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James huntsman (jon's brother) sues church for 'fraud'


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38 minutes ago, Analytics said:

Money is fungible--how does it know which specific dollars in its investment portfolio are from tithing and which are not?

Money isn't an intelligent entity.  Money doesn't know anything.  Accountants know what money is, though.  Accountants keep track of what money is for and where it came from by what accountants refer to as accounts.

Edited by Ahab
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17 minutes ago, smac97 said:

Wouldn't that be a matter of accounting?

Accountants don't talk this way. They consider money to be "fungible." Maybe there is a solid accounting basis behind what they are claiming here (e.g. that the money that was distributed from Ensign Peaks was less than the inception-to-date investment income), but the claim is so vague it's impossible to know what they mean.

17 minutes ago, smac97 said:

And what is it about this statement that you find "misleading?"
 

The statement implies that there is a difference between tithing money, invested money, and money "from" commercial enterprises, but there really isn't. Money is fungible.

17 minutes ago, smac97 said:

Have you read D. Michael Quinn's book regarding the Church's finances?
 

Yes.

17 minutes ago, smac97 said:

People "regret" all sorts of things.  The issue here is a federal lawsuit for fraud (or fraudulent nondisclosure - it's hard to tell based on the complaint).

I would guess the issue is that the Church implied it was using its income one way but in fact was using it in a substantially different way. Allegedly.  

 

 

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2 hours ago, smac97 said:

Here we go again:

The above link (this one) takes you to the Complaint.  A few thoughts:

1. The Complaint is written "emotionally," which seems a bit out of place for a pleading filed in federal court.  Lots of conclusory and/or loaded words and phrases like "these profound words by the esteemed former leader of the Church," "in a fraudulent effort to elicit the donation of tithing funds," "the LDS Corporation secretly lined its own pockets," "brazenly and offensively," "make no mistake, the Church’s status as a religious organization does not give its corporate arm carte blanche to defraud the Church’s members," "the LDS Corporation began its campaign of lies and deceit," and so on.  There is also quite a bit of underlining ("dishonestly and fraudulently placed its own commercial financial interests," "purely non-commercial purposes"), and italicized and bolded text ("this is not a case about faith; it is a case about fraud and corporate greed," "the LDS Corporation actually spent an estimated $1.5 Billion of money donated by the Church’s members to develop the City Creek Mall," "or so he thought," "build a commercial shopping mall and bail out a private insurance company," "doubled down," "tripled down," "for the fifth time").

In my experience (in Utah, anyway), this stuff is used very sparingly.  Judges, both state and federal, seem to want lawyers to take a "just the facts, ma'am" approach.

2. The Complaint characterizes the "LDS Corporation" as "the corporate arm of the Church."  Here's an interesting table published by LDS Philanthropies:

Church-Entities.jpg

A "corporation sole" is "a legal entity consisting of a single ('sole') incorporated office, occupied by a single ('sole') natural person."  Here is a brief summary of the two "corporations sole" listed above (in a 1987 U.S. Supreme Court case) :

See also here:

Huh.  I guess I hadn't realized that the Church itself is "an unincorporated entity."

3. The suit includes a single claim for "fraud."  It appears to be based solely on the financing of the City Creek Mall.

4. I'm not sure the allegations in the complaint are sufficient.  In order to pursue a fraud claim in federal court, the plaintiff must explain the allegations with specificity or "particularity."  In California, “‘{t}he elements of fraud ... are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’”  The specific statements that are deemed fraudulent all pertain to the development of City Creek not using tithed funds.  However, the allegations are also that the Church "fraudulently concealed that they intended to use Plaintiff’s tithing funds for purely commercial purposes."  "Fraud" is making a false statement, "fraudulent concealment" is not disclosing (or concealing) something you have a duty to disclose.  The elements for a claim for fraudulent concealment are (1) failure to disclose or concealed a material fact with an intent to defraud the victim, (2) a duty to disclose, (3) the plaintiff is unaware of the fact and would not have acted as he or she did if he or she knew of the fact, and (4) the plaintiff has suffered damages as a result. 

So the only cause of action here is a bit muddled, as I am not sure if it is for "fraud" or "fraudulent concealment."  Moreover, I'm not really seeing "particular" allegations as to the falsity of the Church's statements about City Creek.  The Church clearly said at the time that "{n}o tax dollars, nor tithes from the 12.5 million Mormons, will be used in construction."  The Church further explained in 2007:

So can Mr. Huntsman simply declare "I think tithes were used," and thereafter file suit?  That seems sort of unlikely.  A key allegation is in paragraph 23: "On information and belief, at the time Mr. McMullin’s statement was made, he had already issued checks from the LDS Corporation’s accumulation of tithing principal for use in connection with the City Creek Mall development and the Beneficial Life Insurance bailout." 

5. FAIR has a pretty good treatment of the City Creek topic here: City Creek Center Mall in Salt Lake City

6. Similarly, the Church has a pretty good 2018 FAQ regarding its finances: Church Finances and a Growing Global Faith

7. Our own Robert F. Smith has commented on this issue here:

As did I:

And here:

8. The Church apparently did not expect to see much in the way of profit from City Creek.  See here:

9. I think a review of D. Michael Quinn's book (and our discussion about it, both linked above) would be helpful for those interested in this topic.

10. I wonder if the federal judge assigned to this case will see it as a sort of "fishing expedition," as a pretext to try to use the power of the judiciary to get a look at the Church's finances.  

11. Apparently these 2018 comments from Bishop Caussé has caused quite a stir:

A Redditor "summed" up Bishop Caussé's remarks this way

12. The full response from the Church's spokesperson:

Thoughts?

Thanks,

-Smac

I think this one might get some traction but even if not the PR is going to be really bad for the church. If the case goes to court it also would seem that a lot of financial information that the church would prefer NOT come out will.  This of course is just my best guess at the moment.

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1 hour ago, provoman said:

Have not read your whole first post, so I apologize in advance if my question has been answered herein. Isn't use of charitable donations by the receiver or use of gifts by the receiver a none suit by the giver, as in once it leaves my hands as a gift to you (you being a 501(c 3), you are permitted to utilize as you see fit? 

Not if the 501(c)(3) uses it for in ways that misrepresents what they said they would do with it or if it enriches those running the NFP in ways inconsistent with its charter.

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53 minutes ago, ksfisher said:

I recall reading a short story years ago about the legal system of a fictional society.  In this story, at the conclusion of a trial, the losing attorney was executed. 

US law could do with a much more robust system for disbarring lawyers who represent frivolous suits and stronger SLAAP statutes and the like to kill vexatious litigation earlier in the process. As it stands the system is set up so you generally (though not always) can get justice assuming you have enough disposable income and time to fight. It is worth noting that Common Law (the system our federal government and 49 of our states base their legal system on) and out judicial system was designed for competing nobles. It works if you have the ability to use it but most people do not.

While the story you reference sounds good for a chuckle setting that standard in a criminal trial would mean almost no one would be able to find a defense attorney which would be a society I would be afraid to live in.

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28 minutes ago, ttribe said:
Quote

Wouldn't that be a matter of accounting?

You throw that out there as if it were a simple matter.  It is not.

So it may be a complex matter of accounting, but still a matter of accounting?

Thanks,

-Smac

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20 minutes ago, Ahab said:

Money isn't an intelligent entity.  Money doesn't know anything.  Accountants know what money is, though.  Accountants keep track of what money is for and where it came from by what accountants refer to as accounts.

As Ttribe says it is not quite that simple.

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15 minutes ago, Ahab said:

Money isn't an intelligent entity.  Money doesn't know anything.  Accountants know what money is, though.  Accountants keep track of what money is for and where it came from by what accountants refer to as accounts.

That's my point. My best guess is that the Corporate of the President has a "Tithing Revenue" account. All tithing revenue goes in to that account. Money then goes from that account to other accounts, including the "Reserve" account. If the Church spends money from the reserve account, is it tithing money? According to the accountants it is not--it is reserve money or rainy day money. If that is what they mean when they say tithing money wasn't used, they are misleading.

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3 minutes ago, Teancum said:

As Ttribe says it is not quite that simple.

Ttribe is wrong.  Keeping track of money, where it came from and what it is or was used for, is a very simply a matter of accounting.  And if you don't believe me you can ask an auditor who knows how to review accounting records.

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1 minute ago, katherine the great said:

I will pass that advice along to them. Of course they’re always welcome to move their headquarters to another country if they’re that worried about the American legal system.  

Wouldn’t help much. They would still need money in the US to run local churches. It might limit liability but it wouldn’t remove it and that limit may require shutting down the church in the whole country.

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1 hour ago, Fair Dinkum said:

First off, Huntsman filed his lawsuit in a Federal California court which will probably be more sympathetic to his P.O.V.  If Huntsman wins it would be appealed to the very liberal and based in San Francisco 9th and not the 10th circuit. Second, based solely on the merits of the suite, doesn't Huntsman have some justification for his suit?  The church has not been very transparent with how it uses tithing funds since it stopped releasing that information back in the late 1950's other then to repeatedly state that tithing is used to to fund missionary program, temple, build chapels etc.  No where has the church ever stated that it would build a massive reserve fund and invest in for profit real estate and bail out its insurance affiliates.

However every tithing slip does have this disclosure: "Though reasonable efforts will be made to use donations as designated, all donations become the Church's property and will be used at the Church's sole discretion to further the Church's overall mission.

Wouldn't it be fun to get an invitation to the Huntsman's Family Thanksgiving Dinner this year?

Although one can sue a hamsandwich, he has no case whatever here.  This is entirely baseless.  Often, with such frivolous suits, the judge makes the plaintiff pay all costs (court and defence).  Emotion has nothing to do with such an issue.

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4 minutes ago, Ahab said:

Ttribe is wrong.  Keeping track of money, where it came from and what it is or was used for, is a very simply a matter of accounting.  And if you don't believe me you can ask an auditor who knows how to review accounting records.

He is not wrong.

When you pay your electric bill did that money come from your wages? Your income tax refund? The money you pulled out of your portfolio? Was it from your current job or the job before it? Money is fungible and one dollar is the same as another so once you throw them into the pot it doesn’t much matter where it came from.

Now you can (and to an extent the church does) earmark some money to specific purposes. The money that goes into Fast Offerings goes into the same account with tithing and the Ward Mission Fund but the ward tracks how much they ‘own’ and the balances come out right.

The danger is best represented by a lot of state lotteries that champion that all the money made goes to schools or veterans or whatever. While technically true the question is to ask whether that means the schools and veterans get more money because you play the lottery or do they get a fixed amount that just happens to be equal to or greater than what the lottery brings in? Spoilers: It is the latter and you playing the lottery doesn’t help kids or veterans.

I personally suspect the Church has a good idea of the proportion of the various funds in investments that come into their care and that their statement about the money coming from businesses is correct but whether the church is innocent or not (and I suspect they are honest here) these kinds of claims are inherently dubious because of the nature of how money works. When something looks like a slush fund it is normal to look at it carefully.

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6 minutes ago, Robert F. Smith said:

Although one can sue a hamsandwich, he has no case whatever here.  This is entirely baseless.  ...

Indeed.  There's an old saying in law practice (one with which I am sure Smac97 is well acquainted):  If a party's case is weak on the facts, pound the law.  If that case is weak on the law, pound the facts.  If a party's case is weak both on the law and on the facts, pound the table.  To me, this lawsuit seems to be a whole lot of table-pounding.

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[Simplified version of my family finances to visualize things]:

I have a family checking account, and a spreadsheet that lists the different 'buckets'.   At the beginning of the month, the balance is zero.  I deposit my $1000 paycheck, and indicate Food: $250.  Auto: $250.  Healthcare: $250.  Utilities: $250.  As those bills come due, I write checks and adjust the spreadsheet.  At the end of the month, I have a zero balance again.

Then, one month, I get both my normal $1000 paycheck, and a $500 bonus.  The balance in my account is now $1500.  In my spreadsheet, I create a new entry: Vacation: $500.    I go through my month writing checks and adjusting my spreadsheet.  

Since money is fungible (as folks point out), how am I to prove that I used bonus money for vacation?  Or did I use paycheck money for vacation, and bonus money for bills?  

One might say that my accounting records are sufficient - when I deposited the bonus money, I bumped up my "vacation" bucket.   So the bonus money is vacation money.  When I paid for the hotel, I didn't move the money out of the Utilities bucket, I moved it out of the vacation bucket.  

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1 minute ago, The Nehor said:

He is not wrong.

When you pay your electric bill did that money come from your wages? Your income tax refund? The money you pulled out of your portfolio? Was it from your current job or the job before it? Money is fungible and one dollar is the same as another so once you throw them into the pot it doesn’t much matter where it came from.

When you pay a bill that payment comes from an account, usually a checking account but maybe a credit card account or maybe a savings account.  And when you get a tax refund or some pay from a job that money goes into an account unless your employer or the bank who cashes your check pays you in cash, but even your cash can be tracked by seeing whose account it eventually goes into.  What you bought or who you paid and what it was for.  Are you suggesting the Church pays in cash for all of its expenditures?  Even if it did when the Church receives cash it goes into a Church account and an auditor can tell which account that cash came from.

1 minute ago, The Nehor said:

I personally suspect the Church has a good idea of the proportion of the various funds in investments that come into their care and that their statement about the money coming from businesses is correct but whether the church is innocent or not (and I suspect they are honest here) these kinds of claims are inherently dubious because of the nature of how money works. When something looks like a slush fund it is normal to look at it carefully.

Yes, and it can be looked at.  That's all I am saying.  Money comes from some source and it goes to some source and all of that can be tracked by an auditor who knows how to review accounting records.

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7 minutes ago, Teancum said:

I think this one might get some traction but even if not the PR is going to be really bad for the church.

Oh, I don't know about that.  The crux of the case is based on the December 2019 story about David A. Nielsen filing an IRS complaint against the Church regarding its use of tithing funds.

So what has happened with that IRS complaint?  See here (published today) (emphasis added) :

Quote

Church spokesman Eric Hawkins called Huntsman’s claims “baseless.”

“Mr. James Huntsman resigned his church membership last year,” Hawkins said in a statement provided to the Deseret News. “Now, he is demanding through his lawyers that tithing he paid to the church as charitable contributions be returned to him. He claims that, contrary to assurances made by past church President Gordon B. Hinckley, the church used tithing to build City Creek, a mixed-use commercial development across the street from church headquarters in Salt Lake City.

“In fact, tithing was not used on the City Creek project. As President Hinckley said in the April 2003 general conference of the church, the funds came from ‘commercial entities owned by the church’ and the ‘earnings of invested reserve funds.’ A similar statement was made by President Hinckley in the October 2004 general conference. Mr. James Huntsman’s claim is baseless.”

The suit also repeated a claim by the former church investment employee that the church used $594 million in tithing funds to bolster Beneficial Financial Group during the 2008 financial crisis. Beneficial is a life insurance company owned by the church’s for-profit arm, Deseret Management Corp., which also owns the Deseret News.

Deseret Management leaders reported earlier that DMC provided those funds to Beneficial to strengthen its balance sheet and made full disclosure to the Utah Department of Insurance.

Church leaders have maintained that tithing funds are used for religious purposes.

“Tithing funds are voluntary contributions by members of The Church of Jesus Christ of Latter-day Saints as an expression of their faith in God,” Hawkins, the church spokesman, said in his statement. “They are used for a broad array of religious purposes, including missionary work, education, humanitarian causes and the construction of meetinghouses, temples and other buildings important to the work of the church, as reflected in scripture and determined by church leaders.”
...
In 2019, David A. Nielsen resigned from employment at the church’s investment firm after his wife and children left the church. He sent a letter to the IRS claiming the church does not meet IRS regulations. Some experts said the letter would not prompt an investigation.

Hawkins said no when asked by the Washington Post if an IRS investigation exists.

That the IRS is not investigating Nielsen's complaint (or else has concluded its investigation and taken no action against the Church) is, I think, noteworthy.

Let's take a look again at the allegations in the Complaint:

Quote

For decades, in a fraudulent effort to elicit the donation of tithing funds from Mr. Huntsman and other devout Church members, the LDS Corporation repeatedly and publicly lied about the intended use of those funds, promising that they would be used for purely non-commercial purposes consistent with the Church’s stated priorities – namely, to fund missionary work, member indoctrination, temple work, and other educational and charitable activities.

It did?  Where?  When?  Pleading fraud requires specificity as to these sorts of details, but the Complaint is noticeably silent.

Quote

Behind the scenes, however, rather than using tithing funds for the promised purposes, the LDS Corporation secretly lined its own pockets by using the funds to develop a multi-billion dollar commercial real estate and insurance empire that had nothing to do with charity.

Really?  "Nothing to do with charity?"  How so?  And how is investing tithes, as a prudent use of some of such funds, utterly disconnected from the Church's philanthropic/charitable/humanitarian work?

"Nothing to do with charity" is a huge claim, legally speaking. 

Quote

Indeed, the LDS Corporation repeatedly and specifically misrepresented that tithing funds would not be used for the commercial development of the City Creek Mall, a for-profit shopping center in downtown Salt Lake City Utah, or for the bailout of a failing private insurance company, Beneficial Life Insurance.

And the evidence that tithes were uses for these purposes is . . . what?

Quote

As Mr. Huntsman only recently discovered, the LDS Corporation actually spent an estimated $1.5 Billion of money donated by the Church’s members to develop the City Creek Mall alone (while simultaneously reassuring the Church’s congregation that no tithing funds whatsoever were used in development of that project).

Except that the Church said tithes were not used.

Quote

As the overwhelming evidence will show, the LDS Corporation defrauded Mr. Huntsman out of millions of dollars by falsely misleading him into believing his tithings would be used solely for charitable pursuits around the world – when in fact, his money (alongside the donations of other similarly-defrauded Church members) was brazenly and offensively used to build a commercial shopping mall and bail out a failing private insurance company.

"Solely for charitable pursuits?"  Who said this?  When?  Where?

Again, a fraud claim must be pleaded with particularity.  The Complaint doesn't do that.

Quote

Beginning in 2003, and unbeknownst to Mr. Huntsman and other members of the Church’s congregation, the LDS Corporation began its campaign of lies and deceit, soliciting billions of dollars from Church members under the guise of charitable contributions.

"Under the guise of charitable contributions?"  What does that mean?

Quote

Falsely promising that it would use tithing funds solely for charitable pursuits around the world and in order to help those most in need of financial assistance, the LDS Corporation fraudulently induced Huntsman to continue paying his yearly tithings.

"It would use tithing funds solely for charitable pursuits?"  Who said that?  When?  Where?

I've grown up in the Church, and I've paid tithing my whole life.  I have never understood that tithes would be used "solely for charitable pursuits."  First off, I'm not even sure what "charitable pursuits" means.  Is constructing and furnishing a church building a "charitable pursuit?"  Is paying for that buildings maintenance and upkeep?  Paying for its utilities?  Is missionary work?  Temples?  

And whence cometh this whole "solely" thing?  Consider this explanation from the Church:

Quote

Q: How does the Church use tithes and other funds? Why does the Church need financial resources?

The Church of Jesus Christ of Latter-day Saints was established to preach the gospel of Jesus Christ and invite all to follow Him. This is a broad, worldwide work that requires considerable resources. The Church supports more than 30,000 congregations and maintains thousands of chapels and meetinghouses; it operates employment centers, storehouses, family history centers, seminaries and institutes, schools, universities and other higher education initiatives, and 159 temples around the world (with another 30 announced or under construction). The Church oversees approximately 70,000 missionaries in hundreds of proselytizing, service and humanitarian missions. This work continues to grow, often in areas with significant temporal needs. To accomplish this work, the Church follows the financial principles it teaches: living within a budget, avoiding debt and saving and investing for the future.

That the Church operates within its means and avoids debt is a wonderful thing.  And at present the Church (to be clear, its members) are sufficiently generous with their tithes that the Church can cover its operating expenses (which includes various charitable endeavors) and still have money (tithes) left over.  So, what should it do with those funds?  Spend it all?  Park it in a bank account, where it will hopefully accrue enough interest to outpace inflation?  Or would it be appropriate - per the Parable of the Talents - to prudently invest some of those funds so that the principal accrues interest, and then utilize that interest for further investments and growth?  

Of course, the purpose of these funds is to build the Kingdom.  Increasing those funds is not an end unto itself.  But here's the thing: the Brethren are not getting rich.  They are in charge of many billions of dollars, and they are not getting rich.  They could have lives of opulence and profligacy, but they are not getting rich.  The tithes given by the community of Saints are being managed for the benefit of the community, as well as to benefit others.  

7 minutes ago, Teancum said:

If the case goes to court it also would seem that a lot of financial information that the church would prefer NOT come out will.  This of course is just my best guess at the moment.

I don't see this case as going to court.  And if it does, I think there will be some real constraints on what information will be released.

Thanks,

-Smac

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1 hour ago, Fair Dinkum said:

No where has the church ever stated that it would build a massive reserve fund and invest in for profit real estate and bail out its insurance affiliates.

The Church has taught that members of the Church should live within their means, build up a financial reserve, and so on.  The Church has, for some decades now, taught this in both word and deed.  And I am very happy to see that.

As for "profit," who is improperly profiting from the Church's management of its resources?

Thanks,

-Smac

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2 hours ago, PacMan said:

Then he says he wouldn’t have contributed tithes if he had known the “true purpose.”  Well, if he was truly devout then he would have paid his tithing either way. There can be no reliance on the stated purpose of the funds if the giving was as a demonstration of faith.

The true purpose of tithes is clearly outlined in the D&C.
Anyone that thinks the purpose of tithing is meant for charity (ie, the poor) hasn't read their scriptures and therefore can't claim to be truly devout.

D&C 119:1 Verily, thus saith the Lord, I require all their surplus property to be put into the hands of the bishop of my church in Zion,
For the building of mine house, and for the laying of the foundation of Zion and for the priesthood, and for the debts of the Presidency of my Church.
3 And this shall be the beginning of the tithing of my people.
4 And after that, those who have thus been tithed shall pay one-tenth of all their interest annually; and this shall be a standing law unto them forever, for my holy priesthood, saith the Lord.

Tithing is not for helping the poor.  Fast offerings are for helping the poor.  You pay tithing it's for building temples, building Zion and for keeping the Church out of debt.
I don't see how he can claim fraud when the use of tithing funds is so clearly spelling out.

Edited by JLHPROF
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I agree with Huntsman on this case.  We know from statements from our French Presiding Bishop that tithing dollars were used to fund the City Creek Mall.  Our church has been receiving money donated for charitable services and either hoarding it or using it to support businesses not allowed per IRS regulations (ie bailing out DMBA).  

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12 minutes ago, Ahab said:

When you pay a bill that payment comes from an account, usually a checking account but maybe a credit card account or maybe a savings account.  And when you get a tax refund or some pay from a job that money goes into an account unless your employer or the bank who cashes your check pays you in cash, but even your cash can be tracked by seeing whose account it eventually goes into.  What you bought or who you paid and what it was for.  Are you suggesting the Church pays in cash for all of its expenditures?  Even if it did when the Church receives cash it goes into a Church account and an auditor can tell which account that cash came from.

Yes, and it can be looked at.  That's all I am saying.  Money comes from some source and it goes to some source and all of that can be tracked by an auditor who knows how to review accounting records.

I don’t think we agree at all but this is a boring derail and I have learned the futility of trying to convince you of anything many times over.

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40 minutes ago, Ahab said:

Ttribe is wrong.  Keeping track of money, where it came from and what it is or was used for, is a very simply a matter of accounting.  And if you don't believe me you can ask an auditor who knows how to review accounting records.

Hahahaha! Do you even know what I do for a living?! You are SO barking up the wrong tree.

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