Waiting to serve what will likely be a long prison sentence and shunned by ex-friends, bankrupt investor Reed Slatkin had another punishment befall him recently when he learned that he has been excommunicated from the Church of Scientology.
Even before he agreed to plead guilty last week to 15 counts of fraud, money laundering and conspiracy, church officials held a hearing and decided to expel the former Hope Ranch resident.
Mr. Slatkin, who first turned to the teachings of Scientology founder L. Ron Hubbard as a 14-year-old in Detroit after his father's suicide, had abused his church connections, officials said.
Most of his early investors and well over half the 800 people he ended up attracting to his investment club were fellow Scientologists, according to bankruptcy court claims files. Indeed, the main reason many people turned over money to Mr. Slatkin was because they were also Scientologists, according to those claims.
"While the underlying issues in the Slatkin bankruptcy case are primarily economic, not religious, it would be difficult to imagine a more dominant force in the life of Slatkin than Scientology. It would be fair to say that Scientology permeated almost every aspect of his life," states the report by R. Todd Neilson, trustee of the Chapter 11 Bankruptcy Estate of Mr. Slatkin.
While the church benefited indirectly because Mr. Slatkin and many of his investors were generous donors, Mr. Neilson concluded that so far there is no evidence that the church was a large beneficiary. In addition, Scientologists were just as much victims in the scam as non-Scientologists, court records show.
After a formal church hearing process, Scientology officials decided to expel Mr. Slatkin, who has been a member since 1963, studied directly under Mr. Hubbard in England, and went on to rise in the church hierarchy before becoming a full-time investor in 1983.
Mr. Slatkin told Securities and Exchange investigators in 2000, the teachings of Scientology form the "basis of almost everything I've done in life."
According to church officials that was an overstatement.
"He misused his connections to the church tremendously," said Linda Simmons Hight, a spokesperson for the Church of Scientology International. "He overstated his connections. He hasn't ministered in the church since 1983 and he has abused his position since then."
There are more than 8 million Scientology members worldwide, according to church publications. Established in 1954, the church's doctrine, among other things, places a high regard on personal ethics, Ms. Simmons Hight said. Mr. Slatkin violated those basic teachings, she said.
As part of his plea agreement, Mr. Slatkin is taking responsibility for operating one of the largest Ponzi schemes in history, fleecing at least $254 million from more than 800 investors since 1986.
Raised in Michigan, Mr. Slatkin was introduced to the teachings of L. Ron Hubbard by an uncle. He had just faced the trauma of his own father's suicide and he and his family were in "pretty bad shape," Mr. Slatkin said in a 2000 deposition he gave to the SEC.
In a deposition he gave to the Securities and Exchange Commission two years ago, Mr. Slatkin said his religion helped him recover. Then, following an accident soon after his father's death in which he almost severed his finger in shop class, Mr. Slatkin again turned to his new religion.
"And almost miraculously, within a couple of days I had full use of my hand again. And it was a big moment for me. And at that point I said, 'Well, I don't know how this works but it works for me,' so I decided that I was going to find out about this."
His commitment to the church led him to study at Hubbard-led Scientology colleges in England and Scotland in 1966 and 1968.
In 1971, while studying Asian languages at UC Berkeley and volunteering at the church, he met his future wife, Mary Jo, a fellow Scientologist. They decided to quit school to pursue Scientology full time. They moved to Los Angeles, where both were ordained as ministers in 1975.
"And I went out on my own and began to disseminate, to proselytize Scientology to friends, family members of people I knew. Because I was, at that point, a very highly trained counselor," Mr. Slatkin told investigators with the SEC.
After the birth of their second son in 1983, the couple decided they needed more money and decided to move to Santa Barbara and learn about investing.
He put the same devotion into investing as he had into the church. When he started making money, he brought in fellow church members and neighbors, promising returns of up to 60 percent.
One of those early investors remembers Mr. Slatkin as focused but also very involved in the lives of his sons.
"Our sons were at Mountain View School together," the former friend and early investor said. "He was this very generous guy and one of his tenets was to give back. Made donations to UCSB athletics, to a private school. He was also really involved in the Boys and Girls Club. He coached baseball.
You know he was always the same guy."
His list of investors quickly grew from a dozen or so to scores and finally hundreds. Even after attracting hundreds of non-Scientologists to his club, Mr. Slatkin still saw his work as part of his religious philosophy.
When he promised the SEC in 2000 that he was closing his club and returning his investors' money, he added: "I have a strong feeling that several hundred people that are involved in this is a very small drop in the bucket compared to the people that I want to help relative to Scientology. And I'm very anxious to get going."