When I dove into Scientology, I put the Sixth Circuit decision in the case of Father Samuel Ciccolini on hold. “Father Sam”, as he is known, founded Interval Brotherhood Home in 1970. Here is how it describes itself:
We provide long term residential, alcohol and drug rehabilitation services primarily to the indigent, adult men and women of Summit County. Rehabilitation services are individualized, abstinence based and holistic with a special focus on the mental (including co-occurring mental illness), emotional, social, spiritual, and physical aspects of sobriety. The agency strives to provide guests with the knowledge, values, and skills to manage their lives appropriately, reconnect with their families, find meaningful employment, and continue a life that is sobriety based.
Father Ciccolini was appealing his sentence from the United States District Court for the Northern District of Ohio. The prosecution was also appealing the sentence:
He was sentenced to one day of incarceration, three years of supervised release, and a $350,000 fine. In addition, the district court ordered Ciccolini to pay $3,500,000 in restitution to a charitable foundation that the district court believed had been harmed by his crimes. Both parties appealed, contending that the restitution order was unlawful because the district court lacked authority to impose it. We agree. As a result, Ciccolini’s sentence will be vacated and the matter will be remanded for resentencing.
When I wrote about the original case, I rather irreverently speculated that the judge might have been worried about a sixty eight year old priest being able to convince the other inmates that he was there for making a false income tax return. That is what he was convicted of along with structuring financial transactions to evade reporting requirements. The latter sounds more sophisticated than it is. He was depositing cash in amounts of less than $10,000. Between April and June of 2003, he made 139 deposits totaling $1,038,680.
Although, he initially argued that the money was cash he had legitimately accumulated and left laying around the rectory, he later admitted that he had diverted money from the IBH Foundation that supported the treatment center. He paid the money to the Foundation and $292,106 in additional taxes for the years 2002 to 2006. The court did an analysis under the federal sentencing guidelines, which considers behavior that makes the basic crime you are convicted of either worse or not so bad. Things like lying in court hurt you. Accepting responsibility helps. In an income tax case, the fact that the income is from an illegal source hurts you. So even though Father Ciccolini was not convicted of stealing from the charity, the guidelines would tend to punish him for that also. All in, the guidelines said that he should do five to six years.
Then the district court judge decided to get creative. He explained:
I am influenced in this at least in part by certain writings made by a Nobel-winning economist by the name of Becker who wrote on criminal punishment, and he suggests or argues that in circumstances such as financial transactions like this, that incarceration is less important than providing a disincentive to others and that the disincentive can sometimes be obtained through financial penalties.
Father Ciccolini had personal net worth of around $5,000,000, including funds in some sort of trust. The pre-sentencing report had concluded that this “vast wealth” could not have been legitimately obtained. Vast wealth. Maybe the people doing the report need to get out more. Father Ciccolini had been getting a salary of just over $100,000 from Interval Brotherhood Home and just over $80,000 from IBH Foundation. He was living in a rectory.
Whatever he had stolen from the IBH entities had not been enough to prevent them from being very strong financially. According to the 990s, the center owns its extensive facilities free and clear and adds over $100,000 to surplus each year and the foundation has over $13,000,000 in investments. He must have been a prodigious fund raiser, which to me indicates that he spent a decent amount of time with fairly prosperous people. Do you think “Father Sam” had to pick up many restaurant checks ? Thirty years of low six figure income with no living expenses could get you to $5.000,000 without being an investment genius.
At any rate. the judge thought it would be better to have Father Ciccoline pay $3,500,000 to the Foundation and only do a day in prison and three years of supervised release. The Sixth Circuit ruled that the district court did not have the authority to make that order. So much for using tax convictions to right other wrongs. A similar determination was made out of the box in the case of the Jinwrights, who nearly drove an historic church into bankruptcy with their lavish lifestyle. They are doing time for income tax evasion and paying the IRS, but there was no way to order restitution to the church, which did not consider itself a victim. It is not clear what Inteval thinks about its founder. He is still featured on the website:
IBH was founded in 1970 by Father Sam Ciccolini who began working with alcoholics when he was a seminarian in Cleveland. The 86-acre, free-standing, residential treatment center was a former Carmelite monastery that Father Sam arranged to purchase using his own savings.
It does not seem likely to me that the world will be a better place because Father Ciccolini will be spending the next five years or so in prison, which seems to be the likely effect of this decision. This decision and the Jinwright case might give pause to those who think that the “That’s how they got Al Capone” approach is the way to address their issues with Scientology.
As might be expected, Jack Townsend’s Federal Tax Crimes has a good discussion of the legal aspects involved in Father Ciccolini’s sentencing. The case did not seem to attract much media attention other than some local coverage in Ohio.
You can follow me on twitter @peterreillycpa.
Originally published on Forbes.com on July 26th, 2012