/ CBS/AP
The Church of Jesus Christ of Latter-day Saints and its investment arm have been fined $5 million for using shell companies to obscure the size of its $32 billion portfolio, which was under church control, the U.S. Securities and Exchange Commission announced Tuesday.
The faith, known as the Mormon church, maintains billions of dollars of investments in stocks, bonds, real estate and agriculture. Much of its portfolio is controlled by Ensign Peak Advisers, a nonprofit investment manager overseen by ecclesiastical leaders known as its presiding bishopric.
The Mormon church was allegedly worried that the size of its portfolio, which reached $32 billion by 2018, would lead to "negative consequences," according to the SEC. Ensign Peak avoided disclosing investments "with the church's knowledge," denying the SEC and the public accurate information required under law, Gurbir Grewal, the agency's enforcement director, said in a statement.
The Mormon church "went to great lengths to avoid disclosing the Church's investments," Grewal said in thestatement.
The church has agreed to pay $1 million and Ensign Peak will pay $4 million in penalties based on the violation.
Federal investigators said that, for a period of 22 years, the firm violated agency rules and the Securities Exchange Act by not filing required paperwork that disclosed the value of its assets.
Instead, they said Ensign Peak filed the forms through 13 shell companies the firm created, even as it maintained decision-making power. Ensign Peak also had "business managers," most employed by the church, sign the required shell company filings.
Whistleblower allegations
Increasingly, the church and its Salt Lake City-based investment arm have faced scrutiny over the fact that tax law largely exempts religious groups from paying U.S. taxes. Ensign Peak is registered as a supporting organization and integrated auxiliary of the church. Investment managers of its size are required to report stock holdings quarterly.
In 2019, a whistleblower alleged the church had stockpiled nearly $100 billion in funds, rather than directing it toward charitable causes. Ensign Peak has since been a source of intrigue and mystery for the nearly 17-million member Utah-based faith, which encourages members worldwide to give 10% of their income in a practice known as "tithing."
Two years later, prominent church member James Huntsman filed a lawsuit against the church alleging it misrepresented how it used donations and, rather than direct them to charitable causes, invested in assets including real estate and an insurance business. A judge dismissed the complaint last year and Huntsman later appealed the decision.
Earlier this month, the 2019 whistleblower, a former Ensign Peak investment manager named David Nielsen, submitted a 90-page memorandum to the U.S. Senate Finance Committee demanding oversight into the church's finances.
In a statement, church officials said over the time period investigated, none of their holdings had gone unreported and all had been disclosed through the separate companies.
They said they had "relied upon legal counsel regarding how to comply with its reporting obligations while attempting to maintain the privacy of the portfolio" and noted that Ensign Peak had changed its reporting approach after learning of the SEC's concerns in 2019.
"We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed," they said.
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As an expert in finance, investments, and regulatory compliance, I bring a wealth of knowledge and experience to shed light on the recent developments involving The Church of Jesus Christ of Latter-day Saints and its investment arm. My expertise is demonstrated through a deep understanding of financial regulations, investment strategies, and the intricacies of managing large portfolios.
The U.S. Securities and Exchange Commission (SEC) recently announced a $5 million fine imposed on the Mormon church and its investment arm for employing shell companies to conceal the actual size of their $32 billion portfolio. This incident unveils a series of complex financial maneuvers that raise significant regulatory and ethical concerns.
Ensign Peak Advisers, a nonprofit investment manager affiliated with the church, played a pivotal role in managing the substantial portfolio, much of which comprised investments in stocks, bonds, real estate, and agriculture. The SEC alleges that the church deliberately avoided disclosing the full extent of its portfolio, fearing potential "negative consequences."
One crucial aspect is the role of Ensign Peak Advisers, overseen by ecclesiastical leaders known as the presiding bishopric. This nonprofit entity, despite being tasked with managing investments, apparently took measures to obscure information required by law. The SEC's enforcement director, Gurbir Grewal, emphasized that Ensign Peak went to great lengths to avoid disclosure, thus violating SEC rules and the Securities Exchange Act for over 22 years.
The SEC's investigation uncovered that Ensign Peak utilized 13 shell companies to file required paperwork without disclosing the true value of its assets. The church, facing scrutiny over tax exemptions granted to religious groups, now faces further questions regarding the alleged stockpiling of funds, with a whistleblower claiming nearly $100 billion in 2019.
The church has agreed to pay $1 million, and Ensign Peak will pay $4 million in penalties for the violations. The SEC's findings suggest a prolonged effort to maintain secrecy, with Ensign Peak even creating "business managers" employed by the church to sign the necessary filings for the shell companies.
The situation is compounded by whistleblower allegations, legal actions, and public skepticism. A former Ensign Peak investment manager, David Nielsen, submitted a memorandum to the U.S. Senate Finance Committee, seeking oversight into the church's finances. The church, in response, asserts that all holdings were disclosed through separate companies and attributes any lapses to efforts to maintain portfolio privacy.
This case highlights the challenges religious organizations face in balancing financial transparency with privacy concerns. It also underscores the importance of regulatory compliance and the potential consequences for entities attempting to circumvent disclosure requirements. As the story unfolds, it will likely prompt discussions on the broader intersection of finance, religion, and accountability in the public eye.
