Petition — Worldwide Church of God, Inc. v. Superior Court of California
Supreme Court brief1979
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OF ee ee eee
Supreme Court, U.S \ |
FILED 2
IN THE MAY 15 1979 |
Supreme Court of the United States
REL RODAK, JR., CLERK
—-
October Term, 1978
NO. ..2......$55 * | {or - 0
WORLDWIDE CHURCH OF Gon, INC., ef al., |
Petitioners,
vs.
THE STATE OF CALIFORNIA,
Respondent.
Petition for Writ of Certiorari to the Supreme Court
of the State of California.
ALLAN BROWNE DAVID M. HARNEY
of of
ERVIN, COHEN & JESSUP HARNEY & MOORE
Ninth Floor 650 South Grand Avenue
9401 Wilshire Boulevard Los Angeles, Calif. 90017
Beverly Hills, Calif. 90210 51115). HORVITZ
MARC J. POSTER and
bic rac csoens MORGAN ALAN G. MARTIN
of
we yee & HORVITZ, GREINES &
POSTER
Suite 800 A Law Corporation
1545 Wilshire Boulevard
; Seventh Floor
Los Angeles, Calif. 90017 15760 Ventura Boulevard
Encino, Calif. 91436
(213) 995-0800
Counsel for Petitioners
Parker & Son, Inc., Law Printers, Los Angeles. Phone 724-6622
SUBJECT INDEX
Page
a ee Ie Je. casa nhybacvascianhas 2
SE SESS NS er 2
Questions Presented for Review SE oy Me RE 2
Statutory and Constitutional Provisions Involved ..... 3
NN i oc catasdnarsteedenine 3
gg ARCA SSRS ae ee a 3
B. Procedural Summary—tTrial Court ............ 5
C. Procedural Summary-—Appellate Court Pro-
gh hE CS TEE RV i ce ee 11
Why the Federal Constitutional Questions Are Prop-
Ur I I isis scscetccasemsdaees 12
A. The Injury to Petitioners’ First Amendment
Rights Has Been Massive, Immediate and
Irreparable and Is Continuing ...................... 12
B. Petitioners Asserted Their First Amendment
Rights Immediateiy, Continually and at
Every Level in the State Courts, to No Avail
nt Sethe <cpaxtbcacsencvebsibséasedoncneses 14
C. The Federal Issue, Impairment of Petition-
er’s First Amendment Rights, Is Ripe for
Se | Ean 15
il.
Reasons for Granting the Writ ......................--..--..-
A. The State of California Has Assumed Do-
minion and Control Over the Worldwide
Church of God Under a Theory of Church-
State Relationship Which, Unchecked, Will
Extinguish All Guarantees of Religious
Freedom Under the Free Exercise and Es-
tablishment Clauses of the First Amendment
B. This Court Has Repeatedly Invoked the Reli-
gion Clauses of the First Amendment to
Strike Down State Interference in Ecclesias-
tical Affairs Far Less Onerous and Pervasive
Than That Involved in the Present Case ....
C. The State of California’s Assertion of Con-
trol Over the Affairs of the Church Violates
the Rights to Privacy and Freedom of As-
sociation of Church Members and Contribu-
17
18
iii.
INDEX TO APPENDICES
Page
Order of California Supreme Court Denying
Petition for Writ of Mandate/Prohibition ....
i ek ANE RE SEES ROL SARS HR ARNON a App. p. 1
California Corporations Code Section 9505 .... 2
Declaration Willis J. Backet ...............0.ccscersess 3
Exhibit A. Text of Telegram of January 19,
og ages SORE AARON OAR CE DOR oR 14
Reporter’s Transcript References .................... 15
Order Appointing Receiver Pendente Lite; In-
wamnctaoms. PPOMGCMS LMG ana. 2... sock ec ccksnincicedccscees, 27
Order Approving Actions of Receiver ............ 35
RUNNIN IIIc incg hice dd. cis anse ovcunmnae ase accanwulessncin 38
Order Appointing Receiver Pendente Lite;
Eniumction Pendente Ltte «.....0.5........:..-.....-..... 40
iV.
TABLE G2 AUTHORITIES CITED
Cases Page
Abney v. United States, 431 U.S. 651 (1977) ........
Construction Laborers v. Curry, 371 U.S. 542
(29GS ) ann cr cee veccessiccsenenere seer enna
Cox Broadcasting Corp. v. Cohn, 420 U.S. 469
(1975) _-va-cmesianats<telpaplanee setae a tantet cesta
Everson v. Board of Education, 330 U.S. 1 (1947)
Investigation of Faith Center, Jnc., et al., In tire
Matter of, Los Angeles Superior Court No.
CZSAS29 ~onennviccnonsinensenee ae
Kedroff v. St. Nicholas Cathedral, 344 U.S. 94
(6 |= y ) On 20,
Late Corporation of Latter-Day Saints v. United
States, 136 U.S. 1 (1890)
Lemon v. Kurtzman, 403 U.S. 602 (1971) ..19, 20,
Madruga v. Superior Court, 346 U.S. 556 (1954) ..
Md. & Va. Churches v. Sharpsburg Church, 396
U.S. 367. (1970)
Michigan Central R. Co. v. Mix, 278 U.S. 492
(1929) -....--ncccsceceumesesciees nee
N.A.A.C.P. v. Alabama, 357 U.S. 449 (1958) ....
National Socialist Party v. Skokie, 432 U.S. 43
(1977)
Nebraska Press Assn. v. Stuart, 423 U.S. 1327
(1975)
16
16
19
22
17
21
V.
Page
New York v. Cathedral Academy, 434 U.S. 125
UN ee ga Sch cad vari Renlpkerdinailnncdaskecevnsanaeane 20
N.L.R.B. v. Catholic Bishop of Chicago, .... U.S.
SpE Rea POS CAD TIN oo ccccckceesic scence ae 18
People v. Christ’s Church, 79 Cal.App.2d 858, 181
NN I oo acca ava pacenensvene sceneursnastedawaqeanncen 7
Presbyterian Church v. Biue Hull Mem. Presb.
Carce, 592 0.5. 440 (1969) ................-......-...- 20
Republic Gas Co. v. Oklahoma, 334 U.S. 62
a ete ste cnnniney bintaae air cakted ak ictdaimeseiacestocities 16
Rescue Army v. Municipal Court, 331 U.S. 549 .... 2
Serbian Orthodox Diocese v. Milivojevich, 426 U.S.
I ea hese ek pax enes La yanab noawscvenaisiciass bonne 21
Stanford v. Texas, 379 U.S. 476 (1965) ccessccseen 22
Statutes
California Corporations Code, Sec. 9505 ................ 3
United States Code, Title 28, Sec. 1257(3) -........... Z
United States Constitution, First Amendment ........
Bim, ty Wy 2 2y 45. 04, 139,16, 17, 18, 29, 21, 22, 23
United States Constitution, Fourteenth Amendment
IN THE
Supreme Court of the United States
October Term, 1978
DO cebcstdcons
WORLDWIDE CHURCH OF Gop, INC., et al.,
Petitioners,
vs.
THE STATE OF CALIFORNIA,
Respondent.
Petition for Writ of Certiorari to the Supreme Court
of the State of California.
PETITIONERS, WORLDWIDE CHURCH OF
GOD, INC., a California corporation; AMBASSADOR
COLLEGE, INC., a California corporation; AMBAS-
SADOR INTERNATIONAL CULTURAL FOUNDA-
TION, a California corporation; WORLDWIDE AD-
VERTISING, INC., a California corporation; GATE-
WAY PUBLISHING, INC., a California corporation;
HERBERT W. ARMSTRONG; STANLEY R.
RADER; HENRY CORNWALL; RALPH HELGE;
and the accounting firm of RADER, CORNWALL
and KESSLER, respectfully pray that a Writ of Cer-
tiorari issue to review an order of the California Su-
preme Court filed March 22, 1979, which finally deter-
mined Petitioners’ right to immediate review of a trial
court order of March 12, 1979, imposing a receivership
sania
on the Worldwide Church of God and its affiliated
entities, Ambassador College and the Ambassador Inter-
national Cultural Foundation.
OPINION BELOW.
On March 22, 1979, the California Supreme Court,
by the vote of 4-3, denied without opinion an original
Application for Writ of Mandate/Prohibition. (The
denial of original writ appears as Appendix A.)
JURISDICTION.
The Court’s jurisdiction rests on 28 U.S.C. section
1257(3). The judgment of the California Supreme
Court .s final (see, e.g., Madruga v. Superior Court,
346 U.S. 556, 557, n. 1 (1954); Rescue Army y.
Municipal Court, 331 U.S. 549, 565-568 (1947): Mich-
igan Central R. Co. v. Mix, 278 U.S. 492, 494
(1929) ).?
QUESTIONS PRESENTED FOR REVIEW.
Can the State of California, consistent with the Re-
ligion Clauses of the First Amendment, disregard the
religious character of an established church, and _ be-
cause it is incorporated as a nonprofit corporation
under state law, treat it as a charitable or public
trust and establish the following relationship with and
involvement in church affairs:
1. All church property is deemed owned by the
People of the State not the church or its members
and is subject to supervision, regulation and contrel
by the State; .
2. All church records are public records and are
subject to audit and review by the State;
‘See further discussion, infra, pp. 12-16.
Hoe ee
3. The State may compel the church at any time
to account for all of its income and expenditures so
the State may determine if church funds are being
used for proper religious purposes;
4. Church officials are public trustees who serve
and may be removed and replaced by the State;
5. The State may reorganize church structure from
hierarchical to congregational form; and
6. The State may appoint a receiver to take posses-
sion of all church property and records and to operate
and investigate the church as a means of accomplish-
ing all or any of the foregoing objectives?
STATUTORY AND CONSTITUTIONAL
PROVISIONS INVOLVED.
The rights asserted by Petitioners arise under the
Religion Clauses of the First Amendment of the United
States Constitution as applied to the states by virtue
of the Fourteenth Amendment. Respondent purports
to ground its authority in part on California Corpora-
tions Code section 9505 which appears as Appendix
B hereto.
STATEMENT OF THE CASE.
A. The Parties.
The Worldwide Church of God was founded approxi-
mately 46 years ago. It is a Christian church based
upon fundamental teachings revealed in both the New
and Old Testaments of the Bible. It is an hierarchical
evangelical religious organization of fundamentalist ori-
entation and is incorporated under the California Gen-
eral Nonprofit Corporation Law.
Herbert W. Armstrong is the founder of the Church,
its Pastor General and in Church doctrine is Christ’s
Pree vies
Apostle and Ambassador, the spiritual and temporal
leader of the Church. Stanley R. Rader is Mr. Arm-
strong’s chosen personal advisor.
Church membership numbers approximately 100,000
persons, about 90% of whom reside outside of Cali-
fornia. The Church does not solicit funds from the
public. Its members tithe and make other voluntary
contributions. Significant support is also received from
non-member contributors.
Church funds (last year’s budget was approximately
$57,000,000) are spent in furtherance of the Church’s
work, which includes the following:
1
A full range of Church programs and activities
for Church members and families, including regularly
scheduled religious programs and convocations, an inter-
national program of youth activities, and welfare and
support programs for indigent members and families.
2. Spreading the gospel to all nations by (a) publi-
cation and distribution of periodicals such as “Quest”
magazine, “The Plain Truth,” “The Worldwide News,”
and “The Good News,” plus with numerous booklets;
(b) extensive television and radio broadcasting; (c)
worldwide travels by Mr. Armstrong and his staff to
meet with world leaders and speak to millions of people
through media broadcasts (Mr. Armstrong has averaged
more than 200 travel days per year over the last ten
years ).
3. Operation of Petitioner Ambassador College, lo-
cated in Pasadena, California, where approximately 350
students are trained for work in the ministry of the
Church.
4. Funding Petitioner Ambassador International
Cultural Foundation (which presents concerts, opera,
aici
theater and other cultural activities featuring world
renowned artists)” and numerous other religious, chari-
table, educational and scientific projects including (a)
archeological excavations and exhibits in Israel; (b)
benefit funds for handicapped children in England and
Monaco; (c) clinic for the underprivileged in Cairo;
(d) Institute for Political Research and Society for
Near Eastern Studies in Tokyo; and many more. The
Church’s activities have received commendations and
awards from more than twenty nations. (See Declara-
tion of Willis J. Bicket, a copy of which appears
as Appendix C hereto, filed in support of Application
for Immediate Stay, California Supreme Court.)* Re-
spondent is the State of California.’
B. Procedural Summary—Trial Court.
1. On January 2, 1979, the California Attorney
General commenced the present action contending that
the Church ‘is a charitable trust and, therefore, all
Church property is beneficially owned not by the
Church or its members but by the People of California,
all Church property ultimately rests in the court’s cus-
2In recent years performing artists have included Artur Rubin-
stein, Vladimir Horowitz, Luciano Pavarotti, Beverly Sills, Mstis-
las Rostropovich, the Philadelphia Orchestra and many other
first rank artists.
8The Declaration of Willis J. Bicket substantially summarizes
the contents of previous declarations and testimony at trial
court hearings by officers and members of the Church, such
as: Declarations of Ellis LaRavia and Willis J. Bicket, filed
in support of February 21. 1979 Motion to Vacate Receivership,
Declarations of Stanley R. Rader and Joseph Kotora filed in
support of Application to Dissolve Ex Parte Receivership on
or about January 10, 1979; R.T. Jan. 10-12, pp. 273-291.
‘The action was originally commenced by the State on relation
of six individuals who have no continuing participation in the
proceedings.
=
tody and is subject to the supervision of the court,
all Church records are public records, Church officials
are trustees who serve and may be removed at the
Court’s pleasure, and at “the slightest hint or suspicion
of wrongdoing, let alone proof positive or proof by
a preponderance, it is the court’s duty ... to see to it
there is a worthy trustee installed, that an investigation
is made, that the facts are exposed.” The Attorney
General contends and the Superior Court of the County
of Los Angeles (the “trial court”) has agreed that
the court is “the guardian and this Church is [its]
ward.” (R.T. Jan. 10-12, pp. 9-12.)°
a. Pursuant to this charitable trust theory, the Attor-
ney General alleges misuse of Church funds and seeks
inter alia, (a) to compel the Church to make a full
accounting to the court of all funds received, expended
or held by the Church;® (b) to remove most of the
present Church leadership and effectively to restructure
the Church from an hierarchical to a congregational
institution; (c) for appointment of a receiver to take
possession of all Church assets, books and records;
(d) to enjoin the Church and its leadership from inter-
fering with the actions of the receiver.
b. On the same date, in accordance with the Attor-
ney General’s charitable trust theory, the trial court
appointed a temporary receiver ex parte to take posses-
sion of all Church assets, books and records and to
‘These statements and quotations of the Attorney General's
position are from trial court transcripts, pertinent portions of
which are quoted in Appendix D hereto.
‘At a hearing on January 10, the Attorney General claimed
the State may determine if Church funds are being used for
proper Church purposes and undertook to demonstrate to the
court that “. . . the money is not being used for God’s work.”
(R.T. Jan. 10-12, p. 13.)
pan: en
take legal action to “protect” and recover Church
assets.’
2. On January 3, 1979, the receiver, the Attorney
General and armed deputies appeared unannounced
at Church headquarters and (a) “roceeded to take
control of Church assets, operatio. and many records
which pertained to ecclesiastical matters, (b) com-
menced removing cartons of Church records without
receipting or inventorying them, (c) and took over
exclusive control (for several days) of the Church’s
computer data center. Church employees were threat-
ened with contempt (and physical force); some were
peremptorily dismissed. (See R.T. Jan. 5, pp. 20-31;
R.T. Jan. 10-12, pp. 217-228.)
3. On January 4, 1979, Petitioners moved to dis-
solve the temporary receivership raising, inter alia, the
unconstitutionality of the State’s actions under the Reli-
gion Clauses of the First Amendment. The motion
was denied on January 5.
4. On January 12, 1979, after hearing, the trial
court found no evidence of liquidation of Church prop-
erties below value or destruction of Church documents
(R.T. Jan. 12, pp. 385-386; R.T. Feb. 21, pp. 135-136)
but nevertheless continued the receivership, explaining
that “perhaps a trier of fact in the future in this,
'The receiver was appointed on the representation to the
trial court that the Church leadership was conducting a massive
liquidation of Church real property below value and that vital
Church records and documents were being shredded. (R.T.
Jan. 2, pp. 4, 6-8.) At a subsequent hearing on January 10-12,
1979, the trial court found these allegations were untrue or
lacking in evidentiary support. (R.T. Jan. 10-12, pp. 385-386;
see R.T. Feb. 21, pp. 135-136.)
The Attorney General relied, in part, on the case of People
v. Christ's Church, 79 Cal.App.2d 858, 181 P.2d 49 (1947),
in which no First Amendment contentions were raised.
=
when this action is heard, will determine that there
is some possibility of truth in these charges, probability
of truth.” (R.T. Jan. 10-12, p. 385.)°
The trial court then entered an oral order, which
wa. reduced to writing by order dated January 19,
1979, appointing a receiver pendente lite and empower-
ing the receiver to take over all operations and functions
of the Church except those deemed by the court to
be ecclesiastical in nature.’ Among other things, the
receiver was authorized (a) to take immediate posses-
sion of all Church records, including membership lists,
and to make ail of these records immediately available
to the Attorney General for use in the pending action;
(b) to conduct a thorough audit of the business and
financial dealings of the Church; (c) to supervise the
day-to-day operations of the Church and, if he saw
fit, to assume complete control of operations; (d) to
suspend or terminate any employees of the Church
except Herbert W. Armstrong or Stanley Rader; and
(e) the court reserved to itself authority to remove
Mr. Armstrong and Mr. Rader from office and to.
determine which Church affairs were ecclesiastical in
nature and which were not."”
5. On January 15, 1979, the receiver intercepted,
and stopped a communication from Mr. Armstrong
8The Attorney General argued and the trial court apparently
accepted the position that the burden of proof lay with the
Church leadership to prove there was no misuse of Church
funds. (R.T. Jan. 10-12, pp. 361-362.)
"The receiver acknowledged the difficulty if not the impossi-
bility of separating financial matters controlled by the receiver
from ecclesiastical matters supposedly left to Mr. Armstrong.
(R.T. Jan. 10-12, pp. 95-98.)
“A copy of the court’s written order dated January 19,
1979 is filed herewith as \ppendix E.
—
to the Church membership worldwide, in which Mr.
Armstrong criticized the actions of the California Attor-
ney General and courts and urged that contributions
be sent to him at his residence in Tucson, Arizona
to defend the lawsuit and continue the Church’s work.
Over the Church’s First Amendment objections, the
trial court affirmed the receiver’s action, and enjoined
Petitioners or anyone acting for them from attempting
to divert voluntary contributions from being sent to
Pasadena, California, where the receiver could take
possession of them.”’
6. On February 2], 1979, after seven weeks of
sustained confrontation and forced cooperation between
the Church and the receiver, the trial court, on the
Church’s motion, agreed to dissolve the receivership.
Accordingly, by order of March 2, 1979, the trial
court dissolved the first receivership and substituted
in its stead an injunction which, inter alia, authorized
the Attorney General “to conduct a thorough audit
or other review as may be appropriate” of the financial
affairs of the Church and to receive the “full and
unqualified cooperation of the Defendants in the con-
duct of this financial review.” Petitioners were required
to furnish the Attorney General (a) physical facilities
at Petitioners’ data center; (b) a computer terminal
with direct “on-line access to all portions of their
[the Church’s| computerized data-base and information
retrieval system . . . so that the Attorney General
will be in a position to retrieve from the computer
quickly any accounting information regarding their af-
fairs that he wishes;” (c) “full access to all computer
"A copy of the trial court’s order approving actions of
receiver filed January 17, 1979, is filed herewith as Appendix
F.
—
programs, source program listings, operating procedures,
record layouts, data-element descriptions, and docu-
mentation of the systems in use at their data center,
immediately upon the auditor’s request;” (d) “any fi-
nancial records or documents requested by the Attorney
General within five working hours or a written explana-
tion for failure to do so;” and (e) “a complete magnetic
tape copy of the financial data-base of the defendant
nonprofit corporation [the Church] as it was in exist-
ence on their computers as of midnight December
31, 1978 . . . in a form convenient for processing
on the Attorney General’s own computers.” The court
reserved to itself the decision whether to compel the
Church to disclose membership lists.’”
7. On March 12, 1979, the trial court, at the
conclusion of other matters in the case sua _ sponte,
without giving notice or hearing evidence, ordered rein-
statement of the receivership, appointed a new receiver,
and conferred upon him substantially identical powers
to those set forth in his order of January 19, 1979.
The court set stay bond at $1,000,000."
By March 2, 1979, attention focused on the Church’s
computer data center, described by the receiver's chief operating
officer as one of the most advanced installations on the West
Coast. (R.T. Feb. 21, p. 58). The data-base of this system
includes current information in the computer and older informa-
tion stored on magnetic tapes. The system is used primarily
to store information of an ecclesiastical nature, including all
mailing lists, such as membership lists, ministry lists, mailing
lists for Church publications and communications, donor lists,
welfare lists and the like. It also stores records of all income
and expenditures for the Church, the College and the Foundation.
(See R.T. Jan. 10-12, pp. 291-300.)
‘8Copies of the trial court's minute order of March 12
and formal order of March 16, 1979, are filed herewith as
Appendix G.
The only “event” which occurred between March 2 when
the trial court dissolved the first receivership and March 12
ae, | aE
8. Within several days of the March 12 order re-
instating the receivership, 899 Church members residing
in California posted individual undertakings totalling
in excess of $3,400,000, thereby staying reimposition
of the receivership. The Attorney General has chal-
lenged all of these undertakings.
C. Procedural Summary — Appellate Court Proceed-
ings.
1. On January 16, 1979, Petitioners filed a Petition
for Writ of Prohibition/Mandate in the Court of Appeal
seeking review of the trial court’s oral order of January
12, appointing receiver pendente lite. On January 25,
1979, the Court of Appeal denied the Petition. On
January 29, 1979, Petitioners petitioned the California
Supreme Court for a hearing.
2. On March 19, 1979, Petitioners filed an original
Petition for Mandate/Prohibition in the California Su-
preme Court seeking review of the trial court’s order
of March 12, 1979, reinstating the receivership.
3. On March 22, 1979, the California Supreme
Court, by a 4-3 vote, denied the Petition for Hearing
and the Petition for Mandate/Prohibition.
when he reinstated the receivership was Petitioners’ filing of
a notice of appeal from the injunction. Petitioners have also
filed notices of appeal from each order appointing receiver.
In normal course, it will take two years or more for these
appeals to be resolved in the California appellate courts.
_.
WHY THE FEDERAL CONSTITUTIONAL QUESTIONS
ARE PROPERLY BEFORE THIS COURT.
A. The Injury to Petitioners’ First Amendment Rights
Has Been Massive, Immediate and Irreparable and
Is Continuing.
The device of the receivership pendente lite was
specifically designed to give and in fact gave the State
immediate and total control over the property, records
and affairs of the Church. Accordingly, the State has
obtained most of the relief it sought in the complaint.”
but without a trial on the merits or any proof of
wrongdoing to justify such drastic relief. As a necessary
corollary to the receiver’s power, the Church (as well
as its leaders and members) have suffered impairment
and destruction of First Amendment rights just as
extensive and final as if a judgment had been entered
after trial. The Church has been delivered into bondage
before it could establish its rights as a free institu-
tion.’* Further litigation of course will continue the
destruction of Petitioners’ First Amendment rights so
vigorously begun by the first receiver, but it will not
raise any new issues under the Religion Clauses of
the First Amendment or more clearly delineate existing
4The State sought an accounting—the first receiver initiated
the accounting and the second receiver is directed to complete
it; the State wanted Church officials removed—the receiver
usurped their functions; the State wanted to determine what
are proper religious expenditures—the receiver is empowered
to control all expenditures and he or the court will determine
whether any expenditure is for a proper purpose.
Similarly, Church members were denied the right to inter-
vene on behalf of the Church on the ground that the Church
as a nonprofit corporation is a charitable trust subject to the
jurisdiction of the State and that members, as mere donors,
lack standing to intervene (Ruling of February 20, 1979 on
Application for Leave to Intervene).
pues. a
issues. The impact of the present proceeding on the
First Amendment rights of the Church and its members
has been devastating. We note the following for the
Court’s consideration:
a. The receiver carried off, examined and copied
a huge number of Church documents, many of which
the Church believes were ecclesiastical and privileged
against disclosure. Similarly, the receiver took exclusive
possession of the Church’s computer system for several
days and presumably had free access to lists of Church
members, ministers and the like. Rights of privacy
once invaded cannot be restored, but new invasions
can be prevented.
b. The receivership instantly destroyed the Church’s
previously outstanding financial reputation, caused im-
mediate cancellation of a four-million-dollar line of
credit with various institutions, and reduced the Church
to a cash-in-advance purchaser in a manner appropriate
to a bankrupt. The receiver also caused a sharp drop
in contributions when he telegraphed the Church
ministry worldwide forbidding members from making
contributions to Mr. Armstrong.'* The Church’s losses
since January 3rd are estimated at more than $5,-
000,000 and they continue to mount. (See Appendix
C.)
These enormous financial losses to the Church have
translated into the following human and ecclesiastical
losses: Elimination of the Church’s national youth pro-
gram for this year and curtailment of regional youth
16Considering that 90% of the Church membership reside
outside of California, this was an extraordinary exercise of
jurisdiction by the receiver and the California court.
Pe eee
programs;" elimination of subsidies to approximately
300-500 indigent families and widows to permit them
to attend the Church’s seven-day Feast of Tabernacles
convocation, the high point of the Church’s religious
calendar; termination of 90 employees including minis-
ters; 40% reduction of newsstand distribution of “Plain
Truth”; drastic reduction of the Church’s educational
programs for the handicapped and alcoholism; drastic
reduction of international programs; elimination of new
construction and physical improvements at the facilities
in Pasadena; and reduction or elimination of employee
educational and training programs. (See Appendix C.)
These injuries are real, immediate and irreparable.
They directly impair religious activities which are an
integral part of the Church’s program. They are the
inevitable result of the State of California’s massive
intrusion into Church affairs and infringement of the
Church’s First Amendment rights.
B. Petitioners Asserted Their First Amendment Rights
Immediately, Continually and at Every Level in
the State Courts, to No Avail.
From their first opportunity on January 4, 1979,
one day after the receiver’s strike force descended on
the Church headquarters in Pasadena, Petitioners have
asserted their constitutional rights under the Religion
Clauses of the First Amendment at every opportunity
and at every level of the California court system through
ee
Mr. Bicket states in his Declaration (Appendix C): “Be-
cause the youth of the Church represents the future growth
and leadership of the Worldwide Church of God, this reduction
and potential loss of young people has caused great concern
for the future of the Church.”
a) aa
and including the California Supreme Court.’* First
Amendment issues were squarely raised in the Califor-
nia Supreme Court both (a) on Petition for Hearing
following denial of Petition for Writ of Prohibition/
Mandate to Court of Appeal to review the order of
January 12th imposing receivership and (b) on Petition
for Writ of Mandate/Prohibition to the California Su-
preme Court to review order of March 12th reinstating
receivership. The Attorney General responded that there
is no First Amendment issue raised. Alternatively, the
Attorney General has argued there is as yet no First
Amendment issue, which, in light of the pervasive in-
fringement of First Amendment rights which have al-
ready occurred, is the same as saying there never will
be a First Amendment issue.
Squarely confronted with the constitutionality of a
series of trial court orders which placed the Church
completely under the control of the court and its re-
ceiver and opened Church files for indiscriminate re-
view, the California Supreme Court, by a 4-3 vote,
denied relief.
C. The Federal Issue, Impairment of Petitioners’ First
Amendment Rights, Is Ripe for Review by This
Court.
Petitioners are concerned for the vitality and survival
of the Church as a viable religious institution. The
Church has already suffered great and irreparable injury
at the hands of the State; it will continue to suffer
18These include Motion to Vacate filed on January 4th,
the hearing on January Sth, the hearing of January 10-12,
the hearing of February 21st, the hearing of March Ist, the
hearing of March 12th, Petition for Writ to Court of Appeal
on January 16th, Petition for Hearing in the California Supreme
Court on Jenuary 29th, Petition for Original Writ in the
California Supreme Court on March 19th, among others.
a Oe
incalculable harm so long as this proceeding continues.
If the Church is ever to obtain meaningful protection
under the First Amendment, it must be now. Resolution
of the constitutional questions presented herein will,
we believe, result in the termination of the receivership
and prompt and final disposition of this action. The
federal issues will never be more ripe for review. Ac-
cordingly, the federal question is in appropriate posture
for consideration by this Court. (Cox Broadcasting
Corp. v. Cohn, 420 U.S. 469, 483 (1975) [“[I]f
a refusal immediately to review the state-court decision
might seriously erode federal policy, the Court has enter-
tained and decided the federal issue, which itself has
been finally determined by the state courts for purposes
of the state litigation.”|; Construction Laborers v.
Curry, 371 U.S. 542, 548 (1963) [“What we do
have here is a judgment of the [state] court finally
and erroneously asserting its jurisdiction to deal with
a controversy which is beyond its power. . . .”]; Repub-
lic Gas Co. v. Oklahoma, 334 U.S. 62, 68 (1948)
{the Court has entertained appeals “because the contro-
versy had proceeded to a point where a losing party
would be irreparably injured if review were unavail-
ing.” |; Nebraska Press Assn. v. Stuart, 423 U.S. 1327,
1329 (1975) (Blackmun, J. in chambers) [“each pass-
ing day may constitute a separate and cognizable in-
fringement of the First Amendment”|; and cf. Na-
tional Socialist Party v. Skokie, 432 U.S. 43 (1977);
Abney v. United States, 431 U.S. 651, 657-660
(1977).)
alt Ps
REASONS FOR GRANTING THE WRIT.
A. The State of California Has Assumed Dominion
and Control Over the Worldwide Church of God
Under a Theory of Church-State Relationship
Which, Unchecked, Will Extinguish All Guaran-
tees of Religious Freedom Under the Free Exer-
cise and Establishment Clauses of the First Amend-
ment,
The State of California expressly and unequivocally
asserts that religious organizations incorporated as non-
profit corporations are charitable trusts and, therefore,
all Church property is subject to supervision by the
State, all Church records are subject to review by
the State; in sum, churches are wards of the State.
Proceeding from these premises, the State claims it
may determine if Church resources have been expended
for a proper religious purpose within the body of Church
doctrine, the State may force Church polity to conform
to the State’s notion of adequate governance, and the
State may assume operation and control of the Church
to achieve these ends.
This assertion of total dominion and control by the
State of California over the property and affairs of
the Worldwide Church of God is not unique. We are
aware of at least one other case in which the State
has asserted similar broad authority to investigate and
control the affairs of a religious organization (Jn the
Matter of the Investigation of Faith Center, Inc., et
al., Los Angeles Superior Court No. C254329). We
do not know how many other churches have been
or are presently being subjected to this massive infringe-
ment of their First Amendment rights. We do know
that many and perhaps most churches in this state
ao
are small, possessed of limited financial resources, and
would have no choice but to succumb to the State’s
intrusion and claimed right to investigate and control
their affairs.
Accordingly, the matter now before the Court is
of far wider significance than just the rights of the
Worldwide Church of God and its members. Unchecked
here, the State of California will be free to proceed
(and may be proceeding) against other religious institu-
tions.
What California can do, other states can do, too.
If the states may intrude into church affairs in the
manner pursued here, the guarantees of the Religion
Clauses of the First Amendment are a dead letter.
B. This Court Has Rep: itedly Invoked the Religion
Clauses of the First Amendment to Strike Down
State Interference in Ecclesiastical Affairs Far Less
Onerous and Pervasive Than That Involved in the
Present Case.
The actions by the State of California in the present
case contravene established constitutional principles
enunciated by this Court in the following respects:
1. Contrary to the position of the State, a church
does not become less than or other than a church
simply because it incorporates. A state cannot strip
a church of its religious character by calling it a
charitable trust. This Court has rejected state or federal
action which would subject religious institutions to state
control applicable only outside the protective sphere of
religion. Most recently, in N.L.R.B. v. Catholic Bishop
of Chicago, .... U.S. ..... 59 L.Ed.2d 533 (1979),
this Court rejected the National Labor Relations
|
Board’s claim of jurisdiction over “religiously associ-
ated” private institutions which otherwise met the
Board’s jurisdictional requirements. To the Board a
school was a school and teachers merely employees
regardless of who employed them. This Court refused
to let the Religion Clauses of the First Amendment
be swept aside by this simplistic characterization, stress-
ing that religious schools involve religious teaching
and teachers at such schools fulfil! a religious function:
“In recent decisions involving aid to parochial
schools we have recognized the critical and unique
role of the teacher in fulfilling the mission of
a church operated school.” (59 L.Ed.2d at 541.)
“The church-teacher relationship in a church-
operated school differs from the employment rela-
tionship in a public or other non-religious school.
We see no escape from conflicts flowing from
the Board’s exercise of jurisdiction over teachers
in citurch-operated schools and the consequent
serious First Amendment questions that would
follow.” (59 L.Ed.2d at 543.)
2. The State of California cannot constitutionally
operate a church. (Everson v. Board of Education,
330 US. 1, 15 (1947) |[‘“Neither a state nor the
Federal Government can set up a church. . . . Neither
a state nor the Federal Government can, openly or
secretly, participate in the affairs of any religious organi-
zations or groups and vice versa.”’|.
3. State supervision of church affairs necessitates
unconstitutional entanglement with religion. Lemon v.
Kurtzman, 403 U.S. 602, 619 (1971) [“A comprehen-
sive, discriminating, and continuing surveillance .
will involve excessive and enduring entanglement be-
tween state and church.” ].
=
4. More specifically, the accounting of church fi-
nances results in unconstitutional entanglement even
where the church is willing to accept an audit. (Lemon
v. Kurtzman, supra, 403 U.S. at 621-622 [“In particular
the government’s post-audit power to inspect and evalu-
ate a church-related school’s financial records and to
determine which expenditures are religious and which
are secular creates an intimate and continuing rela-
tionship between church and state.” |.)
5. The state cannot constitutionally determine
whether church funds are properly spent for religious
purposes. (New York v. Cathedral Academy, 434
U.S. 125, 133 (1977) |“The prospect of church
and state litigating in court about what does or does
not have religious meaning touches the very core of
the constitutional guarantee against religious establish-
ment. . . .”|; Cf. Presbyterian Church v. Blue Hull
Mem. Presb. Church, 393 U.S. 440, 449-450 (1969)
|“. . . First Amendment values are plainly jeopardized
when church property litigation is made to turn on
the resolution by civil courts of controversies over
religious doctrine and practice. . . . [T]he departure-
from-doctrine element of the Georgia implied trust the-
ory requires the civil court to determine matters at
the very core of a religion—the interpretation of particu-
Jar church doctrines and the importance of those doc-
trines to the religion. Plainly, the First Amendment
forbids civil courts from playing such a role.” |.
6. The state cannot constitutionally dictate the man-
ner of church governance or decide who shall and
shall not be a church leader. (Kedroff v. St. Nicholas
Cathedral, 344 U.S. 94, 116 (1952) [Freedom of
religion encompasses the power of religious bodies
“to decide for themselves, free from state interference,
matters of church government as well as those of
faith and doctrine”|; Serbian Orthodox Diocese v.
Milivojevich, 426 U.S. 696, 724 (1976) |[“|T|he First
and Fourteenth Amendments permit hierarchical reli-
gious organizations to establish their own rules and
regulations for internal discipline and government.
. . .?]; Lemon v. Kurtzman, supra, 403 U.S. at 625
{“The Constitution decrees that religion must be a
private matter for the individual, the family, and the
institutions of private choice. . . .”|; Cf., Md. &
Va. Churches v. Sharpsburg Church, 396 U.S. 367,
369 (1970) (Brennan, J. concurring) |“To permit
civil courts to probe deepiy enough into the allocation
of power within a church so as to decide where religious
law places control . . . would violate the First Amend-
ment in much the same manner as civil determination
of religious doctrine.” (fn. omitted) |.
In short, the actions of the State of California are
so far beyond the pale of permissible state involvement/
interference with religion that, were it not for the
necessity to reinstill meaning to the First Amendment,
the case would warrant summary disposition."®
C. The State of California’s Assertion of Control Over
the Affairs of the Church Violates the Rights to
Privacy and Freedom of Association of Church
Members and Contributors.
The First Amendment comprehends the rights to
privacy (Griswold v. Connecticut, 381 U.S. 479
19The dangers to which the State’s conceptualization of the
Church as a charitable trust leads are also illustrated in Late
Corporation of Latter-Day Saints v. United States, 136 US.
1 (1890) which antedates modern development of constitutional
safeguards for freedom of religion. (See Kedroff v. St. Nicholas
Cathedral, supra, 344 U.S. at 119-120 which rejects a New
York legislative assertion of the charitable trust theory and
distinguishes the 19th century Mormon Church case.)
—
(1965)), and freedom of association (N.A.A.C.P. v.
Alabama, 357 U.S. 449 (1958)). Only a compelling
state interest may force these rights to yield, and then
only to the extent strictly necessary.
In the present case, the State’s governing theory
is that church records are public records and are always
available for inspection by the State without reasons
given. The various orders imposing a receivership on
the Church endorse this theory. The January 19th
order (Appendix E) directing the receiver to take
possession of all Church documents and make them
available for inspection to the Attorney General, specifi-
cally included membership lists. The March 12th order
required Court approval before the receiver could dis-
close membership lists, but even this minimal safeguard
was cosmetic in view of the fact that the receiver
was given direct access to the Church’s computer on
which the membership lists were recorded. (See Stan-
ford v. Texas, 379 U.S. 476, 485 (1965), where this
Court noted the “constitutional impossibility of leaving
the protection of | First Amendment] freedoms to the
whims” of state officers. )
Even under the State’s illegitimate goal—seeking to
determine whether church funds have been expended
for proper religious purposes—there would be no need
for names of church members or contributors. However,
because it has not had to do so, the State has offered
no compelling (or any) justification for discovery of
this information. Any and all First Amendment rights
to privacy end freedom cf association have been swept
aside.
CONCLUSION.
The State of California has caused massive, immedi-
ate and irreparable destruction of Petitioners’ rights
under the Religion Clauses of the First Amendment.
Through the device of a receivership pendente lite, the
State has asserted dominion and control over the affairs
of the Church and has thereby directly involved itself
in ecclesiastical affairs.
If the State is permitted to proceed with this unprece-
dented action, we do not know how it will define
church doctrine and restructive church polity. It will
hardly matter, though, because by then the Church
will have ceased to exist as a free institution in Cali-
fornia.
Petitioners respectfully pray that this Petition for
Writ of Certiorari be granted.
Respectfully submitted,
ALLAN BROWNE
of
ERVIN, COHEN & JESSUP
Wo. MARSHALL MORGAN
of
MORGAN, WENZEL & MCNICHOLAS
Davip M. HARNEY
of
HARNEY & MOorRE
E.uis J. Horvitz
Marc J. PosTER and
ALAN G. MARTIN
of
Horvitz, GREINES & POSTER
A Law Corporation
Counsel for Petitioners
APPENDIX A.
ORDER DENYING ALTERNATIVE WRIT
L.A. NO. 31091
IN THE SUPREME COURT OF THE
STATE OF CALIFORNIA
IN BANK.
Worldwide Church of God Incorporated, etc., et
al., Petitioners, v. The Superior Court of Los Angeles
County, Respondent; People ex rel., Timmons, et al.,
Real Parties in Interest.
Petition for writ of mandamus and/or other relief
DENIED. Bird, C.J., Mosk, J., and Richardson, J.,
are of the opinion that the petition should be granted.
Filed: March 22, 1979.
/s/ Bird
Chief Justice
oatiaas
APPENDIX B.
California Corporations Code Section 9505:
“A nonprofit corporation which holds property
subject to any public or charitable trust is subject
at all times to examination by the Attorney Gen-
eral, on behalf of the State, to ascertain the con-
dition of its affairs and to what extent, if at
all, it may fail to comply with trusts which it
has assumed or may depart from the general pur-
poses for which it is formed. In case of any
such failure or departure the Attorney General
shall institute, in the name of the State, the pro-
ceedings necessary to correct the noncompliance
or departure.”
ere,
APPENDIX C.
DECLARATION OF WILLIS J. BICKET
I, WILLIS J. BICKET, hereby declare and state
as follows:
I am the Assistant Treasurer of the Worldwide
Church of God and Ambassador College (hereinafter
collectively referred to as “Church”). The facts stated
herein are known by me to be true. If called upon
to do so, I could and would testify competently hereto
under oath.
I
THE CHURCH
A. History and Structure
The Worldwide Church of God was founded by
Herbert W. Armstrong some 46 years ago (originally
as the Radio Church of God). It is a Christian church
based upon fundamental teachings revealed in both
the New and Old Testaments of the Bible.
Since its founding, the Church has flourished and
grown to the point where it now has approximately
100,000 members worldwide (including baptized mem-
bers and their dependent children). Of these, only
about 10% reside in California. Herbert W. Armstrong
has been the Church’s spiritual and temporal leader
since its very beginning, and in Church theology is
the appointed apostle of Jesus Christ on earth, charged
with the responsibility of fulfilling the Church’s primary
mission of spreading His gospel throughout the world.
The Church does not solicit funds from the public.
Its members, however. tithe voluntarily and make other
voluntary contributions from time to time. The Church
also receives significant financial support from an even
greater number of nonmembers, generally referred to
ee me
as co-workers (whose members are well in excess of
100,000). The Church’s national budget last year was
approximately $57,000,000. (It will be significantly
lower this year.)
B. The Church's Work
Church funds are spent in furtherance of the Church’s
work, which includes the following:
I. A full range of Church programs and activities
for Church members and families, including regularly
scheduled religious programs and convocations, an inter-
national program of youth activities, and welfare and
support programs for indigent members and families.
2. Worldwide travels by Mr. Armstrong and _ his
staff for the purpose of meeting and speaking to millions
of people through electronic and print media and other-
wise carrying out the Church’s primary mission of
“spreading the Gospel to all nations.” In the last 10
years, for example, Mr. Armstrong has averaged more
than 200 travel days per year.
3. Publication and distribution of periodicals such
as “Quest” magazine, “The Plain Truth,” “The World-
wide News,” and “The Good News,” together with
numerous booklets.
4. Extensive television and radio broadcasting for
the purpose of spreading the Gospel.
5. The support and operation of Ambassador Col-
lege, located at the Church’s headquarters complex
in Pasadena, which trains approximately 350 students
for the work of the ministry of the Church and also
educates them in other areas.’
'The Church, as a rule, believes in putting its money
in the Work rather than investing in monuments and edifices.
As a consequence, its congregations usuaily meet in rented
on or
6. The production and presentation of concerts,
opera, theater and other cultural activities (many chil-
dren’s programs are presented free of charge) funded
by the Church and conducted through the Ambassador
International Cultural Foundation. Performing artists
include Artur Rubinstein, Vladimir Horowitz (his
first West Coast concert in 30 years), Luciano Pavar-
otti, Beverly Sills, Mstislav Rostropovich, The Phila-
delphia Orchestra, and other first rank artists.
7. Numerous other charitable, educational, scientif-
ic and religious projects, including (a) Archeological
excavations and exhibits in Israel (including sites at
the temple mount and Jewish quarter in Jerusalem);
(b) benefit funds for handicapped children in England
and Monaco; (c) clinic for the under privileged in
Cairo; (d) Institute for Political Research and Society
for Near Eastern Studies in Tokyo; and (ce) Nepal
and Thailand mountain tribe education programs, to
name only a few.
The Church’s worldwide activities have received com-
mendations and awards from heads of state and leaders
of governments throughout the world, including the
Bahamas, Belgium, Costa’ Rica, Egypt, Hong Kong,
India, Iran, Israel, Jamaica, Japan, Jordan, Kenya,
Kuwait, Lebanon, Monaco, the Netherlands, the Phil-
ippines, South Africa, Spain, Sri Lanka, Tanzania and
Thailand.
or leased halls or buildings, a fact which explains, perhaps,
its rather low visibility outside of Pasadena. Church headquar-
ters, Ambassador College and Ambassador Auditorium are
located on a 50-acre campus in Pasadena. The Church is
one of the largest private employers in Pasadena.
ae
Il
CHURCH’S FINANCIAL PROGRAM
PRIOR TO RECEIVERSHIP
A. Superior Bank Credit Lines
Prior to the imposition of the receiver by the Superior
Court, both the Church and the College enjoyed excel-
lent credit with financial institutions and vendors. The
Church’s principal bank line of credit agreement pro-
vided for loans of up to $4,300,000, as follows: $1,000,-
000 unsecured line of credit for cash flow, interest
at prime; $2,000,000 unsecured construction line of
credit, interest at prime plus one-half percent, repayable
at $75,000 per month plus interest; and $1,300,000
secured motor vehicle fleet line of credit, interest at
prime plus three-quarters percent.
B. Favorable Vendor Billing Practices
Radio and television broadcasting constitute a major
program of the Church. Annual expenditures for media
time exceed $5,000,000. The general industry practice
is to require religious, political, and other special inter-
est groups to prepay all media time, generally 30 days
prior to the air date. The Church, however, has enjoyed
such excellent relations with radio and teievision stations
that it had been able to secure time with payment
due 30 to 60 days after our program was presented.
This open credit was a significant source of financing
for purposes of regulating cash flow.
C. Additional Credit Lines
In addition to lines of credit, both the Church and
the College were previously able to obtain additional
financing for the purchase of real and personal property,
secured by such property, and for general operating
es,
purposes through the pledge of otherwise unencumbered
real and personal property.
D. Balanced Cash Flow
The cash flow of both the Church and the College
is seasonal and subject to fluctuation. Because of the
significant, predictable fiuctuations, borrowings for pur-
poses of balancing cash flow are necessary to fund
all operations of the Church. Salaries, debt-service,
utilities, Church hall rentals, maintenance, and other
major expenses are all fixed and incapable of being
significantly deferred. Therefore, any interruption of
cash flow impacts most heavily on other Church activi-
ties, which unfortunately include the Church’s main
charitable and educational endeavors.
_ Il
DESTRUCTIVE ACTS OF THE
RECEIVER AND THEIR IMPACTS ON THE
CHURCH PROGRAM
A. Destruction of the Church's Credit Lines
On January 3, 1979, when the ex parte receivership
was placed upon the Church, one of the receiver's
first official acts was to notify principal banks of his
authority. Because of his order, the bank returned all
outstanding checks, stamping them “refer to maker,”
which is the same notation often used when they are
returned for insufficient funds (i.e., bankruptcy). The
Church had approximately one million dollars in out-
standing checks that were “bounced” by this action
of the receiver. The checks were to important creditors,
such as radio and television stations that carried the
Church’s religious programming, as well as to dependent
widowed members and/or their families.
sialic
The damage to our credit rating was enormous.
It was made even worse by our inability to answer
vendor inquiries because all accounting personnel were
locked out of their offices by the receiver and denied
all access to the Accounting and Data Processing facili-
ties until noon, January 9, 1979. The telephones, there-
fore, went unanswered.
The bank immediately offset cash in our accounts
of $1,349,000 against our outstanding lines of credit,
then totally cancelled the credit lines.
B. Destruction of Orderly Cash Flow
Not surprisingly, vendors began to demand cash in
advance for C.O.D. terms. The largest independent
radio station in the New York market, WOR, where
we were the first religious programming they accepted,
immediately notified us of cash-in-advance terms.
On January 19, 1979, the receiver sent a telegram
to the Church’s ministry worldwide (evidently from
a ministry list he confiscated) forbidding them to make
contributions to Mr. Armstrong, who resides in Arizona,
and forbidding the Chusch’s leaders from soliciting
or diverting contributions} to any location except Pasa-
dena. (The text of this telegram is set forth as Exhibit
A hereto.)” The resulting confusion caused a drop
in expected revenues during the balance of January
and February of about $2,750,000. This, coupled with
the total destruction of our credit and the bank’s appro-
priation of $1,349,000 in our accounts to discharge
an existing loan, dried up our cash flow. In addition,
the receiver spent approximately $150,000 of the
“This is a remarkable claim of jurisdiction over the Church’s
worldwide membership (only 10% of the Church’s members
reside in California).
soilless
Church’s funds for his own expenses, and the Church
has incurred and will continue to incur enormous legal
expenses in resisting the present action.
C. Sale of Big Sandy Campus
When the present lawsuit began, we were in escrow
to sell the Church’s college campus in Big Sandy,
Texas, for $10,600,000 cash. This would have netted
the Church about $10,000,000, which we had arranged
to invest at 10%, thereby gaining $1,000,000 per year
in additional operating revenue. At the same time,
the sale would have relieved us of a maintenance burden
running $100,000 per month for a campus we were
no longer using. The net effect would have improved
our cash flow by over $2,000,000 per year. Instead,
although the receiver ultimately approved the sale, the
buyer cancelled. We are now trying to revive the sale,
but, if we do, it will be on less favorable terms because,
among other reasons, some of the buyer's financial
sources are reluctant to finance the purchase of a
property in receivership. An all-cash sale now appears
highly unlikely.
Moreover, even if a sale’is consummated, our loss
of investment income and continuing cost of mainte-
nance of the campus is running a cumulative deficit
or loss of about $180,000 per month.
Based on what has occurred to date, we project
an irretrievable loss this year in excess of $5,000,000
“as a result of this lawsuit, particularly as a result
of the receivership.
ay ve
IV
ADVERSE EFFECTS OF RECEIVERSHIP
AND LAWSUIT ON CHURCH PROGRAMS
A. Youth Programs
The Church maintains a nationwide youth program
for nearly seventeen thousand young people (ages from
12 to 19)—this includes basketball, volleyball, track
and field, cheer leading, music, literature end art. Each
year local, regional and national competitions are held
to encourage the youth to improve their skills in each
of these activities. Youth counselors are church mem-
bers with special talents and training to direct these
activities and to furnish moral teaching in line with
the precepts of the Church. Because of the receivership,
it was necessary to eliminate the national programs
for one year and greatly curtail the regional programs.
Local programs have been reduced to those activities
that can be funded locally.
Because the youth of the-Church represent the future
growth and leadership of the Worldwide Church of
God, this reduction and potential loss of young people
has caused great concern for the future of the Church.
B. Festival Operations
The Church has an annual seven-day convocation
called the Feast of Tabernacles in the fall of each
year. This is the high point of our religious calendar
and is a time where all family members attend a
Church convention in twelve selected sites throughout
the United States. Because of the receiver, it has been
necessary to reduce the travel allocation to indigent
families and widows by $175,000. This will mean
that from 300 to 500 families will not be able to
attend these important religious events.
— | a
C. Terminations
Ninety employees, including ministers, were laid off
as part of the budget reductions caused by the im-
position of the receiver. The termination of certain
key employees has added to our overall difficulties.
Some of these people will be impossible to replace
at any price.
D. Newsstand Distribution Program
One of our key methods of distributing our interna-
tional magazine (Plain Truth, circulation nearly two
million) is via the Newsstand Distribution Program.
This program has had to be reduced by 40% for
the next year. At the same time, we have been forced
to reduce the number of pages in each issue, thus
lessening the overall impact and message that each
issue Can Carry.
E. Church Educational Programs for the Handi-
capped ©
The Church has an active program for the handi-
capped (deaf, blind) by which specially trained in-
dividuals provide seminars and tape cassette programs
for those handicapped individuals. These programs have
had to be drastically reduced or eliminated for one
year. In addition, our nationally acclaimed program
on Alcoholism (booklets, films, and speakers) has also
been greatly reduced.
F. International Programs
Over two million dollars is allocated to programs
for the international aspects of our Work. These pro-
grams provide printed materials (Plain Truth, booklets
and reprint articles) as well as salaried U.S. ministers
(trained at Ambassador College) in over 30 foreign
_— =
offices. These programs have been drastically curtailed
and in some areas eliminated.
G. Construction
All construction projects have been eliminated and
only those projects that are essential to the safety
and vital maintenance of our 50-acre Pasadena facilities
have been allowed. Building maintenance and grounds
maintenance have been drastically reduced. Ambassador
College grounds have been awarded a number of certifi-
cates of excellent in the past five years. Improvement
programs have been put off for one year.
H. Education and Training of Employees
Because of the receiver, it was necessary to eliminate
most of our employee educational and seminar training
programs. These programs are used to keep the neces-
sary skills of our professional people at a high level.
Data Processing, Publishing and Media fields are con-
stantly changing, and it is vital that our technical people
keep up with the state of the art. Because these ad-
vantages are not offered this year, it may deter new
staff members from joining our organization and may
influence others to seek employment in other organiza-
tions.
Vv
CONCLUSION
We are trying to restore our normal operations,
but with the imposition of the receivership in the current
lawsuit, we are experiencing great difficulty.
Because of this lawsuit and particularly the receiver-
ship, prospects for future revenues and conventional
assistance from financial institutions is bleak at best.
Vendors are reluctant to extend the normal credit terms
ron | We
that they have given us for years. We have been
unable to find any bank which will give us credit
even though we are able to generously collateralize
our loans. Famous artists are reluctant to perform
in our performing arts facilities lest they somehow
become affected by the current litigation.
As long as this cloud remains over our heads we
will continue to suffer irreparable damage. This un-
fortunate condition will continue until the Church,
which thousands of people have worked so hard to
build, has either been vindicated or destroyed. We
are presently paying a fearful price in pursuit of our
vindication.
I declare, under penalty of perjury, that the foregoing
is true and correct.
Executed on this 11th day of April 1979, at Pasa-
dena, California.
/s/ Willis J. Bicket
WILLIS J. BICKET
oT one
EXHIBIT A
(The text of telegram of January 19, 1979 is set
forth as Exhibit A hereto. )
“Church members Worldwide Church of God are
not permitted to make contributions to Herbert Arm-
strong or his representatives for Church purposes or
on behalf of the Church.
“California Court ruled Worldwide Church of God,
Church related corporations, Herbert Armstrong, Stan-
ley, other defendants, are prohibited from diverting
contributions from Worldwide Church’s Headquarters,
Pasadena, California to other locations. Defendants are
prohibited from soliciting or causing Church contribu-
tions to be made payable to anyone or to any location
other than the Worldwide Church of God.
Steven S. Weisman
Court Appointed Receiver
Worldwide Church of God”
pa es
APPENDIX D.
The following excerpts from the trial court pro-
ceedings set forth the Attorney General’s and the trial
court’s theory and understanding of church-state re-
lationship under the First Amendment and the extent
of permissible state involvement in church affairs. As
indicated, the quoted statements are by Mr. Hillel
Chodos, who was initially attorney for the relators,
then Special Deputy Attorney General and at all times
principal spokesman for the Attorney General; Deputy
Attorney General Lawrence Tapper; Retired Judge
Steven Weisman, the first receiver; and the trial judges
who heard the various motions. Reference is made
to the comments of Mr. Browne, counsel for the
Church, where necessary to place the response of
others in context. Transcript references are in chrono-
logical order.
FROM THE JANUARY 2ND EX PARTE HEAR-
ING FOR APPOINTMENT OF RECEIVER:
Pages 3-4:
MR. H. CHODOS: If I can just make a few observa-
tions. First of all, I recognize that any request for
an ex parte receiver, without notice, has to be viewed
against a strong presumption that it is an emergency
measure to be used with great caution. I would suggest
to you, however, that at least insofar as pertains to
the Worldwide Church of God, Inc., Ambassador Col-
lege, Inc., and Ambassador International Cultural Foun-
dation, Inc., that the usual principles are not applicable.
All of those corporations are organized and existing
under California law, exclusively for charitable, reli-
gious and educational purposes. It is our position that
a shorthand way of describing the law applicable to
sessed
the corporation of that type is that their property
always and ultimately rests in the Court’s custody,
and they are always and ultimately subject to the
supervision of the Court on the application of the
Attorney General. In effect, there are no private inter-
ests. The Court is not taking something away from
somebody or interfering with anyone’s private rights.
In effect, what we are saying is that there are presently
trustees who have been allowed to manage the charita-
ble fund on a day-to-day basis. There is reason to
believe, as we have shown you, that they have not
done their job in a faithful manner. We believe that
essentially those trustees serve at the Court’s pleasure,
and may be replaced with a more trustworthy trustee.
THE COURT: I don’t have any quarrel with that
up to there,...
Page 7:
MR. TAPPER: ... But the records we are talking
about are public records, just as the assets that Hillel,
in describing the charitable organizations, are also pub-
lic assets.
FROM THE JANUARY 5TH HEARING ON MO-
TION TO VACATE ORDER APPOINTING RE-
CEIVER:
Pages 51-52:
{Question By Mr. Browne To Receiver Weisman]:
. . With regard to those various aspects you have
mentioned, radio time, TV time, literature, aren’t there
programs domestically and abroad the money is used
for, culturally and educationally and religiously?
[By Receiver Weisman|: A I have heard that.
but that is still hearsay, Mr. Browne. I can’t get the
records.
oe, <n
Q_ And you now have the authority then to decide
whether or not funds may be spent on any or all
of those projects; isn’t that true?
A Yes. But that’s why I appointed Mr. Cole as
my executive officer, because he’s going to run the
church end. I am just there temporarily, and I wish
I weren’t, I’ll be frank with you. I am there temporarily
to marshal the assets to see that no more money
is being unnecessarily spent.
Q But at this point in time, you perceive your
function as being the ultimate authority in whether
funds are spent or not spent: isn’t that true?
A Yes. But I take advice from my executive officer.
Q But if there is a disagrecment, one man _ has
to stand up and be counted, and you would have
the ultimate decision, would you not?
A I think so.
Page 70:
[Receiver Weisman]: A_ I am not concerned with °
the spiritual part of the church; it is not my business.
[By Mr. Browne|: Q_ Well, wouldn’t you agree
with me, Judge, that in deciding where funds are
to be spent on programs of the church, media time,
whether to support particular other charities, that that,
in effect, is action in the ecclesiastical sense?
A Might be, might not be; I don’t know.
MR. H. CHODOS: Objection, Your Honor... . I
am shocked to hear Mr. Browne suggest that money
that is contributed to this church, college and founda-
tion can somehow be diverted to support other kinds
of charities. That is against the law... .
‘slit
THE COURT: This is perhaps a good time to
point out, what is the purpose of this church? I have
nothing before me in the way of articles or bylaws
or anything to tell me what the purpose of this church
Biss.
Page 97:
|MR. CHODOS|: . every court that has consid-
ered the |! First Amendment] issue since the beginning
of Anglo-American jurisprudence has rejected the argu-
ment on which counsel's presentation is based. Because
this court is the perpetual, ultimate, continuing cus-
todian of charitable funds, and that custody and the
powers and duties that flow from that custody under
the law have nothing to do with the First Amendment.
Now, Mr. Browne, as every one of his predecessors
in a similar situation, says, well, the money and the
religious matters are intertwined, because if you can’t
spend the money to do this or that kind of religious
activity, you are interfering with the exercise of religion.
Well that’s not going to happen here. Judge Weisman
has no intention of it happening. Judge Pacht had
no intention of it happening when he made this order,
and there is nothing in the order to deal with that.
FROM THE HEARING OF JANUARY 10-12TH
RE APPOINTMENT OF RECEIVER PENDENTE
LITE:
Pages 7-8:
MR. CHODOS: Because of the nature of the church,
as a charitabie trust, the relationship of the court
to the church is unique.
Every other party who comes before the court has
some claim to its own property, and has some right
to resist intervention by the court. But for 700 years,
Your Honor, it has been the law in England and
—
America that charitable funds are public funds. They
are perpetually in the custody of the court. The court
is the ultimate custodian of all church funds, just
as the Attorney General has always been charged with
the power and the duty to investigate allegations of
misuse or even suspicions of misuse. And the point
that | am trying to make, Your Honor, is that the
charitable funds is the res or subject matter of this
proceeding. It isn’t a party in the usual sense. It is
in Your Honor’s safekeeping. It has no interests to
protect against the court. Your Honor has the power
and the discretion to safeguard and preserve those
assets and the duty to do so. But the church, as
a charitable trust, has no interest to protect here.
It has no client. It is the court’s funds and the court
may remove and replace and substitute trustees at
its pleasure.
Just as Judge Weisman would have no standing
to oppose your decision to remove him, if you were
to do it 10 seconds from now, he couldn't hire a
lawyer to argue that he should remain in office. So
the trustees of that fund have no standing. And the
fund itself, Your Honor, has no interest other than
to be preserved and to be applied for the charitable
uses for which it was created.
Pages 9-11:
|[MR. CHODOS|: It is Your Honor’s responsibility,
as we see it, to do whatever needs to be done to
appoint receivers and other agents to do whatever
needs to be done to preserve it and protect it, protect
the assets and records, and no one has any basis
to resist that intervention.
If there is the slightest hint or suspicion—and |
submit to you have we have raised it by our papers
es
in ample measure—if there is the slightest hint or
suspicion of wrongdoing, let alone proof positive or
proof by a preponderance, it is the court’s duty, as
1 understand it, to see to it there is a worthy trustee
installed, that an investigation is made, that the facts
are exposed.
|MR. CHODOS|: Mr. Rader—Mr. Armstrong is
the spiritual leader of this church, and he has the
faith and devotion of the members.
And I would agree—and the Attorney General will
agree—that it’s beyond our power or your power to
interfere in any way with his ecclesiastical decisions
or ecclesiastical supremacy. We have no desire to do
that.
But the church funds, Your Honor, do not belong
to Mr. Armstrong. They don’t belong to Mr. Rader.
To the extent they have collected funds through a
California charitable corporation, those funds are im-
pressed with the trust over which Your Honor is the
supervisor. This court, in the exercise of its equitable
powers, is the supervisor.
Page 12:
|MR. CHODOS|: What I’m. suggesting is this
church doesn’t need a lawyer to help this court protect
its assets. We are satisfied that on the application
of the Attorney General and a proper showing, this
court will provide whatever protection the assets of
the church need... .
... Its Your Honor’s charge. You are the guardian
and this church is your ward.
a
Page 13:
MR. CHODOS: No. | don’t think the church has
a single interest that needs counsel before Your Honor.
In my view, the church ought to welcome, ought to
welcome the supervision of the court.
. People send in their money, their tithes to
do what they believe is God’s work. We have shown
you, Your Honor, and I believe we will show you
today, that the money is not being used for God's
work. . .
Page 26:
MR. CHODOS: That is right. The church doesn’t
need representation, because the only thing that can
happen to it is something good, because that is what
we are asking for.
In other words, if we prevail, it is for the benefit
of the church.
We are trying to preserve the assets.
THE COURT: So it follows the church doesn’t
need counsel at this moment.
MR. CHODOS: That is right.
Page 46:
RECEIVER WEISMAN: ...
Now, under Judge Pacht’s order, as I read it, I
was granted the normal full rights as a receiver, in
other words, to come in and take over and run the
thing, and all that, which contemplates in my mind
a large staff to come in and run this thing.
Page 94:
MR. BROWNE: .. . But the point is there is
no way a receiver or any other person can have any
seca
control over the financial aspects of this church and
not impact the spiritual quality.
Page 98:
MR. BROWNE: Im trying to point out that the
financial aspect of this church is so interwoven with
the fabric. It would seem to me the next point is
to ask the Pope how many people he has surrounding
him; does he have ten administrative aids or 25.
THE COURT:
If this is construed as a motion to deny the receiver
as a matter of 's», because it involves the church,
the motion is dd.
Page 139:
|MR. CHODv.}: Your Honor, you will need, we
are satisfied, a firm, complete and total control of
the financial and business affairs through a receiver
until such time as those people who are attempting
to influence the membership to resist rather than co-
operate can be persuaded or somehow made to withdraw
their incitement to resist us.
Page 180:
|[MR. CHODOS|: You can’t run an operation—I
intend to show, Your Honor, that since a court order
was made last week, there has been nothing but chaos
because there has been massive resistance and disobe-
dience on such a continuing basis that to bring it before
the Court a week or two weeks or four weeks from
now and give notice and have a hearing would be
not only an idle act, but an impossible burden. for
the Court—this Los Angeles Superior Court to carry.
= Se
Page 312:
|[MR. CHODOS]|: But the court, and only the
court, has the power and the duty to enforce the
charitable trust. and what I am trying to tell you,
Your Honor, if you issue an injunction, who do you
think is going to prepare the contempt papers and
come to court and litigate it if it is not obeyed?
Who do you think is going to watch it? Who do
you think is going to take depositions? Not me.
Pages 361-363:
|MR. CHODOS|: He |Mr. Browne] started with
the premise that we have a heavy burden of proof.
And I suggest to Your Honor that that may be true
in an ordinary receivership action between private par-
ties, where private interests are at stake, but where
charitable trusts are concerned, it is the opposite which
is true. Once the slightest showing sufficient even to
raise the court’s eyebrow has been made before the
court to suggest that there may perhaps be improprieties
in the administration of a charitable trust, the presump-
tions all operate the other way, and the trustee has
the burden of coming forward and showing that every-
thing has been fair and regular, and that burden,
Your Honor, has not been carried and no attempt
has been made to carry it.
Counsel tells you that a receivership is the most
drastic remedy, and that may be where the court at-
tempts to interfere with private rights. In cases like
that, the Fourteenth Amendment and the due process
clause of the California Constitution interpose them-
selves between the court and the private party. But
there are no private rights here. This money is public
money. This court is the guardian of it today: it
was the guardian of it last week; it was the guardian
oa:
of it in 1948, and it will continue to be the guardian
of this money as long as the charitable trust continues
to exist.
And | would suggest to the court that it is no
more drastic for the court to replace Mr. Rader as
the custodian of this trust with Judge Weisman, than
it would be for the court to replace Judge Weisman
with someone else. This court has the power to remove
and replage trusiees of a charitable trust at its pleasure,
in order™ie™assure itself that there should never be
the slightest question or possibility of dissipation of
charitable trust assets.
.. What I do know is that Mr. Armstrong and
Mr. Rader and their henchmen, who are part of the
palace guard who have been brought here to court
to foist off their claims upon you, are the takers,
not the givers.
The givers are the people all across the country
who send in their tithes and their double tithes and
their offerings, and that, Your Honor, it is not because
they have faith in Herbert Armstrong, but because,
I presume, they have faith in God, and because they
have believed that Herbert Armstrong and the man
he has unfortunately chosen to deputize with control
of this church are faithful trustees of God’s work... .
Page 375:
|[MR. CHODOS|: What I am saying, the judge—
Judge |Receiver| Weisman has to have control over
the funds so he can hire people to help him. He
has to have control over the premises so he can keep
people off if they are getting in his way. And Your
Honor has to rely on him and on yourself not to
exercise those powers of possession in such a way
as to interfere with ecclesiastical functions.
ee ee
Pages 378-379:
RECEIVER WEISMAN: Now, if I were given a
complete staff and could have some kind of independ-
ence, that is the only way I would operate.
And if I have to operate under any of the present
conditions, | am not going to do it. And I am waiting
to find outs what kind of an order you will give,
because with all due respect to the court, I asked
you the other day to protect me. Remember? Well,
with all due respect to the court, if an order comes
out that I can't live with, | want to tender my resigna-
tion. Either I do it right, or I don’t do it at all.
THE COURT: Are you saying that there would
be a material or not a material difference, assuming
that you had all the control that you had.
JUDGE WEISMAN: All the control I would need
would be to be able to hire and fire people, including
Mr. Rader. |
Pages 380-381:
|MR. BROWNE|: Your Honor, with all due re-
spect, the problems inherent in turning an entire church
and its financial operation over to a receiver is so
repugnant to the First Amendment, I cannot—
THE COURT: We have been all through that,
Mr. Browne.
MR. BROWNE: I know that.
THE COURT: There is no point in going into
it again. | understand your position clearly.
I don't agree with your position in that regard.
Pages 381-383:
MR. CHODOS:, And the point I am trying to make
is if the word receiver frightens people, then you ought
a
to call him what he really is, which is a temporary
trustee appointed by the court, until the court car
be assured. The only other thing we are asking for is
two things in the lawsuit. That an accounting be pre-
pared, and that some procedure be devised for selecting
an independent board of trustees, or whatever you
call it, who will provide some check and balance on
the financial aspect of this enterprise, insofar as it
is a financial enterprise.
What I’m saying is whoever is out there has to
know that they owe their allegiance to God but work
for Judge Weisman, whatever you want to call it,
they are working for a paycheck.
They work for him, the trucks, the buildings, the
telephone, and the bugging system, if there is one,
is his, and everything is his, so he can see that it’s
right.
ae, ae
APPENDIX E.
Order Appointing Receiver Pendente Lite;
Injunction Pendente Lite.
Superior Court of the State of California for the
County of Los Angeles.
The People of the State of California, ex rel. Alvin
Earl Timmons, et al. Plaintiff, vs. Worldwide Church
of God, Inc., a California Corporation, et ai., Defend-
ants. Case No. C 267 607.
Filed: January 19, 1979.
The order to show cause re receiver and injunction
pendente lite in the above-entitled cause came on for
hearing in Department 3 of the above-entitled Court
on January 10, 1979, before the undersigned. Plaintiffs
and relators were represented by: Lawrence R. Tapper,
Deputy Attorney General; Hillel Chodos; Hugh John
Gibson; and Rafael Chodos, Esqq., and defendants
were represented by Ervin, Cohen and Jessup and Allan
Browne, Esq. After full consideration of the moving
and responding papers filed in the matter, and after
consideration of additional evidence and argument both
oral and documentary presented at the hearing, and
after due consideration of all matters presented, the
Court makes the following Order:
ORDER
1. Prior Orders Superseded. All prior orders regard-
ing the appointment of the receiver, and all prior injunc-
tions and restraining orders, are hereby vacated and
dissolved, and superseded by this Order.
2. Receiver Appointed Pendente Lite. Steven S.
Weisman, a retired Judge of the Superior Court, hereto-
fore appointed ex parte as temporary Receiver, is hereby
appointed Receiver pendenite lite over all the financial
and business affairs of the Worldwide Church of God,
Inc., Ambassador College, Inc., and Ambassador Inter-
national Cultural Foundation, Inc. (hereafter referred
to collectively, except where the context otherwise indi-
cates, as “the Church”), to carry out the duties which
are specified in this Order; and his original Oath and
Bond, filed herein on January 2, 1979, shall continue
to stand until further order of Court.
3. Assets and Property. The Receiver is to take
possession and control of the Church, including all
of its assets, both real and personal, tangible and intan-
gible, of every kind and description, except as is other-
wise provided in this Order.
4. Church to Continue to Function. \n spite of
this order of possession, it is further ordered that all
the authorized employees of the Church shall be per-
mitted to continue to carry out their duties and to
continue all activities and operations of the Church.
The Receiver nevertheless shall have the right and
power to supervise and monitor all of the business
and financial operations and activities of the Church;
however, he shall not interfere therein unless he deter-
mines, in the sound exercise of his sole discretion,
that such interference is necessary to avoid damage
or loss to the Church of any kind. And if he does
so determine, then he shall have the right to take
over management and control of the Church to whatever
extent that he, in the sound exercise of his sole discre-
tion, deems necessary.
5. Assistants. The Receiver is empowered to hire,
employ and retain lawyers, accountants, appraisers, bus-
iness consultants. computer experts, security guards,
secretarial and clerical help, and employees of all sorts
to assist him in the discharge of his duties pursuant
to this Order; and he is authorized to pay reasonable
compensation to ali his assistants out of the funds
and assets of the Church, subject to the supervision
of this Court as hereafter provided.
6. Records. The Receiver is to take immediate
possession of all books and records of the Church,
no matter where or in whose possession said records
may be found. These records are to include without
limitation journals, ledgers, bank statements, vouchers,
invoices, logs, memoranda, computer-readable data, and
membership lists. These books and records shall be
made available for the use of the employees of the
Church in the carrying out of all their duties. They
shall also be made available to the representatives of
the plaintiffs in this action, for use in preparing for
the trial in this action.
7. Operations. The Receiver is to supervise and
control all the business and financial operations of
the Church, including both ordinary day-to-day opera-
tions, and extraordinary operations. And while it is
ordered that the Receiver shall not interfere with the
normal business and financial operations of the Church
unless he deems it, in the sound exercise of his sole
discretion, to be necessary so to interfere: to that extent
he will have the right, and it is hereby ordered, that
the Receiver has the right to take over any portion
of the cperation of the business and financial affairs
of the Church that he deems necessary in order to
protect the Church and its assets.
8. Termination of Employees. Except as is other-
wise provided herein with respect to Messrs. Herbert
W. Armstrong and Stanley Rader, the Receiver is
hereby authorized to suspend or terminate, as he
in the sound exercise of his sole discretion determines
is necessary, any employee, officer, or agent of the
Church, (subject to any contractual employment rights
the suspended or terminated party may have), and
to direct that said employee, officer or agent not be
permitted access to any of the grounds or facilities
of the Church from and after the date of such termina-
tion or suspension.
9. Messrs. Armstrong and Rader. Messrs. Arm-
strong and Rader will be permitted to continue their
prior functions as representatives and authorities of
the Church unless and until they are, either of them,
removed by proper action of the Church pursuant to
its By-laws, aud Articies: or unless they are removed
by further order of this Court pursuant to an application
on the part of the Receiver. If the Receiver deems
it necessary at any time hereafter pending the trial
to move the Court to remove either Mr. Armstrong
or Mr. Rader or both, the Receiver may file a petition
with the Court on notice to the defendants, and
the Court will hear the matter and make a deter-
mination on that issue. However, subject to their rights
under the existing employment contracts which Messrs.
Armstrong and Rader have, to the extent that those
rights may hereafter be determined by the Court, their
compensation for services and their reimbursement for
any expenses they may incur in the course of their
employment by the Church, shall only be in such
amounts as may be determined by the Receiver in
his discretion from time to time.
10. Non-Interference By Receiver in Ecclesiastical
Affairs. It is not the purpose or intention of this
Order to allow the Receiver to interfere in any way
with the ecclesiastical functions of the Church (as
eae ee
distinguished from the College or the Foundation);
and he shall not do so. This Receivership concerns
itself exclusively with the financial and business affairs
of the Church. The ecclesiastical affairs of the Church
shall continue to be controlled and directed by its
duly authorized ecclesiastical authorities. Notwithstand-
ing the authority of the Receiver to terminate or suspend
persons from employment pursuant to Paragraph 7
above, such termination or suspension shall in no way
affect their membership or standing in the Church,
11. Disputes as to whether a given matter is ecclesi-
astical, In the event of any dispute between the Receiver
and the ecclesiastical authorities of the Church (as
opposed to the College or the Foundation) over whether
or not a particular matter is ecclesiastical, the authori-
ties aforesaid are authorized to employ counsel to apply
to this Court for a resolution of said dispute; and
said counsel may thereafter apply for reasonable com-
pensation from the Church funds pursuant to Court
order.
12. Accounting of Church Affairs. The Receiver
is authorized and instruc.ed to employ, to the extent
necessary, accountants, auditors, and attorneys to con-
duct a thorough audit of the financial and business
dealings of the Church; and to compensate said pro-
fessional assistants out of the Church treasury, subject
to supervision by this Court as hereafter provided.
Moreover, the Receiver is to review all allegations
of malfeasance and neglect concerning the financial
and business affairs of the Church, and to apply to
this Court where appropriate for leave to sue on behalf
of the Church for suitable relief.
13. Funds. It shall not be necessary for the Receiver
initially to take possession of, nor to deposit in any
=
special Receiver’s account, the funds of the Church
now or hereafter received by the Church; but the
Receiver shall supervise the deposits and disbursements
of the funds by the Church in accordance with the
terms of this Order. The funds of the Church shall
continue to be handled by its employees in the same
manner and with the same bookkeeping, accounting
and disbursement procedures as were in effect at the
time of the commencement of the ex parte receivership,
subject to the supervision of the Receiver. But in
any event, the Receiver shall have the right, in the
sound exercise of his sole discretion and at any time,
to take possession and control of the funds of the
Church forthwith by notification to the Court and
to the defendants, and to deposit them in a special
~ Receiver’s account, if he deems it necessary.
14. Sale of Big Sandy. Unless the Receiver files a
motion with the Court within ten days after the date
of this Order opposing the sale of Big Sandy for
good cause, that sale shall go forward as a cash sale
for $10.6 million, all funds payable directly to the
Church.
15. Supervision by the Court of receivership ex-
penses. The Court hereby approves and ratifies the
transfer by the Receiver of .$50,000.00 to a special
Receiver’s account, and the payment therefrom by him
of sums for security guard service, locksmith service,
and accountants, and the payment to himself and his
attorney of $1000.00 each on account of fees.
As soon as reasonably practicable, the Receiver shall
present a petition to this Court outlining the nature
and extent of the expenditures he anticipates have
been or will be necessary for the discharge of those
of his duties herein which are peculiar to this receiver-
ae, en
ship, and he shall seek approval or ratification of
this Court to incur and pay such expenditures. Pending
the presentation and determination of said petition,
the Receiver is authorized to incur and pay such ex-
penses as in his discretion are necessary or expedient
to the immediate discharge of his duties.
The Receiver shall not be required to seek advance
approval of this Court for expenditures associated with
the day-to-day operations of the Church.
16. Attorneys’ Fees To Be Approved By the Cour.
Pursuant to representations made to this Court by
counsel for defendants on January 10, 1979, and on
January 16, 1979, this Court hereby approves the
payment on January 9, 1979 of $30,000.00 out of
Church funds to Ervin, Cohen and Jessup, and the
payment on the same date of $6,000.00 out of Church
funds to Coombs, Gittler and Hauser, for services alleg-
edly rendered by those law firms to certain of the
individual and corporate defendants for whom they
have appeared of record herein; provided however, that
said approval is without prejudice to subsequent review
by the Court, upon its own motion or upon the appli-
cation of an interested party, to review the reasonable-
ness and propriety of said payments, and to direct
that all or a portion of said sums be returned to
the Church, either by the said law firms, or by one
or more of the individual defendants.
‘The remainder of attorneys’ fees received by said
firms on January 9, 1979 (ie. the remaining $20,000.00
paid to Ervin, Cohen and Jessup, and the remaining
$4000.00 paid to Coombs, Gittler and Hauser) are
to be repaid to the Receiver forthwith.
Except as provided in the foregoing, no further attor-
ney’s fees or legal fees shall be paid out of Church
ieutian
funds in connection with this litigation except after
proper application to and approval by this Court. This
prohibition shall extend to payment of attorney’s fees
to attorneys representing the plaintiff, the relators, the
defendants or any of them, or the Receiver.
INJUNCTION
Until a final disposition of this matter is made, the
defendants and each of them, and their agents, em-
ployees, and all persons acting in concert with them,
are hereby enjoined and restrained from interfering
with or obstructing the Receiver in the discharge of
his duties, or from withholding from him any of the
funds, assets, properties, books, or records of the
Church; and are further enjoined and restrained from
selling, mortgaging, encumbering, or otherwise dis-
posing of any of the assets of the Church or its asso-
ciated corporations.
DATED: January 19, 1979.
JULIUS M. TITLE
JUDGE OF THE SUPERIOR COURT
| ae
APPENDIX F.
Superior Court of the State of California for the
County of Los Angeles.
Filed: Jan. 17, 1979.
The People of the State of California, ex rel., Alvin
Earl Timmons, et al., Plaintiffs, vs. Worldwide Church
of God, Inc., A California Corporation, et al., Defend-
ants. Case No. C 267 607.
Order Approving the Actions of Receiver.
On reading the verified application of JUDGE
STEVEN S. WEISMAN, Receiver in this proceeding
for an Order approving said Receivers January 15,
1979 action whereby he stopped and recalled the at-
tempted mailing to approximately sixty-thousand (60,-
000) members of the Worldwide Church of God of
Defendant Herbert W. Armstrong’s letter dated January
14, 1979, the Law Offices of Michael J. Clemens,
by Michael J. Clemens, Esq., appearing for the Re-
ceiver, and the Law Firm of Ervin, Cohen and Jessup,
by Allan B. Cooper, Esq., appearing for the Defendants,
and the Court having considered the record and files
in this matter, the aforesaid Application and the Ex-
hibits attached thereto, and having heard the arguments
of counsel and being fully advised in the premises,
finds as follows:
1. That those portions of Defendant Herbert W.
Armstrong’s letter of January 14, 1979 which specifical-
ly relate to the members or prospective donors of
the Worldwide Church of God making their monetary
donations payable to said Defendant Herbert W. Arm-
strong personally and directing them to mail said dona-
tions to said Defendant Herbert W. Armstrong. c/o
General Delivery, Tucson, Arizona, are in direct contra-
a ae
vention and violation of the intent, spirit and provisions
of the pronounced order of this Court orally issued
on January 12, 1979, whereby, inter alia, the De-
fendants, and each of them and their agents and em-
ployees acting in concert with them, were enjoined
and restrained from interfering with or obstructing the
Receiver in the discharge of his duties or from with-
holding from him any of the assets of the Church.
2. That it is admitted by the Defendants that the
Church receives at its World Headquarters, Pasadena,
California, donations from contributions which amount
to approximately seventy million dollars ($70,000,-
000.00) each year and that said contributions constitute
the major asset of the Church.
3. That said Receiver acted correctly and efficiently
in the performance of his duties of protecting and pre-
serving the financial assets of the Church by stopping
and recalling the mailing of said letter of Herbert
W. Armstrong which called for contributions to be
made payable to Herbert W. Armstrong personally
and directing them to be mailed to Mr. Herbert W.
Armstrong, c/o General Delivery, Tucson, Arizona.
IT IS ORDERED that the application of Receiver
is granted and the action of the Receiver, which re-
sulted in the stoppage and the recall of the mailing
of Defendant Herbert W. Armstrong’s letter of January
14, 1979, is hereby approved and ratified.
IT IS FURTHER ORDERED that in addition and
supplementary to the previous order of this Court,
and until there has been a final disposition of the
matter by trial and a Judgment of the Trial Court,
the Defendants, and each of them and all their agents,
employees and all persons acting in concert with them,
are hereby enjoined and restrained from diverting. or
lis
attempting to divert, the sending of contributions to
the Church’s World Headquarters in Pasadena, Cali-
fornia, and are further restrained and enjoined from
soliciting or causing Church contributions to be made
payable to anyone other than to the Worldwide Church
of God or to be mailed to any location other than
to said Worldwide Church of God, either at its World
Headquarters in Pasadena, California, or to any of
said Church’s various branches throughout the world.
It is the intent of this Order to ensure that the solicita-
tion of Church contributions and the receipt thereof
by the Worldwide Church of God shall continue in
the same fiscal manner as existed prior to the ex
parte appointment of the Receiver herein.
DATED: January 16, 1979.
/s/ Julius M. Title
JUDGE OF THE SUPERIOR COURT
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APPENDIX G.
Superior Court of California, County of Los Angeles
Date: March 12, 1979.
HONORABLE: JULUS M. TITLE, JUDGE.
G. TORRELLAS, Deputy Sheriff.
G. HASSEN, Deputy Clerk.
G. SCAVARDA, Reporter.
The People of the State of California vs. Worldwide
Church of God, Inc., et al. C 267 607.
Hillel Chodos & L. Tapper (for Plaintiffs), M. Clem-
ens, R. Nutter and J. Jaenicke (for Receiver), Aulana
L. Peters (for Accountants), Arnold D. Larson (for
Intervenor), Allan Browne, W. Morgan and E. Hor-
vitz (for defendants).
NATURE OF PROCEEDINGS: Hearing on Final
Accounting of Receiver, etc.
Matters come on for hearing. Hillel Chodos’ motion
for attorney fees and costs is denied without
prejudice. The Court declares that it will not take
oral testimony on the final accounting of the
former Receiver, but will decide the issue on the
further written objections, declarations and _ points
and authorities of counsel. All subpoenas issued for
today’s proceedings are ordered quashed. The former
Receiver shall make available to the defendants, for
examination in the Receiver’s offices, all records, bills,
vouchers, etc., including attorney time records. The
accounting firm of Peat, Marwick and Mitchell shall
also make available to the defendants all of its records
on the final accounting. Said examinations by the de-
fendants shall be completed on or before March 16,
1979 and their objections in reference to the final
a
accounting shall be delivered to the Court on that
date. Counsel fo the Receiver is directed to file, on
or before March 14, 1979, declarations setting forth
their theory on the refusal of payment for the services
of the security firm, Boyd and Associates. Any reply
by Boyd and Associates shall be filed on or before
March 16, 1979.
Defendants’ motions for leave to sue Receiver Steven
Weisman and to increase the amount of his bond
are denied. Defendants’ motion for undertaking on
granting injunction pursuant to CCP 529 is denied.
The declaration of Willis J. Bicket is ordered filed.
The Court finds that the taking of the appeal
by the defendants from the Court’s order of March
2, 1979, is not per se violative of said order, but
nevertheless the status quo of the assets and records
must be maintained pending appeal. The Court vacates
its prior orders re the dissolution of the Receivership
and appoints David L. Ray as Receiver on terms
and conditions enunciated by the Court in open court
this date and as contained in the notes of the official
court reporter. Counsel for the Plaintiff is directed
to prepare a written order. Said Receiver is directed
to file a bond in the amount of $10,000.00. The
Court sets the amount of a bond to stay Receivership
pending appeal at $1,000,000.00. Pursuant to request
of Plaintiff. the Court directs that the record reflect
that Stanley R. Rader is present in Court this date.
A copy of this minute order is mailed to all counsel
this date.
ania
Order Appointing Receiver Pendente Lite;
Injunction Pendente Lite.
Superior Court of the State of California for the
County of Los Angeles.
The People of the State of California, ex rel. Alvin
Earl Timmons, et al. Plaintiff, vs. Worldwide Church
of God, Inc., a California Corporation, et al., Defend-
ants. Case No. C 267 607.
Filed: March 16, 1979.
After due hearing before the undersigned in Depart-
ment 48 of the above-entitled Court on March 12,
1979, plaintiffs and relators appearing by Lawrence
R. Tapper. Deputy Attorney General; Hillel Chodos;
Hugh John Gibson; and Rafael Chodos, Esq. and de-
fendants appearing by Ervin, Cohen and Jessup and
Allan Browne, Esq. and defendant, Stanley Rader being
present in Court at said time, and after due considera-
tion of all matters presented, the Court makes the
following Order:
ORDER
!. Paragraph +1 of the prior Order dated 3-2-
79 entered herein dissolving the Receivership in this
action is hereby vacated and is superseded by this
Order.
2. David L. Ray is hereby appointed the receiver
pendente lite over all the financial and business affairs
of the Worldwide Church of God, Inc., Ambassador
College, Inc., and Ambassador International Cultural
Foundation, Inc.
3. Those corporations will be hereinafter referred
to collectively as “the church”, except where the context
otherwise requires. The receiver is to carry out the
a a
duties which are specified in this order: Bond is fixed
in the sum of $10,000 for the receiver.
4. The receiver is to take possession and control
of the church, including all of its assets, both real
and personal, tangible and intangible, of every kind
and description, except as is otherwise provided by
the court at this time.
5. In spite of this order of possession, it is further
ordered that all of the authorized employees of the
church shall be permitted to continue to carry out
their duties and to continue all activities and operations
of the church. The receiver nevertheless has the right
and power to supervise and monitor all of the business
and financial operations and activities of the church,
but he shall not interfere unless he determines, in
the sound exercise of his sole discretion that such
interference is necessary to avoid damage or loss to
the church of any kind.
If he does so determine, then he shall have the
right to take over management and control of the
church to whatever extent that he, in the sound exercise
of his sole discretion deems necessary.
The receiver is empowered to hire and employ and
retain lawyers, accountants, appraisers, business consult-
ants, computer experts, security guards, secretarial and
clerical help, and employees of all sorts to assist him
in the discharge of his duties pursuant to this order.
He is authorized to pay reasonable compensation to
all of his assistants out of the funds and assets of
the church, subject to the supervision of this court
as will be provided herein.
The receiver is to take immediate possession of all
books and records of the church, no matter where
pe
or in whose possession said records may be found.
These records are to include, without limitation, jour-
nals, ledgers, bank statements, vouchers, invoices, logs,
memoranda, and computer-readable data.
These books and records shall be made available
for the use of the employees of the church in the
carrying out of all their duties. They shall also be
made available to the representatives of the plaintiffs
in this action for use in preparing for the trial in
this action,
The receiver is to supervise and control all the busi-
ness and financial operations of the church, including
both ordinary day-to-day operations, and extraordinary
operations. While it is ordered that the receiver shall
not interfere with the normal business and financial
operations of the church unless he deems it, in the
sound exercise of his sole discretion, to be necessary
so to interfere. To the extent he determines it necessary,
the receiver has the right to take over any portion
of the operation of the business and financial affairs
of the church that he deems necessary in order to
protect the church and its assets or to carry out his
duties as receiver.
Except as otherwise provided herein with respect
to Messrs. Herbert W. Armstrong and Stanley Rader,
the receiver is hereby authorized to suspend or termi-
nate, as he in the sound exercise of his sole discretion
determines is necessary, any employee, officer, or agent
of the church. subject to any contractual employment
rights the suspended or terminated party may have,
and to direct that said employee, officer or agent not
be permitted access to any of the grounds or facilities
of the church from and after the date of such termina-
tion or suspension.
_—
Messrs. Armstrong and Rader will be permitted to
continue their prior functions as representatives and
authorities of the church unless and until they or either
of them are removed by proper action of the church
pursuant to its by-laws and articles; or unless they
are removed by further order of this court pursuant
to application on the part of the receiver. If the receiver
deems it necessary at any time hereafter pending the
trial to move the court to remove either Mr. Armstrong
or Mr. Rader or both, the receiver shall file a petition
with the court on notice to the defendants. The court
will hear the matters and make a determination on
that issue. However, subject to their rights under the
existing employment contracts which Messrs. Armstrong
and Rader have, to the extent that those rights may
hereafter be determined by the court, their compensa-
tion for services and their reimbursement for any ex-
penses they may incur in the course of their employ-
ment by the church, shall only be in such amounts
as may be determined by the receiver in his discretion
from time to time. .
It is not the purpose or intention of this order to
allow the receiver to interfere in any way with the
ecclesiastical functions of the church, as distinguished
from the college or the foundation, and the receiver
shall not do so. This receivership will concern itself
exclusively with the financial and business affairs of
the church. The ecclesiastical affairs of the church
shall be continued to be controlled and directed by
its duly authorized ecclesiastical authorities. Notwith-
standing the authority of the receiver to terminate
or suspend persons from employment pursuant to this
order, such termination or suspension shall in no way
affect their membership or standing in the church.
ee
In the event of any dispute between the receiver
and the ecclesiastical authorities of the church, as op-
posed to the college or the foundation, over whether
or not a particular matter is ecclesiastical, the plaintiff
or defendants may apply to this court for a resolution
of that dispute.
It shall not be necessary for the receiver initially
to take possession of, nor to deposit in any special
receiver's account, the funds of the church now or
hereafter received by the church; but the receiver shall
supervise the deposits and disbursements of the funds
by the church in accordance with the terms of this
order. The funds of the church shall continue to be
handled by its employees in the same manner and
by the same bookkeeping, accounting and disbursing
procedures as were in effect at the time of the com-
mencement of this action, subject to the supervision
of the receiver. But in any event, the receiver shall
have the right, in the sound exercise of his sole discre-
tion and at any time, to take possession and control
of the funds of the church or any portion thereof
required to carry out his duties. He shall take such
possession if he deems it necessary forthwith on notifica-
tion to the court and to the defendants and to deposit
them for his use in the special receiver’s account.
As soon as reasonably practicable, the receiver shall
present a petition to this court outlining the nature
and extent of expenditures he has expended or which
he anticipates will be necessary for the discharge of .
those of his duties which are peculiar to this receiver-
ship, and he shall seek approval or ratification of
this court to incur and pay such expenditures. Pending
the presentation and determination of said petition,
the receiver is authorized to incur and pay such expenses
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as in his discretion are necessary or expedient to the
immediate discharge of his duties.
The receiver shall not be required to seek advance
approval of this court for expenditures associated with
the day-to-day operations of the church.
6. No risk or obligation incurred by the receiver
shall be the personal risk or obligation of said receiver
but shall be the risk or obligation of the receivership
estate, unless the Court shall determine hereafter that
it would be appropriate to order otherwise.
Until a final disposition of this matter is made,
the defendants and each of them, and their agents,
employees, or all persons acting in concert with them,
are hereby enjoined and restrained from interfering
with or obstructing the receiver in the discharge of
his duties, or from withholding ..om him any of the
funds, assets, properties, books, or records of the
church.
Bond to stay the appointment of the receiver is
fixed at $1 million. This may be paid from church
assets without prejudice to the right of the court to
assess the cost at a later time against any individual
defendants as may be appropriate.
Dated: Mar. 16, 1979.
JULIUS M. TITLE
Judge of the Superior Court.
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