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BOX 1143 100 582-1007537 1/6

Ship MAA


Knowledge Report

This is a knowledge report regarding my business dealings with Reed Slatkin as requested. Last
March 1988 myself and Reed concluded a deal in which [indecipherable] into the money-management business
with another partner JohnllllGottlfurclht (not a Scientologist). Reed and myself each own 25 %
of the company and John owns 50%.

Several years prior Reed developed a computer software program that identified
stocks to buy based on certain criteria. The program was to identify stocks that
should perform particularly well after getting specific signals indentified by the program.
[I] was very impressed when I saw the program Reed had developed and thought it would be very
effective in managing money in the stock market. I had also heard very favorable reports about the results
Reed was achieving managing money for some friends of mine that were [indecipherable]
[In] particular Brian Reso who introduced me to Reed was very enthusiastic about the results
Reed had [gotten?] managing money for him. Reed was managing money in an investment pool
for Brian and a bunch of Scientologists using this program. I had gotten into that the pool
was making in excess of [page ends]


Based on Reed's impressive statistics and my enthusiasm over the program he developed,
I encouraged Reed to go into money-management business with me. At the time (August 1987)
I was a stockbroker with Prudential-Bache Securities. I began to introduce Reed to some
of my contacts in the brokerage industry who Ithought might be interested in raising money
for us to manage. The responses we were getting were uniformly favorable.
I introduced Reed to an associate of mine Tom Sakai from Hawaii, Tom was so [deleted word] favorably
impressed with the strategy that he said he could probably raised [sic]100-200 million for us to manage.
Tom is a consultant to several hundred million dollars of pension money for labor unions and
large corporate funds. Tom invited Reed to Hawaii to make presentations to dozen or so of
his clients, he also requested that Reed give him his past performance results that he achieved
in his private investment pools. These performance results are an important factor in the
choosing of an investment advisor. Tom used the results that Reed had provided to him to
create a report to give to prospective clients. Based on the presentations and the past
performance results Tom got commintments of in excess of $30 million for us to manage. Without
going into all details following that in a business trasnaction Reed and myself went into business
with JolhnllllGottlfurclht who had an investment advisory firm managing $100,000,00 and became partners.


In the course of business it became necessary to audit the investment results Reed obtained
in stocks in his "pool". We needed the audited results in order to raise additional money for a
certain type of investment fund that we were planning on doing. We started on this in April 1988.
Reed was supposed to produce the brokerage statements and confirmations to back-up the results
that he stated he achieved. After several months of delays Reed had failed to produce the documentation
Myself and our partners had become suspicious. I confrontated Reed on this matter by asking him
if there [sic] any problems on his stats. He told me that there were no problems and that he just
wanted to make sure the results were right. After a lot of pressure Reed finally produced the brokerage
statements that were requested. I drive up to Santa barbara to get them and brought them down to
LA with me. I gave them to our partners and our internal accounting people. Shortly after starting the
verification it came to light that brokerage statements were made-up by Reed and not actual and were
grossly misrepresentative. reed was confronted Amy and John and got the the withhold off that he had
falsified his results and really didn't achieve them and that he made up the statements to fit the false
stats he had stated he achieved. Reed then got the withhold off to me. I had a substantial amount of my
personal funds invested in Reed's pool outside the company. I had been given reports


by Reed that my money invested in the pool had nearly doubled. Naturally I had major concern about my personal funds since
this information regarding the resutls came to light. I discussed this with reed. He told me that
told me that
[indecipherable] .
that, if i was uncomfortable.
He said that he had misrepresented to me what the pool actually was. He had represented that his results
were in stocks and options using the program. He said that the pool was actually comprised of diffirent
kinds of investments aside from stocks. He said that he had actually made the rteturns he reported to the
investors in his pool and results were true although not attained by investing only in stocks.
Because of the situation i had lost a lot of my confidence in Reed. Therefore we agreed that Reed to handle my doubt,
would we give me back the money I invested in the pool and the profits that I made. We further agreed that
Reed would keep me on the books in the pool and continue to manage my money until such a time that I
desired to officially withdraw or remain in.
The fact that Reed had reported false results that we used to raise money put the company in grave danger.
We had used those results to incur[?] accounts and had published promotional material in the form of graphs brouchers etc.
We were confronted with serious legal and


public relations problems as a result of this and consulted our legal counsel to guide us in
our handling. Our laywers informed us that we had to make disclosures to every client who hired us
that the past performance results acheived using Reeds program were unveritable. Every client
was contacted by letter [indecipherable] most of the clients were seen in person. we were very concerned that this situation
could potentially put us out of business. Fortunately it worked out that after making this disclosure we lost very
little business because of the mispresentations. The company is currently in a precarious position because of
mediocre performance results.

I helped Reed by working with him on handling the ethics of situation anf the consequent problems he had with
the Gottlfurclhts. Reed put himself in a lower condition and wrote up his overts and withholds. Tony Hitchman also helped
Reed handle his ethics on this matter. Reed also had major situation with the Gottlfurclhts. They were demanding some
form of monetary settlement form him because of misprepresentations. Reed made a legal settlement with them
following some very enturbulating negotiations of which I helped resolve. Additionally parts of the original deal
Reed & I had with Gottlfurclhts had to be revised.
I have subsequently made attempts to examine the statistics and actuivities of the investment pool that Reed runs. Reed
has given me


a general idea of what he does and diffirent types of activities of investment the pool is involved in.
I have seen some documentation of some the investments in the pool. Reed has also shown me a cursory breakdown of how he
invests the pools funds, Reed has made a lot of money for several scientologists who subsequently flowed that money on to the bridge
Reed is currently finishing up some family matters and following that he has told me he will be routing back into auditing lines at AOLA
within the next few weeks. I'm writing this report to inform the proper terminals of this situation so that Reed can be
completly cleaned-up on this mattter. If there are any further questions about the details if on this matter please phone me
at (818)905-1615.

Richard Levine.