The Treasury arm of the Mormon Church is under investigation by the Securities and Exchange Commission for efforts to keep its multi-billion dollar mutual fund secret.
Earlier this week, whistleblower David Nielsen, a former employee of Ensign Peak Advisors, the church’s investment firm, testified that the fund maintained unreported overseas accounts, made misleading statements to the IRS, and made fraudulent statements to the SEC.
The SEC has typically imposed fines for these types of violations. According to the Wall Street Journal, the amount of the fines demanded by the investigators is currently unknown. The fund is believed to be managing around $100 billion worth of investments.
An LDS spokesman, Doug Anderson, did not confirm the investigation, telling the newspaper, “The church works with many state regulators to ensure we are complying with the law. We take this responsibility very seriously.”
Dubbed the “rainy day fund,” the church’s biggest investments include Apple, Google’s parent company Alphabet, Tesla, Meta, JP Morgan Chase and Exxon.
The world headquarters of The Church of Jesus Christ of Latter-day Saints in Salt Lake City. Church members must give up 10 percent of their annual income to remain in good standing
Whistleblower David Nielsen, a former employee of Ensign Peak Advisors, the church’s investment firm, testified that the fund maintained accounts abroad, made misleading statements to the IRS, and made fraudulent statements to the SEC
According to current and former employees, the holdings include $40 billion in US stocks, in addition to investments in well-known hedge funds such as Bridgewater Associates LP and Woodland in the Florida Panhandle.
Investment companies are required by law to publish the names of the US stocks they manage. The coverage is known as 13-F.
US law states that ignorance or oversight is not a defense because investigators do not need to show intent to break the law, only that the law was broken.
A former SEC investigator, Robert Plaze, told the WSJ, “The SEC is concerned when people don’t file their 13-F reports because it’s information the market isn’t receiving that it is legally entitled to.” ”
Nielsen first began whistling about Ensign’s activities in 2019. He claimed that the church used charitable donation funds for financial investments.
Church members worldwide are encouraged to give 10 percent of their income to the Church as tithing.
Nielsen argued the church owes billions of dollars in taxes and he wants a cut of that as part of a reward the IRS is offering to whistleblowers.
His report claimed that Ensign made no charitable donations, despite being considered a tax-exempt charity.
He also said the company illegally used tax-exempt donations to salvage two failed business ventures during the recession, specifically a life insurance company and construction of the City Creek Center.
Companies found guilty of reporting crimes are typically fined by the Securities and Exchange Commission
Officials have denied any wrongdoing, and Presiding Bishop Gerald Causse said: “It is not an issue. Tomorrow we can sell it and it will come back with a return.’
This week, Roger Clarke, the leader of Ensign, told the WSJ, “Paying tithing is more of a sense of obligation than that the church needs the money.”
“So they never wanted to be in a position where people felt like they shouldn’t be contributing.”
After Nielsen went public with his allegations, church officials defended how they use and invest donations from members.
The vast majority of member donations are used to fund church operations, temples, missions, education and humanitarian needs, while another portion “is methodically secured through wise financial management and building a prudent reserve for future use,” church spokesman Eric Hawkins said in a statement in December 2019.
Officials admit the fund’s overall size is being kept tightly closed as Ensign Peak relies on tithes of its 16 million followers worldwide.
David Nielsen wants Ensign’s tax withholdings cut as payment for his testimony
Ensign is registered as a Church Sponsorship and Integrated Relief Organization, which allows it to operate as a nonprofit and earn money largely tax-free, as long as it serves religious, educational, or charitable purposes only.
Nielsen claims the Church has not directly funded these three categories for more than two decades.
Aside from public reporting, the church does not share with business partners how much money it and Ensign Peak employees sign on lifetime confidentiality agreements.
Former employees say that current employees are no longer privy to the company’s overall assets and have little knowledge of what the money is being used for.
“We’ve tried to remain reasonably anonymous,” Clarke said. He also said the $100 billion in savings will be used during tough financial times.
A former employee said occasional lunches between Ensign Peak and the church arm raised questions about the purpose of the money.
The church announced last year that since 1985 it has given 197 countries $2.2 billion in aid, including cash, goods and donations in kind.
This week, a statement from the church said it was sending food, clothing, blankets, medical supplies, medicines, shelter, water, toiletries and other items to help victims of this week’s earthquake in Turkey and Syria.
Carolyn Homer, a member in Virginia, decided to tithe less and give more to other charities after learning about Ensign Peak.
Roger Clark (pictured) told WSJ, “Paying tithing is more of a sense of obligation than that the church needs the money.”
Carolyn Homer, a member in Virginia, said this week: “When I hear members of the Church say, ‘It’s none of your business how rich we are,’ to me it accurately reflects the Scriptures that we worship, and that not in the right way’
In the Book of Mormon, God denounces churches for prioritizing wealth over helping the poor.
She said, ‘When I hear members of the Church say, ‘It’s none of your business how rich we are,’ to me it echoes the very scriptures we worship, and not in a good way.”
Ever since Nielsen’s complaint, members have been at odds about tithing and the way the church manages finances.
Lasi Kioa, a 61-year-old Tongan immigrant and lifelong church member, told WSJ, “They are using it well. You help other people. They build the church. I believe in that.’
Member Sam Brunson, a professor of tax law at Loyola University, wants the church to use the $100 billion to help those in need.
“They could make a good contribution to eradicating malaria or repairing Puerto Rico’s power grid,” he said, adding that the church could potentially change the way it approaches tithing and have charitable members instead could have donated.
Tax attorneys have debated whether Ensign Peak broke any laws, as Nielsen claims, but Brunson doesn’t think so.
Though frustrating, he says the Church’s actions are legal.
He said, “I’m a stakeholder in the church, and society has a stake in the church too. Even though I’m willing to tithe blindly, I’d love to see what happens with that money.’