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					JULIE E. OELSNER, State Bar # 125432 (SPACE BELOW PROVIDED FOR FILING STAMP ONLY) LAW OFFICE OF JULIE E. OELSNER 901 F Street, Suite 210 Sacramento, CA 95814 Tel: (916) 441-4177 PHILIP H. STILLMAN, State Bar # 152861 SETH F. GORMAN, State Bar # 191893 FLYNN, SHERIDAN, TABB & STILLMAN P.O. Box 690 16903 Avenida de Acacias, Suite 5 Rancho Santa Fe, CA 92067 Tel: (619) 759-7000 Fax: (619) 756-1575

FORD GREENE, State Bar # 107601 HUB LAW OFFICES 711 Sir Francis Drake Boulevard San Anselmo, CA 94960 Tel: (415) 258-0360

Attorneys for Creditor, PLAINTIFF

UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA SACRAMENTO DIVISION

In re:

ANANDA CHURCH OF SELF-REALIZATION, a California religious corporation, 237366714, dba Crystal Clarity, Publishers fka Ananda Church of God Realization

14618 Tyler Foot Rd. # 146 Nevada City, CA 95959

Debtor in Possession

)))))))))))))))))) CASE NO.: 98-34244-B-11 MC NO.: JEO-1

CREDITOR PLAINTIFF'S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF HER MOTION TO DISMISS THE CHAPTER 11 BANKRUPTCY, OR IN THE ALTERNATIVE, TO CONVERT TO CHAPTER 7, APPOINT A BANKRUPTCY TRUSTEE AND RELEASE THE COPYRIGHTS FROM STAY

Date: December 16, 1998

Time: 1:30 p.m. Dept.: B

INTRODUCTION With arguments like "contribution" really means "loan" and that it is "irrelevant" whether members took tax deductions for their "loans" it is now apparent that Debtor Ananda Church of Self-Realization ("Ananda") bankruptcy is in bad faith and the admissions in its Opposition compel dismissal. Incredibly, in three oppositions (which effectively shows identity of interest between the debtor and the Creditors' Committee), the Housing Pool contributors have not produced a single contemporaneous document refuting the evidence that the housing pool contributions were donations. Specifically, on the face of the existing documents produced, the contributions are donations not debts. The Housing Pool document reads: "It is important to understand that a Housing Pool Contribution is a way of acknowledging and keeping track of donations made, but in no way is it an obligation on the part of ACGR or AV in the sense of repayment." Exhibit 33 [emphasis added]. If the court were to sanction such fraud, any tax exempt organization could file bankruptcy to defeat any judgment creditor by simply itemizing donations as debt and having its donor/members claim to be creditors. The shear absurdity of such a position mandates dismissal. As hereinafter outlined, sanctioning such absurdity turns the entire Internal Revenue Code upside down. 1. Ananda does not challenge that it is not bankrupt or that it is entirely a solvent debtor with no real need for reorganization. When the housing pool donations are excluded, as revealed in the bankruptcy filing, what remains is a nonprofit organization with at least $8.1 million in real estate, $1.8 million in personal property including $517,739 in the bank, and only $3 million in purported "creditors." This number includes $2 million of the supposed investors in Ananda's unregulated speculative investment income growth fund, apparently depleted by Ananda's "investments." See Schedules A, B, F-1. 2. Ananda admits in its opposition that at least $2.79 million of the housing claims were donations when made. See Opp. at 8; Schedule F-2, category B. Accordingly, by its own admission, a claim to $5.4 million as creditors in the housing pool is a sham. Moreover, for this court to authorize a plan of reorganization with the Housing Pool as creditors would be to sanction a violation of the tax laws pertaining to nonprofit organizations, a violation of the securities laws, perpetuate a fraud, sanction a violation of the statute of frauds, and a violation of the rule against perpetuities. The fact that Ananda and the housing pool claimants have failed to produce even one contemporaneous document revealing that "contribution" in the housing pool documents really meant "loans" manifests the falsity of the claims. 3. By enclosing the Agreement in effect transferring the copyrights from Swami J. Donald Walters to Ananda, signed only six court days after the mailing of the notice of entry of

judgment in PLAINTIFF v. Ananda and three weeks before filing for bankruptcy protection, Ananda effectively admits a fraudulent conveyance. See Notice of Entry of Judgment dated August 14, 1998, Exhibit 7; "Agreement" dated August 25, 1998, Declaration of John Smallen, Exhibit A. Moreover, the copyright registrations are conclusive of Walters' ownership of title to the copyrights. When Ananda completed the copyright registrations for Walters it could have checked the box work-for-hire or list itself as the author, but chose to register the copyrights in Walters' name. See Exhibit 39 [table of copyright registrations]; Exhibits 19 & 40. Ananda's attempt to portray itself as a victim from a series of "almost unbelievably vehement attacks by PLAINTIFF and her attorneys, Michael Flynn and Ford Greene" is an improper attempt to insult opposing counsel in violation of the rules of professional conduct. Moreover, Ananda is no victim; it is a multi-million dollar transnational tax-exempt corporation with $10 million in assets in Nevada City with a publishing subsidiary, a successful bookstore, and affiliates in Italy, Palo Alto, Sacramento, Portland, and Seattle, meditation groups around the world, and 17 subdivisions or entities comprising the Ananda Church. See Exhibit 41; p. 9, Exhibit 8. After Ananda's leaders sexually abused and defrauded Plaintiff, as found by the jury in PLAINTIFF v. Ananda, leaving her destitute, homeless and suicidal, Ananda instituted a lawsuit against her for defamation. Ananda then deluged Ford Greene, a sole practitioner, with mountains of paper on the defamation action, only to drop the defamation suit the day before trial. Thereafter, Walters contradicted his sworn testimony and admitted his sexual abuse of multiple parishioners on the witness stand. When Mr. Greene associated co-counsel, Ananda proceeded to break into their law-firm and steal attorney-client communications.(1) Ananda was also held liable for fraud, Exhibit 7, apparently paid all of its attorneys over $ 2 million, Exhibit 2 and seeks to hire about a half a dozen more to thwart payment of a $400,000 judgment creditor, and as will be shown below, has manufactured evidence to attempt to transform donations to loans, and insists on this Court interpreting terms like "contribution" to mean "loan" in the face of reason and in derogation of the tax code. Bad faith is evident and dismissal is warranted. ARGUMENT

I. BAD FAITH IS EVIDENCED BY LISTING THE HOUSING POOL DONATIONS AS CREDITORS

Bad faith is evidenced by the listing of the housing pool donations as creditors: (1) Ananda admits Category B were donations that Ananda later decided to classify as loans; (2) an interpretation that "contribution" in the housing pool agreements really means "loan" is incredulous; (3) Ananda has produced no contemporaneous evidence contradicting the express terms of the housing pool agreements and Parol evidence would not be admissible to contradict the express and unmistakable terms of the agreement; (4) Ananda's decision to characterize the contributions as loans which are (a) unenforceable for want of consideration, (b) a fraudulent transfer, and (c) illegal and against public policy as a violation of the Internal Revenue Code and the tax exempt status of Ananda. These are but a few of the badges of fraud, or at a minimum bad faith, that compels dismissal of this bankruptcy. Ananda's admission on page 10 of its

Opposition that the taking of tax deductions by the housing pool contributors is "irrelevant" manifests an attempt to perpetrate a fraud on this court, or at a minimum, bad faith A. The Opposition Reveals that at least $2.79 Million of the Claimants Donated the Money and Thus Cannot Be Loans or Creditors for Category B(2)

The Opposition reveals that "[f]rom approximately 1986 to 1995, if a member took life vows in the Ananda Monastic Order that member donated their housing pool contribution to Ananda, i.e., Ananda would provide them with a residence, but these persons were not entitled to any reimbursement of this contribution." Opp. at 8:14-17 [emphasis added]. Nevertheless, Ananda has listed these life member donors as creditors in Category B of Schedule F-1 for $2.79 million. The mere classification of donors as creditors reveals bad faith to now claim--$2.79 million. But the circumstances in which these transforming donors became known as creditors seals any lingering doubts: Mr. Peters, Ananda's treasurer revealed that he doubled the liabilities by approximately $2.5 million without even contacting the housing pool donors, which is apparently paroted in the bankruptcy filings. O.B. at 12-13; 2/9/98 RT 54:2-13; 24:9-13; 28:13-22; 29:1021; 32:1-33:29; 44:8-14; 54:2-10, Exhibit 16; 2/10/98 RT 5:5-26; 53:22-26, Exhibit 17. Ananda explains the manipulation of its books: "It was not known if Ananda would continue in light of these allegations. Ananda was required to produce pro forma financial statements on extremely short notice." Opp. at 9:20-22. This is rebutted by the documentary evidence that for the two months prior to Mr. Perters' testimony on the housing pool, Ananda went around getting signatures on housing pool documents from the day that Walters began his testimony on the witness stand, December 2, 1997 through February 10, 1998, see Exhibit 35 [housing pool documents]; Exhibit 3 [testimony of Walters] before Peters' testimony on February 25. See Exhibit 4. Apart from Ananda's admission that they were donations not loans when made, the life vows further establishes their invalidity. SeeExhibit 13. Even if this Court were to assume that "contribution" really means "loan", or that an entity can transform donations to liabilities at its whim, it still does not explain how any of this creates a general obligation on the funds of Ananda given that the documents expressly state that they create no obligation on the general funds of Ananda. Ananda's attempt at post hoc retroactive transformations of donations to loans, reeks of bad faith-it they were made as donations how do they become debts? Since this $2.79 million in Category B are admitted donations, one might ask what are they doing on the schedules? B. The Housing Pool Contracts Reveal That They Were Donations and Not Loans

The Opposition attempts to argue that the "qualms that THE PLAINTIFF'S GROUP cites as grounds for dismissal of the filing stem mostly from its unwillingness to understand and appreciate the distinctions between the several categories spelled out above." Opp. at p. 9. However, reference to the Oppositions' parol evidence is unnecessary and entirely improper. For one, as described above Ananda admits that Category B for $2,790,098.94 were donations when made. Opp. at p. 8. Second, on the face of the housing pool Agreements for Category C for $2,202,809.00 and Category D for $100,672.00, the donative intent that it is express: In two places it declares signed by the donor and acknowledged by the donee that the money given is a

contribution, and the Agreement in no mistakable terms, that the contribution "does not create a general debt or obligation on the part of Ananda Church of Self-Realization or any of its affiliated persons or entities." To attempt to contradict the express and unmistakable terms of the contract by parol is impermissible. Alling v. Universal Manuf. Corp., 5 Cal.App.4th 1412, 1436, 7 Cal. Rptr.2d 718 (1992) ["the parol evidence rule barred the admission of the business plan either to supplement the express terms of the [contract], or to vary of define any provision of that contract"]. For example, Caroline Gardiner is listed as a category C claimant for $83,000.00. See Schedule F-2, line116 as an "others with HPC" for $2.2 million. The Agreement that Ananda produced to PLAINTIFF reveals that it was a contribution and not a loan. See Exhibit 37. The Agreement reads: I understand that if this contribution is to be refunded, it will be paid from the 'Cash Out Pool' of the Housing Pool Fund only, and does not create a general debt or obligation on the part of Ananda Church of Self-Realization or any of its affilitated persons or entities. I understand that this Agreement is binding on my heirs, assigns and successors. [] In light of the above, I voluntarily contribute the sum of $35,000 to the Housing Pool Fund, the receipt of which is acknowledged below by a representative of the Housing Ministry.

(Exhibit 37). The Agreement reveals in two places that it is a contribution with no general debt or obligation on the part of Ananda. Both parties consented to that arrangement and understanding. Nowhere in the Agreement is their any revelation that this was not a contribution but a loan. The conditional language "if this contribution is refunded" reveals that there is no binding and controlling liability on Ananda. Likewise, the Housing Pool agreement of Category C claimants Nancy Sexton, see Schedule F-2, line 132, and Catherine Steenstra, see Schedule F2, line 134, reveal identical language clearly expressing mutual donative intent. See Exhibit 37. Accordingly, category C donors for $2,202,809.00 do not belong in the bankruptcy as a loan creditors and the listing of these category C donations as creditors exposes the fraud and this bad faith filing.(3) C. By the Very Terms of the Housing Pool Agreements, There is No Claim on the General Fund and Ananda's Acts Contrary to the Contracts Exposes Its Bad Faith Filing

Those contributions to the housing pool that are not admitted donations, i.e. categories C-E for $2.6 million, expressly agreed when they signed the housing pool agreements that "if there contribution is to be refunded, it will be paid from the 'Cash Out Pool' of the Housing Pool Fund only, and does not create a general debt or obligation on the part of Ananda Church of SelfRealization of any of its affiliated persons or entities." SeeExhibit 37. Thus, by the very terms of the purported agreement, Ananda's listing of Housing Pool contributions as obligations of the general fund exposes the fraud. D. Any Donations Termed Liabilities Are Unenforceable

In order for a contract including a loan to be enforceable, it must have an offer and acceptance, consideration, sufficient particularity in its terms, must not have an illegal purpose or be against public policy, if it creates an interest in land must be in writing, and the contract must be able to be performed within the period of the rule against perpetuities. On all elements, the purported "loan" fails. Ananda has not rebutted that the loans are unenforceable, and the conglomeration of these facts further demonstrates that this bankruptcy is interposed in bad faith to frustrate one creditor-PLAINTIFF. 1. The Purported "Loan" Is Unenforceable As Illegal and Against Public Policy As It Violates the Internal Revenue Code for Tax Exempt Organizations

Bad faith is evident by Ananda's attempt to have this Court authorize "transactions" which would violate the law, are contrary to Ananda's tax exempt status, are contrary to the clear and unmistakable language of the documents, and Ananda has produced no contemporaneous evidence that "contribution" really means "loan." Additionally, any oral loans creating interests in land would violate the statute of frauds, and without a clear repayment period violate the rule against perpetuities and fail to form a contract with its essential terms. But interpreting "contribution" as "loan" defies the rule of reason. Additionally, it would not be a reasonable interpretation to assume that Ananda has been defrauding the IRS since 1968 and that the Board of Directors, acting in good faith with their fiduciary duties the company and conducting due diligence, authorized decades of tax-exempt jeopardizing transactions. (a) Violative of the Organizational Requirements for Nonprofit Organizations Ananda derives the benefits of being a tax-exempt religious corporation under IRC 501(a): exemption from most taxes, IRC 501(a), deductibility of contributions, IRC 170(c), reduced postal rates, 39 U.S.C. 4355(a), and exemptions from securities laws so long as there is no fraud or private inurement, 15 U.S.C. 77c-3(a)(4) [Securities Act of 1933], 15 U.S.C. 781-12(g)(2)(D) [Securities Exchange Act of 1934]; 15 U.S.C. 80b-3(c)(10) [Investment Company Act of 1940]. Yet, in order to maintain the tax-exempt status, the charitable entity must be organized for exempt purposes, and the "organization's resources must be devoted to purposes that qualify as exclusively charitable within the meaning of section 501(c)(3) of the Code and the applicable regulations." Rev Rul. 72-369, 1972-2 C.B. 245, Rev. Rul. 69-279, 1969-1 C. B. 152, Rev. Rul. 69-256, 1969-1 C.B. 151. An organization is not considered as operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. Reg. 1.501(c)(3)-1(c)(2), 1.501(a)-1(c); Athenagoras I Christian Union of the World, Inc. v. Comm'r, 55 T.C.M. 781 (1988). Here, Ananda's attempt to return $5.4 million in donations as newly characterized loans manifests a wholesale inurement of more than half of the assets of Ananda-in effect a dissolution of the corporation-to the benefit of its membership. For this Court to recognize the Housing Pool Donations as after-the-fact loans is to sanction a fraud on the IRS. Equity should not come to assist Ananda. (b) Violative of the Private Inurement Prohibitions

The private inurement prohibition "serves to prevent anyone in a position to do so from siphoning off any of a charity's income or assets for personal use." Gen. Couns. Mem. 39862; see also Gen. Couns. Mem. 38459. The purpose of the private inurement rule is to ensure that the tax-exempt organization involved in serving exempt interest and not private interests. The doctrine requires that there transactions be tested against a standard of reasonableness: that is, financially advantageous to the organization, and commensurate with the organization's purposes. Griswold v. Comm'r, 39 T.C. 620 (1962). Intepreting these housing pool donations as loans would be unreasonable. It cannot be assumed that Ananda's Board of Directors' would have made the decision that incurring $5.4 million in debt for an organization worth $10 million would be "financially advantageous to the organization". Factors to be considered when assessing reasonableness are the duration of the indebtedness, the rate of interest, the security, the repayment amount-all in relation to similar circumstances in the community. Here, as there are now contemporaneous documents defining these as "loans" because they are not loans, this Court is lead to a task of absurdity in trying to interpret documents which do not exist, because there was no "loan". Moreover, interpretation of the donations as $5.4 million in liabilities is not "commensurate with the organization's [charitable] purposes". Maynard Hosp., Inc. v. Comm'r, 52 T.C. 1006, 1031 (1969) ["It is doubtful, too, whether an organization's operation can be 'exclusively' for charitable purposes . . . when its income is being accumulated to increase directly the value of the interests of the stockholders which they expect, eventually, to receive beneficially"]; Rev. Rul. 66-259, 1966-2 C.B. 214 [net assets on dissolution must pass for charitable or public, governmental purposes]. An insightful discussion of a similar situation appears in the footnote.(4) The reason why these donations were not listed on the balance sheets as liabilities prior to the PLAINTIFF lawsuit is that they were donations not loans.(5) 2. The Purported "Loan" Is Unenforceable As it is a Fraudulent Conveyance Fraudulent conveyance law in California courts further reveals that the claim of donations as loan is in bad faith as a fraudulent conveyance. Cal. Civil Code, 3518 ["He who has fraudulently dispossessed himself of a thing may be treated as it he still had possession.]. Multiple badges of a fraudulent conveyance, or at a minimum, bad faith, are evident. First, a lack of or inadequate consideration for the transfer may indicate a fraud. Neumeyer v. Crown Funding Corp., 56 Cal.App.3d 178, 184, 128 Cal.Rptr. 366 (1976). Proof of consideration in Ananda's purported creation of new indebtedness is absolutely necessary. As is explained in Cioli v. Kenourgios, 59 Cal.App. 690, 211 P. 838 (1922), "'whereever this confidential relation is shown to exist, the parties are held to a fuller and stricter proof of the consideration, and of the fairness of the transaction.'" Id. at 696-97. Here there is no consideration, as past consideration is not consideration. Second, a confidential relationship between the transferor and transferee may indicate fraud. Wood v. Kaplan, 178 Cal.App.2d 227, 230-31, 2 Cal. Rptr. 917 (1960). Here, Ananda members devoted their loyalty to Walters and Ananda in a signed vow of obedience. SeeExhibit 12. Ananda provided counselling to the members. See Depo Walters (Sept. 6, 1995) 144:10-11 ["And she came to you for counseling?" "Yes"], Exhibit 45; Depo Walters (Sept. 6, 1995) 162:15-23 ["As the senior spiritual director of Ananda, you were counseling both of these people during that month. Is that correct? Yes."], Exhibit 45. Likewise, there was a relationship as landlord or property Manager, and teacher-student. See Depo. Walters, 860:22-862:6, Exhibit 45. Third, the transfer of most or all of a debtor's nonexempt property may indicate fraud. Here, the record reveals that Ananda purports to transfer as "loans", $5,410,091 of donations by the

membership, see Schedule F-2--more than one half of its assets. Fourth, disposition or transferring property in anticipation of a pending lawsuit may indicate fraud. See Cioli v. Kenourgios, 59 Cal.App. 690, 696 , 211 P. 838 (1922). Here, the record reveals that Mr. Peters, Ananda's treasurer changed the status of the donations to loans overnight without even contacting the donors during the PLAINTIFF trial. See O.B. pp. 12-13; 2/9/98 RT 54:2-13; 24:913, 28:13-22; 29:10-21; 32-1-33:29l 44:8-14; 54:2-10, Exhibit 16; 2/10/98 RT 5:5-26, 53:22-26, Exhibit 17. Fifth, other states in the Ninth Circuit recognize additional badges of fraud: secret conveyance of property or, transferee takes property in trust for debtor. Sherry v. Ross, 846 F. Supp. 1424, 1429 (D. Haw. 1994). Here, Mr. Peters' secret transformation of the donations to loans overnight without contacting the donors additionally manifests the fraud. In order to establish constructive intent to defraud the court need not find all of the above badges. Heath v. Helmick, 173 F.2d 157, 161 (9th Cir. 1949). Rather, the combination of several badges creates a presumption of fraudulent intent. Id. Fraud, or at a minimum, bad faith is disclosed. 3. The Purported "Loan" Is Unenforceable as Ananda Received No Consideration Contracts must be supported by consideration. Cal. Civ. Code, 1550(4). Consideration can be either a benefit conferred or a detriment suffered. Cal. Civ. Code, 1605. Here, there is no new consideration in return for Ananda purportedly incurred additional debt. Consideration must be "good" or "valuable." Civ. Code, 1605; Aden v. Vallejo (1903) 139 Cal. 165, 168. Past consideration is insufficient and cannot be consideration for a new promise. Lagomarsino v. Giannini (1905) 146 Cal. 545, 546. Here, the money was donated as revealed above. Accordingly, there is no consideration for Ananda incurring the liability. 4. The Purported "Loan" Is Unenforceable as Any Terms Are Not Stated With Sufficient Particularity to Evidence a Loan

The purported loan is unenforceable as the terms are not stated with sufficient particularity. Not one of the three oppositions has produced any evidence substantiating the claim that the contributions were in fact "loans." The housing pool documents and purported promissory notes, Exhibits 33, 35, 37, do not reveal an interest rate of the loans, do not reveal the existence of a repayment period. Accordingly, these vital terms of the "loan" are missing and reveals an enforceable or the non-existence of a loan. 5. No Offer and Acceptance As described above, Mr. Peters created the purported liabilities without ever contacting the membership. Moreover, Ananda has not produced contemporaneous evidence that each member offered to loan money to Ananda for a specified period of time and for a specified rate of return. In fact, Ananda has produced no contemporaneous evidence to rebut the donative intent. SeeExhibit 37. 6. The "Loan" Violates The Rule Against Perpetuities and Statute of Frauds.

There is no definitive repayment period and no clause which ensures that it can be performed with the period of the rule against perpetuities. Accordingly, it is void. Moreover, any oral agreement to create a loan or a mortgage on the real estate violates the statute of frauds as it would create an interest in land. Promissory estoppel is of no aid when as the evidence demonstrates, there was no inequitable conduct-the documents demonstrate the housing pool contribution documents express the intent of the parties. As the document states the express intent of the parties in no mistakable terms: "It is important to understand that a Housing Pool Contribution is a way of acknowledging and keeping track of donations made, but in no way is it an obligation on the part of ACGR or AV in the sense of repayment." Exhibit 33 [emphasis added]. Moreover, by their own admissions, the most they would be if not donations are contingent creditors and equitable estoppel does not apply to defeat the written expression of the intent of the parties. II. BAD FAITH IS EVIDENCED BY LISTING WALTERS' COPYRIGHTS AS ASSETS

The argument advanced by debtor and others that property cannot be lifted from the stay pursuant to motion was affirmatively rejected by the Ninth Circuit Bankruptcy Appellate Panel in 1996. See In re Duvar Apt., Inc. v. Federal Deposit Ins. Corp., 205 B.R. 196 (9th Cir. BAP 1996). What has occurred here is a variation on the "new debtor syndrome" A creditor can establish a prima facie case of bad faith and cause for granting relief from the stay pursuant to 362(d) "by showing the transfer of distressed property to the debtor within close proximity to the bankruptcy filing." Id. at 200. Once the prima facie case is established, the burden shifts to the debtor to demonstrate a good faith business reason for the transfer and the filing. In re Eighty South Lake, Inc., 63 B.R. 501, 508 (Bankr. C.D. Cal. 1986), aff'd, 81 B.R. 580 (9th Cir. BAP 1987). Creditor PLAINTIFF has met its prima facie case. Debtor has purportedly "transferred" the distressed property of the copyrights to debtor within close proximity to the bankruptcy filing. In re Duvar, 205 B.R. at 200. Just 6 court days after the Court sent by U.S. Mail the "Notice of Entry of Judgment" on a $1.285 million verdict against J. Donald Walters, and three weeks before the voluminous bankruptcy papers were filed, Ananda attempted to transfer Walters' copyrights to the debtor by a purported "Agreement" dated August 25, 1998. See Exhibit A to the Smallen Declaration; "Notice of Entry of Judgment," Exhibit 7. The copyrights are "distressed property", as Ananda and Walters asserted his net worth [without the copyrights] totaled $8,900.00. See Defendants' Points and Authorities in Support of Motion for New Trial, p. 16, Exhibit 9. Other evidence of bad faith in claiming the copyrights to be assets of the debtor establishes "cause" for relief from the stay for copyrights. For example, Ananda claims that all the copyrights listed in the schedules were created as "works-for-hire" for Ananda. Opp. at 12. Yet, Ananda asserts its inception was in 1968, Opp. 7; Smallen Decl., 5, even though 21 copyright registrations reveal registration in Walters' name prior to 1968.(6) One of the copyright registrations even contains the language inserted by Walters: "*solely owned by J. Donald Walters" See Songs for the Seeker, reg. appl. rcd. 1/5/68, Exhibit 19. Moreover, bad faith and cause for relief from the stay is established by Walters certification under penalty of fine some 73 times over 30 years to three distinct questions on the copyright certifications: (1) the works were not created as works for hire; (2) he was the author and not Ananda; and (3) Ananda is not

a copyright claimant.(7) Ananda's claim that this was mere inadvertence is incredulous considering the volume and duration. Moreover, a claim that the certification that the above works were not "works for hire" was "ignorance of the law" is also defeated on the face of the registrations as Ananda demonstrated that it knew how to register the works as "works for hire."(8) Most damning, Ananda registered multiple works in Walters' while registering other works as "works for hire."(9) However it is not solely Walters who swore that Ananda was neither the copyright claimant nor the author, and that the works were not created as "works for hire." Multiple authorized persons from Ananda Publications and Crystal Clarity Publishers, wholly owned subsidiaries of debtor contacted the Copyright Office to make corrections to the registrations, but did not make an obvious change, if the fact were true, that (1) Ananda was a copyright claimant; (2) Ananda was an author; or (3) the works were created as works for hire.(10) Accordingly, the bad faith is manifest, and 30 years of sworn testimony contradict the document attached to Smallen's declaration, manufactured on August 25, 1998-just 11 days [6 working days] after the Court sent by U.S. Mail, the "Notice of Entry of Judgment" and three weeks before the voluminous bankruptcy papers were filed. See Decl. Smallen, Exhibit A; "Notice of Entry of Judgment," Exhibit 7. Accordingly, "cause" exists for relief from the stay for the copyrights. In re Duvar, 205 B.R. 19; see also In re Sunbow, LLC v. ACI Sunbow, LLC, 206 B.R. 213 (Bankr. S.D. Cal. 1997). On the face of the registrations, Walters has legal and equitable title to the copyrights. SeeExhibits 19, 40. Ananda has not filed an action on behalf of the estate for declaratory relief or for this court to impose a constructive trust on the property titled in Walters. In re Tinnell Traffic Services, Inc., 41 B.R. 1018, 1021 (Bankr. M.D.Tenn. 1984) (without a judicial decree imposing a constructive trust on the property in question, said property remains property of the titleholder); see also In re Anderson, 30 B.R. 995, 1014 (D.C. M.D.Tenn. 1983). Accordingly, cause has been established for relief from stay. Moreover the issue of copyright ownership has already been litigated, and is subject to both the doctrines of res judicata and collateral estoppel and res judicata.(11) The central issue in the determination of a new trial on punitive damages was the net worth of Walters. Ananda and Walters asserted that Walters' net worth was $8,900.00, and did not comprise the copyrights. Creditor PLAINTIFF asserted that his net worth was well over a million dollars with the copyrights as assets. SeeExhibits 9-11. The Court considered the evidence and argument of counsel, including the testimony of Walters that he owned the copyrights and the testimony of Ananda that it owned the copyrights as works for hire. Opening Brief ("O.B."), p. 8; 12/2/97 RT 131:11-12, Exhibit 3; 12/3/97 RT 160:24-161:8, 162:9-164:21, 165:1-166:21, 167:13-168:1, 169:2-9, 171:1-8, Exhibit 14. The Court determined the net worth of Walters to include the copyrights and decided to reduce the punitive damage award against Walters on his determination of Walters' net worth included the copyrights-i.e. that it was not just the $8,900,00 of other personal property as asserted by Walters and Ananda. See Exhibits 9-11. This determination of copyright ownership was essential to the determination of net worth, punitive damages, and a new trial, and was extensively litigated with equivalent burdens of proof. Likewise, there were the same parties and it reached a final conclusion. Res judicata bars relitigation of this matter.

Additionally, it cannot be presumed that Ananda and its Board of Directors extensively violated the tax code committing private inurement and jeopardizing the tax-exempt status of Ananda,(12) and acted ultra vires in contravention to the bylaws,(13) especially when contemporaneous evidence suggests otherwise. Ananda's interpretation of conduct to violate the tax laws for 30 years would not be a reasonable interpretation. Additionally, such an interpretation would impermissibly allow Ananda to take advantage of its own wrongs.(14) In any case, it is utterly ridiculous to argue that Walters, who was the founder, spiritual director, president, and the individual who all had to take a vow of loyalty was an employee.(15) As Ananda describes in its brief to the 9th Circuit: "all the evidence in the record demonstrates that Yogananda was in complete control of his own writings. He was indisputably the founder and spiritual leader of SRF. It is Yogananda not SRF-who determined what to write about, what to say on those topics, and how to say it. There is absolutely no record support for the absurd notion that SRF could tell Yogananda to create some specific work or either to put something in or take something out of his writings. [] The absence of such control is incompatible as a matter of law with a work for hire." Appellee's Brief, p. 20, Exhibit 34. Ananda has shown no reason to question the validity of its arguments to the Ninth Circuit. Bad faith is manifest. CONCLUSION Accordingly, based upon the foregoing authority, creditor Plaintiff respectfully requests this Court DISMISS this bankruptcy filing for good cause shown. In the alternative, creditor Plaintiff respectfully requests this Court convert the bankruptcy to a Chapter 7, appoint a trustee, and release of the copyrights from the stay. DATED: December 14, 1998 Respectfully Submitted, LAW OFFICE OF JULIE E. OELSNER

By: _____________________________ JULIE E. OELSNER Attorney for Creditor, Plaintiff TABLE OF CONTENTS INTRODUCTION 1 ARGUMENT 3 I. BAD FAITH IS EVIDENCED BY LISTING THE HOUSING POOL DONATIONS AS CREDITORS 3

A. The Opposition Reveals that at least $2.79 Million of the Claimants Donated the Money and Thus Cannot Be Loans or Creditors for Category B 3 B. The Housing Pool Contracts Reveal That They Were Donations Not Loans 4 C. By the Very Terms of the Housing Pool Agreements, There is No Claim on the General Fund and Ananda's Acts Contrary to the Contracts Exposes Its Bad Faith Filing 5 D. Any Donations Termed Liabilities Are Unenforceable 5 1. The Purported "Loan" Is Unenforceable As Illegal and Against Public Policy As It Violates the Internal Revenue Code for Tax Exempt Organizations 6 (a) Violative of the Organizational Requirements for Nonprofit Organizations 6 (b) Violative of the Private Inurement Prohibitions 7 2. The Purported "Loan" Is Unenforceable As it is a Fraudulent Conveyance 8 3. The Purported "Loan" Is Unenforceable as Ananda Received No Consideration 9 4. The Purported "Loan" Is Unenforceable as Any Terms Are Not Stated With Sufficient Particularity to Evidence a Loan 9 5. No Offer and Acceptance 9 6. The "Loan" Violates The Rule Against Perpetuities and Statute of Frauds. 10

II. BAD FAITH IS EVIDENCED BY LISTING WALTERS' COPYRIGHTS AS ASSETS 10

CONCLUSION 15

TABLE OF AUTHORITIES

Cases

Aden v. Vallejo (1903) 139 Cal. 165 9

Alling v. Universal Manuf. Corp., 5 Cal.App.4th 1412, 7 Cal. Rptr.2d 718 (1992) 4

Athenagoras I Christian Union of the World, Inc. v. Comm'r, 55 T.C.M. 781 (1988) 7 Bugna v. McArthur, 33 F.3d 1054 (9th Cir. 1994) 14 Church of Scientology of Calif. v. Comm'r, 83 T.C. 381, aff'd, 823 F.2d 1210 (9th Cir. 1987) 14

Cioli v. Kenourgios, 59 Cal.App. 690, 211 P. 838 (1922) 8, 9 Estate of Grace M. Scharf. et al., 38 T.C. 15 (1962), aff'd 316 F.2d 625 (7th Cir. 1963) 8

Flynn v. Superior Court of San Diego County, 57 Cal.App.4th 990 (1997) 2

Founding Church of Scientology v. United States, 412 F.2d 1197 (Ct. Cl. 1969), cert. den., 397 U.S. 1009 (1970) 14

Griswold v. Comm'r, 39 T.C. 620 (1962) 7 Heath v. Helmick, 173 F.2d 157 (9th Cir. 1949) 9

In re Anderson, 30 B.R. 995 (D.C. M.D.Tenn. 1983) 13

In re Barigian, 72 B.R. 407 (Bankr. C.D. Cal. 1987) 14 In re Duvar Apt., Inc. v. Federal Deposit Ins. Corp., 205 B.R. 196 (9th Cir. BAP 1996) 10, 13

In re Eighty South Lake, Inc., 63 B.R. 501 (Bankr. C.D. Cal. 1986), aff'd, 81 B.R. 580 (9th Cir. BAP 1987) 10

In re Tinnell Traffic Services, Inc., 41 B.R. 1018 (Bankr. M.D.Tenn. 1984) 13

Lagomarsino v. Giannini (1905) 146 Cal. 545 9

Maynard Hosp., Inc. v. Comm'r, 52 T.C. 1006 (1969) 7, 14

Neumeyer v. Crown Funding Corp., 56 Cal.App.3d 178, 128 Cal.Rptr. 366 (1976) 8

Parshall Christian Order v. Comm'r, 45 T.C.M. 488 (1983) 14

People of God Community v. Comm'r, 75 T.C. 127 (1980) 14

Wood v. Kaplan, 178 Cal.App.2d 227, 2 Cal. Rptr. 917 (1960) 8

Codes, Statutes, Rulings, Memoranda

15 U.S.C. 77c-3(a)(4) 6

15 U.S.C. 781-12(g)(2)(D) 6

15 U.S.C. 80b-3(c)(10) 6

39 U.S.C. 4355(a) 6

Cal. Civ. Code, 1550(4) 9

Cal. Civ. Code, 1605 9

IRC 501(a) 6

Reg. 1.501(c)(3)-1(c)(2), 1.501(a)-1(c) 7

Rev Rul. 72-369, 1972-2 C.B. 245 6

Rev. Rul. 66-259, 1966-2 C.B. 214 7

Rev. Rul. 69-256, 1969-1 C.B. 151 6

Rev. Rul. 69-279, 1969-1 C. B. 152 6

Gen. Couns. Mem. 38459 7

Gen. Couns. Mem. 39862 7

JULIE E. OELSNER, State Bar # 125432 (SPACE BELOW PROVIDED FOR FILING STAMP ONLY) LAW OFFICE OF JULIE E. OELSNER 901 F Street, Suite 210 Sacramento, CA 95814 Tel: (916) 441-4177 PHILIP H. STILLMAN, State Bar # 152861 SETH F. GORMAN, State Bar # 191893 FLYNN, SHERIDAN, TABB & STILLMAN P.O. Box 690 16903 Avenida de Acacias, Suite 5 Rancho Santa Fe, CA 92067 Tel: (619) 759-7000 Fax: (619) 756-1575

FORD GREENE, State Bar # 107601 HUB LAW OFFICES 711 Sir Francis Drake Boulevard San Anselmo, CA 94960 Tel: (415) 258-0360

Attorneys for Creditor, PLAINTIFF

UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF CALIFORNIA SACRAMENTO DIVISION

In re:

ANANDA CHURCH OF SELF-REALIZATION, a California religious corporation, 237366714, dba Crystal Clarity, Publishers fka Ananda Church of God Realization

14618 Tyler Foot Rd. # 146 Nevada City, CA 95959

Debtor in Possession.

))))))))))))))))))))

CASE NO.: 98-34244-B-11 MC NO.: JEO-1

SUPPLEMENTAL DECLARTION OF SETH F. GORMAN IN SUPPORT OF CREDITOR PLAINTIFF'S MOTION TO DISMISS THE CHAPTER 11 BANKRUPTCY, OR IN THE ALTERNATIVE, TO CONVERT TO CHAPTER 7, APPOINT A BANKRUPTCY TRUSTEE AND RELEASE THE COPYRIGHTS FROM STAY

EXHIBITS NOS. 39-45

Date: December 16, 1998 Time: 1:30 p.m. Dept.: B

I, Seth F. Gorman, hereby declare: 1. I am a member of the law firm of Flynn, Sheridan, Tabb & Stillman, attorneys for Plaintiff in PLAINTIFF v. Ananda, San Mateo Case No. 390230; attorneys for FLYNN, SHERIDAN, TABB & STILLMAN and PHILIP STILLMAN in Flynn et al. v. Bolling et al., Nevada County Case No. Pending (San Diego Case No. 712980); and attorneys for PLAINTIFF in Plaintiff v. Walters et al., Nevada County Case No. 60539. The following is declared of my personal knowledge, unless stated on information and belief, from my involvement in the above actions and review of the files kept in the ordinary course of business at Flynn, Sheridan, Tabb & Stillman of which I am familiar. 2. Attached as Exhibit 39 is a true and correct copy of a chart of the copyrights. 3. Attached as Exhibit 40 are true and correct copies of additional copyright registrations of J. Donald Walters. 4. Attached as Exhibit 41 is a true and correct copy of an article posted on the web-site of Ananda of December 11, 1998. 5 Attached as Exhibit 42 is a true and correct copy of Flynn v. Superior Court of San Diego County, 57 Cal.App.4th 990 (1997).

6. Attached as Exhibit 43 is a true and correct copy of pages 12, 15, 20, 27-28, 36-37 of the deposition of William Divita of October 17, 1997. 7. Attached as Exhibit 44 is a true and correct copy of an article posted on the web-site of Ananda of December 11, 1998. 8. Attached as Exhibit 45 is a true and correct copy of pages 144, 162, 860-862 of the deposition of J. Donald Walters dated September 6, 1995 and September 21, 1995. Declared under penalty of perjury under the laws of the United States this 13th day of December, 1998 in Rancho Santa Fe, California.

___________________________ Seth Gorman 1. Michael Flynn, a partner in FST&S caught an individual trespassing and stealing documents from the law firm. The identity of the entity behind the theft of the documents was deliberately concealed for over two years because all the witnesses refused to answer who paid for or authorized the theft. The facts of one of their novel assertions of a private investigator privilege is reported at Flynn v. Superior Court of San Diego County, 57 Cal.App.4th 990 (1997), Exhibit 42. The bankruptcy papers now reveal that Ananda was using its tax-exempt funds to pay for the three sets of lawyers to conceal the identification of Ananda: the law firms of Bacalski, Byrne & Koska, Dicks & Dunning LLP, and Pasco & Hays LLP attorneys for the thief and the hierarchy of private investigators. Private investigator Bill Divita, whose attorneys fees were paid by Ananda, testified that the in-house counsel for Ananda, Sheila Rush hired him to steal the law firm documents. 10/17/97 Divita Depo 12, 15, 20, 36-37, Exhibit 43. The stolen documents were handed to the secretary or person who signed Ananda lawyer Jon Parsons' proofs of service. Id. at 27-28, Exhibit 43. This attorney, Jon Parsons, seeks to be appointed special counsel for Ananda. See Motion to Appoint Special Counsel. The Hon. Judge Stevens, presiding judge in PLAINTIFF v. Ananda, Case No. 390230 ordered the production of the stolen documents to FST&S, and some of the stolen attorney-client communications were produced. 2. The Opening Brief describes the example of Caroline Gardiner listed as a category B contributor and extensively discusses the badges of bad faith and fraud. See O.B. pp. 12-15. 3. Category D: "Former Members in Cash Out Pool" also reveals bad faith in this bankruptcy. Shirley Ward is listed as a category D claimant for $34,417.00 as a "former member in the cash out pool". See Schedule F-2, line 146. The Agreement that Ananda produced for Ms. Wart to PLAINTIFF reveals that it was a contribution and not a loan. See Exhibit 37. The pertinent language is identical to the category C and accordingly reveals in no unclear terms, it was a contribution and does not create a general obligation on the assets of Ananda. Accordingly, listing the category D contributions for $100,672.00 exposes the fraud and this bad faith filing.

4. "Memberships" were sold for the apparent purpose of obtaining ownership of the property of the charitable nonprofit corporation. The court held that the sale of interests in property could not entitle the members to a beneficial interest in the capital or earnings of the charitable organization beacuse the law of state prohibited the corporation from paying any part of its income to members and required transfer of the assets upon dissolution to charitable purposes." The Court commented, "We have before us a cynical transaction of highly doubtful morality. It is difficult to believe that the Illinois laws providing for the creation of the charitable organization here involved were ever intended to generate property interests in the hands of these petitioners which could be the subject of traffic for gain. The privilege of serving the charitable institution embodied in the so-called certificates of membership was not a property right ..." Estate of Grace M. Scharf. et al., 38 T.C. 15, 33 (1962), aff'd 316 F.2d 625 (7th Cir. 1963) (conc. Raum). The court also held that the money transferred to the nonprofit for equity ownership would be "impressed with a trust requiring that it be used for the charitable purposes for which [it] was organized or distributed to a charitable use similar to that for which [it] was organized." Id.. at 31. 5. To interpret "contribution" as "loan" would also violate the bylaws. It would not be a reasonable interpretation that Ananda's Board of Directors would act ultra vires to violate the bylaws of the corporation. The bylaws also states: "No member, director, officer, or employee of or member of a committee of or person connected with the corporation, or any other private individual shall receive at any time any of the net earnings or pecuniary profit from the operations of the corporation, provided, that this shall not prevent the payment to any such person of such reasonable compensation for services rendered to or for the corporation in affecting any of its purposes as shall be fixed by the board of directors; and no such person or persons shall be entitled to share in the distribution of any of the corporate assets upon the dissolution of the corporation." Bylaws, Art. X, Exhibit 22. Ananda's conduct in attempting to distribute the assets of the corporation to the membership, directors, violates this clause, especially considering Ananda's new claim that $5.4 million of the donations are now loans. 6. What is God? What is Love?, Eu 856086, reg. appl. rcd. 12/4/64; More Boxes? No Thank You, Lord, Eu 856085, reg. appl. rcd. 12/4/64; Go On Alone, EU 856087, reg. appl. rcd. 12/4/64; Morning Song, Eu 856661, reg. appl. rcd. 12/7/64; Whose Child Am I?, Eu 856656, reg. appl. rcd. 12/7/64; Whose Gift Is Happiness?, Eu 856657, reg. appl. rcd. 12/7/64; The Shawl of Gold, Eu 856658, reg. appl. rcd. 12/7/64; Ripples Bring Memories, Eu 856659, reg. appl. rcd. 12/7/64; I Have a Love, EU 856660, reg. appl. rcd., 12/7/64; A Stranger in Foreign Lands, Eu 856662, reg. appl. rcd. 12/7/64; Songs for the Seeker, Ep 245315, reg. appl. rcd. 1/5/68; The Nightengale, Eu 856663, reg. appl. rcd. 12/7/64; The Christmas Memory, Eu 856664, reg. appl. rcd. 12/7/64; Rama and Sita, Eu 856665, reg. appl. rcd. 12/7/64; Old Jim, Eu 856084, reg. appl. rcd. 10/27/64; Why?, Eu 856088, reg. appl. rcd. 12/4/64; Little Kathy, Eu 937007, reg. appl. rcd. 4/6/66; The Great Society (?), Eu 937006, reg. appl. rcd. 4/6/66; Walk Like a Man, Eu 937005, reg. appl. rcd. 4/6/66; Where Has My Love Gone?, Eu 937004, reg. appl. rcd. 4/6/66; Well Done, Lord!", Eu 907194, reg. appl. rcd. 9/25/65, Exhibit 19. 7. Walters or his agent certified that the following works were not works for hire by checking the "no" box to the question: "Was this contribution to the work a 'work made for hire'?" Walters also certified that he and not Ananda is the author of the following works. SeeRays of the Same

Light - Volume I, TX 2 758 641, reg. 8/2/89; Yoga Postures for Higher Awareness, TX 2 855 154, reg. 5/15/90; Crises in Modern Thought, TX 2 330-967, reg. 7/6/88; Rays of the Same Light - Volume II, TX 2 330-968, reg. 6/8/88; Rays of the Same Light - Volume III, TX 2 621 689, reg. 8/2/89; Your Sun Sign as a Spiritual Guide, TX 2 732 600, reg. 8/2/89; Kriya Yoga and the Essence of Yoga, TX 2 855 158, reg. 5/15/90; Secrets of Inner Peace, TX 2 711 905, reg. 10/5/89; My Separation from SRF, TX 3 405 204, reg. 9/9/92; Secrets of Happiness, TX 2-128717, reg. 8/5/87; Secrets of Meditation, TX 2 711 896, reg. 10/5/89; Secrets of Persuasion, TX 2 711 897, reg. 10/5/89; Secrets of Success, TX 2 711 906, reg. 10/5/89; How to Overcome Harmful Emotions, TX 2 855 153, reg. 5/15/90; 26 Keys to Living with Greater Awareness, TX 2 633 187, reg. 8/8/89; The Land of Golden Sunshine, TX 2 330-972, reg. 6/8/88; Intentional Communities: How to Start Them and Why, TX 2 654 180, reg. 8/2/89; The Peace Treaty, TX 3 106 580, reg. 5/3/91; On Wings of Joy, TX 2-128-224, reg. 8/5/87; The Reappearance of ChristVolume I, TX 2-128-218, reg. 8/5/87; A Course in Meditation, TX 2 8555 157, reg. 5/15/90; Affirmations & Prayers, TX 2-247-980, reg. 2/3/88; The Art of Supportive Leadership, TX 2 152 498, reg. 9/9/87; Cities of Light, TX 2 190 853, reg. 11/16/87; Education for Life, TX 2-000324, reg. 1/23/87; How To Be A Channel, TX 2 190 852, reg. 11/16/87; Rules of Conduct for Members, TX 2-249-451, reg. 11/16/87; 14 Steps to Perfect Joy, TX 2 835 998, reg. 8/2/89; Chant of the Angels, SR 226-518, reg. 11/4/96; Life Mantra, SR 217-089, reg. 8/4/95; Mantra, SR 217-091, reg. 8/4/95; The Mystic Harp, SR 222-892, reg. 6/28/96; I, Omar, SR 222-893, reg. 6/25/96; Meditation for Starters, SR 207-541, reg. 2/16/95; Life Is the Quest for Joy, SR 217085, reg. 8/4/95; Secrets of Life, SR 194-441, reg. 8/15/94; Christ Lives in the Holy Land, PA 256 717, 6/20/85; Mediterranean Magic, PA 159-482, 12/20/82; Autobiography of a Yogi: Reminiscences, PA 256-715, reg. 6/20/85; Egyptian Memories, PA 256 716, reg. 6/20/85; Meditation for Starters, TX 4-237-413, reg. 6/17/96; Do It Now, TXu 604 050, reg. 10/15/93; Expansive Marriage-A Way to Self-Realization, TX 4-012-348, reg. 1/23/95; The Rubaiyat of Omar Khayyam-Explained Spiritually by Paramhansa Yogananda, TXu 601 426, reg. 9/15/93; Secrets of Radiant Health and Well-Being, TX 3-582-512, reg. 1/2/93; Life's Secrets, TX 3 656 371, reg. 10/1/93; Little Secrets of Happiness-For Children, TXu 574 009, reg. 6/2/93; Life's Little Secrets-For Children, TXu 574 011, reg. 6/2/93; Little Secrets of Friendship-For Children, TXu 574 012, reg. 6/2/93; Secrets of Bringing Peace on Earth, TX 3-582-513, reg. 6/2/93; Secrets of True Comfort and Joy, TXu 554 503, reg. 2/1/93; Gurus, Spiritual Authority, and Celibacy, TXu 671-425, reg. 1/23/95; The Jewel in the Lotus, TX 3 656 410, reg. 10/1/93, Exhibit 19. I Am Thine, PAU 739 853, reg. 6/20/85, Secrets of Radiant Health and Well-Being, TXu 537 009, reg. 9/24/92; Secrets for Men, TXu 539 938, reg. 10/1/92; Secrets of SelfAcceptance, TXu 540 962, reg. 9/29/92; Secrets For Women, TXu 537 558, reg. 9/24/92; Secrets of Love, TXu 538 187, reg. 9/24/92; Secrets of Leadership, TXu 542 554, reg. 9/24/92; Secrets of Prosperity, TXu 537 662, reg. 9/24/92; The Reappearance of Christ-Volume I, TX 2-128-218, reg. 8/5/87; John Anderson, My Jo, PAu 2-125-383, reg. 11/4/96; Songs of Saint Francis, PAu 893-422, reg. 7/14/86; Songs of Shakespeare, PAu 862 258, reg. 7/14/86; Songs of Spirit, PAu 862 255, reg. 7/14/86; Wedding Songs, PAu 862 256, reg. 7/14/86; Into the Magic, PAu 862 257, reg. 7/14/86; Superconsciousness: A Guide To Meditation, TXu 640-877, reg. 7/7/95; Do It Now!, TXu 687-533, reg. 4/18/95; Egyptian Suite, PAu 862 254, reg. 7/14/86; The Story of Crystal Hermitage, TX 2 152 486, reg. 10/9/87; The Essence of Self-Realization: The Wisdom of Paramhansa Yogananda, TXu 418-743, reg. 5/11/90, Exhibit 40.

8. The following works listed as assets of Ananda were certified to be "works for hire", that Ananda was the copyright claimant, or that Ananda not Walters was the author: J. Donald Walters (work for hire), Secrets of Attracting and Keeping Friends, TX 2 711 904, reg. 10/5/89; J. Donald Walters (Ananda copyright claimant), 14 Steps to Perfect Joy, TX 2 835 998, reg. 8/2/89, Exhibit 19; Crystal Clarity, Publishers (author, work for hire, copyright claimant), Secrets of Leadership, VA 608 866, reg. 9/21/93; Crystal Clarity, Publishers (author, work for hire, copyright claimant); Secrets of Bringing Peace on Earth, VA 608-864, reg. 9/21/93; Crystal Clarity, Publishers (author, work for hire, copyright claimant), Secrets of Prosperity, VA 608865, reg. 9/21/93; Crystal Clarity, Publishers (author, work for hire, copyright claimant), Secrets of Winning People, VA 608-869, reg. 9/21/93; Crystal Clarity, Publishers (author, work for hire, copyright claimant), Secrets of Self-Acceptance), VA 608-868, reg. 9/21/93; Crystal Clarity, Publishers (author, work for hire, copyright claimant), Crystal Clarity-Secrets Box, VA 609-042, reg. 8/5/93. 9. The following works were registered with a certification that they were not works for hire after 8/2/89 when Ananda first evidenced its knowledge of how to list itself as the copyright claimant. SeeRays of the Same Light - Volume I, TX 2 758 641, reg. 8/2/89; Rays of the Same Light - Volume III, TX 2 621 689, reg. 8/2/89; Your Sun Sign as a Spiritual Guide, TX 2 732 600, reg. 8/2/89; Kriya Yoga and the Essence of Yoga, TX 2 855 158, reg. 5/15/90; Secrets of Inner Peace, TX 2 711 905, reg. 10/5/89; My Separation from SRF, TX 3 405 204, reg. 9/9/92; Secrets of Meditation, TX 2 711 896, reg. 10/5/89; Secrets of Persuasion, TX 2 711 897, reg. 10/5/89; Secrets of Success, TX 2 711 906, reg. 10/5/89; How to Overcome Harmful Emotions, TX 2 855 153, reg. 5/15/90; 26 Keys to Living with Greater Awareness, TX 2 633 187, reg. 8/8/89; Intentional Communities: How to Start Them and Why, TX 2 654 180, reg. 8/2/89; The Peace Treaty, TX 3 106 580, reg. 5/3/91; 14 Steps to Perfect Joy, TX 2 835 998, reg. 8/2/89; Chant of the Angels, SR 226-518, reg. 11/4/96; Life Mantra, SR 217-089, reg. 8/4/95; Mantra, SR 217-091, reg. 8/4/95; The Mystic Harp, SR 222-892, reg. 6/28/96; I, Omar, SR 222-893, reg. 6/25/96; Meditation for Starters, SR 207-541, reg. 2/16/95; Life Is the Quest for Joy, SR 217085, reg. 8/4/95; Secrets of Life, SR 194-441, reg. 8/15/94; Meditation for Starters, TX 4-237413, reg. 6/17/96; Do It Now, TXu 604 050, reg. 10/15/93; Expansive Marriage-A Way to SelfRealization, TX 4-012-348, reg. 1/23/95; The Rubaiyat of Omar Khayyam-Explained Spiritually by Paramhansa Yogananda, TXu 601 426, reg. 9/15/93; Secrets of Radiant Health and WellBeing, TX 3-582-512, reg. 1/2/93; Life's Secrets, TX 3 656 371, reg. 10/1/93; Little Secrets of Happiness-For Children, TXu 574 009, reg. 6/2/93; Life's Little Secrets-For Children, TXu 574 011, reg. 6/2/93; Little Secrets of Friendship-For Children, TXu 574 012, reg. 6/2/93; Secrets of Bringing Peace on Earth, TX 3-582-513, reg. 6/2/93; Secrets of True Comfort and Joy, TXu 554 503, reg. 2/1/93; Gurus, Spiritual Authority, and Celibacy, TXu 671-425, reg. 1/23/95; The Jewel in the Lotus, TX 3 656 410, reg. 10/1/93, Exhibit 19. Secrets of Radiant Health and Well-Being, TXu 537 009, reg. 9/24/92; Secrets for Men, TXu 539 938, reg. 10/1/92; Secrets of SelfAcceptance, TXu 540 962, reg. 9/29/92; Secrets For Women, TXu 537 558, reg. 9/24/92; Secrets of Love, TXu 538 187, reg. 9/24/92; Secrets of Leadership, TXu 542 554, reg. 9/24/92; Secrets of Prosperity, TXu 537 662, reg. 9/24/92; John Anderson, My Jo, PAu 2-125-383, reg. 11/4/96; Superconsciousness: A Guide To Meditation, TXu 640-877, reg. 7/7/95; Do It Now!, TXu 687533, reg. 4/18/95; The Essence of Self-Realization: The Wisdom of Paramhansa Yogananda, TXu 418-743, reg. 5/11/90, Exhibit 40.

10. See The Path: Autobiography of a Western Yogi, reg. appl. rcd. 9/5/77; A900269 (Margery Stern). Also multiple authorized persons at Ananda made multiple changes to the copyright registrations, but did not ever assert that (1) Ananda was a copyright claimant; (2) that Ananda was the author; or (3) that the works were created as "works for hire". See Renewal, The Path: Autobiography of a Western Yogi, TX 2 753 179 [changes by Karen Gamow of Crystal Clarity]; Crises in Modern Thought, TX 2 330-967 [changes by "Karen Gamow, authorized agent of Crystal Clarity"]; My Separation From S.R.F., TX 3 405 204 [amended by telephone conversation with David Betts]; 26 Keys to Living with Greater Awareness, TX 2 633 187 [changes authorized by Karen Gamow of Crystal Clarity Publishers]; Cities of Light, TX 2 190 853 [corrected by Peter Skillman of Crystal Clarity]; How To Be A Channel, TX 2 190 852 [corrected by Peter Skillman of Crystal Clarity]; 14 Steps to Perfect Joy, TX 2 835 998 [amended by telephone call with "David Detts, accountant for Ananda Publications"], Exhibit 19. 11. Collateral estoppel requires proof of the following elements: (1) the issue at stake is identical to that involved in the prior litigation; (2) the issue was actually litigated in the prior litigation; (3) the issue was determined by a valid and final judgment; (4) the determination of the issue in the prior litigation was essential to the judgment in the earlier action; and (5) the standard of proof in the prior litigation was at least as high as in the present litigation. In re Barigian, 72 B.R. 407, 409-10 (Bankr. C.D. Cal. 1987); Bugna v. McArthur, 33 F.3d 1054, 1057 (9th Cir. 1994). 12. For example, when a church disbursed substantial sums to its founder and members of his family, as fees, commissions, royalties, compensation for services, rent, reimbursement for expenses, and loans; maintaned a personal residence for the founder, the court found private inurement. The "logical inference can be drawn that these payments were disguised and unjustified distributions of ... [the church's] earnings." Founding Church of Scientology v. United States, 412 F.2d 1197, 1201-02 (Ct. Cl. 1969), cert. den., 397 U.S. 1009 (1970); Church of Scientology of Calif. v. Comm'r, 83 T.C. 381, 492, aff'd, 823 F.2d 1210 (9th Cir. 1987) [founder's practice of marketing books and other items in the name of the church, and being paid royalties for sales is private inurement]. A compensation arrangement based upon a percentage of gross receipts was held by a court to constitute private inurement, where there was no upper limit as to total compensation. People of God Community v. Comm'r, 75 T.C. 127, 132 (1980);see alsoParshall Christian Order v. Comm'r, 45 T.C.M. 488, 492 (1983) [tax exemption status rejected because provided its founder and his family with "housing, food, transportation, clothing and other proper needs as may from time to time arise"]; Maynard Hosp., Inc. v. Comm'r, 52 T.C. 1006 (1969) [the most obvious form of private inurement would be the diversion of an organization's net earnings to the board of directors]. 13. The bylaws state: "No member, director, officer, or employee of or member of a committee of or person connected with the corporation, or any other private individual shall receive at any time any of the net earnings or pecuniary profit from the operations of the corporation, provided, that this shall not prevent the payment to any such person of such reasonable compensation for services rendered to or for the corporation in affecting any of its purposes as shall be fixd by the board of directors; and no such person or persons shall be entitled to share in the distribution of any of the coporate assets upon the dissolution of the corporation." Bylaws, Art. X, Exhibit 22.

14. The Opening Brief extensively discusses the indications of bad faith in the Investment Fund and needs no repeat here. See O.B. at 15-16. Ananda produced the "Pooled Income Trust Agreement" at trial in response to requests for financial documents on the investment pool. To say that it was never funded or that "investment" means "loan" is a stretch. Attorney Meegan's brief on behalf of some of the investment fund members adds nothing as it is accompanied by no evidence, no declarations, and cites no case authority. 15. See Vows of Loyalty to Walters, Exhibit 12; Rules of Conduct, arts. 12 & 13, Exhibit 13 [requiring indoctrination of teaching of Walters and vow of loyalty to Spiritual Director]; Article by Walters describing the difficulty in separating himself from a controlling position at Ananda, Exhibit 44.


				
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