For the past week, the church has been all over the news. Not for something they will want to draw publicity. The U.S. Securities and Exchange Commission announced that the Church has been fined $5 Million for using shell companies to obscure the size of its investment portfolio.
On February 21st, the SEC issued a press release stating they had charged the church and its investment partner, Ensign Peak with violations of the law. Ensign Peak is the investment partner company of the church. Ensign Peak was created by the church and is managed by “senior church leaders”, meaning the First Presidency and Presiding Bishopric. These investments started with the excess tithing money received by the church and now includes reinvested gains and other funds from church-owned businesses. Ensign Peak acts technically as a nonprofit entity as part of the charitable organization that is the church. Even though it invests massive amounts of money, Ensign Peak doesn’t pay taxes, just like the church. But, it is required to file certain forms called 13F forms to disclose investments once they reach a certain size. Rather than file these 13F forms with the SEC according to the law, the church set up dozens of shell companies to “manage” these investments in order to keep things messy and hard to follow. The First Presidency approved these shell companies to be created with “better care being taken to ensure that neither the ‘Street’ nor the media [could] connect the new entity to Ensign Peak”.
These companies however we’re basically fake companies that didn’t baggage the funds at all, they just signed paperwork to illegally state that the companies existed and managed funds. They desperately wanted to hide their investments so the public and church members wouldn’t know how much they had. The church senior leadership did this because they were afraid if members knew how much money the church had, that they would stop paying their tithing or pay fewer tithes to the church.
The problems started for Ensign Peak when some church employees figured out that the church was not being truthful or lawful and raised concerns internally, but the warnings were ignored. They then reported their suspicions to the SEC as whistleblowers. At the time the church issued a press release assuring everyone that “The Church complies with all applicable law governing our donations, investments, taxes, and reserves.” Now, after investigations, the SEC finds the church guilty of skirting the laws and misrepresenting and misstating their required filings. The church reached a settlement with the SEC.
They have proposed to pay a five million dollar fine to the SEC and the SEC has agreed to the settlement. Ensign Peak with pay $4M and the church will pay $1M. The church is responsible for paying a portion because they approved the methods and were willing and knowledgeable participants in the fraud. They now claim they will act according to the law. This probably means they will actually begin to use these shell companies fully to manage the funds so they don’t have to disclose their investments.
Press Release – SEC Charges Mormon Church for Disclosure Failures and Misstated Filings
Here’s the rather legal-sounding open release from the SEC:
Washington D.C., Feb. 21, 2023 —
The Securities and Exchange Commission today announced charges against Ensign Peak Advisers Inc., a non-profit entity operated by The Church of Jesus Christ of Latter-day Saints to manage the Church’s investments, for failing to file forms that would have disclosed the Church’s equity investments, and for instead filing forms for shell companies that obscured the Church’s portfolio and misstated Ensign Peak’s control over the Church’s investment decisions. The SEC also announced charges against the Church for causing these violations. To settle the charges, Ensign Peak agreed to pay a $4 million penalty and the Church agreed to pay a $1 million penalty.
SEC Charges The Church of Jesus Christ of Latter-day Saints and Its Investment Management Company for Disclosure Failures and Misstated Filings
https://www.sec.gov/news/press-release/2023-35
News Coverage from Everywhere
Nearly every major news sure and newspaper has covered the story, but they don’t tend to get into the details of what the church did wrong and why they’re paying this settlement. They don’t tend to detail that the senior church leaders, meaning the First Presidency and Presiding Bishopric, perpetuated real fraud with the goal of misrepresenting their investments so that the church members would keep donating the church 10% of all their income.
The faith, widely 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 church has agreed to pay $1 million and Ensign Peak will pay $4 million in penalties based on the violation.
Ensign Peak avoided disclosing investments “with the church’s knowledge,” denying the SEC and the public of accurate information required under law.
Mormon church fined for obscuring $32 billion investment portfolio
https://apnews.com/article/mormonism-us-securities-and-exchange-commission-religion-business-a598c9ef9544f57e0b60d5ca80774bf7
The church was motivated to obscure its holdings in order to misrepresent the number of its investments and just how much money the church has on hand. Their reason for this is so that members would not know and thus, be less persuaded to pay tithing to the church. The church uses tithing for operational expenses, and then the extra is invested into these holdings and obscured from members (as well as from the governments).
https://missedinsunday.com/memes/finances/contribution/
Church Issues Press Release
The church was quick to respond with its own press release on the same day as the SEC charges and settlement were announced. The church formats this press release in a question-and-answer format, seemingly so they can detail answers to the questions, but also so they can control the questions and be brief with implied answers making.
“We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed,” the church says. They really want to assure everyone that the matter is closed. They state in three separate instances, twice that they consider the matter closed and finally a defacto “With the announcement of the order, the matter is closed.” They are not leaving it open for conversation or discussion. They barely are admitting any fault, they say:
Q: Did Ensign Peak fail to comply with SEC regulations?
A: We reached resolution with the SEC. We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed.
Church Issues Statement on SEC Settlement
https://newsroom.churchofjesuschrist.org/article/church-issues-statement-on-sec-settlement
Mistakes were made. They don’t want to claim any responsibility for either the mistakes or discuss things any more. They consider the matter closed. They wish it was never opened and public. They would likely have settled for more had they been able to keep the whole thing hidden. They conclude the press release by affirming again the definite resolution and end of all discussions and comments, “this matter is closed”.
This question asks if Ensign Peak failed to comply with regulations. They don’t answer the question here but implicitly are saying that they did not, since they reached a resolution. The stated resolution is for the church and Ensign Peak to pay a fine to the tune of five million dollars. The amount of the settlement is omitted from the official church press release, in hopes, no doubt, to keep a lid on how bad it went for them once the SEC investigated their practice. Compare this statement to the SEC’s press release which states the church knew full well what it was doing, it was obfuscating its wealth and avoiding disclosing investments. They allege that it was Ensign Peak which is at fault, but the church shares in the fine because this was done “with the church’s knowledge”.
“We allege that the LDS Church’s investment manager, with the Church’s knowledge, went to great lengths to avoid disclosing the Church’s investments, depriving the Commission and the investing public of accurate market information,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
SEC Charges The Church of Jesus Christ of Latter-day Saints and Its Investment Management Company for Disclosure Failures and Misstated Filings
https://www.sec.gov/news/press-release/2023-35
The church is quick to point the finger at the “legal council”. Twice they refer to their reliance on the legal council. Surely, the church uses its own unnamed law firm as its main legal counsel for all matters, so this finger-pointing is circular. They also have a former Utah Supreme Court Justice in the ranks of the First Presidency, so they know what they are doing as far as following the law. This is a mere deflection. It doesn’t make them look any more christlike to pass the buck and place blame on their lawyers.
Since 2000, Ensign Peak received and relied upon legal counsel regarding how to comply with its reporting obligations while attempting to maintain the privacy of the portfolio.
…
The Church’s senior leadership received and relied upon legal counsel when it approved of the use of the external companies to make the filings.
Church Issues Statement on SEC Settlement
https://newsroom.churchofjesuschrist.org/article/church-issues-statement-on-sec-settlement
This press release from the church is as misstated as the filings they got fined for! Let’s compare what the church said to what the release and order from the SEC said.
Earlier Press Release
When the whistleblower news first hit a couple of years ago, the church issued a press release to address the issue. They were sure to point out that they were being misunderstood and innocent. Compare these two statements if you will. In the first one, they state that the claims are based on a “narrow perspective and limited information”. The first statement claims that the church “complies with all applicable laws” and then states that they “welcome the opportunity” to address questions. This gives the impression that they know the laws well and are following them and that they are open to discussing the issues (even if only with the officials).
Claims being currently circulated are based on a narrow perspective and limited information. The Church complies with all applicable law governing our donations, investments, taxes, and reserves. We continue to welcome the opportunity to work with officials to address questions they may have.
First Presidency Statement on Church Finances, 17 December 2019
https://newsroom.churchofjesuschrist.org/article/first-presidency-statement-church-finances
The next statement is the latest, where they state that they reached a resolution, which must be interpreted as admitting guilt and fault in wrongdoing, even though they clearly stated earlier that they comply with all applicable laws. Which is it then?
We reached resolution with the SEC. We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed.
Church Issues Statement on SEC Settlement, 21 February 2023
https://newsroom.churchofjesuschrist.org/article/church-issues-statement-on-sec-settlement
They further confirm fault by stating that they “regret mistakes made”, not quite admitting that they made the mistakes in question. Then they state that they “now consider this matter closed”, so they are not in fact welcoming opportunities to address questions. They are caught red-handed for being unlawful and caught lying about it! Their defensive reassurances of a few years ago prove to be simple posturing and empty claims. Lies to placate their members who might hear the disturbing news.
Tithing
Mormon tithing is not optional for members, it is required for members to join in full membership and participate in the temple ceremonies. Members commit to paying tithing early in discussions with missionaries and even as small children. The church does not exempt anyone from paying tithing, they repeatedly state that if you can’t afford to feed your kids or pay your rent, pay your tithing first, and then the Lord will provide. Members sacrifice immensely by paying tithing because they trust the church needs the funds and also is a benevolent entity that is trustworthy with these funds. The church has interviews with members to ask them annually if they pay a full tithe (meaning 10% of all their income) to the church, and they also have interviews to obtain a temple recommend which also asks members if they are full tithe-paying members. These tithing funds are treated sacredly by local leaders and the church requires local leadership to never be alone with the funds and on Sundays when members give the Bishopric their tithes, the money is counted together by a member of the bishopric and a ward clerk and taken and deposited in the bank that very day. The church takes more care of its tithes than they do of its own children. Often children are alone with a local leader and asked sexually explicit questions.
Financial Information Belongs to Those Who Made the Contribution
Don’t mention that in a televised interview then church President Gordon B Hinckley mentioned that they don’t disclose financial data because he believes that information belongs to those who made the contribution. This would mean church members are privy to the investment and expenses of the church, but they are not. This is a direct lie. The church is not financially transparent and has done its best to be as private as it possibly can get away with being. This SEC investigation and order shows that they are willing to push beyond the limits of the law even to keep from sharing any information about money.
Hinckley was able to kindly lie through his smile that the financial “information belongs to those who made the contribution, and not to the world”. If it belongs to the donors, that would be the general church membership, but they are kept in the dark more than the SEC!
“For the last 70 years or so, the Mormon Church has had an ethos of keeping its finances private,” Brunson said.
https://apnews.com/article/mormonism-us-securities-and-exchange-commission-religion-business-a598c9ef9544f57e0b60d5ca80774bf7
It is abundantly clear from the order from the Securities and Exchange Commission that these violations were committed by Ensign Peak “with the knowledge and approval of the Church, which sought to avoid disclosure of the amount and nature of its assets”.
Memes to the Rescue
This legal jargon and reports of misstated 13F reports and LLCs is confusing, let the best memes from Facebook and Reddit clear things up:
The Order
We learn many many things that the church was silent about in its own press release. They made the offer to settle for five million dollars, which is the closest thing they get to admitting fault for these violations. They knew what they were doing the whole time. They did this in order to obfuscate how much they had. They didn’t want to draw attention to making investments with excess tithing money. The fault goes to the tippy top, the First Presidency and Presiding Bishopric unanimously approved all these violations, running for nearly 20 years! That goes back to Presidents Gordon B Hinckley, Thomas S Monson, and Russell M Nelson.
Below is the official cease and desist order issued by the Securities and Exchange Commission in web format, it can also be found in pdf format here.
wasmormon Emphasis added.
Release No. 96951 / February 21, 2023
ADMINISTRATIVE PROCEEDING File No. 3-21306
ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 (“Exchange Act”), against Ensign Peak Advisors, Inc., and The Church of Jesus Christ of Latter-day Saints (“Respondents”).
II.
In anticipation of the institution of these proceedings, Respondents have submitted Offers of Settlement (the “Offers”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and 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, Respondents consent to the entry of this Order Instituting Ceaseand-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below.
III.
On the basis of this Order and Respondents’ Offers, the Commission finds that:
Summary
From 1997 through 2019, Ensign Peak Advisors, Inc. (“Ensign Peak”), an entity which manages the assets, including the investment securities, of The Church of Jesus Christ of Latter-day Saints (the “Church”), failed to file with the Commission certain required forms (“Forms 13F”) that would have disclosed the size of the Church’s equity portfolio to the Commission and the public. Instead, the Church and Ensign Peak created thirteen limited liability corporations (“LLCs”), including twelve similar LLCs (the “Clone LLCs”) with addresses located throughout the U.S., for the sole purpose of filing Forms 13F and preventing public disclosure by Ensign Peak of the Church’s equity securities holdings. The Forms 13F that Ensign Peak filed in the names of these LLCs misstated, among other things, that they had sole investment and voting discretion over the listed securities, when Ensign Peak at all times retained discretion over all investment decisions.
Ensign Peak developed its approach to filing Forms 13F in the names of these LLCs with the knowledge and approval of the Church, which sought to avoid disclosure of the amount and nature of its assets. Through their institutionalized use of this approach for almost twenty years, Ensign Peak’s significant role in the securities markets as an institutional investment manager was not disclosed to the Commission, the markets, and the investing public as required by Section 13(f) of the Exchange Act and Rule 13f-1 thereunder.
Respondents
1. The Church of Jesus Christ of Latter-day Saints is a Utah corporation sole, headquartered in Salt Lake City, Utah, which was organized and operated to carry out the purposes of the faith known as The Church of Jesus Christ of Latter-day Saints. The Church has over 16 million members in more than 30,000 congregations across 160 countries. As referenced in this Order, “senior leadership of the Church” consists of the Church’s First Presidency and Presiding Bishopric.
2. Ensign Peak Advisors, Inc. is a Utah nonprofit corporation headquartered in Salt Lake City, Utah. Ensign Peak is responsible for investing and managing the reserves of the Church. Ensign Peak is governed by a Board of Trustees, consisting of members of the Church’s Presiding Bishopric and the Managing Director of Ensign Peak. Ensign Peak’s Managing Director is appointed by the Church’s First Presidency and reports to the senior leadership of the Church. Ensign Peak is exempt from registration as an investment adviser with the Commission under Section 203(b)(4) of the Investment Advisers Act of 1940, which exempts investment advisers that are charitable organizations that also solely advise other charitable organizations.
Facts
Ensign Peak’s Form 13F Filing Requirement
3. The Church created Ensign Peak in 1997 as an integrated auxiliary of the Church to manage the Church’s investment securities. Ensign Peak has no shareholders or members. The securities portfolio managed by Ensign Peak consists of what the Church calls “reserve funds” or “reserves,” which include U.S. equity and debt securities purchased with excess tithing, income and returns generated by Ensign Peak, and the assets of other Church integrated auxiliaries. Ensign Peak does not charge the Church management fees.
4. Section 13(f) of the Exchange Act and Rule 13f-1 thereunder require that institutional investment managers file Forms 13F with the Commission on a quarterly basis if they exercise investment discretion over at least $100 million in securities that are traded on a national securities exchange or on the automated quotation system of a registered securities association (“Section 13(f) Securities”). Pursuant to Rule 13f-1(b), an investment manager is deemed to exercise discretion over all accounts for which any person or entity under the control of the investment manager exercises investment discretion. Form 13F requires such institutional investment managers, among other things, to disclose to the Commission the fair market value of its Section 13(f) Securities under management. Forms 13F filed with the Commission are available to the public for review.
5. Throughout its history, the securities portfolio Ensign Peak managed for the Church contained a wide range of equity and fixed income assets. At its inception, Ensign Peak managed approximately $7 billion of Church assets, a significant percentage of which consisted of Section 13(f) Securities. The portion of Section 13(f) Securities in the portfolio grew to approximately $37.8 billion by 2020.
6. Throughout its history, Ensign Peak was required to file Forms 13F identifying and providing certain information about the Section 13(f) Securities that it managed for the Church.
Formation of the Form 13F Filing Entities
7. By at least 1998, senior management at Ensign Peak was aware of Ensign Peak’s requirement to file Forms 13F and communicated this requirement to senior leadership of the Church.
8. The Church was concerned that disclosure of the assets in the name of Ensign Peak, a known Church affiliate, would lead to negative consequences in light of the size of the Church’s portfolio. Ensign Peak did not have the authority to implement this approach without the approval of the Church’s First Presidency.
9. In 2001, at Ensign Peak’s recommendation, the Church created a trust, and a separate LLC under the ownership of the trust, to file Forms 13F. The Church designated Ensign Peak’s Managing Director as the trustee. Ensign Peak filed the first Form 13F identifying the Church’s Section 13(f) Securities in the name of the trust’s LLC. Senior leadership of the Church approved the creation of the first LLC to file Forms 13F.
10. The first LLC was assigned a location in Glendale, California, although it conducted no business at that site. Ensign Peak signed an investment management agreement (“IMA”) with the LLC, and certain of Ensign Peak’s employees were assigned to be investment managers for the LLC. However, notwithstanding the IMA, Ensign Peak failed to transfer investment discretion to the LLC. Ensign Peak filed the first Form 13F in the name of this LLC on February 26, 2003, for the year ended December 31, 2002. Ensign Peak filed later Forms 13F using the name of the LLC through the quarter ended September 30, 2006.
11. On March 15, 2005, the Church became aware that the public might link this first LLC to the Church because the person signing the Forms 13F was listed in a public directory as a Church employee. To address this issue, on March 21, 2005, the senior leadership of the Church approved a new reporting entity to be created with “better care being taken to ensure that neither the ‘Street’ nor the media [could] connect the new entity to Ensign Peak.”
12. On December 1, 2005, Ensign Peak formed a second LLC as a Delaware nonprofit corporation, located in Wilmington, and named Ensign Peak’s Managing Director as its general manager. Ensign Peak then filed Forms 13F in the name of this new LLC.
13. Several years later, in 2011, Ensign Peak became concerned that its portfolio had become so large that the Form 13F filings it made using the name of the second LLC might attract unwanted attention and sought the Church’s approval to form additional LLCs to file Forms 13F. On May 19, 2011, the Church’s senior leadership approved Ensign Peak’s recommendation to “clone” the second LLC to create new Form 13F filers.
14. After obtaining Church approval, Ensign Peak formed new Clone LLCs for the purposes of filing Forms 13F. Five new entities were formed and given Delaware addresses, although none conducted business in Delaware.
15. In 2015, Ensign Peak became aware that a third party appeared to have connected the holdings of various LLCs back to Ensign Peak. Ensign Peak brought this issue to the attention of the Church. The senior leadership of the Church approved Ensign Peak’s recommendation to “gradually and carefully adapt Ensign Peak’s corporate structure to strengthen the portfolio’s confidentiality.”
16. On November 6, 2015, the senior leadership of the Church approved Ensign Peak’s plan for the creation of additional Clone LLCs to further prevent disclosure of the Church’s holdings managed by Ensign Peak. Ensign Peak formed six additional Clone LLCs, bringing the total to twelve.
Structure and Management of the Clone LLCs
17. Ensign Peak had authority over all of the LLCs throughout their existence. The Church also had indirect authority over all of these LLCs since the Church controlled Ensign Peak and approved the approach of using the LLCs to file Forms 13F (the “LLC Structure”).
18. The Clone LLCs also entered into IMAs with Ensign Peak, whereby Ensign Peak was designated as the Clone LLCs’ client. These IMAs assigned discretion and authority to manage the securities portfolio to the LLCs. The Managing Director of Ensign Peak signed each IMA on behalf of Ensign Peak. In his capacity as General Manager of the Clone LLCs, he also signed the IMAs on behalf of each relevant Clone LLC.
19. Despite the provisions in the IMAs stating that the Clone LLCs would have management authority, the Clone LLCs never exercised investment discretion over the Church’s assets. Although Ensign Peak designated several of its own investment managers to serve as investment managers for each Clone LLC, these investment managers continued to manage the Section 13(f) Securities on behalf of Ensign Peak. They did not know which assets were allocated to the Clone LLCs and performed no functions for the LLCs outside of their existing responsibilities for Ensign Peak.
20. Many of the IMAs also contained a provision addressing proxy voting, stating that the LLC was not authorized to vote by proxy or otherwise any of the securities and property held in the securities portfolio assigned to it. Rather, each Clone LLC was required to forward any proxy solicitation materials and consent solicitations it received to Ensign Peak for consideration and action.
21. Each Clone LLC was set up with a “Business Manager,” who, according to the terms of the LLC agreements, had responsibility for “the preparation and filing of the Company’s governmental reports, returns, notices and the like, including reports required by law of investment managers or entities exercising investment discretion.” However, the Business Managers performed no functions for the Clone LLCs outside of signing the Form 13F signature pages each quarter.
22. Ensign Peak was responsible for designating the Clone LLCs’ Business Managers, many of whom were Church employees. Business Managers were selected because they had common names and a limited presence on social media, and were therefore less likely to be publicly connected to Ensign Peak or the Church. Ensign Peak provided the Business Managers very limited information about the Clone LLCs or why they were created.
23. Each Clone LLC was given an address outside of Utah although none of them conducted any business at those locations other than the receipt of mail. Ensign Peak chose multiple locations across the country for these purported offices to create the impression that the Clone LLCs conducted business operations throughout the U.S., making it more difficult to trace the Clone LLCs back to Ensign Peak or the Church.
24. Each Clone LLC was also assigned a local phone number that would go directly to voicemail. An Ensign Peak senior manager instructed a Business Manager of one of the Clone LLCs to notify him of all voicemails from regulatory agencies to any of the Clone LLCs, but to delete all others.
Ensign Peak Filed Misstated Forms 13F
25. After the Clone LLCs were formed, Ensign Peak prepared and filed Forms 13F with the Commission under the names of the Clone LLCs.
26. To prepare the filings, Ensign Peak maintained a list of all Section 13(f) Securities within its portfolio, and allocated these securities to the various Clone LLCs. Ensign Peak allocated newly-held Section 13(f) Securities to a Clone LLC at the end of a quarter, and also reallocated other Section 13(f) Securities to new LLCs as the number of LLCs increased. Ensign Peak’s senior management then drafted the Forms 13F and filed them, generally before obtaining the Business Managers’ signatures.
27. Each Form 13F filed in the name of a Clone LLC misstated that the LLC had sole investment discretion for the securities listed, that there were no other managers for these securities, and that the Clone LLC had sole voting discretion over these securities. Even though the IMAs stated that Ensign Peak had delegated investment discretion, Ensign Peak continued to manage the entire portfolio and at all times maintained investment and voting discretion over all the securities listed in the Forms 13F.
28. Each Form 13F was signed by the designated Business Manager. The signature page stated, “The institutional investment manager filing this report and the person by whom it is signed hereby represent . . . that all information contained herein is true, correct and complete[.]” However, Ensign Peak provided the Business Managers with insufficient information about the Clone LLCs or the securities assigned to them that would enable the Business Managers to make this representation. When Ensign Peak obtained the Business Managers’ signatures for the Forms 13F, Ensign Peak gave the Business Managers only the signature pages of the Forms 13F and not the complete documents. In addition, the Forms 13F were often filed with electronic signatures before Ensign Peak actually obtained the Business Managers’ handwritten signatures.
29. Each Form 13F also misstated that the Business Manager signed the Form 13F from the address listed on the signature page. In fact, all Business Managers were located in Salt Lake City, and the addresses on the forms were used to convey the impression that the Clone LLCs were located across the country.
30. The Church and Ensign Peak understood that Ensign Peak continued to make investment and voting decisions relating to the portfolio, and that the LLC Structure was created for the sole purpose of filing Forms 13F.
31. Throughout its history, at least once each year, Ensign Peak’s Managing Director met with the senior leadership of the Church to discuss Ensign Peak’s activities, including at times the LLC Structure. Unanimous approval from the senior leadership of the Church was required before Ensign Peak could deviate from the LLC Structure and file Forms 13F in Ensign Peak’s own name.
32. The Church and Ensign Peak continued to take the same approach to filing Forms 13F through the Clone LLCs despite two Church Audit Department (“CAD”) internal audits of Ensign Peak – one in 2014 and one in 2017—that reviewed the LLC Structure. In discussions with Ensign Peak’s senior management, although CAD did not recommend specific changes to the LLC Structure, CAD highlighted the risk that the SEC might disagree with the approach.
The LLC Structure Was Made Public
33. In May 2018, a public website reported that various entities that appeared to have ties to the Church had filed Forms 13F revealing holdings of approximately $32 billion. The website referenced evidence indicating that these entities’ domain names were all registered to an entity tasked with overseeing and protecting the intellectual property of the Church, and that each of the LLCs identified listed a Business Manager whose name matched that of a Church employee.
34. After the website reported this information, two Business Managers resigned their roles, voicing concerns about what they had been asked to do. Rather than changing the LLC Structure, two new Business Managers were assigned to replace the two who resigned.
35. Ensign Peak continued to file Forms 13F through the Clone LLCs until February 14, 2020, when Ensign Peak filed a consolidated Form 13F for the quarter ended December 31, 2019. Ensign Peak’s Form 13F consolidated securities previously listed on the various Forms 13F filed in the names of the Clone LLCs. Ensign Peak’s first Form 13F disclosed its management of 1,659 Section 13(f) Securities valued at approximately $37.8 billion.
Violations
36. As a result of the conduct described above, Ensign Peak violated Section 13(f)(1) of the Exchange Act and Rule 13f-1 thereunder by failing to file Forms 13F in Ensign Peak’s name. Ensign Peak also violated Section 13(f)(1) of the Exchange Act and Rule 13f-1 thereunder by filing misstated Forms 13F in the names of LLCs created for the sole purpose of filing Forms 13F.
37. As a result of the conduct described above, the Church caused Ensign Peak’s violations of Section 13(f)(1) of the Exchange Act and Rule 13f-1 thereunder.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondents’ Offers. Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Ensign Peak shall cease and desist from committing or causing any violations and any future violations of Section 13(f) of the Exchange Act and Rule 13f-1 promulgated thereunder;
B. Pursuant to Section 21C of the Exchange Act, Respondent the Church shall cease and desist from committing or causing any violations and any future violations of Section 13(f) of the Exchange Act and Rule 13f-1 promulgated thereunder;
C. Ensign Peak shall, within 10 days of the entry of this Order, pay a civil money penalty in the amount of $4,000,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.
D. The Church shall, within 10 days of the entry of this Order, pay a civil money penalty in the amount of $1,000,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.
E. Payment must be made in one of the following ways…
WOW, talk about transparency! The SEC did their homework and was able to spell out the full story about what the church has done in violation of the law and how the church got itself into this mess!
It’s not even surprising anymore, after looking into church history for years, this is actually “par for the course”. We tend to think the church has come a long way since the early days, but it’s still the same organization. The only surprising thing anymore is that everyone doesn’t see them for what they are.
$5 million? If they have 50 Billion in their accounts (which we know they have at least double that), that’s a fine of .001%. Say you had $1,000, this is the equivalent of paying 1 cent fine. Just the cost of doing business to them, that’s all.
What do you think about this settlement? Did it trouble your mormon shelf? Let us know by telling your story.
More reading:
- https://www.sec.gov/news/press-release/2023-35
- https://www.sec.gov/litigation/admin/2023/34-96951.pdf
- https://newsroom.churchofjesuschrist.org/article/church-issues-statement-on-sec-settlement
- https://newsroom.churchofjesuschrist.org/article/first-presidency-statement-church-finances
- https://secletter.org/
- https://widowsmitereport.wordpress.com/
- https://apnews.com/article/mormonism-us-securities-and-exchange-commission-religion-business-a598c9ef9544f57e0b60d5ca80774bf7
- https://www.bbc.com/news/business-64727764
- https://bycommonconsent.com/2023/02/21/the-church-the-investment-advisor-and-the-sec/
- https://religionunplugged.com/news/2023/2/21/lds-church-to-pay-5-million-in-fines-to-sec-for-avoiding-disclosure-of-equity-investments
- https://www.wsj.com/articles/the-mormon-church-amassed-100-billion-it-was-the-best-kept-secret-in-the-investment-world-11581138011