The Church of Jesus Christ of Latter-Day Saints (LDS) and its investment management firm, Ensign Peak Advisers Inc., agreed to pay a combined $5 million to settle charges that the religious institution did not correctly disclose its investment holdings, the Securities and Exchange Commission (SEC) announced on Tuesday.
According to the SEC, the Mormon church and its nonprofit investment group used shell companies from 1997 to 2019 to hide the LDS’s multibillion-dollar stock portfolio from the public over worries that it would generate negative publicity and donors would no longer contribute to the church.
The LDS teaches that Mormons must provide 10 percent of their income to the church, a longtime practice known as tithing.
SEC officials stated that these shell organizations submitted the required forms outlining investments but had incorrectly claimed to operate independently. It was learned, however, that Ensign Peak managed the investments and that the church knew of the agreement to make church employees “business managers” of these shell companies.
By 2018, the church’s investment portfolio had increased to approximately $32 billion.
The U.S. Securities and Exchange Commission office in Washington, on Sept. 18, 2008. Chip Somodevilla/Getty Images
Gurbir S. Grewal, director of the SEC’s division of enforcement, said in a statement that the church “went to great lengths” to conceal its investments from the public.
“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,” Grewal stated. “The requirement to file timely and accurate information on Forms 13F applies to all institutional investment managers, including nonprofit and charitable organizations.”
The market watchdog’s announcement confirmed that Ensign Peak agreed to settle the SEC’s allegation that it violated Section 13(f) of the Securities Exchange Act of 1934 and Rule 13f-1 thereunder by failing to file Forms 13F and for misstating information in these forms. The religious entity agreed to settle the SEC’s charge that it caused Ensign Peak’s violations through its approval of the firm’s use of shell companies.
Ensign Peak paid a $4 million fine and LDS paid a $1 million penalty.
The church acknowledged cooperating with the authorities and noted that the case was finished.
“This settlement relates to how the forms were filed previously,” the church said. “Ensign Peak and the church have cooperated with the government over a period of time as we sought resolution. We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed.”
The Mormon church’s reliance on shell entities first came to light in 2018 when an organization called the Truth and Transparency Foundation—previously known as MormonLeaks—alleged the church’s investments reached billions
A year later, an ex-Ensign Peak employee submitted a whistleblower complaint to the Internal Revenue Service and claimed that the church had accumulated close to $100 billion in funds instead of allocating the money toward charitable causes.
The Wall Street Journal called it “the best-kept secret in the investment world” in a 2020 article.
