Mormon church fined for scheme to hide $32 billion investment portfolio
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 the statement.
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.