Feb 22, 2023 - News

SEC: Mormon leaders sought shell companies to hide holdings

Illustration of the Salt Lake Temple with lines radiating from it.

Illustration: Brendan Lynch/Axios

When the Church of Jesus Christ of Latter-day Saints approved shell companies to hide $32 billion in holdings from the public, the orders came from the "senior leadership of the church," the U.S. Securities and Exchange Commission said.

Why it matters: When the Wall Street Journal reported earlier this month that the SEC was investigating whether the church's holdings were properly disclosed, the focus was on Ensign Peak Advisors, an investment firm owned by the church.

  • It was previously unclear, however, whether church leaders themselves were under scrutiny.

The latest: SEC documents released Tuesday accused church leaders of approving 13 shell companies to file legally required public disclosures of the church's investments to avoid a single filing that would show its full holdings.

  • The shell companies were created "with the Church's knowledge and approval," to avoid "negative consequences in light of the size of the Church's portfolio," the SEC wrote.
  • The church is paying a fine of $1 million while Ensign Peak pays $4 million under a settlement with the SEC.

Flashback: Ensign Peak failed to file its own disclosures for over 20 years — 1997 to 2019 — the SEC asserted, pointing to multiple instances where the "senior leadership of the church" instructed the firm to hide its investments.

  • Ensign Peak in 1998 planned to use "other entities" to file its disclosures — a strategy the investment firm could not authorize "without the approval of the Church's First Presidency," per the settlement.
  • Church leaders approved the first shell company's creation in 2001, and another in 2005 because the person signing the disclosure forms could be traced to the church. Church leaders wanted "better care … to ensure that neither the 'Street' nor the media connect the new entity to Ensign Peak," according to correspondence cited by the SEC.
  • Church leaders approved new shell companies in 2011 after Ensign Peak warned them it had enough money to attract attention — and again in 2015 when a "third party" connected the various LLCs to the church.

Of note: The settlement states the "senior leadership of the Church" refers to the First Presidency — the prophet and his top two counselors — and the Presiding Bishopric, which manages the church's "temporal" resources like money and buildings.

Context: The church has long faced scrutiny from members and nonmembers for its secrecy about its wealth, estimated to exceed $100 billion.

  • The $32 billion addressed by the SEC only accounts for the church's equity securities, and not all of its wealth.

How it works: Ensign Peak filed financial disclosures in those shell companies' names and claimed they operated independently, even though the investment firm controlled their holdings, per the SEC.

  • The nonprofit investment company also "directed nominee 'business managers,' most of whom were employed by the Church, to sign [the filings]," the SEC wrote.

The other side: In a prepared statement, church officials said Ensign Peak acted on "legal counsel regarding how to comply with its reporting obligations while attempting to maintain the privacy of the portfolio."

Between the lines: The church did not say why "maintaining the privacy of the portfolio" was important or address the "negative consequences" the SEC said might come from disclosing its equity investments.

  • Yes, but: The head of Ensign Peak told The Wall Street Journal in 2020 the church didn't want members to know the scale of its wealth because they might stop paying tithing.
  • The church did not respond to Axios' inquiry Tuesday as to whether it objected to disclosure requirements as a matter of public policy, since complying with them inherently conflicts with "privacy."

Details: The church said it stopped filing its disclosures through shell companies after the SEC "first expressed concern" in June 2019.

  • "Ensign Peak and the Church have cooperated with the government over a period of time as we sought resolution," church officials wrote.

What they're saying: "We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed," the church wrote.


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