEARING IN THE PIT

Mr. Slatkin's scheme worked as long as he could find fresh investors
willing to hand over their cash, according to the bankruptcy trustee and
the U.S. Attorney's office. But the number of investors had to grow
exponentially to keep it afloat.

In the last months, Mr. Slatkin cycled dozens of deposits through two
accounts, all the while stringing along people trying to get their money
back, according to dozens of investors.

Even as their suspicions grew, he continued to send out quarterly
statements indicating profits from 24 percent to 100 percent a year,
according to court documents.

To calm their fears, he sent out notes asking for investors' patience.

"Rest assured, your funds are safe and the delay has nothing to do with
the current fluctuation in the market," he told investors as late as April
7, 2001.

Just a month before declaring bankruptcy, he was still taking in money. He
accepted $400,000 from Kate Edelman Johnson, a Los Angeles widow who had
already invested half-a-million dollars.

"He was eager to take my proffered investment and have it disappear into
his bottomless pit," Mrs. Johnson said in a letter to the court.

Sorting through the paperwork to separate fact from financial fantasy has
been hard work, so it's difficult to accurately peg the size of the
bankruptcy.

The amount of money actually invested that has not been repaid amounts to
about $254 million, according to the bankruptcy trustee.

But many investors filed claims based on how much they thought their
accounts had grown. Those claims may exceed $890 million, according to
estimates.

As of late last week, 527 individuals had filed claims totaling $817
million, and those numbers keep climbing.

"It isn't the biggest Ponzi scheme in U.S. history, but it's got to be in
the top 10," said Richard Wynne, an attorney with the Los Angeles firm
Kirkland & Ellis, which represents a committee of the creditors who lost
the most money.

WHERE DID IT GO?

While most lost money to Mr. Slatkin, about 75 people thought they
substantially benefited from their relationship with Mr. Slatkin, taking
in $151 million more than they paid him, according to bankruptcy records.

Most of those individuals had no idea the profits were fiction. "All
account statements sent to investors were fabricated," it states in the
plea agreement signed by Mr. Slatkin. But other investors, including at
least a half dozen locals who received $1 million to $5.8 million each,
are now being singled out by bankruptcy attorneys and may attract the
attention of criminal investigators.

"It's possible that certain investors knew, or should have known, of
Slatkin's investment scheme," the trustee said in his December report.
"What an investor knew or should have known is likely to depend on, among
other things his or her specific relationship with Slatkin."

As part of the plea agreement, Mr. Slatkin has agreed to explain the
relationships with individuals he says "knowingly conspired and agreed to
obstruct the SEC proceedings."

"We think that he had various people that helped him facilitate this
scheme," said Mr. Wynne. "I don't know how big the circle is."

The U.S. Attorney's Office specifically identifies three individuals in
the statement of facts. Those include two men, Dan Jacobs in France and
Didier Waroquiers in Germany, who were paid to help set up the bogus Swiss
accounts, and Jean Janu, Mr. Slatkin's bookkeeper.

The U.S. Attorney also singles out Hope Ranch resident and former Grateful
Dead road manager Ron Rakow as someone who helped attract new investors.

Over the next several weeks, many of those individuals -- as well as Mr.
Slatkin's wife Mary Jo and sons Justin and Brett -- are scheduled to give
sworn statements in the bankruptcy proceedings.

Ms. Janu's attorney would not comment for this story, and she has invoked
her Fifth Amendment rights in court. Neither Mr. Jacobs nor Mr. Waroquiers
could be located for comment.

"His business relationships with these people raise a lot of questions,"
said one source close to Mr. Slatkin. "Some of them didn't know he was
engaged in a fraud, but you have to ask yourself how some of them didn't
know. It's clear that some people took advantage of their relationship
with Reed and made millions from it."

The short list of business associates with active knowledge of his work
includes a former Santa Barbara radiologist, a local couple who acted as
advisers on tech stocks, and several others who provided advice on
investments.

According to the trustee, at least one person, Richard Levine, a Tarzana
businessman and Mr. Slatkin's partner in several investments, knew of the
fraud. "The Trustee and Committee have reliable evidence that by no later
than 1989, Levine knew that Slatkin had been making fraudulent
representations about his investment results," the trustee's report
states.

Mr. Levine could not be reached for comment, but in court papers, he said
he is devastated by the implication.

"Mr. Levine and his family have been subjected to harassment and
embarrassment as a result of the media and the public distortion of the
facts and misuse of mere theories and allegations," Mr. Levine's attorney
said in a letter to the court. The letter asked the judge to grant a
protective order keeping Mr. Levine's testimony closed to the public and
media.

While a few former associates, including Ms. Janu, have invoked their
Fifth Amendment rights against self-incrimination, many others are
stepping forward, according to papers filed with the court.

Richard McMullin, a former neighbor, started out working as a 19-year-old
"gofer" for Mr. Slatkin and went on to become one of his full-time
associates. Mr. McMullin and his mother received $3.7 million more than
they invested.

"He has cooperated fully with the investigation and plans to be
forthcoming in his deposition to the Trustee," said Bruce Glesby, Mr.
McMullin's attorney.

"Richard is as big a victim, if not one of the biggest, as anyone in all
of this," his attorney said. "When all is said and done, I'm 100 percent
convinced that he will not be found guilty of any wrongdoing whatsoever."

'A GOD COMPLEX'

What will Mr. Slatkin say when he finally testifies under oath about the
scheme?

Some of his friends have been trying to reconcile "the idea of Reed, this
wonderful, wonderful guy and Reed the fraud-monger," one former associate
said.

Mr. Wynne, the attorney working with the committee, called the plea a
"smart deal" for Mr. Slatkin because if he had gone to trial to contest
the charges, he would have been exposed to a life term. Because the plea
compels Mr. Slatkin to cooperate with investigators, it may help creditors
uncover any missing money, Mr. Wynne said.

"While some of his victims certainly might have preferred that Mr. Slatkin
be drawn and quartered, his plea... is an appropriate resolution to his
15-year fraudulent scheme," he said. "Mr. Slatkin will have a long time to
sit in jail and contemplate what he did to hundreds of his creditors and
their families."

Another former investor, George Kriste, who claims to have lost more than
$1.5 million, said the next phase of the investigation will be
interesting.

"The hope is that he has every incentive to be forthcoming," Mr. Kriste
said. "If he's forthcoming, there are more than enough rats on this ship
that we can chase."

Another twist in the case includes some of Mr. Slatkin's former associates
lashing out against the actions of the bankruptcy trustee and members of
the creditors committee, made up of six businessman who in all lost more
than $115 million, according to court records. A number of them say the
losses reported by the Azeez family and businessman George Abbott do not
reflect all the money they made with Mr. Slatkin.

It's a charge the bankruptcy trustee calls bunk, but associates say Mr.
Abbott and the Azeez family were among a select few who were able to
purchase founders stock in EarthLink. Michael Azeez and Mr. Abbott both
say those are misstatements of the facts.

"It shows you how desperate some of these people are," said Mr. Abbott,
who made his EarthLink investment through someone other than Mr. Slatkin.

As for the Azeez family, they say even though they were introduced to
EarthLink through Mr. Slatkin, they took an investment risk on their own.
In addition, the profits they made from EarthLink were nowhere near enough
to offset their $42 million loss to Mr. Slatkin.

Others feel like they're being victimized a second time.

Mr. Poitras, who lost $15 million, boils over when people say Mr. Slatkin
just "stole from the rich."

"Every dollar he stole I made with my bare hands -- painting, landscaping,
every kind of improvement on a terrible house on a beautiful property,"
Mr. Poitras said. "Am I a little guy or a big guy? I think I am a working
man who got lucky, but all my money is still gone."

But some buy the argument, even if they think Mr. Slatkin is guilty.

"There is a certain amount of credence to that whole Robin Hood idea,"
said one former associate. "Yeah, at least in later years, he was taking
money from the rich. But to me Reed had a 'God Complex.' He decided who
won and who lost.

"I don't know how he rationalized what he did, but he had to have known
this day was coming."

A Scientology minister once, Slatkin expelled from church
Santa Barbara News-Press
3/31/02
http://news.newspress.com/topsports/033102day1side.htm

Waiting to serve what will likely be a long prison sentence and shunned by
ex-friends, bankrupt investor Reed Slatkin had another punishment befall
him recently when he learned that he has been excommunicated from the
Church of Scientology.

Even before he agreed to plead guilty last week to 15 counts of fraud,
money laundering and conspiracy, church officials held a hearing and
decided to expel the former Hope Ranch resident.

Mr. Slatkin, who first turned to the teachings of Scientology founder L.
Ron Hubbard as a 14-year-old in Detroit after his father's suicide, had
abused his church connections, officials said.

Most of his early investors and well over half the 800 people he ended up
attracting to his investment club were fellow Scientologists, according to
bankruptcy court claims files. Indeed, the main reason many people turned
over money to Mr. Slatkin was because they were also Scientologists,
according to those claims.

"While the underlying issues in the Slatkin bankruptcy case are primarily
economic, not religious, it would be difficult to imagine a more dominant
force in the life of Slatkin than Scientology. It would be fair to say
that Scientology permeated almost every aspect of his life," states the
report by R. Todd Neilson, trustee of the Chapter 11 Bankruptcy Estate of
Mr. Slatkin.

While the church benefited indirectly because Mr. Slatkin and many of his
investors were generous donors, Mr. Neilson concluded that so far there is
no evidence that the church was a large beneficiary. In addition,
Scientologists were just as much victims in the scam as
non-Scientologists, court records show.

After a formal church hearing process, Scientology officials decided to
expel Mr. Slatkin, who has been a member since 1963, studied directly
under Mr. Hubbard in England, and went on to rise in the church hierarchy
before becoming a full-time investor in 1983.

Mr. Slatkin told Securities and Exchange investigators in 2000, the
teachings of Scientology form the "basis of almost everything I've done in
life."

According to church officials that was an overstatement.

"He misused his connections to the church tremendously," said Linda
Simmons Hight, a spokesperson for the Church of Scientology International.
"He overstated his connections. He hasn't ministered in the church since
1983 and he has abused his position since then."

There are more than 8 million Scientology members worldwide, according to
church publications. Established in 1954, the church's doctrine, among
other things, places a high regard on personal ethics, Ms. Simmons Hight
said. Mr. Slatkin violated those basic teachings, she said.

As part of his plea agreement, Mr. Slatkin is taking responsibility for
operating one of the largest Ponzi schemes in history, fleecing at least
$254 million from more than 800 investors since 1986.

Raised in Michigan, Mr. Slatkin was introduced to the teachings of L. Ron
Hubbard by an uncle. He had just faced the trauma of his own father's
suicide and he and his family were in "pretty bad shape," Mr. Slatkin said
in a 2000 deposition he gave to the SEC.

In a deposition he gave to the Securities and Exchange Commission two
years ago, Mr. Slatkin said his religion helped him recover. Then,
following an accident soon after his father's death in which he almost
severed his finger in shop class, Mr. Slatkin again turned to his new
religion.

"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."

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 Asian 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 with the SEC.

After the birth of their second son in 1983, the couple decided they
needed more money and decided to move to Santa Barbara and learn about
investing.

He put the same devotion into investing as he had into the church. When he
started making money, he brought in fellow church members and neighbors,
promising returns of up to 60 percent.

One of those early investors remembers Mr. Slatkin as focused but also
very involved in the lives of his sons.

"Our sons were at Mountain View School together," the former friend and
early investor said. "He was this very generous guy and one of his tenets
was to give back. Made donations to UCSB athletics, to a private school.
He was also really involved in the Boys and Girls Club. He coached
baseball. You know he was always the same guy."

His list of investors quickly grew from a dozen or so to scores and
finally hundreds. Even after attracting hundreds of non-Scientologists to
his club, Mr. Slatkin still saw his work as part of his religious
philosophy.

When he promised the SEC in 2000 that he was closing his club and
returning his investors' money, he added: "I have a strong feeling that
several hundred people that are involved in this is a very small drop in
the bucket compared to the people that I want to help relative to
Scientology. And I'm very anxious to get going."

--Scott Hadly