The Church, the Investment Advisor, and the SEC

The fact that the church played a shell game to hide ownership of it’s portfolio is disappointing, but not surprising. And I don’t mean that in too much of a negative way. The right to privacy seems to have some distinct American individualist flair that extends to companies in many ways that other nations don’t follow. A church could be more likely viewed as an individual when it comes to protective privacy rights rather than a publicly traded company in that view. I can see the council meetings saying it’s none of anyone’s business what kind of assets the church has. That can not only affect willingness to pay tithing, but willingness to serve, right down to various communities, businesses or real estate transactions looking at the church with dollar signs their eyes. Yes, everyone knew the church had money, but when you find out your neighbor has a few billion more than expected it’s not surprising to have some resentment or demands come up. Surely that at a minimum puts the church on the defensive having to explain itself rather than focus on its mission.

Could there be a first amendment case to be made? If the church views this information as damaging, and wanted it witheld, wouldn’t government requirements to release the info be interference in free exercise of religion? Not that the church would make that argument as they would as this whole ordeal from the shell company to later agreeing to disclose seems to be done with wanting to avoid too much press.

A big first amendment case that could go all the way to the supreme court would go counter to the church not wanting to draw attention to its assets in the first place.

It’s also interesting to note the policy appears to have been signed off under Pres. Hinckley and reversed under Pres. Nelson.

Okay, it’s irksome that I got lessons where “honesty” meant “not using a paperclip from work on something personal” and “spending hours to track down a one-cent discrepancy on a ledger.”

Another thing that strikes me here: I’ve always mentioned that, in contrast to some Evangelicals who seem to take pleasure in flouting laws to preach where it’s forbidden, the LDS Church tries to go in the front door. But with stuff like this and the structuring of Australian and Canadian tithing revenues to avoid taxes, it seems there’s long been a side door for cash.

Sam, I’m needing help to understand a basic premise here. If any securities investment goes beyond $100 million and would require a Form 13F filing with the SEC, then how is any of this LLC (shell company) method the church was using could even be sustainable? When I take EPA’s current $44 billion and divide it by the $100 million maximum (to avoid filing), I’m getting 440 necessary LLC’s to stay within the law. I’m just wondering how this would have even been scalable in the first place? What am I missing or misunderstanding?

Sam, you said that they did “wrong”. But in what sense are you using the word? Was there a moral failing here?

The issue for SEC was pretty narrow, as you pointed out. It was attempting to break the fund down into smaller funds so as to attract less attention (which was perfectly legal), the only issue was maintaining investment authority over the aggregate. This seems like a pretty arcane corner of securities law. There isn’t even any allegations that doing this gave the fund an unfair advantage in practice.

(An analogous situation where a person did obtain an advantage by going through several smaller companies would be Walt Disney buying land for DisneyWorld through several shell companies. Although, in that example, I’m not sure that there is even any laws against doing that today.)

Finally, what say you to the idea that the meaning of laws isn’t fully known until they are tested? Was EPA’s reading of the statutes completely unreasonable?

Given that so much of the church’s institutional rhetoric in lessons and general conference encourages black-and-white thinking, this legalistic approach to parsing the law — both in its bright line meaning and its intent — is wearisome.

Organizations that capture large amounts of the world’s resources, whether they be financial or physical, eventually pass a point where they (the organizations) become systemically important (to borrow a phrase from the 2008 financial crisis). In concentrating so much wealth into so few hands, systemically important entities become like nation states, accountable to no one. And like billionaires who can’t possibly spend all their money, their assets circulate infrequently, leaving on the sideline resources that could be put to more intensive use by the people actually here on earth (as opposed to god in his heavens who asks “what is property to the Lord?”).

We believe we’re sent to earth to learn to choose. That’s all well and good when you have resources, but nigh impossible when you don’t. Put concretely: we shouldn’t rely on the whims and largesse of billionaires or wealthy churches to funnel money into ______(insert pressing public need)_____ when the resources actually exist but remain outside the public’s control. Utah waits with bated breath to hear what the church with its extensive senior water rights will do to address the dying Great Salt Lake. Really? Seems like this environmental tragedy in the making illustrates how systemically important entities rob the people of their ability to act in concert to address urgent needs.

In the years leading up to the American Revolution, colonies (e.g., New York) acted to disestablish churches. Why? Because they locked up too much wealth. Some of the shenanigans in Kirtland — including, in part, the church’s legal organization or lack thereof and the Kirtland Anti-bank Safety Society — reflected attempts to get around restrictions on church asset ownership. This later played out in Nauvoo, the ecclesiastical office of Trustee-in-Trust and the mess separating church from personal properties following Joseph’s death.

The repetitional damage from this and other recent public disclosures add weight to the question: is all this secrecy worth it?

Sam, couple of quick questions for people who don’t have your knowledge of regulatory and tax law.
1. 13Fs only apply to US stocks, right? Meaning the SEC is not concerned about other asset classes (like international equity, real estate, natural resources, hedge funds, PE, etc.)
2. Are 13Fs just for individual stocks? So if the Church moved 100% of it’s US equity exposure to an S&P500 fund, would they still need to report?
3. My understanding was that EPA doesn’t pay taxes because it’s a non profit (assumed this was also true for university endowments). Is that largely correct? (Wondering if they worry about capital gains if an investment does really well and they want to sell)

Thanks!

I appreciate the explanation. I’m disappointed in the church leadership’s action. I honestly believe that within church leadership there’s a bunch of conservative nutcakes that kind of behave like mainstream conservative nutters. It is to say the least, disappointing.
I think the church needs to apologize. I think there needs to be some disclosures on what actions will be taken. And obviously, some discussion about the intentions for the funds. I personally do not have a huge problem with the existence of such a fund, but I think it’s fundamentally better for the membership to have some idea of what the leadership thinks should be done with it. The church is very paranoid of scrutiny because of its history and I understand that, but it needs to ignore that and look at the bigger picture a bit more often than it does. SLC is a fishbowl in that regard at times.

This is a win for the Church. The fine is trivial (and most of it is borne by EPA). Whatever benefit they feel was derived by these actions surely surpasses the fine they have to pay. Also, since he changed the practice in 2019, it seems like yet another opportunity for President Nelson to throw previous leaders under the bus. I don’t agree with either of those, personally, but the view from SLC may be less worrisome.

And I don’t think they’re too worried about the public fallout from this, either. They consider “this matter closed”. The furor will die down, and they certainly won’t bring it up again. It will surface from time to time in our remote corner of the internet, but that will be it. Although, if you were a Church leader preparing a talk on honesty to give at some conference around 5 weeks from now, you may be told to hold off for a few months.

Was anyone harmed here, Sam?

Sam, setting aside the question of whether there was a violation of reporting requirements, who was harmed by EPA’s actions and how?

Nate, “For all of you who are engaging in the familiar garment rending “The Church lied! They are hypocrites! They lack integrity!” overly emotional response to this nothing burger.” Condescend and use hyperbole much?

Since I have a feeling many of you will not read the counter narrative especially if you think they are “homophobic ne’er-do-wells who almost never argue in good faith” (no evidence provided, even if thats true, how are they wrong on this subject?) I will highlight the most important points of the Public Square link, feel free to engage with these

Were the “shell companies” the EPA used illegal?

There’s no allegation that they were. These companies are the subsidiary LLCs that EPA used to reorganize in 2000. Most shell companies are used for legitimate purposes, particularly in the financial sector. They can be used to legitimately maintain the privacy of investors or better organize financial assets. The SEC’s claim is not that EPA’s organizational scheme was fraudulent, but that using that organization, EPA should have reported differently than they did.

Is getting fined by the SEC a big problem for an investment fund or relatively common?

Obviously, a fund never wants to be fined. But fines like this are common. About 5% of investment funds are fined by the SEC each year. Experts compare it to a traffic ticket.

These kinds of investigations are also especially common when multiple entities are involved, such as in the case of the EPA.

If these kinds of fines are so common, why has there been so much media coverage?

We can only speculate why individual newsrooms have decided to report on the story, but as media professionals, we see that this story has several elements that would be attractive to journalists that have nothing to do with the severity or unusualness of the matter.

The Church of Jesus Christ is still a curiosity for many Americans, and as a result, articles that can refer to the Church in their headlines generate more traffic. And because of the Church’s position on moral issues, it can be used as a lightning rod in culture war debates, which can motivate both journalists and their readers. Moreover, EPA is considered a large fund and manages a large sum of money. All these reasons taken together could generate sufficient newsworthiness.

What changes have Ensign Peak Advisors made to avoid these issues in the future?

This was a narrow issue. And the narrow issue has been fixed for more than three years now. While it is unfortunate that there was ever a misunderstanding about disclosure requirements based on the advice of counsel, it’s also probably unavoidable that in its more than 25-year history EPA would make some mistake on its disclosure requirements. Once again, its overall record on compliance is impeccable.

What do this investigation and penalty say about the Church’s priorities and values?

Not much. The Church invests in its fund to fulfill its mission, which in addition to its religious mission, includes humanitarian aid that totaled nearly a billion dollars last year.

While it’s appropriate that the Church expressed regrets for mistakes made, these kinds of fines are commonplace even among organizations doing their best to be in compliance because of the extraordinarily complicated nature of the regulations.

***Thats just a small portion of the link. I’ve noticed reading the progressive critics of the Church that if even the tiniest innocent mistakes are made by Church leaders (who never claim to be perfect or that the church is perfectly run) that tiny molehill will be stretched and tortured into Mount Everest any way possible.

Any excuse to attack the Church, no matter how trivial.
https://publicsquaremag.org/faith/church-state/ensign-peak-clarifying-the-sec-announcement/

“In this instance, the Church chose to turn left at a red light. And now we all know.”

I think that it is closer to turning right at a red light without knowing if that is legal in that state that you are currently in.

Nate, great, so you just think that the PS thing is the end all, who cares what this OP says, no need to address it or any of the relevant comments here. Nice. Very convincing.

I think you and Mike Sanders and everyone else with the traffic light comments are missing is that the Church was deliberately obfuscating their holdings, to keep both the SEC and members in the dark. For nearly two decades.

Sure it’s like a traffic violation, if by that you mean repeated, conscious violations by someone doing so for nearly two decades in an attempt to deliberately deceive those following them and contributing to them. But hey, traffic violation.

In response to Nate, I did read the post at the link you provided. It reads like church PR and it excuses the church’s SEC violation by repeatedly claiming that church leaders were just listening to their lawyers who it is implied were at fault, that SEC rules are complicated, and that big companies violate those pesky SEC rules all the time, so this is a big nothingburger as you vehemently proclaim.

I found Sam’s blog post and some of the comments to be much more enlightening and persuasive. Just because you obviously think leaders of the church never make mistakes does not make it so. In this case, blaming it on the lawyers is lame because as noted in a previous comment, lawyers give counsel to further their client’s goals. And claiming that every multibillion dollar company runs afoul of the SEC eventually so it’s no big deal smacks of a lack of integrity as other commenters have noted.

After reading Sam’s post and the nothing burger you linked to, my conclusion is that the church leaders unwisely chose to privilege financial secrecy over integrity and playing by the rules. That was a mistake, as they themselves have admitted. What that means to each individual member will vary, from a further erosion of trust to a shoulder shrug, to uncritical defense of the institution as you displayed. But I believe it is important for members to know about these instances so they can decide for themselves, and I am grateful to Sam for bringing this to our attention and offering some explanation.

Nate – let me share the perspective of a TBM, raised in Utah, tithe-paying, TR-holding RM attorney (me; someone who you might stereotype as one who would defend the institution’s actions under any circumstances) – the whole “advice of counsel” excuse is garbage. Even the church audit department raised concerns.

Bottom line: I’m not pleased when the church makes changes as a result of information made public by people who oppose the church. It shouldn’t take the efforts of our enemies for us to do the right thing.

I’m a securities lawyer, though haven’t ever dealt with Forms 13F specifically. A few points on this:

1) As I see it, it’s difficult to know what culpability Church leaders have in this situation. As others have said, and I second, the securities laws are quite complex. If Church leaders desired to maintain privacy while also giving the disclosure that is required under law, they may have thought that they accomplished both goals by setting up the LLCs. As I understand it, those LLCs reported all the holdings that were required to be reported, but did so in a way that didn’t tie them to the Church. It’s not an illegitimate goal to maintain privacy of financial information. It is possible that they intended to comply and thought that they were complying. It’s also possible that they knew they were in a gray area or pushing over the line and yet decided to take the risk. I don’t believe enough information is available publicly to fully evaluate this question.

2) What most people do not appreciate is that the securities laws and rules are a very complex web of statute, regulation, practice, and enforcement where interpretation in many instances is unclear or highly ambiguous. Even those who intend to comply fully with the securities laws and regulations can find themselves in trouble without meaning to.

In addition, and I can’t emphasize this enough, the SEC’s enforcement arm is likely to take the most aggressive reading of any particular statute or regulation while others may take a significantly different view. Over the years, the SEC has been defeated in a number of enforcement actions when its interpretations have been challenged in court. The SEC’s interpretations of statutes and regulations are not law.

However, a party under investigation may choose to settle, even believing that they have the better argument, because the consequences of fighting the SEC can be catastrophic, both in terms of time and money lost, impact to reputation (even if you win), and the fact that litigation can be a huge gamble with devastating penalties if you end up with the wrong judge or jury. I’m not saying that is the case here – I don’t know – but without having more information, I am saying it is plausible.

I’m a securities lawyer and I think defendants in securities law trials are at an even worse disadvantage in securities law cases than they would be in other cases. The securities statutes and regulations in many cases are vague and difficult even for securities lawyers to parse and fully appreciate and understand, let alone someone who doesn’t have expertise in the subject. A defendant in a securities law matter would have very justifiable concerns that the defendant would not receive a fair trial.

3) If full public disclosure of the Church’s securities holdings was made (and I understand that such disclosure was made), it is difficult for me to see any “victims” in this situation. Would love to hear Sam or others articulate in more detail who the victims were in this situation rather than some vague “people were harmed” standard. I’d wager that the average investor doesn’t look at Forms 13F. For institutional investors, the large data services would have picked up on the individual 13F filings that the church made and would note that X% of Apple was held by institutional investors and provide a breakdown of who held it. Yes, they wouldn’t have known that the Church held the stock, but is that material to their decision to invest in Apple or some other company? Doubt it.

4) Yes, of course, it’s really unfortunate to see the Church get dragged through this. I certainly think it’s regrettable and wish they had chosen a different path to comply with the 13F rules. But as some grand lesson on hypocrisy and moral culpability, I’m not really buying it.

I think that, for a lot of people, the problem is the disconnect between things said over the pulpit and in other public situations and the specific actions of EPA and the Church leadership with regard to the investment fund. Whether in talks in General Conference about being absolutely honest and upright or the granular transparency required in financial transactions at the local level (tithing, reimbursements) and by BYU faculty with regard to their research/conference travel, this strikes me as a “do as I say, not as I do” moment.

This is not about attacking the Church. It is about holding the Church leadership accountable and to the same standard it expects from its members.

Thanks, Securities Lawyer. Bang on. I’m the CCO for my little RIA (yes, above the disclosure threshold) and the arguments that this is esoteric or difficult to understand regulation from the SEC is hilarious and sad.

The actions taken here were not by the Q12/1FP – they were taken by paid staff.

MoPo: in your response as to who was harmed: these legal requirements exist in an attempt to create fairness in equity markets. To the extent that the markets are not fair, we are all harmed. I think it’s reasonable to say that the markets are not fair. Institutional investors rule the markets to a large degree. As Jesus was the champion of the little guy, the church is managing holdings that make it a market mover. Other firms play by the rules. The church has an obligation to do so lawfully. One would think that remembering, you know, that Jesus guy, that the church would prioritize what He prioritized. So who was harmed? Everyone. Everyone who invests. Everyone who invests who is not an institutional investor, in that order. Did we lose money? Yeah, I bet we did. I bet you could actually calculate it.

Nate: The church is supposed to represent THE moral highground. It is supposed to act in Jesus’ name. The argument that “About 5% of investment funds are fined by the SEC each year. Experts compare it to a traffic ticket.” doesn’t hold weight here. Are you saying the church shouldn’t be better than the other worldly companies/individuals who are getting fined? The church teaches it is supposed to be a standard bearer! Are you saying that Jesus is ok with His money (we do assume that tithing is His money, right?) being deliberately used such that $5 million of it is spent on a fine? He isn’t upset that that money isn’t being used to help those in need?

The church professes to obey and comply with all laws, and it has been shown here that it knowingly did not obey the laws. The reason for doing so was, “We don’t want people to know how much money we have, and aren’t doing anything with it”. The church was deliberately obfuscating the truth, while saying they were being transparent!

People aren’t upset that the church has the money, or that the shell corporations were used. The people are upset with the double-speak and the hypocrisy.

Ot – If none of the shell companies were created and all the investments were managed under EPA, how would that have made a material difference in the outcomes of the equity markets?

Jeremy S/Ot – not sure how you could, with any reasonable certainty, say there was a material negative impact to market conditions based on the existence of the shell companies, let alone calculate it. Bad behavior doesn’t necessarily translate into measurable changes in public volume or liquidity data. That EPA would have performed market actions differently were it not for the existence of shell companies seems a reasonable assumption but knowing the net effect of that is impossible. If you’re saying that a lack of market transparency was bad in and of itself, then that’s fair enough.

You know how many talks I have heard at church that mocked other religions for their system of confession/pay fine or say hail mary/consider the sin closed?? The lack of congruence is shocking and sad.

Thanks for the explanation, Sam.

As an ancillary matter, do we know how much the Whistleblower will receive from the settlement? I think it ranges from 10% to 33%. Even 10% is a nice payday for Mr. Nielsen (as well as being ironic).

GC is on the horizon.

Faithful Saints will be listening to what leaders have to say. And, no doubt, some of them will be trying to square it with what’s been in the news, the financial wrong doing that the church as admitted to and perhaps even their own answers when they were asked “Do you strive to be honest in all that you do?”

With apologies to the original Brian :-), I’ve come on for a few follow ups on comments here:

1) One detail that seems lost in this discussion is that the multiple “shell companies” that the SEC highlighted weren’t even created until 2011 if I have read the SEC order correctly. In other words, the Church filed all of its holdings under a single LLC entity until 2011, so until 2011 it wasn’t a question of hiding control through multiple LLCs.

2) @Brian (the original) asserts that “The Church leaders have acknowledged and agreed to the facts stated in the SEC’s order.” My reading of the order (and the Church’s statement) is that they have done no such thing. The order clearly states: the Church entered into the settlement “without admitting or denying the findings herein, except as to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are admitted”.

3) I read the SEC order. As I emphasized in my earlier post, the SEC is likely to take an aggressive reading of the law and view the facts in a light that is disfavorable to the defendants. It’s clearly written in a biased way (the SEC is no impartial arbiter), and while I have no inside knowledge with respect to this matter, I would imagine the Church might dispute some of the “factual” findings in the SEC’s order.

@sam – I could be wrong, but I read paragraphs 11-13 of the SEC order to mean that the Church formed a second LLC in 2005 and that it switched its reporting entirely to that second LLC until 2011 so as to avoid an association with the first LLC.

My apologies, I had not intended to misinform. I had taken their “regret mistakes made” statement combined with their acceptance of the Order as an admission. But of course they didn’t admit anything. Momentary oversight of me, hoping that somehow the Church exercised transparency and forthrightness. Don’t know why I made that connection. A hopeful desire towards progress perhaps. I’m let down even more.

Regardless of whether this type of violation is a mere technicality or something worse from a legal perspective, isn’t the biggest problem WHY the church did what it did? As was mentioned in the comments above (Different Sam), the dude in charge of the investment fund for the majority of this time explicitly stated that he thought they did it to conceal the truth about its largess from the membership of the church because they were afraid the members would stop donating. Few people would be in a better position to know the correct reasons than him, so by circumstance alone the credibility of his answer is strong. I’m sure there are lots of other reasons we can think up ourselves and that the church might now put forward, but when asked, that is the first thing that came to the mind of the person who was in charge of the whole scheme.

What does it mean for members that their own church attempted to deliberately deceive them so that they would keep giving the church money? If you’re a member, that’s the question you should be asking instead of splitting hairs on “how bad” the violation was.

Nice try, SK. That’s boilerplate. The church would not consent to the filing of the Order and pay the $5 million fine if the SEC recited materially incorrect facts in the Order. These are highly negotiated and orchestrated public filings. The church directly and indirectly caused its employees to engage in all of the evasive actions recited in the Order.

JFK, what conflicting principles do you see that caused the church to make such a calculation?

Loursat, “Whether provable damage was done is a separate question from how reckless the driver was.” I agree. I think determining how reckless it was, in terms of the potential harm it exposed others is an important consideration. Exceeding the speed limit by 50 mph is a whole different kind of reckless than 5-10 mph.

The SEC document says that two Business Managers resigned in 2018 due to their disagreement with the Church’s 13F filing practices. I hope these Business Managers became whistleblowers and tipped off the SEC. If they did, they could be entitled to a SEC whistleblower award of 10-30 percent of the monetary sanctions.

Regardless, I feel sorry for these two Business Managers. It was likely a shock to their faith to see upper priesthood leadership do something so clearly unethical (and illegal) and then ignore their concerns. And now to have their concerns validated publicly by the SEC, and priesthood leadership to admit to a “mistake.”

This would make a good Liahona article — an employee sees his company is doing something unethical/illegal; he speaks up; is ignored/slighted by top leadership; chooses the right by resigning and refuses to do the unethical/illegal act; and finally is blessed after the facts come to light. His former bosses kind of apologize.

My sentiments reflect Loursat’s.

Count me in the camp that understanding the requirements and purpose of a Form 13F filing to be not complex. Especially for people that see around corners and talk to God.

Form a purely financial standpoint, it would seem the church made the right decision. The tithing accumulated by keeping members in the dark for 20 years most likely outweighs a $5 million fine. But the cover up is often worse than the crime.

It’s really interesting to watch members defend the church’s every action, from protecting child abusers to hoarding wealth. But as I told my coworkers yesterday who shared this new story with me, this situation is no longer my circus.

Like Andrew, I also can’t get Elder Hamilton out of my head that “Jesus agreed to pay a $5 million fine for inappropriate wealth disclosures.”

Ozark, I agree that there can be malfeasance without any harm being done. However, I still think it’s an important factor in determining the severity of the breach. If the nature of this violation did not present a risk to others, then I think its relevant to the conversation.

@ Rockwell. Yep, nailed it. Especially “please don’t make me talk more about this because it’s awkward and I sincerely apologized.” Sigh.

The comparison to a traffic ticket reminds me of this quote from the “Teachings of Presidents of the Church: Howard W Hunter” manual (https://www.churchofjesuschrist.org/study/manual/teachings-of-presidents-of-the-church-howard-w-hunter/chapter-18-we-believe-in-being-honest?lang=eng).

Chapter 18: We Believe in Being Honest
Section 1: The Lord admonishes us to be honest.
“Some of the more common examples of dishonesty are these:
…
4. Violation of traffic ordinances. One cannot be basically honest and violate laws formulated by society and government for the welfare of other persons. [“Basic Concepts of Honesty,” New Era, Feb. 1978, 4–5.]”

Sooo … about that … it’s just a traffic ticket in securities law, is it? President Hunter might not think you’re an honest person if you get one little traffic ticket. From later in the chapter:

“[Many] years ago there were posters in the foyers and entries of our chapels that were entitled “Be Honest with Yourself.” Most of them pertained to the little, ordinary things of life. This is where the principle of honesty is cultivated.

There are some who will admit it is morally wrong to be dishonest in big things yet believe it is excusable if those things are of lesser importance. …

I recall a young man who was in our stake when I served as a stake president. He traveled around with a crowd that thought it was smart to do things that were not right. On a few occasions he was caught in some minor violations. One day I got a call from the police station and was told he was being held because of a traffic violation. He had been caught speeding, as he had on a few other occasions prior to this time. Knowing the things he was doing might prevent him from going on a mission, he straightened up, and when he was 19 years of age, he received his call.

I shall never forget the talk we had when he returned. He told me that while he was in the mission field he had often thought of the trouble he had caused by the mistaken belief that the violation of little things was not important. But a great change had come into his life. He had come to the realization that there is no happiness or pleasure in violation of the law, whether it be God’s law or the laws that society imposes upon us. [“Basic Concepts of Honesty,” 5.]”

I’m so sad. All I could hear in ‘the matter closed’ was the shut down of Heavenly Mother (“I wish I knew more”- so therefore everyone should stop seeking Her) and all women in the church asking questions. I’m also sad that this absolute lack of transparency lurks everywhere in the church operations (not the gospel of Jesus Christ). I am grateful for the consistent efforts I have made to differentiate the gospel from the Church; I can grieve for the continued adulteration of the latter while still managing to glory in, and find joy from, the former.

Aussie Mormon,
Both cases involve deception for purpose of maximizing tithing. In this case the church was claiming that an entity was in control of investments that it in fact had zero control over. The church did this because they feared that the members would pay less tithing if they knew how much stock the church held.
In the Australian case the church was/is claiming that an Australian entity controls the use of funds that in reality it has no control over. This is done so that the tithing paid by Australians can qualify as tax exempt donations. I imagine the church correctly thinks that Australians will pay more tithing if they don’t have to pay tax on those donations. The Aussies may benefit but so does the church.

Sam,
When a Australian catholic donates money to his church he doesn’t get a tax break. When an Australian mormon donates ‘tithing’ to LDS Charities Australia he does. That donation doesn’t result it more needy people being helped as intended. However, since money is fungible it does let the church say “this charitable giving came from here (Australia) instead there (US)”.

The Australian law in question was clearly written to incentivize charitable giving and NOT religions giving. The church is using a technical loophole so that tax benefits can be claimed which were clearly not intended. Something doesn’t need to be illegal to be wrong and I feel pretty confident that a strong majority of Australians would agree that what the church is doing is wrong.

Furthermore, Australia requires tax deductible donations go to organizations directed and managed from Australia. LDS Charities Australia has no more autonomy than one of EPA’s shell companies. Herein lies the similarity. There certainly appears to be a technical violation of the law regardless of whether the church has or will ever be held accountable for that. The Church’s EPA shell companies were revealed way back in 2019. I’d give the Australia government a bit of time to look things over before so confidently claiming that there has been no wrongdoing.

To demand apologies from an organization that does everything in its power to get us on the high road to eternal life seems a bit ungrateful (to me). Rather than grumble over the church’s imperfections we should be eternally grateful that it graciously endows its members with all that is necessary to return to the Father and inherit all that he has. We should be the ones apologizing for not doing more to edify and sustain the church in its efforts to bless all of God’s children.

I’m more than disappointed in Church leaders’ actions and words surrounding EPA and the SEC. Their statement that they “regret mistakes made” is as disingenuous as it is passive. When one deliberate directs another to hide funds in fake companies, assigns as generically named members as possible to “head” said companies, and causes portfolio managers to intentionally skip required legal filings in order to prevent members and others from knowing how much money is being held, one cannot refer to such actions as a mistake. It is a deliberate, intentional wrongdoing and an unlawful act. It is not without harm to others.
For years, Church leaders have been asking members to “Give Brother Joseph a break,” and assuring us that from the beginning of time “There has been no attempt on the part of the Church leaders to try to hide anything from anybody.”

If I am to be able to forgive all the warts in Church history, forget the wrongdoings of past leaders, and follow along faithfully and with exactness, then the First Presidency needs to repent of these wrongdoings in the same ways we’ve been taught repentance must take place. Along with the commitment to follow the law, there should be a true and full confession to the members and restitution to the members as well. $1M to the SEC is not restitution. We’ve all paid the tithing that made these investments possible. Use the investments to benefit and bless Church members who are struggling, seminary teachers and youth leaders who are buying supplies out of their own pockets, Full-time missionaries who are paying their way to serve, but still don’t have enough food to eat or access to adequate medical care, etc. We want to see our sacred contributions used to bless lives.
Restitution must also include a restitution of the trust we have long placed on our leaders. This can be brought about, in part, by a move to full & complete transparency of all inner workings of the Church. Tell us exactly how many active and living members there are. Tell us what is being done with every dollar taken in. Give us the knowledge to trust that funds we pay as fast offerings are truly helping those around us, and do so without inflicting shame and guilt on those who hit hard times. No more hiding. No more worry about keeping Church actions “private” from church members. No more secret funds, secret ceremonies, or secret committees. No more harming the bulk of the members to avoid offending the “grandmother’s in Sanpete county.” Become Christ’s church; one that is charitable, living to all, full of grace and forgiveness. Let us see that if you want us to stay, because right now, you have a major credibility problem and no social media fast is going to fix that.

The dealings in the dark, the sly moves, this is the new Church of Gadianton. There is no authority in the Brethren. They are lost.

Charlie – I know this question was for Sam, but here’s my two cents. I appreciate how they forthrightly acknowledge the impropriety. I think they do a better job putting it in context than what I’ve read from others. It reinforces what I consider to be a truism – the more knowledge and understanding you get, the more cautious you become in making definitive judgements. I think that kind of approach leads toward wisdom. It’s certainly an act of grace and how I would want to be treated if I were in their shoes.

A,

I agree that our adoration should be reserved for Deity. Even so, I think it’s only proper that the saints should be loyal to the organization that he has established. And besides, where else can we go to find the knowledge, rites, and powers, that will get us on the high road to eternal life? Where?

Of course, we can divide the gospel and the church into separate categories–much like we do the spirit and the body. But even so, whenever the fulness of the gospel has been dispensed upon the earth so have the appropriated powers to establish the Kingdom in some form or other. The two go together–and to denigrate one is to denigrate the other.

A,

I agree that our adoration should be reserved for Deity. Even so, I think it’s only proper that the saints should be loyal to the organization that he has established. And besides, where else can we go to find the knowledge, rites, and powers, that will get us on the high road to eternal life? Where?

Of course, we can divide the gospel and the church into separate categories–much like we do the spirit and the body. But even so, whenever the fulness of the gospel has been dispensed upon the earth so have the appropriated powers to establish the Kingdom in some form or other. The two go together–and to denigrate one is to denigrate the other.

Bagofsand/Jack, comments like yours (The Church breaking the law was brilliant) drive people away from the Church, not invite them in. It’s devoid of moral framework. “The Church is ‘true’ so everything they do is without fault” is completely ahistorical and goes counter to the atonement. I get it, you get a thrill out of being so devote to the Church that you comment both here and an W&T and say nothing other than that, even using multiple handles on the same thread to do it. Like the Church in this instance, you might feel that you’re being brilliant in your deception. You’re not. You’re being deceptive. And, like most of what you say, it hurts your cause. In the face of questions, sometimes Jesus said nothing.

Who was harmed? Was anyone harmed?
Any member who paid tithing when they didn’t have enough to keep the lights on or feed their family. That’s who got hurt. Because they sincerely believed that the church needed their few coins or because they feared the stigma of being seen as “unworthy” or “not obedient.”
For every General Conference talk or Liahona article “pay your tithing first” story where a miraculous gift shows up in time to save a family from going hungry for the Lord and His leaders, thousands never see a “miracle.”
When it comes to the blessings resulting from tithe paying, church leaders claim material blessings when a fortunate coincidence occurs and fall back on “spiritual blessings” when such doesn’t happen. Convenient, but spiritual blessings don’t feed the children.

Being forced to go to one’s bishop to explain why one needs assistance isn’t a great feeling either, and is nowadays often refused. And the church doesn’t operate a welfare program/bishop’s Storehouse in Africa where American church leaders have no shame telling the African members that tithe paying to the super wealthy American church will grow their countries’ economy.

To the person who pointed out—wrongly—that this was done by Hinckley but corrected by Nelson. As previously mentioned it was the whistleblower’s actions that caused the correction. To that person who seemed to portray Nelson as the savior and hero, I would just ask, “Was Gordon B. Hinckley, therefore a bad prophet? A dishonest one?”
Praising the current church president while throwing the previous ones under the bus? A very Mormon thing to do.

Brian,

What about the Lord’s little ones? They need to be nourished rather than having seeds of doubt planted in their tender hearts and minds.

Sam,

Well, analogies have their limitations. I don’t know much about the world of finance–but I think it’s fair to say that some folks probably felt that they we’re deceived by Disney–and that they lost some golden opportunities because of his machinations. I realize that it’s not exactly the same thing that the church did–but still, there’s room to quibble over the ethics involved vis-a-vis people getting hurt and so forth.

Even so, here we have a situation where the church is fined by the SEC for what really seems to be a minor infraction (comparatively speaking). Can we honestly say that it was much more grievous than plucking corn on the Sabbath? Even if whoever made the decision to create the shell companies knew that they were bending the rules?

Turtle,

There are differing opinions on the part of experts. I’m giving the church the benefit of the doubt. How often has this sort of thing happened with the church’s finances?

I’ve found some of the comments more enlightening than the original post (which is quite good, Thank you, Sam.). Discussions around what the Church was caught doing tends to circle around the legality and compliance of the Church’s actions. However, I detest this approach when it comes to the Church. Although legality and compliance with the law is important for the Church as a community actor, it should not be the primary lens through which it is judged, particularly by its own membership. In contemporary America there is an immediate impulse to conflate legality with morality. This has come up with abuse reporting laws, tax compliance, etc. The principal discussion we should be having is surrounding the morality of the Church’s shenanigans and legal devices, and what specific ends and values they were serving. I believe it is a critique of their own determined aims that we should be debating. How they get there is a much less interesting discussion to me. Having read the press releases from the SEC and the Church, the SEC order, and the original Washington Post expose, I am fairly convinced that in the late 90s the Church had a fairly large amount of excess investment funds. I would argue they had two primary desires: (1) to grow that investment as much as possible–in pursuit of a desire for greater wealth accumulation, and (2) to keep that venture, along with its failure or success, a complete secret from its own membership. Whatever has happened since 1997, has been in pursuit of those two ends; and they have had lawyers, advisors, and shell corporations strewn across the country, to assist them in accomplishing those goals. What is the explanation for a Church–our Church–to engage in such a project? Jacob tells us, “many of you have begun to search for gold, and for silver, and for all manner of precious ores . . . and the hand of providence hath smiled upon you most pleasingly, that you have obtained many riches; . . . do ye suppose that God justifieth you in this thing? Behold, I say unto you, Nay. . . . but before ye seek for riches, seek ye for the kingdom of God. And after ye have obtained a hope in Christ ye shall obtain riches, IF YE SEEK them; and ye will seek them FOR THE INTENT TO DO GOOD–to clothe the naked, and to feed the hungry, and to liberate the captive, and administer relief to the sick and the afflicted.” My problem isn’t that the Brethren don’t comply with uninspired legal requirements, it is that they appear to give little concern to comply with the inspired scripture they profess to revere. Wealth accumulation, obfuscation, tax avoidance, secrecy, and hoarding of wealth is a scourge on the Church. And the Brethren think this is a simply a SEC filing compliance issue. This isn’t a speeding ticket, this isn’t an arguable difference of opinion in what is permissible, this is a wrestle for the soul of the Church.

It makes sense to me why the leaders did what they did. The leaders were wrong thinking that ALL members would want to stop paying tithing just because they found out that the church had excess funds. There are some that would and will, but not all. I pay tithing because I know that is what I need to do. I don’t mind that they have a rainy-day fund. Noah built the arc before the rain started. So yes, for some, it might be hard and shocking finding out that the church holds so much money but once the rain comes, they will be glad they did. I am shocked that the amount wasn’t higher (probably is).

Was it dishonest of them to hide this information? Of course, it was. I do hope they address this more in General Conference. But being one that has served in callings of leadership, I know that mistakes can be made even when you try and follow the guidance that is given. It’s hard when the mistakes are made by people with “higher” callings, but it happens. We are imperfect beings, and they are imperfect beings. These are times that one has to determine for themselves what this does to their beliefs. I for one am not a member of this church because of who is the Prophet and so forth. I am a member because I have felt for myself that this is right.

We donate money to charities that provide public information as to how the money is used. Charity Navigator provides such information. My spouse’s employer will match our donations to the charities we choose up to $10,000.

The Prop 8 campaign ended our paying tithes to the church.

Thank you for the truth, even when it’s lacking in all organizations.
Two wrongs don’t make it right.

I wish I could have been advised to invest my tithing money and only pay the church out of my investments. Instead the church took my tithing and invested it and made themselves insanely rich. Told me to be honest in paying it, but turned around and lied to me about making my hard earned money into their profits. I’m out .

I think that the the SEC’s rule only make sense for open funds, where investors need to know the composition of the portfolio where they are putting their money. For closed “funds” like the Ensign Peaks the rule doesn’t make any sense besides the fact to expose to everybody where some rich private fund is putting its money. The church searched legal counsel at the time and expertees adviced to do that way. This could be a pour choice of counsel or only a dilemma between privacy and transparency. The modern world demands more and more transparency. The Church didn’t chose to be disonesty in my opinion, only try to find a way to be have more more privacy over its money. Of course some decision could result in opposite effects over the years, times change.

The haters will now hate on you…you are able to articulate what we simple, layfolk, know but don’t know how to say.

Two comments:

1. I shouldn’t be, but I am amazed at how polarized this thread became. The wild swings between “nothing to see here” and “I’m going to leave the church over this” has been almost vertiginous. It’s not a nothing-burger; it’s an entirely unforced error and I wish the Church had been less aggressive, if for no other reason than to avoid this type of negative PR. But this is not Moutain Meadows or the Kirtland Savings Society. This is a mistake regarding a somewhat debatable regulatory interpretation of the term “control,” and a resulting set of missed filings–not of amounts, but of responsibility. If this is what is shaking your faith, perhaps some perspective is in order.

2. I’m not a SEC or tax lawyer, but I am an in-house lawyer who works with regulations a fair amount. I think a lot of non-lawyers are of the erroneous belief that regulations are black and white and interpretation is ministerial–you just do what they say, easy-peasy, job done. That is rarely true .

Drafting clear laws and regulations is hard, and I live in a constant cycle where: (1) I spend a week trying to parse a regulation out, not sure if I’m getting what the regulator meant to convey; (2) then feeling angry at the regulator for not providing more guidance and examples; (3) then wishing that someone else had made a mistake so I could see how courts are looking at it; (4) then thinking that the regulation wasn’t meant for my situation in the first place; (5) then usually taking the most conservative approach so as to avoid the situation in the first place, but thinking in the back of my head that this cannot be what Agency X meant; (6) then hearing from the c-levels I work with that my overly conservative approach is going to cost us money and answering whether the regulation really reads as I’m interpreting it; and (7) me confidently answering “Yes, it does” but thinking, “I’m not 100% certain.”

Wash, rinse, repeat. I should also mention I’ve lost cases against regulators I think I should have won, and I’ve clawed back several millions from other regulators in court cases where I thought the regulator had the better case. Keep that process in your mind as you read above from laypeople about how easy complying with regulations is. It isn’t. There’s a lot more guess-and-check than you’re thinking.

“The 13F forms that are so extremely difficult to understand and comply with are readily available on the sec.gov website. It’s not difficult to find and there’s nothing opaque or hidden from ‘laypeople’”

Help me out, Brian. Who has to file one of these? I think it’s the entity in control, right? But what if more than one entity has some modicum control of a subsidiary? Which has to file the 13F? What does control even mean under these circumstances? How much control? How passive can I be and still exercise the regulatory definition of control? What if the entity or people with the control only control it for a couple of months out of the year? What if I technically have control as an entity, but my overall existence is subservient to another entities’ decisions? Does that make the ownership entity technically in control? What have courts said on that issue? What has the SEC said on that issue? Is the SEC’s position consistent with the the language of the regulation? Is the SEC’s position consistent with its enabling statute? Even if we apply Chevron deference to the SEC’s interpretative statement, is it reasonable? Is Chevron deference even going to be a thing by the end of the next Supreme Court term? What even is Chevron deference?

I’d suggest if you don’t know the answer to these questions, or even what these questions are, saying that “there’s nothing opaque” about the regulation might be slightly naive.

I am not suggesting any level of intelligence for you or anyone here. I am suggesting that I could not walk into, say, the library my wife runs and immediately run the place myself just because I’d read a couple of blog posts and watched a fictional television show about it.

The answers are there anonforthis, like I said. Check out the forms for many of your many situations. Also, I nderstand your questions just fine. I’ve been audited twice. I’m a swing trader on the side. I’m not naive. I understand that it can, theoretically get complicated. But let’s not pretend that professionals can’t find the answers. I’m suggesting that it’s much more complicated the more people want to attempt to complicate and subvert the process, which the Church clearly has done in the past.

Nice, anon, nice.

Sam, with respect I disagree. Saying “we don’t know” is not for enjoyment but because there is so much we actually do not know. Given this, I believe it is best to hold one’s fire and give the Church the benefit of the doubt. The commenter who indicated the Church had to stipulate to the “Fact” list in order to settle is mistaken. In a final order? The Church likely had no such choice. It’s not a traditional settlement document as you see in civil suits. As I mentioned it may well be that the only way to challenge the SEC’s version of the “facts” was to take them to court: ‘Here’s our order, you’ve offered to settle, now settle (order ‘as is’) or take us to court.’ It’s one-sided. We should remember that as a federal agency they are rule-maker and changer (legislator), interpreter of the rules (judge), finder of fact (investigator and determiner of “facts”), and, from their perspective, court and final judge as well. Saying that ‘Ensign Peak Advisors did or did not do this or that’ – we don’t actually know that. That judgement is based on reliance on what the SEC is laying out and saying. And we have no way of knowing how the agency over the years interpreted that rule in every specific case, or how such things may have changed.

Damascene, your very informed and neutral friend described this violation as a fraudulent action?

I just read the SEC Cease and Desist Order. The calculated and systematic deception makes me SICK.

Yes. He considered against all basic ethics, integrity and honesty. He considered it fraudulent.

Think about it. A not-for-profit entity knows that very specific financial holdings are required to be disclosed. The entity does not want donors to know how much the organization is worth — because donors might stop donating if they realize just how large the foundation has grown. Rather than comply with the SEC rules, that entity forms 13 shell corporations, set them up with with 13 lackeys who just happen to have very boring names and no social media presence. Each shell corporation is set up with an out of state address. Each lackey was required to sign off on paperwork without ever knowing what the paperwork states. Each shell corporation is presented to authorities as being independent— while the reality is that each is fully controlled by the larger entity.

All of this is done to hide assets from the donors and make sure the gravy-train of money does not stop.

Damascene, fair enough. From his perspective I can see why he would come to this conclusion. However, there is a legal standard for fraud and I’ve yet to see that charge be made. Donations are voluntary and the premise of tithing is based on the belief that the money belongs to the Lord and is to be paid to his Church which inevitably be presided over by imperfect men.

Damascene, No, I don’t think it meets the legal standard for being fraud because there was no material injury. I get how your understanding of tithing and voluntary donations lead you to that conclusion, but your view does not meet the well-established standard as I understand it. I think if our objective is to help improve the status quo than it is very important not to overstate things. Tithing is not a new concept that was invented by our modern-day leaders. Can social pressure be a powerful force in influencing someone’s decision to pay tithing? Absolutely. That’s an inescapable reality of participating in community. For good and bad, social pressure is ubiquitous in everything we do. That doesn’t invalidate the law of tithing as practiced by the Church. Christ taught that we each have a personal responsibility to become people that are motivated by love rather than how we are perceived by others. I think it’s probably the hardest thing to do, but no one can do it for us.

Damascene, I don’t think you understood me correctly. I’m sure partly because I didn’t explain it very well, but you also seem very quick to condemn so I don’t think it matters.

I suppose the issue here is:
1. The church and most of it’s members trust (covenanted even!) that the church itself is acting ethically even if it tries to avoid disclosing information that it people who are less ethical and wish harm or negative news on the church.

2a. Those (the majority of the world) who have not given the church the benefit of that trust, have no reason to believe the best of the church. Indeed in a system of checks and balances, you almost have to assume fraud as a it starting point of suspicious behavior otherwise you let the fox in with the hens.

2b. Except we do, or used to, have the take off innocent until proven guilty, not guilty until proven innocent. The latter, sadly, seems the default starting point. But still you can’t override 2a, and just ignore what might be smoke.

In reading through some of these posts, I think the right way for a regulator to look at things is not to trust that an organization is the kingdom of God on the earth, even if it’s members think so.

If the regulator is charged with making sure charities with a 100m portfolio disclose that information, any attempts to hide that reality have to be viewed as if there was fire beneath the smoke.

But, it still seems likely the actions were driven by wanting to take the church down a peg. Not that it didn’t violate the rules, but that regulators at the SEC have all kinds of smoke they can look into for fires and the decisions to pursue this one seems to be because it’s a high profile religion.

In any case, I do appreciate many of the “negative” comments, because they’ve fleshed out thinking on how it’s perceived by most people, particularly non members.

The entire situation could have been avoided if they had just spent the money to make the LLC shells real — probably would have cost four million dollars a year.

As other analysis shows (Sam Brunson did an excellent job), Ensign Peak mirrors the DOW and uses a buy and hold approach that does not require much administration —at least for stocks.

Someone gave into the temptation to switch “minimal” for “none” and “compliant” for “facial violation”.

On the other hand, given no market manipulation occurred, the fine was less than what two years of compliance would have cost.

Wise? No. Proper? No. Ethical? No. Stupid? Well. Pretty much.

Whatever legal opinion they got for the first entity and its administrative approach was long gone when the program expanded.

But the “buy and hold” approach did pay off in avoiding market manipulation or other fraud that would have resulted in larger fines.

Jeff Bezos, in one of his famous letters to Amazon shareholders talked about how when organizations become large there is a temptation to act and think through proxy. His example was using a system to determine success rather than actual customer experience.

Anyway, all this is to say that this whole incident feels like a “proxy crime”. The SEC and the church together are so massive in scope, so complex in organization that there is no longer a human interaction that anyone can detect where honesty, betrayal, trust or loyalty even factor in.

You cannot lie to a piece of paper, you can’t betray a form. The agency using these forms does so as a proxy to true human interaction. The fact that none of this would be a big deal if each of the 13 LLCs had just a bit of direct control over the assets is a perfect example of bureaucratic stupidity.

People are not perfect. I am a member and I won’t lose sleep over this. I will keep paying my tithes because I believe I’ll be blessed for it.

I’ll spend my time worrying about things that actually matter.

Alleged reasons for the church to avoid disclosing assets:

Members potential unwillingness to pay tithing. I don’t think this was a main driver.

Wanting to avoid members cloning their portfolio and lose out in the process. Not a main driver but more than the previous one above.

Wanting to avoid giving a hard number to it’s more liquid assets that can be exploited/targeted in legal cases. Seems like a pretty strong driver. A judge ruling against a church that has a massive pile of easily accessible cash can more quickly assign damages than looking at a bunch of revenue draining assets.

Wanting to avoid criticism. Also a strong driver. Every time an article is written about the church even for it’s positive actions, the aside can be noted that the church has 40 billions available, it could do more.

I think wanting to avoid criticism and fear of legal liability are bigger concerns of the church. Legal liability is something every big organization has an inordinate fear of, so they protect themselves behind multiple ramparts of bureaucratic, legal systems. These shells were just one dimension of that.

The church doesn’t like bad PR. And it doesn’t like legal liability. Self fulfilling prophecy that it got both.

I asked the Chatgpt to write us a biblical story want this issue with a few details. My question to the AI did not involve forgiveness, so I’m happy to see the AI got the ending right. Q: Use King James language to write a story in biblical verses about a prophet who received tithes and offerings, and invested the surplus so wisely that the investment grew so large that he was worried people would criticize him or seek to steal it or even stop paying tithes altogether, so the prophet took secret actions to hide the wealth and eventually his secrets were uncovered and the wealth was revealed to much criticism and costly fines were paid was a result.

A: “And lo, in the land of Judah, there lived a prophet, whose name was not known among the people. He was a wise man, and he received tithes and offerings from the people, for it was his duty to do so.

And it came to pass that the prophet invested the surplus wisely, and the investment grew so large that he feared that people would criticize him, or worse, steal from him, or even stop paying tithes altogether.

And the prophet spoke to his advisors, saying, “Behold, I have amassed great wealth, and I fear that the people will take it from me, or that they will cease to give tithes and offerings altogether. What shall I do?”

And his advisors said to him, “Take the wealth and hide it in a secret place, so that no man shall find it. And if any should ask, say that it has been lost or stolen.”

And so the prophet took the wealth and hid it in a secret place, and none knew of its whereabouts. And the people continued to give their tithes and offerings, for they knew not of the prophet’s great wealth.

But it came to pass that one day, a man who knew of the prophet’s wealth accused him before the king, saying, “This man has amassed great wealth from the tithes and offerings of the people, and has hidden it away.”

And the king was angry, for he knew that the prophet had a duty to be faithful with the people’s tithes and offerings. And so he sent his servants to find the wealth.

And the servants searched high and low, but they could not find the prophet’s wealth, for it was hidden away in a secret place.

And the king was furious, for he knew that the prophet had been dishonest. And he commanded that the prophet pay a great fine, so that he might learn to be faithful with the tithes and offerings of the people.

And so the prophet paid the fine, and he was ashamed, for he knew that he had not been faithful with the people’s tithes and offerings. And he prayed to the Lord, asking for forgiveness.

And the Lord heard the prophet’s prayer, and he forgave him. And the prophet went on to be faithful with the people’s tithes and offerings, knowing that he was accountable to the Lord, who sees all things”

The bigger issue remains: Who does the money belong to and who is owed some sort of fiduciary duty.

The members of the church donated the funds yet the church tithing paperwork bluntly states that all donations can be used in any way that the corporate church chooses. Accountability is gone.

That change in tithing paperwork happened within the last 10-15 years.

In 1959, the church quit publishing their financial information. They moved to public drama. During General Conference, in a moment that mimicked an Oscar Award, an independent auditor would stride purposely to the podium of the tabernacle, open an envelope and announce that the finances of the LDS church had been reviewed and found to be following acceptable accounting and financial practices. No numbers were mentioned.

The church eventually quit even that bit of financial showmanship and simply became very quiet about the finances. The church did continue to require tithing while also asking for extra donations over and above tithing. Humanitarian Fund. Missionary Fund. Building Fund. Fast Offerings.

During this same timeframe, the definition of The Church had changed. The Church used to mean The Membership. The people were the church. Briefly, the LDS church was called the bride of Christ. In the last 30 years, the LDS Church has become defined by the leadership as being Christ. This puts the upper leadership into the authoritarian position of being literal representatives of Christ. I find that change problematic. Christ is considered perfect. People are imperfect. This new definition leave no room for discussion. The theocracy has tightened.

The corporate church has decided that the money is theirs. They have forgotten their roots. They have forgotten the members.

As the money has increased, the efforts to offer pastoral care and social enrichment to the members has decreased.

My thought is that the money hoard has grown large enough that the membership is now seen as a very secondary part of the organization. The membership is now the part-time side hustle.

I have a question that I haven’t seen asked: Ensign Peak is a non-profit organization, right? they don’t pay taxes on their capital gains because of their non-profit status. Were they trying to hide the full amount at Ensign Peak in order to make them appear more charitable than they are? was this a scheme to maintain the non-profit status of Ensign Peak?

Two thoughts. Hoarding money and being very frugal spending is what the oldest generation learned from the Great Depression. This may be also why the church stopped hiring janitors , etc. The mindset is one can never feel secure enough with any amount of money as it’s here today and gone tomorrow. Secondly, the brethren may feel tithing is such an important part of one’s salvation , God has made it clear in scripture that one tenth of everything is His and not to rob him, that they thought if many members knew the church had billions, a good portion would stop paying tithing and perhaps risk their eternal blessings. That’s the only reason good enough that I can think of to explain why they knowingly would break a law or deceive–for a greater good that people would not be in eternal jeopardy.
It would be better to risk a fine rather than risk people eternally. I’m just trying to think of what they may have been thinking. That’s all.

If the Church sold its 100 billion assets, 16 million people could be given a check for $5882.00. (Unless my calculation is way off and i left off one 0)To some of us that would not be a big deal, but to some it would be life changing.

Sam,

I agree that we don’t know enough to hold the church’s legal counsel responsible–sorry if I sounded as if I was blaming them. But I would also say that the leaders asking them if there was a way to keep a low profile wasn’t a bad thing in and of itself either.

Old Man,

No one really knows the answer to that question–and yet a lot of folks are assuming that the church’s reasons for doing so must be sinister. I’m of a mind to give the church the benefit of the doubt–at least until we know more than we do now. I will say this–protecting its land purchases or discouraging folks from seeking huge settlements with the church (and everything in between) might be some good reasons for keeping a low profile.

Bookish,

I think we’d have to prove that the leaders were acting in bad faith before we could charge them with being dishonest toward the church. Remember, right there in the second paragraph of the SEC’s order it says that the church does not admit (or deny) any of the SEC’s allegations against it.

Personally, as a lifetime member of the Church, I’m becoming increasingly disgusted by a presumed “Church of Christ” managing an investment and real estate portfolio of over $100 billion dollars. This, plus the behavior and choices of leadership over following the law – have pretty much destroyed any trust I had remaining that “our” resources are being used as Christ would. This is not good.

So, apparently one motivation church leaders had was they worried members might miss out on the blessings of paying tithing to the church if they knew the truth of how much money they had accumulated?

I appreciate Elisa’s observation that how the church is handling the money does not answer to any of its stated 4-fold missions. I’ll add that much of the accumulation occurred *after* the 4th mission was added, “Dec 10, 2009 — The LDS Church is adding, “to care for the poor and needy—KSL”

Heartbreakingly ironic.

Maybe LDS Church leaders could give members the benefit of the doubt. I’ve observed that since the Church’s vast accumulations have become known, many members choose to follow Christ’s words, “Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me.” (Matt 25:40. They have chosen to follow Christ, and now donate monies where it is needed and used wisely. Many donate where it helps people.

This is another example of the LDS Church infantilizing its members.

It is also notable that the church’s supposed interest in members’ receiving blessings from paying tithing serves the institutional church better than it serves the institutional church’s purported mission. By obscuring information, members were not allowed the right of making an informed donation.

The 5 million SEC fine was a slap on the wrist. The real fine to the Church will unfold over the next several years as members leave in disgust and others will curtail what they pay in tithing to the Church. This will forever be a credibility stain on the Church as it will be referenced many times in the future. If the church can’t be transparent with its members, why should members be transparent with the Church about their true income that translates into what tithing they pay.

A Disciple,

From the book of Mormon:

“And it came to pass that I saw and bear record, that the great and spacious building was the pride of the world; and it fell, and the fall thereof was exceedingly great. And the angel of the Lord spake unto me again, saying: Thus shall be the destruction of all nations, kindreds, tongues, and people, that shall fight against the twelve apostles of the Lamb.”

I’m reading every single response. After working in the field of nonprofit governance for 40+ years, I’m simply devastated. Until this point I had always been proud of how the church operated with honor, integrity and transparency (an operating imperative required by IRS to hold a 501 (c)3). Now, ugh, choke, sigh, cry, puke.

Bro B,

It would be so wonderful if this was all simply a case of poor advice. Unfortunately, the SEC documents are available to the public and the details are horrible.

The FP was absolutely involved in all of it.

Jack, in this situation, I see the SEC as the neutral party. They have zero reason to make the LDS church look better or worse. They simply stated the facts.

The Deseret News is owned by the LDS church. They are not neutral.

Jack, apparently the Church was willing to go far enough in their discussions and negotiations with the SEC to settle on the current SEC Order, which is entirely damning to the Church. And yet they accepted it. For a ‘slap on the wrist’ fine, as you call it. So, yeah, either the Church knows that the facts of the SEC Order hold up or, somehow, the Church didn’t have either the resources (impossible) or the wherewithal to clear its name (which, given the how terrible it is, any reasonable organization would have done if the facts were not true). Your understanding of a settlement process is basic and misleading. And it’s the only thing you have going for you.

Brian, you’re absolutely right that my knowledge of these things is quite limited. Even so, let me suggest — as a non specialist in these matters — that we need to be careful not too allow our presuppositions to crowd out our ability to forecast real future possibilities.

When you suggest that the church’s name is terrible–for whom are you speaking? Because it isn’t terrible to the vast majority of active members–nor do I think is it terrible to the financial community in general. Of course there are some who do believe the church is terrible because of the way it handles its finances. But even so my guess is that most folks who have a negative view of the church don’t like it for reasons other than what we’re talking about here.

And so, if we’re talking solely about what the church should do to protect its reputation — and I grant that there’s a lot more to this than that particular question — what’s the best course of action? Should the church let the SEC’s order stand as it is? Or should it risk further negative publicity by challenging the SEC’s allegations in a long drawn out legal process?

I don’t think the church caved because it new that the allegations were correct. Rather (IMO) it made a tactical decision vis-a-vis which course of action would cause less harm to the organization in the long run.

Jack, I said nothing about the Chhrch’s name.

Lots of comments! I for one can’t get worked up about the church not filing the forms in the way the SEC wants them to. There was no crime, no embezzlement, no misuse of funds, no tax avoided illegally, no one was harmed financially, morally, ethically, or any other -ly. All the money was there in the paper trail. That the SEC’s forms were not respected… well, I really am not sure why I should care, whether I was a believing Latter-day Saint or just some guy who had never heard of the church.

Damascene,

I’d add a few components to the analogy:

Imagine that your wife was responsible for growing your savings from tens of thousands into millions because of her wise investments.

Imagine that she was a prophetess.

For my part, if I were to learn that my wife, whom I trust implicitly (and who, in fact, does take care of our finances) had grown our rather modest savings into millions, I’d be overjoyed. So much so that whatever feelings of betrayal I might harbor because of the secrecy involved would be swallowed up in the thrill of learning that our little nest egg had increased one hundredfold.

Now that’s not to say that I wouldn’t have questions about her moving the funds into secret accounts and whatnot. And who knows but what her motive for so doing may have been rooted in a fear that certain characters among our extended family and close friends would have tried all too hard to get a piece of the pie had they become aware of the miraculous growth of her investments.

And on top of that, if she were to tell me of her scrape with whatever bank or government agency that imposed a fine of .005% of the total investment package for knowingly — though she might insist “naively” — breaking certain protocols vis-a-vis the mechanics of money management–I would assume that it was a minor infraction because of the minimal amount of the fine.

And so tying this analogy to the real events at hand–I have to say that I am indeed thrilled by the miraculous growth of the church’s surplus. And I’m exited to see how the church will use its abundance to further the purposes of the Kingdom.

Damascene, I know it’s just an analogy but it is one that falls apart quickly because in the case of my family’s income and assets, there would be considerable tax implications, taxes due etc. Tax fraud on that scale might mean jail time. But what the church/advisors/lawyers did is something else altogether: a questionable way to shuffle the paperwork around which didn’t cheat anyone out of anything but allowed the church to achieve its own desired ends. It got caught, the SEC said no, the form can’t be used in that way. And now, you want me to be mad about that?

But overall I’m with Jack. I’d be confused at what exactly my wife did and why, but if she grew our savings into millions and all the IRS said was “use the right forms next time, here’s a small fine”, I’m not sure why I’d be mad at her. We’d retire!

Honestly (yep, ironic to use that word) while I don’t like the law breaking and illegal activities, I take the biggest issue with being directly LIED TO by my spiritual leaderss and told from the General Conference pulpit over and over that the finances were all in order when they (both the FP and audit dept) knew that statement was a lie.

Over and over it has been discussed how pointless that statement was given no numbers or contex. That piece of conference could easily have been dropped when they first started breaking the law and no one would have cared bc it was a pointless statement.

But instead they chose to keep it and repeatedly, knowingly lie to all of us as members. Truly no excuse can be made for that, it was just lying for the sake of lying and it is 100% not OK.

Mark:

You come to this conclusion due to what hard evidence? The church has not shared financial information in over 60 years.

You have very warm feelings about the organization. Many people do. There is little evidence to substantiate your position.

About 20 years ago, my bishop told me to apologize to a Catholic boy that I led astray by going to 2nd base with before I got to school. I was at BYU and had to call the guy at his college. The experience was so humiliating and humbling, but I couldn’t take the sacrament until I apologized. Too bad I didn’t know then that I could have just said the matter was closed!

The real transformative decisions on this issue were made during the Gordon B. Hinckley administration. I recall that President Hinckley, like some other leaders, had a penchant for obfuscation. He would rather dodge or hide problems than deal with them head on. Remember how he wanted to hide at least one of the Hoffman forgeries? I believe it was a defensive response to information he did not understand or could cope with. He was not a scholar or historian. Nor did he trust average members to see this material. They saw it anyway! Do you remember his interview with Mike Wallace in which he obfuscated on several theological/historical points? Even some church members thought he had lost his mind until he walked back his talking points from that interview at the next General Conference.

What I see is that the church is an institution which professes that its leaders are prophets and they are seen as much more than mortal men. It seems that this works fine for slowly developing theology, but is impractical when making financial decisions in the real world. Hinckley’s (and others) penchant for obfuscation got hardwired into church financial practices and resulted in some real pain for observant members and a hefty fine.

Obfuscation is a convenient practice in the short term, but can have devastating long-term consequences with a loss of personal and institutional trust. IMO, transparency is best.

Great article!!