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


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2 minutes ago, 2BizE said:

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).  

France has its own Presiding Bishop?

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4 minutes ago, 2BizE said:

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).  

Except tithing is NOT donated for charitable services.  That's not its purpose.

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3 minutes ago, 2BizE said:

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).  

Were those statements bank statements showing what money was used or are you just talking about some words he used to say what he said?  Financial statements from banks are what are needed to show where the money came from.

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5 minutes ago, The Nehor said:

France has its own Presiding Bishop?

Apparently our Presiding Bishop is French.  Who knew?

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1 hour ago, HappyJackWagon said:

I can't imagine this case will go anywhere but it does bring up some interesting questions. I think most people pay tithing with the expectation that the funds will be used to build up the church in religious ways; Temples, chapels, missions etc.

Yes.  But I think most reasonably-informed members understand that the Church has expenses that are not directly involved with these "religious ways."

I also think that most reasonably-informed members understand and appreciate that the Church is doing what it has been teaching us to do: live within its means, set aside reserve funds, plan for the future, etc.

I also think that most reasonably-informed members understand and appreciate that setting aside reserve funds and planning for the future does not mean simply stuffing money in a metaphorical mattress, but instead involves prudent use and investment of such funds.  The Parable of the Talents not only lauds such prudent use by the "good and faithful servant{s}," but also condemns the servant who buried the talent given to him and did nothing with it.

I also think that most reasonably-informed members understand and appreciate that the people who have access to and control over the Church's finances have put in place numerous safeguards, oversights, checks and balances, etc. so as to reduce the risk of misuse of such funds.  We have the Council on the Disposition of Tithes, the Budget Committee, the Appropriations Committee, the Church Budget Office, the Church Audit Committee, and more.  We get annual reports from the Audit Committee.  Moreover, we see the beautiful temples, the tens of thousands of missionaries, the thousands of church buildings, the Church's humanitarian and philanthropic efforts, the canneries and storehouses, Welfare Square, Humanitarian Square, and so on.

I also think that most reasonably-informed members understand and appreciate that the Brethren are not getting rich.  Their living allowances are static, uniform and fairly modest given the amount of work they do, the skills involved, and the alternatives available to so many of them.

1 hour ago, HappyJackWagon said:

Most people don't expect their donation to be placed into investments for highrise housing in Philadelphia or malls or cattle farms etc.

Why would you think that?  I would expect the Church to use sacred funds wisely.  Are you suggesting that the Church's investments are not wise?

1 hour ago, HappyJackWagon said:

IMO the church can do whatever it wants to with donated monies but that doesn't change the fact that the use of funds may not meet the donor's expectations.

I would hope that members who have concerns about this would be circumspect, that they would give this matter some deliberation and study and effort to understand.  I would hope they would not listen to the dissidents and critics who presume to tell us how we should feel about how our Church manages our freely-given donations.

I would also hope they would think that the finances of an organization with members in the millions and resources in the billions are likely to be a bit more complex than, say, an individual's or family's finances.

1 hour ago, HappyJackWagon said:

That's a PR issue and I think the church is responsible for creating those expectations. How many lessons have we heard about tithing and its uses? Rarely, if ever is it taught that donations will go into a massive investment structure and that the church will function primarily on the annual returns from those investments.

How much of that invested money is spent advancing the missions of the Church?  

How much of that invested money is spent on profligacies seen on the Lifestyles of the Rich and Famous (General Authorities Edition)?

1 hour ago, HappyJackWagon said:

I wish I could finance my life that way but I don't think most people expect the church to function that way.

I think "most people" trust that the Church will handle sacred funds wisely.

And that trust seems to be well placed.

1 hour ago, HappyJackWagon said:

The issue of the Corporation Sole is interesting. Legally there is no Church of Jesus Christ of Latter-day Saints. The church is essentially a trademark with legal entities surrounding it controlled by 1 person.

Two, actually (Pres. Nelson and Bishop Causse).

Thanks,

-Smac

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1 hour ago, Ahab said:

Yes, since you asked.  It is simply a matter of accounting.

Then "fraud" doesn't really enter into the picture, I think.

Thanks,

-Smac

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1 hour ago, HappyJackWagon said:

I can't imagine this case will go anywhere but it does bring up some interesting questions. I think most people pay tithing with the expectation that the funds will be used to build up the church in religious ways; Temples, chapels, missions etc. Most people don't expect their donation to be placed into investments for highrise housing in Philadelphia or malls or cattle farms etc.

D&C 119:2 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.

Why can't it be both?  Zion is temporal as well as religious.  And through the diverse portfolio the Presidency of the Church debt is also no longer an issue.  Tithing is filling its purpose.

Quote

IMO the church can do whatever it wants to with donated monies but that doesn't change the fact that the use of funds may not meet the donor's expectations. That's a PR issue and I think the church is responsible for creating those expectations. How many lessons have we heard about tithing and its uses? Rarely, if ever is it taught that donations will go into a massive investment structure and that the church will function primarily on the annual returns from those investments.

This is the real issue.  People have no idea what tithing is for.  That does fall on the Church if they are not clearly teaching how tithing is used.
But Church History also shows consistent usage of tithing in building up the Church financially.  Nothing has changed.

Edited by JLHPROF
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30 minutes ago, ttribe said:

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

Let me guess.  You're an auditor of accounting records.  One of those auditors who can't tell where money came from or how it was used by looking at accounting records.

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13 minutes ago, smac97 said:

Then "fraud" doesn't really enter into the picture, I think.

Thanks,

-Smac

Eh, maybe or maybe not.  Some individuals or institutions don't keep accurate records or follow generally accepted accounting principles and thereby misrepresent themselves to auditors or the general public.  But a good auditor can reveal the fraud.

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21 minutes ago, smac97 said:

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?  

According to the lawsuit, charitable activities include "to fund missionary work, member indoctrination, temple work, and other educational and charitable activities."

21 minutes ago, smac97 said:

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

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?  

The question isn't whether it is appropriate to live within your means and have a rainy day fund. The question is whether the church is saving so much money it can't rightly be classified as appropriately saving, but rather is improperly hoarding. As a general guideline that you would hear from experts in finance who specialize in such things, an organization such as the church should have at most 100% of its annual budget in savings "for a rainy day," and can save more for that for specific expenditures it is planning in the upcoming few years or for specific pension obligations or whatever. If an organization wanted to be extremely cautious, it could have 200% of its annual budget in a rainy day fund. But saving more than that is widely considered hoarding--it is considered a suboptimal use of its resources because too many dollars are going to Wall Street and too few are going to the organization's raison d'être.

I understand that at some indeterminate date in the distant future these funds and the investment income they generate are intended to be used on the actual mission of the Church. But riffing off of what an economist might say, at some indeterminate date in the distant future, we're all dead.

If James Huntsman spent a big part of his life in deep, serious conversations with his family about how much they should save vs. how much they should give away, and talking about how much the Huntsman Foundation should save each year and how much it should spend, then he probably came to the sensibilities I described above--if the Church needs $7 Billion a year to fund its operations, then its rainy day fund should be about $7 Billion. If it has more saved than that, it should either spend more on its mission or tell its donors that they should redirect their contributions to other charities that actually need to money.

If he then figured out that the Church's savings wasn't 100% of its budget as would be appropriate but was closer to 2000%, and that even with this exorbitant amount saved about 60% of its annual revenue was going to increase the savings even more, he could quite justifiably come to the conclusion that the Church was being misleading when it referred to its hoarding as prudently saving for a rainy day.

21 minutes ago, smac97 said:

Increasing those funds is not an end unto itself. 

But it sure seems that way.

21 minutes ago, smac97 said:

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.

That's great. But "hoarding" and "overpaying your executives" are two different corporate sins.

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1 minute ago, ttribe said:

Wow.  You really don't know how to converse in good faith do you?  Let me help you with a few snippets from my CV:

Bachelor of Science in Accountancy from Arizona State University, Summa Cum Laude

Master of Accountancy from Brigham Young University, High Distinction

Certified Public Accountant

Certified in Financial Forensics

Certified Fraud Examiner

Certified Internal Controls Auditor

Five years as an auditor (primarily of SEC registrants) at Deloitte & Touche

Three years in academia at Arizona State University and The University of Arizona teaching accounting and auditing (2 of those years at the UofA in the PhD program in Accounting)

16 years in forensic accounting performing financial investigations and proving expert witness testimony, having testified over 50 times at this point.

 

In short, you have no business telling me that I don't know what I'm talking about when it comes to accounting and auditing, especially when it comes to litigation.

All I needed from you was a very short answer to a very simple question:  Can an auditor discover where an individual's or institution's money came from and how it was used by auditing accounting records?

The correct answer is yes if the auditor is good at his job.

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1 minute ago, Ahab said:

All I needed from you was a very short answer to a very simple question:  Can an auditor discover where an individual's or institution's money came from and how it was used by auditing accounting records?

The correct answer is yes if the auditor is good at his job.

And I'm telling you that your hand-waving and oversimplification grossly understates the challenge associated with the matters in this case.  Your comment betrays a lack of understanding of both the nuance and complexity of the issues which would need to be identified, measured and presented should this case proceed into discovery and beyond.

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5 minutes ago, Analytics said:

According to the lawsuit, charitable activities include "to fund missionary work, member indoctrination, temple work, and other educational and charitable activities."

And that's why the lawsuit will go nowhere.

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3 minutes ago, JLHPROF said:

And that's why the lawsuit will go nowhere.

I don't know that you can make such a definitive statement.  My initial assessment is that there is a small, but still non-zero chance, that the Plaintiff could successfully argue that there is an issue of fact over whether the Church ever misled its donors on the use(s) of the funds, especially as it relates to potential commingling with business ventures.  If the court decides that complaint has merit, then the case would move into discovery and the sheer magnitude of financial records to be analyzed would result in a small army of lawyers and accountants poring over records going back years to determine whether the Church (and its related entities charged with maintaining and investing its monies) had ever commingled tithing money with business venture money.  I suspect the Plaintiff would also assert that various statements by Church leadership (Pres. Hinckley immediately comes to mind) have created the perception that such funds were segregated and that tithing funds would only be used for ecclesiastical purposes.  I think it is unwise to simply dismiss this case as being an act of sour grapes when the potential ramifications here are quite significant.

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18 minutes ago, Analytics said:

According to the lawsuit, charitable activities include "to fund missionary work, member indoctrination, temple work, and other educational and charitable activities."

The question isn't whether it is appropriate to live within your means and have a rainy day fund. The question is whether the church is saving so much money it can't rightly be classified as appropriately saving, but rather is improperly hoarding. As a general guideline that you would hear from experts in finance who specialize in such things, an organization such as the church should have at most 100% of its annual budget in savings "for a rainy day," and can save more for that for specific expenditures it is planning in the upcoming few years or for specific pension obligations or whatever. If an organization wanted to be extremely cautious, it could have 200% of its annual budget in a rainy day fund. But saving more than that is widely considered hoarding--it is considered a suboptimal use of its resources because too many dollars are going to Wall Street and too few are going to the organization's raison d'être.

I understand that at some indeterminate date in the distant future these funds and the investment income they generate are intended to be used on the actual mission of the Church. But riffing off of what an economist might say, at some indeterminate date in the distant future, we're all dead.

If James Huntsman spent a big part of his life in deep, serious conversations with his family about how much they should save vs. how much they should give away, and talking about how much the Huntsman Foundation should save each year and how much it should spend, then he probably came to the sensibilities I described above--if the Church needs $7 Billion a year to fund its operations, then its rainy day fund should be about $7 Billion. If it has more saved than that, it should either spend more on its mission or tell its donors that they should redirect their contributions to other charities that actually need to money.

If he then figured out that the Church's savings wasn't 100% of its budget as would be appropriate but was closer to 2000%, and that even with this exorbitant amount saved about 60% of its annual revenue was going to increase the savings even more, he could quite justifiably come to the conclusion that the Church was being misleading when it referred to its hoarding as prudently saving for a rainy day.

But it sure seems that way.

That's great. But "hoarding" and "overpaying your executives" are two different corporate sins.

An organization’s decisions not meeting with the approval of financial planners does not make those decisions criminal or unethical.

 

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4 minutes ago, ttribe said:

I don't know that you can make such a definitive statement.  My initial assessment is that there is a small, but still non-zero chance, that the Plaintiff could successfully argue that there is an issue of fact over whether the Church ever misled its donors on the use(s) of the funds, especially as it relates to potential commingling with business ventures.  If the court decides that complaint has merit, then the case would move into discovery and the sheer magnitude of financial records to be analyzed would result in a small army of lawyers and accountants poring over records going back years to determine whether the Church (and its related entities charged with maintaining and investing its monies) had ever commingled tithing money with business venture money.  I suspect the Plaintiff would also assert that various statements by Church leadership (Pres. Hinckley immediately comes to mind) have created the perception that such funds were segregated and that tithing funds would only be used for ecclesiastical purposes.  I think it is unwise to simply dismiss this case as being an act of sour grapes when the potential ramifications here are quite significant.

If it does go to discovery I wonder whether the brain trust that created this very badly written lawsuit would have the resources to do anything with the documents they might demand. It reminds me of a case I was involved with in a job. A defendant with more money than sense spent a fortune trying to contest the findings of our equipment and sought to get the code for our device. Eventually we decided “why not” and gave it to them. They couldn’t understand it or do anything with it and they lost.

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Just now, The Nehor said:

If it does go to discovery I wonder whether the brain trust that created this very badly written lawsuit would have the resources to do anything with the documents they might demand. It reminds me of a case I was involved with in a job. A defendant with more money than sense spent a fortune trying to contest the findings of our equipment and sought to get the code for our device. Eventually we decided “why not” and gave it to them. They couldn’t understand it or do anything with it and they lost.

My assessment is that Mr. Huntsman may have considerably deep pockets, as well, but I'm venturing into speculation at this point.

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3 minutes ago, ttribe said:

I don't know that you can make such a definitive statement.  My initial assessment is that there is a small, but still non-zero chance, that the Plaintiff could successfully argue that there is an issue of fact over whether the Church ever misled its donors on the use(s) of the funds, especially as it relates to potential commingling with business ventures.  If the court decides that complaint has merit, then the case would move into discovery and the sheer magnitude of financial records to be analyzed would result in a small army of lawyers and accountants poring over records going back years to determine whether the Church (and its related entities charged with maintaining and investing its monies) had ever commingled tithing money with business venture money.  I suspect the Plaintiff would also assert that various statements by Church leadership (Pres. Hinckley immediately comes to mind) have created the perception that such funds were segregated and that tithing funds would only be used for ecclesiastical purposes.  I think it is unwise to simply dismiss this case as being an act of sour grapes when the potential ramifications here are quite significant.

I'm not able to debate you on business or accounting.  I know very little.  Likewise I know little about the 501c designation and what entities are permitted to do within that limit.

However, the fraud claim is a bit more clear.  I think since fraud requires deception and the scriptures clearly define tithing usage for any member to read it's hard to say anyone was misled.  The proscribed use of tithing in publicly available Church teachings is sufficiently vague to allow for many, many uses, not all of them ecclesiastical.  And it's sufficiently clear that many of these non-religious uses can apply.

 

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Just now, ttribe said:

My assessment is that Mr. Huntsman may have considerably deep pockets, as well, but I'm venturing into speculation at this point.

I think if he did have money and intended to use it he would have hired a better lawyer to prepare the case. Honestly I think the lawsuit is not intended for a judicial audience just like the original complaint to the IRS was not primarily written for the IRS.

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32 minutes ago, Ahab said:
Quote

Then "fraud" doesn't really enter into the picture, I think.

Eh, maybe or maybe not.  Some individuals or institutions don't keep accurate records or follow generally accepted accounting principles and thereby misrepresent themselves to auditors or the general public.  But a good auditor can reveal the fraud.

I will re-state: Then "fraud" doesn't really enter into the picture as regarding this lawsuit, I think.

I think the Church keeps pretty good records, and follows "generally accepted accounting principles."

Nielsen filed his complaint against the Church 15 months ago.  It appears that the IRS either A) never investigated or else B) investigated and found no wrongdoing.  Either way there is no investigation by the IRS of Nielsen's allegations.  I think that merits some attention.

Thanks,

-Smac

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3 minutes ago, The Nehor said:

An organization’s decisions not meeting with the approval of financial planners does not make those decisions criminal or unethical.

Yes, but if it represented itself as needing tithing in order to fund its charitable purposes but was really intending to use most of the tithing to increase its corporate empire, it might be committing fraud. 

I don't have a huge problem with the Church doing whatever it wants to with its money, but I do think it ought to meet best practices in financial transparency so that there aren't misunderstandings with the donors regarding what it is doing with the money.

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27 minutes ago, Analytics said:

According to the lawsuit, charitable activities include "to fund missionary work, member indoctrination, temple work, and other educational and charitable activities."

Pretty vague, that.  And since fraud requires particularity...

27 minutes ago, Analytics said:

The question isn't whether it is appropriate to live within your means and have a rainy day fund.

Are you sure?  It seems like that is the question, but that people have differing opinions about it.  Kathleen Flake called it:

Quote

Pondering the merit of added transparency for the church’s finances, Flake asks why the church doesn’t simply open up its records.

Her answer: The alleged problem is not about financial malfeasance, “it’s about competing views of what should be done with Church money and who gets to say so.”

“In other words,” Flake concludes, “this is a power struggle ... and one that we’ve seen before from those who don’t understand Mormonism and how it handles its money.”

Yep.

27 minutes ago, Analytics said:

The question is whether the church is saving so much money it can't rightly be classified as appropriately saving, but rather is improperly hoarding.

I don't think that's the question.  Not the question posed in the lawsuit, anyway.

I recall reading a quote from D. Michael Quinn in which he felt that the Church's "rainy day fund" was pretty modest given the Church's significant operating expenses.

Anyway, it's not really the place of a federal judge to adjudicate whether a private religious organization is, as you put it, "appropriately saving" or "improperly hoarding."  Rather, the judge will be concerned with whether the Church has complied with the law.

27 minutes ago, Analytics said:

As a general guideline that you would hear from experts in finance who specialize in such things, an organization such as the church should have at most 100% of its annual budget in savings "for a rainy day," and can save more for that for specific expenditures it is planning in the upcoming few years or for specific pension obligations or whatever. If an organization wanted to be extremely cautious, it could have 200% of its annual budget in a rainy day fund. But saving more than that is widely considered hoarding--it is considered a suboptimal use of its resources because too many dollars are going to Wall Street and too few are going to the organization's raison d'être.

Could you provide some references for this?

27 minutes ago, Analytics said:

If James Huntsman spent a big part of his life in deep, serious conversations with his family about how much they should save vs. how much they should give away, and talking about how much the Huntsman Foundation should save each year and how much it should spend, then he probably came to the sensibilities I described above--if the Church needs $7 Billion a year to fund its operations, then its rainy day fund should be about $7 Billion. If it has more saved than that, it should either spend more on its mission or tell its donors that they should redirect their contributions to other charities that actually need to money.

In other words, Kathleen Flake was right: "{I}t’s about competing views of what should be done with Church money and who gets to say so."  It's about James Huntsman wanting to tell the Church what it "should" do, and what it "should ... tell its donors," and so on.

So . . . not about fraud, then.

27 minutes ago, Analytics said:

If he then figured out that the Church's savings wasn't 100% of its budget as would be appropriate but was closer to 2000%, and that even with this exorbitant amount saved about 60% of its annual revenue was going to increase the savings even more, he could quite justifiably come to the conclusion that the Church was being misleading when it referred to its hoarding as prudently saving for a rainy day.

But it sure seems that way.

That's great. But "hoarding" and "overpaying your executives" are two different corporate sins.

Neither of which is implicated in the present lawsuit.

Thanks,

-Smac

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8 minutes ago, smac97 said:

Nielsen filed his complaint against the Church 15 months ago.  It appears that the IRS either A) never investigated or else B) investigated and found no wrongdoing.  Either way there is no investigation by the IRS of Nielsen's allegations.  I think that merits some attention.

There are multiple things that could be going on regarding the IRS. Maybe the IRS investigated and cleared the church. Maybe they are quietly working on it. Maybe it is on their backlog. Maybe they decided to ignore it because it was too politically sensitive.

Regardless, those allegations are about whether Ensign Peak Advisors should rightly be considered a charity, given that it allegedly doesn't ever spend any money on charitable purposes, ever. Even if the IRS rightly concludes that Ensign Peak Advisors is a non-profit charity and not a for-profit hedge fund, it would have no bearing on whether the Church was being honest with its members about what it was doing with the bulk of its income.

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