I replied to Chris Ogle in a letter dated 15 June 1997(reproduced below). I heard nothing more from Arica Institute until on 17 September 1997, I received an undated paper letter signed by Bobbi Dunderdale, an Arica official at the time (OCR scan of the letter reproduced below.). Although NONE of my questions mentioned in the earlier correspondence were answered, the Board did send me copies of the last three IRS (Internal Revenue Service) returns, the minimum information required to be provided me under federal law.
The returns provide little useful information and did not refute my questions. I noted only that Arica failed to list Sarah Ichazo, The former Bolivian Guru's wife, who runs Arica Hawaii, a "subsidiary", and one might reasonably conclude, the New York home office as well, as a key employee (irrespective of compensation) as required by IRS regulations.]
A commentary on AricaOscar ethics and financial relationships, distributed to the Arica Community and other interested parties.
Final Edition: Version 2.11
I believe Oscar is currently budgeted to receive about $170,000.- per annum from Arica Institute as "expenses" through Arica Hawaii, on whose account "non-employee" Sarah Ichazo is a signatory. This is apart from whatever he may receive from the Arica Fund, or in direct or indirect contributions, about which I have few details and little present comment.
I question the ethics of the current arrangement, both as to content and as to transparency (Glasnost). I would have preferred more up to date "budget" information to use for the following analysis, but repeated requests to Arica have failed to result in the information requested, a violation I believe of the conditions of Arica's tax exempt status under U.S. federal law. (However, I think the behavior patterns exposed in The Prelude remain pretty much the same today.)
So I have taken, for most of this Prelude Extended Example, Arica budget summaries from "NEWS FROM ARICA INSTITUTE - JULY 1993". On page 17 appears the projected budget for 93/94 and comparisons with the years 92/93, 91/92, 90/91. Although these are very brief summaries indeed and hardly suited for readers wishing to be adequately informed, I think you will find my brief analysis both interesting and compelling. If you have any doubts about the objectivity or the serious implications of The Prelude analysis, I suggest you show it to a non-Arican who knows something about business and taxes.
(nb It would be useful to have a copy of the above mentioned budget summary on hand, but the analysis can be followed without it.)
My original understanding was that Oscar is being paid "expenses" primarily for new product development as well as for other "help/assistance/advice" that he may provide for the Institute.
In 90/91 Arica total product sales were: (all figures in whole $US) $ 120,054. In 90/91, Arica Hawaii "expense reimbursement" was $27,265, around 22% of total product sales which include mandatory "additional materials" for trainings purchased from Oscar Ichazo Company, (materials priced generally from 1/3 to 1/2 the cost of the respective OIC training) and ordered from Arica, and earlier trainings, books, yantras, Dragon's Milk etc, but not membership fees or donations.
[[ AIHI (Arica Hawaii) product sales in 90/91 were MINUS $13,187 ( - 38,576 91/92; - 35,000 92/93; - 29,802 projected 93/94). I really don't have any idea what this is. I would be interested in an explanation. It has been suggested this may have something to do with shipping expenses or other items bought and sold between Hawaii and Arica Institute.]]
In 91/92 Arica product sales jumped to $252,000 slightly more than double. I guess (I wasn't following that stuff too closely at the time) that a major new training (MS 1?) had been released by OIC and that Arica benefited through sales of "additional materials packages" to those who bought the main training package directly from OIC. Calculating very roughly, multiply say $250 for the materials by Aricans apt or able to buy them. ( I generally assume, for the purposes of The Project, that Arica has about 5-600 active members who are basically being used to supply income to OscarArica as it is "needed".) In this case say 400. 400 x 25 = $100,000. The actual increase in product sales was $132,000, so the above presumption is probably valid in conception if not as perfectly precise as it would have been had I guessed 540 purchasers ($135,000). (see below)
However, in 91/92, AHER (Arica Hawaii Expense Reimbursement) rose to $162,998, an increase of $135,202, $3,000 MORE than the TOTAL increase in product sales income to "The School". That is 64% of total product sales. And, it seems to suggest that the product development cost was more than the sales revenue, something that can be justified only when there are multiple long-term sales prospects, which would be difficult to assert, especially given subsequent years sales data from these items. So, Arica Hawaii is collecting more from Arica Institute for product development than the products developed produce in revenue. In the year above it looks as if OSCAR "CHARGED" ARICA AS "EXPENSES" ALMOST THE SAME AMOUNT AS ARICA GAINED FROM SELLING THEM. Why didn't he just sell the "additional materials" packages himself instead of creating all this complex run around? One answer might be that doing it the complex way allowed Oscar to pick up the $135,000 as tax free income, ie reimbursed tax-deductible expenses.
From a later Arica publication, which I managed to obtain from private sources, I note that in '92 there were 460 participants listed for MS 1. By '94 this figure had only risen to 497, only 37 more " additional materials" packages over two years, which seems to bear out the two conjectures above, about generating income from existing Aricans and calling into question the ethics and legality of large expenses being charged against small actual and rationally foreseeable sales.
Further proof is found in this point: The total market for MS 1 was limited to "8th Level" Aricans (500?) who had bought the main MS 1 stuff from OIC. They bought all the packages that were sold by Arica. Future sales would be based on new people getting to the level necessary to buy the trainings. But, Arica changes trainings often. Will this one still be required in the future? And, there has been no growth in Arica for years. What is the objective basis for claiming that there will ever be enough "additional materials" packages sold to justify the (my guess) half a million dollars a good accounting might show that have actually cost the Arica membership?
In 92/93, Arica product sales dropped to $128,000; AHER dropped to $85,000. [The declines in percentage terms are very close, which leads me to hypothesize that these "expense reimbursements" are less related to actual provable expenses than to some sort of pre-arranged fixed payment ("salary") based on a percentage of anticipated Arica income, which are then disguised as expenses and paid to Hawaii.]
In 93/94 (projection) sales were projected to remain at $128,000 while AHER was projected to rise to $90,000, a 9% raise, while total Arica income, with the exception of a quite subjective entry arbitrarily raising expected contributions from $75,000 to $100,000, was projected to remain stagnant.
The key here is what is shown in the next statement (94/95). If something very close to $90,000 was actually paid during the year as AHER, it's a pretty good bet that the above hypothesis is valid in principle. For those who don't understand US taxes, here is the implication. Reimbursed expenses are not counted as income so you don't pay taxes on them. You save, depending on your tax bracket, some 30-40%. But if they aren't really expenses, but income, a sort of disguised salary for example, you have a tax evasion problem.
In fact, my presumption here was not accurate. Actual figures for 93/94 show total product sales of $62,545 ($64,455 less than projected). [It has been my experience that Arica budget projections are often based on fantasy projections related to perceived needs rather than being rooted in any reality I am familiar with. Several examples of this are noted in passing in this Prelude. Any close look at Arica budget projections compared to later reality will reveal many more instances of this and other unfortunate habits.]
Nevertheless, in this case, contributions did in fact increase past the projected level of $100,000, to $132,548 while membership income reached $221,743 rather than the projected $259,275; ADU income, projected at $25,000, was only $14,966.
In Arica accounting, the contributions category is somewhat difficult to assess as it is footnoted: "Includes contributions directly to Arica HI and to the Arica Fund either designated or general." I question the mixing of contributions with expense reimbursements as seems to be indicated here and the lack of precision and detail. Intelligent aware people and other people are entitled to clear and informative accounts. And because of the lack of information, I cannot determine how much of the unforeseen increase in the above mentioned 93/94 contributions actually went directly to Hawaii.
However, AHER (renamed: Product Exp. Reimbursement. HI, which focuses AHER expenses into a narrower accounting category, seemingly eliminating expenses being paid for general "consulting" services - which would have to be classified as income by Oscar- as allowed for in Paragraph 5) expenses in 93/94 were not $90,000 as projected in the budget, but $175,159, nearly double, a figure NEARLY THREE TIMES THE TOTAL OF ACTUAL ARICA INSTITUTE 93/94 PRODUCT SALES. I hope you see why I capitalized the above. Frankly, it's totally outrageous.
In 90/91 AHER payments were around 6% of total Arica income. By 93/94, the percentage of total Arica income paid to Oscar via Arica Hawaii from all sources - except contributions and payments by the Arica Fund - had risen to 35% (a six-fold increase) while total Arica income remained virtually stagnant over the period. I don't recall seeing a lot of discussion in the Arica community about these ethically and financially questionable and disturbing relationships and payments.
As total product sales were projected to be $62,000 for 94/95 and AHER "expenses" projected to "drop" to $170,000, again a nearly 3 to 1 ratio in favor of Arica Hawaii, we find more supporting evidence for demanding a thorough examination of these expenses, from a standpoint of professional business practice, ethics, and federal income tax law.
In recent years ( I have only seen scattered figures) I believe AHER payments have remained around $170,000 per year (exclusive of Arica Fund direct payments to Oscar). This amount poses several questions. What are the payments for? Are the materials packages selling in such a way as to repay Arica's investment? Is a separate accounting made for Divine Nature, MS 1, etc? Which new products from Hawaii justify such expenses? I can't believe a CPA actually signed off an audit on these accounts. Send the Arica auditors this Prelude and see what their response is.
I was never quite clear about Velocity in this respect: In early 1996, I received some sort of announcement/solicitation from Velocity Training Inc, with a Sausalito, California return address. I was somewhat puzzled that on this document, which apparently was from an ordinary California for-profit corporation (Usually non-profits announce themselves as such, especially when getting started.) , the Arica symbol was displayed, but without copyright attribution.
I immediately wrote Velocity Training Inc awakening (?) them to the situation and noting the problems such use could cause for Arica, ie trademark loss. I also asked for information about Velocity since they were asking for my participation in a survey, a perfectly normal request I should think. I asked for details on: profit/non-profit? major shareholders? board of directors? contractual relationships with Oscar/OIC/Arica? All stuff that any ethical public corporation routinely makes available. Strictly a matter of professional business practice.
I never heard a word from them. I never saw the name used again. I notice only that in recent Arica publications the Institute is copyrighting/service marking/trade marking terms with Velocity in them. I presume Velocity Training Inc. has been buried somewhere. [ My speculation was that VTI was to be a for-profit corporation with Oscar, Sarah, and say Tom Salter, Paule Marx, Gene Young and a few other Obergons as shareholders and that it would contract with Arica for certain services at very favorable (for VTI) terms. Then with the huge success of the worldwide Velocity Tour, VTI would make a lot of money. Anyway, it was a thought.]
It has also been announced that Oscar will be getting a direct income share from the new trainings. What percentage? And why is Arica paying Oscar to develop trainings which he himself sells most of the value of through his own OIC and (new) to split the proceeds of trainings they speparately paid his "expenses" to develop? And what is the contractual and financial and actual relationship between Oscar - Oscar Ichazo Company - Arica Institute - Arica Hawaii - Velocity Training Inc ?
Oscar is a member of the board of Arica Institute. Although he has publicly claimed the contrary, even in letters to public authorities which I have copies of (I think in an attempt to distance himself should Arica be successfully sued), the fact is that he makes every important decision and runs every important aspect of Arica Institute and has done so, with a few short exceptions, since its beginning. Period.
Boards of not-for-profit corporations are required under law to maintain a certain ethical independence and have a fiduciary responsibility. I think a survey of Arica board minutes would not show many cases where the Board refused to follow Oscar's explicit instructions (to characterize them as orders would not, I think, be in error) to the letter. Of course this poses a legal problem [I think for example that not only has the Board failed in its legal obligation to act ethically and independently, but that there is a possible case for a criminal conspiracy to violate United States Federal Income Tax Law.] for Board Members, but a more difficult one for Oscar as well.
As effective and actual CEO of a non-profit corporation, Arica Institute, while at the same time operating as sole owner a for-profit company, Oscar Ichazo Company, that is nearly inextricably intertwined with Arica Institute, and whose wife has control over the Arica Hawaii account, Oscar has had to be very careful to assure absolutely ethical financial relationships and their objective accounting. I think the evidence shown here, as well as substantial other evidence available from the files of Arica, Oscar, Oscar Ichazo Company and Arica Hawaii indicates that he may not have been as conscientious as both ethics and the law demand.
nb As The Prelude neared launch time, I was informed that it is common knowledge among Aricans that Oscar receives $10,000 a month from Arica, implying my AHER figures are not unknown. I did not know this. But I imagine THIS $10,000 a month comes from the Arica Fund and is not related to AHER. Arica Institute shows no direct payments to Oscar of any taxable income, contributions, consulting fees etc unless there are some hidden in General and Administrative.
So take a hypothetical "vintage" year: Direct contributions to Oscar: $??? Contributions to Oscar via Arica Hawaii that are not shown in account summaries$??? Arica Fund to Oscar: $120,000; AHER to Arica Hawaii/Dynamic Duo: $170,000; 400 OIC sales of a top-level training @ $750.00 = $300,000. Undoubtedly there are many legitimate expenses, a comprehensive list would be indeed nice to see, but Oscar's Gross "Income" here, even with the exclusion of two potentially significant sources, is: $590,000!
Another interesting avenue to explore would be things that Arica sells for Arica Hawaii - Oscar - OIC (I really am unsure how to tell them apart sometimes) such as the THE ONYX BEADS. How much did Arica Hawaii or OIC pay for the beads and how much did they sell them to Arica for? Did Arica pay in advance or take them on consignment? How much did Arica sell them for? How many were sold? What was profit for Hawaii and for Arica Institute? Was there any possible coercion here? Would the Arica Institute person responsible for purchasing the beads still have a job if failed to buy them? Did Arica really want those beads? Could they have purchased similar items more cheaply elsewhere? I mean, to some people (rational or awake), such a relationship betweeen a commercial (?) firm and a non-profit institute might seem ripe for potential problems.
Finally, only hours before launch, I received, from a source, the following interesting information which sheds new light on and lends new support to the basic theme of The Prelude to The Letter:
Arica Institute Budget: ..........94/95 (projected).....94/95 (actual) Net Product Sales...................62,000....................43,500 Memberships........................220,000...................228,000 Tuition/Royalties/Other.............66,500....................42,600 Day of Unity........................20,000....................10,800 Contributions......................120,000...................103,300 TOTAL REVENUE:.....................488,500...................429,000...$59,500 less "Reimburse AIHI":..................170,000...................120,000...$50,000 less
The first point this illustrates is that Arica budgets expense reimbursement payments to Oscar/Hawaii again at the $170,000 per annum figure, which looks much more like disguised salary or pre-arranged agreed upon sum rather than actual expenses. The second point is that there was a decline of approximately $60,000 in actual revenue and that payments to Oscar were reduced by $50,000. The third point is that if these were real "expenses", Arica Institute, not having enough funds to pay the $170,000 "Invoice for Expenses" would have to pay the remainder the next year.
The fourth point (which bears on the rational expectation of recuperating the "expenses" through sales of the products that resulted from them) is that all Arica Institute income categories that come from non-Aricans (sales, tuition etc, day of unity) dropped substantially, on average about a third.
The fifth point is that AricaOscarHawaii is regularly paid, as "expenses", practically every penny of revenue that exceeds needs for normal Arica Institute operations which it also seems are probably cut (ie lower rents in Dobbs Ferry) to maximize the "expense" payment to Oscar. How else can the $60,000 shortfall in income to Arica Institute result in a reduction of "expenses" of only $50,000? The $10,000 had to be cut from other parts of the Arica Institute operating budget.
The last point is that total Arica sales reflect many other items besides the products Oscar was "expense reduced" to develop for Arica: old trainings, match books, etc, so the total excess of "expense" payments in relation to sales of related products is even more distorted (ie Oscar is paid even more relative to the already negative expense/product sales ratio) than what has been indicated here. I think a year by year and product by product comparison of Oscar's development "expenses" with the sales revenue generated for Arica from those same products would be quite revealing.
On a personal and professional note, I have reason to believe that OscarArica, due to the success of earlier velocity watch samizdat publications, made an attempt to prevent me from obtaining information about AricaReality, partially by restricting ADU Report distribution. I can understand why. AricaReality is not nice. The Truth, in this case, is quite ugly. Nevertheless, I do not think it has been wise or ethical or "professional businesslike" policy.
I may have made errors in this Prelude. It would not surprise me nor bother me in particular. I had to work from very restricted information. I am, however, quite confident about the reality of most of the points raised. Aricans have been and are being swindled. No other conclusion is possible. Oscar and Sarah live in increasingly splendid isolation on a Maui mountaintop, while the main "vehicle of transmission" Arica Institute, "the school", is reduced to limping by in a couple of rooms in a backwoods upstate New York town, Dobbs Ferry.
I hope you have found The Prelude to the Letter interesting, informative, and useful.
Sterling Doughty \ \ \ v
******* The PRELUDE TO THE LETTER is a velocity watch samizdat presentation, a joint production of: fofcfcaes, the way of the compassionate warrior and the big sur nation. Written by sterling doughty and toshiwa with assistance from Tao. This document: The Prelude to the Letter, fofcfcaes, the way of the compassionate warrior, big sur nation, velocity watch, velocity watch samizdat and the symbol ( electronic version: \ \ \ v ) are protected under the law. Non-commercial reproduction and distribution of The Prelude is permitted as long as appropriate credit is given and excerpts are not used out of context. Thank you. For those interested in such matters, The Prelude was written mostly in 24 and 48. The Project is part of my Work on behalf of the real School, of which Arica was briefly a part. Futher information on any of the above as well as more OscarArica related information covering a wide variety of ethical, structural and historical points, grouped together as The Project sm, is available free of charge or obligation from: email@example.com
[Of course The Project sm of 1996 has transmuted. It is now metaton.]
[Note: Below is the Arica Institute reply to the above letter, 21 April 1997, by Christopher M. Ogle, member of the Arica Institute Board of Directors. This response is presented here as an OCR scan of the original e-mail hard copy print-out.]
ahead to Arica's reply and...
more financial fantasy
ahead to SOBER READING
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