Church fined by SEC

[rockpond]

On 3/4/2023 at 8:57 PM, Stormin' Mormon said:

They did manage the assets assigned to them. They had "investment authority" (as defined by the law in question) but not "sole investment authority" (as defined by the SEC regulation in question). 

This was bad legal advice, not perjury. This was failing to adhere to federal regulations, not breaking the law. 

And that's still bad optics and not a great look for the church. I'm not really trying to deny that.

But perjury? Coercion? Violation of federal law? That really is jumping to the worst possible interpretation.

How are you concluding that the LLC managers had any investment authority?  I haven't seen any statement to indicate that and, in fact, everything I have read or heard suggests that they had zero investment authority over the assets assigned to their LLC.

[Bernard Gui]

2 hours ago, SeekingUnderstanding said:

Clearly...

Just checking.

[jkwilliams]

33 minutes ago, rockpond said:

How are you concluding that the LLC managers had any investment authority?  I haven't seen any statement to indicate that and, in fact, everything I have read or heard suggests that they had zero investment authority over the assets assigned to their LLC.

I'm trying to figure out the difference between "failure to adhere to federal regulations" and "breaking the law." Isn't a federal regulation a law, and isn't failure to adhere to it breaking that law? 

[Bernard Gui]

4 minutes ago, jkwilliams said:

I'm trying to figure out the difference between "failure to adhere to federal regulations" and "breaking the law." Isn't a federal regulation a law, and isn't failure to adhere to it breaking that law? 

Federal, state, local. Everything is regulated. There isn't a one of us, individuals or organized groups, who haven't broken the law then.

By the way, what about the guy who is trying to sell the apples?

[jkwilliams]

Just now, Bernard Gui said:

Federal, state, local. Everything is regulated. There isn't a one of us, individuals or organized groups, who haven't broken the law then.

By the way, what about the guy who is trying to sell the apples?

"Everyone does it" is not a particularly good excuse.

[Danzo]

11 minutes ago, jkwilliams said:

I'm trying to figure out the difference between "failure to adhere to federal regulations" and "breaking the law." Isn't a federal regulation a law, and isn't failure to adhere to it breaking that law? 

Failing to follow these regulations is breaking the law. However it should be noted that it is breaking civil law, not criminal law.

Currently the number of federal laws (and state and local) is so vast that I would be highly surprised if I wasn't breaking a few.   Given my experience with a small (but significant) part of US law I would be more surprised if the church investment people were exactly obeying all laws than I am that they missed a few. 

I distinctly remember arguing in a court of law over whether the presence of a golf digest magazine in my clients office constituted breaking the law.  Its absurd of course, but the stakes were real and the legal issue was real.

[CV75]

3 hours ago, Bernard Gui said:

I don’t understand the significance of holding a temple recommend. Is it like “…and I’m a sixth generation Mormon…?”

The way I see it, and for good reason (apples-and-oranges), there is no temple recommend question about how one feels about following secular, governmental policy (such as fiscal transparency) in a Church setting. So, people can feel different ways about this subject and still answer all the real questions.

Someone might try to tie this to other questions such as #7 or #9, but that would be an interpretation on their part.

[CV75]

32 minutes ago, jkwilliams said:

I'm trying to figure out the difference between "failure to adhere to federal regulations" and "breaking the law." Isn't a federal regulation a law, and isn't failure to adhere to it breaking that law? 

Regulations are standards and rules adopted by administrative agencies that govern whether and how laws will be enforced. Lots of stuff about that difference on Google. Federal agencies are allowed by law to set up their regulations. Failure to adhere to a regulation can be viewed by some as a clear-cut ethical matter, and not so by others.

[Stargazer]

26 minutes ago, jkwilliams said:

I'm trying to figure out the difference between "failure to adhere to federal regulations" and "breaking the law." Isn't a federal regulation a law, and isn't failure to adhere to it breaking that law? 

In a sense, failure to adhere to a regulation is breaking the law that is behind the regulation. But only in a sense. Regulations inhabit a peculiarly interesting area of law.  There's a hierarchy.

Constitution -> Statute -> Regulation

A provision of the Constitution, the 15th Amendment, decrees in its Section 1 that "The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of race, color, or previous condition of servitude". But this alone does not enforce the amendment. So Section 2 states that "The Congress shall have the power to enforce this article by appropriate legislation." This is because the subject is complicated enough that the Amendment alone is insufficient and cannot easily be enforced. The various Voting Rights acts comprise the law on this subject, but the law itself seems to be sufficient, because no federal regulations were created to administer the law. 

So Congress drafts legislation to enforce the Amendment. In fact, all federal legislation expands upon the Constitution. Technically, if something isn't mentioned in the Constitution, the Congress may not pass a law enforcing it. Fortunately, Congress is sufficiently limber and imaginative that it can pass a law about anything at all and make it look Constitutional. 

Well, anyway, if you look in certain portions of the Internal Revenue Code, for instance, you will find, in place of actual statute language, references to regulations that are not included in the law. For example, in  TITLE 26 / Subtitle A / CHAPTER 1 / Subchapter E / PART I / § 441(f)(4) it says: "The Secretary shall prescribe such regulations as he deems necessary for the application of this subsection." And the same it true regarding the SEC.

The question is, if you violate the regulations, are you violating the law? Oh, sure, they can and will fine you for your disobedience, but what you're violating is a regulation that the agency has created in order to enforce the law, and which, at their own initiative, can change without asking Congress's permission. Granted, they have to publish the change in the Federal Register so that in case Congress doesn't like the change they can object to it. But Congress rarely bothers. 

So is this "breaking the law"? Maybe. Maybe not.

Violating these regulations are akin to getting a speeding ticket on the highway. And you get fined. Of course, the violation of some traffic laws is not a mere infractions, but an actual misdemeanor or felony. But most of them do not rise to that level. You can make perfectly honest mistake with no malign intent and still get fined for a technical violation. And sometimes the cop will let you off with a warning. And sometimes the SEC might do the same. But you broke the law! How dare they let you off!

Because it's not really "the law." 

In my humble opinion.

[Stargazer]

42 minutes ago, CV75 said:

The way I see it, and for good reason (apples-and-oranges), there is no temple recommend question about how one feels about following secular, governmental policy (such as fiscal transparency) in a Church setting. So, people can feel different ways about this subject and still answer all the real questions.

Someone might try to tie this to other questions such as #7 or #9, but that would be an interpretation on their part.

If you get a speeding ticket the day before your temple recommend interview, and you haven't yet paid your fine, nor "repented", should you be denied the recommend?

[MiserereNobis]

45 minutes ago, Stargazer said:

If you get a speeding ticket the day before your temple recommend interview, and you haven't yet paid your fine, nor "repented", should you be denied the recommend?

Just tell the bishop that you are a sovereign citizen.

[CV75]

25 minutes ago, Stargazer said:

If you get a speeding ticket the day before your temple recommend interview, and you haven't yet paid your fine, nor "repented", should you be denied the recommend?

I would wait a week until I forgot about the speeding or paying the ticket...!  just kidding.

The term "be denied" indicates that I would not get the recommend signed by my bishopric/stake presidency member even if I answered #9 and #15 in the affirmative. So, do they somehow know I was also naked, drunk and trying to run over President Nelson (or any other general authority or local leader) on my way to my paramour's house at the time?

But at face value, I would feel fine getting my recommend because "I strive to be honest in all that I do" even though I was caught speeding and hadn't paid the fine yet (I would pay it).

I see speeding as a matter of law, not regulation, and the SEC compliance situation a matter of regulation. As such it is further removed from morality and ethics in my mind than speeding is. The difference in the magnitude of significance of the two types -- my speeding and the Church deciding not to file accurate forms -- is just as subjective; at what point do I believe intentional fiscal non-reporting by a church, given its type of investments, undermine our life and safety obligations?

[Danzo]

57 minutes ago, Stargazer said:

In a sense, failure to adhere to a regulation is breaking the law that is behind the regulation. But only in a sense. Regulations inhabit a peculiarly interesting area of law.  There's a hierarchy.

Constitution -> Statute -> Regulation

 

Unfortunately, in the real world the law works much different.  Often, the statute tells the Executive to make regulations and those regulations become part of the statute.  More Circular than linear.  Often criminal punishment comes from breaking regulations since the statute tells the government to make the rules that create the crime. 

Breaking Regulations is breaking the law.

The punishments can range from nothing at all to fines, to time in prison.  

At this point, in the United States, at least, the number of ways one can violate the law far exceeds the ability of the government to enforce the law and even the citizens to understand the law enough to know when they are breaking it. this leads to some laws being selectively enforced by the government, some laws not being enforced at all by the government and even encouraging and enabling some laws to be broken.

This is why one should never talk to the police (or any enforcement personnel such as the IRS or SEC)  Always ask for questions in writing and always respond in writing after having your lawyer review the responses.  

A case that I am currently working on involves a fraud penalty of several hundred thousand dollars that would not have been assessed if the clients had not talked to the IRS.   Neither the Client, nor their tax prepare were even aware of the laws that were allegedly broken until I informed them. 

[Danzo]

10 minutes ago, CV75 said:

I see speeding as a matter of law, not regulation, and the SEC compliance situation a matter of regulation. As such it is further removed from morality and ethics in my mind than speeding is. The difference in the magnitude of significance of the two types -- my speeding and the Church deciding not to file accurate forms -- is just as subjective; at what point do I believe intentional fiscal non-reporting by a church, given its type of investments, undermine our life and safety obligations?

Breaking the speed limit would be a matter of regulation (as well as law) the posted speed limits are usually set by regulation not by any legislative body (except for maybe the maximum limit).

The SEC thing is basically the SEC accusing the church of breaking the regulations (which is breaking the law).   The church would probably have seen the 5 million as less than the cost of litigating the issue and agreed to it to avoid the cost of litigation (as well as an implicit higher fine if they would have fought and lost). 

I have that discussion often with clients.  Many times I have to tell them that they are right, the government is wrong but that they should just pay the fine because they would likely pay me more (and they still might lose). 

[pogi]

There is a lot of talk about the law vs regulation as if any of this softens the moral violation in the web of deceit (lying, according to the LDS definition) or expecting "managers" to potentially perjure themselves by legally attesting to the accuracy by signing documents with false addresses and verifying info that they can't verify.  Or the potential moral violation of designating the EPA as a "charitable" organization for tax exempt purposes.  Nor does it address the potential moral violation of stockpiling 100 billion dollars for a "rainy day" fund, when members in the Philippines are struggling to feed their families and pay tithing.  It is raining for so many (in and out of the church), with little to no relief available where it could be offered.  

I think the accumulation of these funds was just a matter of inertia.  I don't think there is any nefarious purposes behind it, but I think it has gotten so big so quickly that they don't know what to do with it all - so it sits and grows.   How big is big enough?  That is a question that needs to be asked because there are people suffering who could use our help and we are not offering it.  

Edited March 6, 2023 by pogi

[Danzo]

6 minutes ago, pogi said:

There is a lot of talk about the law vs regulation as if any of this softens the moral violation in the web of deceit (lying, according to the LDS definition) or expecting "managers" to potentially perjure themselves by legally attesting to the accuracy by signing documents with false addresses and verifying info that they can't verify. 

What are you even talking about? I am beginning to think that you don't really know what perjury is. Maybe you should find out what perjury is before making these kinds of accusations. 

The government (who investigated this a lot more than you did, does not allege perjury).

 

[Danzo]

15 minutes ago, pogi said:

Or the potential moral violation of designating the EPA as a "charitable" organization for tax exempt purposes. 

Again, I don't think you know a thing about what constitutes a charitable organization for tax exempt purposes. No one in the government has accused it of that. 

[Danzo]

17 minutes ago, pogi said:

Nor does it address the potential moral violation of stockpiling 100 billion dollars (enough to give each individual member nearly 6 BILLION dollars each) for a "rainy day" fund, when members in the Philippines are struggling to feed their families and pay tithing.  It is raining for so many (in and out of the church), with little to no relief available where it could be offered.  

I think you need to back to school.  100 divided by 6 =17. there are much more than 17 members, even in my small branch.

[pogi]

1 minute ago, Danzo said:

I think you need to back to school.  100 divided by 6 =17. there are much more than 17 members, even in my small branch.

Yes, I corrected it.  Stupid mistake. 

[Tacenda]

Just read on FB about two sister missionaries that were robbed at gunpoint recently, they weren't injured thank goodness. This made me remember back a few years ago when in a neighbor's nephew's mission a missionary was kidnapped. Then I wondered if that's why the church might want to hide their wealth. I'm sure it's happened before, kidnappings. This happened in the African area somewhere. But another good idea is for the church to disperse this fund in more humanitarian needs to get it down to a decent amount. Right now it's indecent, I know some will laugh at that. And maybe more missionaries will be robbed when outsiders think the church is so wealthy. 

[pogi]

9 minutes ago, Danzo said:

What are you even talking about? I am beginning to think that you don't really know what perjury is. Maybe you should find out what perjury is before making these kinds of accusations. 

The government (who investigated this a lot more than you did, does not allege perjury).

 

Quote

Perjury can also be committed by knowingly signing or acknowledging a written legal document (such as affidavit, declaration under penalty of perjury, deed, license application, tax return) that contains false information. Perjury is regulated by federal and state legislation.

https://www.hg.org/perjury.html#:~:text=Perjury can also be committed,by federal and state legislation.

Choosing not to go after these managers for perjury is not the same as saying that it didn't happen. 

[pogi]

13 minutes ago, Danzo said:

Again, I don't think you know a thing about what constitutes a charitable organization for tax exempt purposes. No one in the government has accused it of that. 

I don't think you know what I know.  Please knock off the personal insults and attacks!  

There seems to be some serious question as to whether the church evaded taxes:

Quote

 

It’s not clear,” said Sam Brunson, who teaches tax law at Loyola University in Chicago.

Ensign Peak Advisors Inc. is not a charitable organization on its own, the Latter-day Saint attorney said, since managing money doesn’t qualify as a tax-exempt purpose.

“It has to distribute some of that money to the church [to use for charitable pursuits],” Brunson said. “But the IRS does not dictate how much. Ten percent may not be enough, but it almost definitely has to be more than zero.”

If the whistleblower is correct and Ensign never sent any money back to the church, he said, then there is a “legitimate question about whether it is tax exempt.”

Brunson said few churches have a big enough nest egg to worry about these distinctions, but such questions have long been raised in the context of large universities such as Harvard.

The ambiguity around Ensign is “because it’s a tax-exempt organization separate from the church,” the professor said. “If the advisers operated within the church’s Presiding Bishop’s Office [which oversees the faith’s vast real estate, investment and financial operations], there would be no problem.”

https://www.sltrib.com/religion/2019/12/17/lds-church-we-obey-all/

I used the word "potential".  So back off. 

 

Edited March 6, 2023 by pogi

[CV75]

39 minutes ago, Danzo said:

Breaking the speed limit would be a matter of regulation (as well as law) the posted speed limits are usually set by regulation not by any legislative body (except for maybe the maximum limit).

The SEC thing is basically the SEC accusing the church of breaking the regulations (which is breaking the law).   The church would probably have seen the 5 million as less than the cost of litigating the issue and agreed to it to avoid the cost of litigation (as well as an implicit higher fine if they would have fought and lost). 

I have that discussion often with clients.  Many times I have to tell them that they are right, the government is wrong but that they should just pay the fine because they would likely pay me more (and they still might lose). 

Yes, with speeding, it depends on the State – speed limits are called one or the other (or even an ordinance!) depending on where you live, how they are set up and why. And then some States have absolute and / or basic categories of speed limit on top of that, so there’s a “pass” (couldn’t help it) on much of it. I think that generally, our sense of morality or ethics is more strongly associated with law than regulations.

I’ve seen arguments that the SEC allegations concern compliance with the regulations it is authorized to set by law to fulfil its mission (protect investors, maintain a fair and functional securities markets, and free up ways for capital formation. I find the semantics (regulation v la) helpful in this case. I’m sure that cost was the primary driver for the Church’s negotiation of the fine over litigation; it is easy for me to envision doing the same thing and answering temple recommend question #9 in the affirmative.

[Danzo]

Just now, pogi said:

Choosing not to go after these managers for perjury is not the same as saying that it didn't happen. 

Except it does. The SEC did not refer this to the Department of Justice to prosecute perjury, and they had access to more facts than you do. 

Have you read the form 13F? ?

It does not contain a Jurat, nor does it say under penalty of perjury or false swearing, a prerequisite of a perjury charge (contrast this with a 1040 which does contain a jurat)

Perjury is an extremely difficult charge to prosecute. It requires someone to state something material that was false that they knew at the time was false, under oath!

No where has anyone accused anyone of perjury except people who don't know what perjury is. 

 

 

[CV75]

20 minutes ago, Danzo said:

I think you need to back to school.  100 divided by 6 =17. there are much more than 17 members, even in my small branch.

I mean, $5882! $5882!