A fund operated by the Mormon Church used a series of shell companies to hide billions of dollars of investments from the public over more than two decades, the US Securities and Exchange Commission said today.
Ensign Peak Advisors, a non-profit that manages investments for the Church of Jesus Christ of Latter Day Saints, was required to disclose its ownership of publicly-traded securities because its portfolio exceeded $100 million. Instead, to hide the scale of the Church’s holdings, Ensign Peak created shell companies around the United States and reported them as the real owners of those securities.
The SEC fined Ensign Peak $4 million and the Church $1 million in order to settle the charges. The total assets the organizations failed to disclose amounted to nearly $38 billion by 2020, when Ensign Peak began properly disclosing its ownership after whistleblowers revealed the size of its operation.
In 2019, the Washington Post reported that a whistleblower revealed to the IRS that Ensign Peak had amassed more than $100 billion. The capital, collected through regular tithes from Mormon faithful, is deployed across hedge funds, public equities, and private lands, and rivals the hoards held by university endowments and sovereign wealth funds.
The Church has said that the money is used to support its extensive missionary and philanthropy work during troubled economic times. But the whistleblower, David Nielsen, alleged that the funds were not used for nonprofit purposes and shouldn’t be tax exempt. The IRS has not taken public action on the allegations and tax attorneys are dubious that the agency will want to take on the Church in a complicated case, compared to the relatively straightforward disclosure issues that SEC targeted today.
Some members of the Church told the Wall Street Journal that more of Ensign Peak’s money should be used more actively to fight poverty rather than being hoarded. Roger Clarke, who leads Ensign Peak, has said that part of the reason the Church sought to conceal its wealth was to ensure continued tithing by believers.
The SEC’s order said that Ensign Peak created 13 LLCs that claimed to control the assets in question, but in fact had no discretion over the fund’s investment strategy. In 2005, per the SEC, a Church employee was publicly linked with one of the LLCs, and leaders urged the creation of a new entity with “better care being taken to ensure that neither the ‘Street’ nor the media [could] connect the new entity to Ensign Peak.”
The social power of religious institutions and their traditional exemption from taxation in many jurisdictions has been used for financial chicanery in the past. Notably, the Catholic Church’s internal bank, the Institute for the Works of Religion, exploited its own network of shell companies to launder the money of wealthy Italians, transfer Nazi gold, and fund Solidarity, the anti-communist organization in Poland.