Church fined by SEC

[Danzo]

46 minutes ago, pogi said:

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:

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

 

There is no serious question. Only blind accusations from uninformed individuals who don't know anything about what a tax exempt organization is.  

How may 990s have you filled out?

How many 1023 forms have you filled out?

Until a real accusation from the government entity that regulates tax exempt organizations come up with an accusation stop repeating unfounded speculation. 

As for "Potential", any organization has the "potential" to do about anything.  EPA has the "Potential" to be funding terrorists or to kill puppies.

 

 

 

 

Edited March 6, 2023 by Danzo

[pogi]

1 hour ago, Danzo said:

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. 

The legal experts who spoke about this on Doug Fabrizio used the word "perjury".

Either way, my point was to discuss the morality of it but you keep bringing up legal technicalities.   Expecting them to lie on legal documents is an ethics violation, legal/perjury or not. 

 

Edited March 7, 2023 by pogi

[pogi]

40 minutes ago, Danzo said:

There is no serious question. Only blind accusations from uninformed individuals who don't know anything about what a tax exempt organization is.  

How may 990s have you filled out?

How many 1023 forms have you filled out?

Until a real accusation from the government entity that regulates tax exempt organizations come up with an accusation stop repeating unfounded speculation. 

As for "Potential", any organization has the "potential" to do about anything.  EPA has the "Potential" to be funding terrorists or to kill puppies.

I may not be an expert on these issues, but I wouldn't call Sam Brunson (whom I was quoting) an "uninformed" individual who "doesn't know anything"?

If the government chooses not to pursue this case for many potential reasons, that doesn't mean that no violation was committed.  I am not sure if the IRS has or will even investigate.   

[Teancum]

3 hours ago, Stargazer said:

Because it's not really "the law." 

Hmmm.   Seems like you went to a lot of gyrations to get to this conclusion.  But nah, regulations are law.  For example, I deal with tax law as a profession. As you noted there is language in various sections of the IRC that designate power to the secretary of the treasury to proscribe regulations.  In tax law the highest level of law is the IRC which is directly from congress.  Treasury regulations are next in line in authority and interpret and explain the law. They carry significant weight when applying tax law. Running afoul of them can cost you civil penalties and in some cases criminal penalties.  So I would not really agree that regulations from institutions that congress has empowered to draft and enforce such regulations are really not law.

[mfbukowski]

4 hours 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?

Hey I know your real name there Shirley Eujest, so I'm gonna tell jo mama.

[Danzo]

2 hours ago, pogi said:

I may not be an expert on these issues, but I wouldn't call Sam Brunson (whom I was quoting) an "uninformed" individual who "doesn't know anything"?

If the government chooses not to pursue this case for many potential reasons, that doesn't mean that no violation was committed.  I am not sure if the IRS has or will even investigate.   

Then you might want to actually listen to your own expert “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.”"

[Danzo]

2 hours ago, pogi said:

The legal experts who spoke about this on Doug Fabrizio used the word "perjury".

Either way, my point was to discuss the morality of it but you keep bringing up legal technicalities.   Expecting them to lie on legal documents is an ethics violation, legal/perjury or not. 

 

I don't think it is very moral to falsely accuse someone of something when you don't even know what that something is.  If someone is using the word perjury then it just means that they want to use Hyperbole or that they just  don't know what that word means.  The SEC Report accuses the Church of misstatements, not wire fraud, not perjury, not false statements, not any of the many things that they could have accused the Church of.   I don't know who this Doug Fabrizio is but if he used perjury, then I don't have a lot of confidence in his legal opinions.

In the immortal words of El Guapo "Well, you told me I have a plethora. And I just would like to know if you know what a plethora is. I would not like to think that a person would tell someone he has a plethora, and then find out that that person has *no idea* what it means to have a plethora."

[pogi]

16 minutes ago, Danzo said:

Then you might want to actually listen to your own expert “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.”"

Once again, please tone down the personal attacks.

“If” they would have followed the rules, they would have followed the rules - that seems to go without saying.  They didn’t do that. 

They could have operated it in that way (I wish they would have as there would have been more direct oversight by the church and more direct accountability for the decisions and internal operations), but they chose not to.   They clearly saw benefits in starting the EPA,.  But along with the benefits (including shielding the church from the brunt of accountability), comes other potential tax obligation noted by Sam.  

 

 

[pogi]

1 hour ago, Danzo said:

I don't think it is very moral to falsely accuse someone of something when you don't even know what that something is.  If someone is using the word perjury then it just means that they want to use Hyperbole or that they just  don't know what that word means.  The SEC Report accuses the Church of misstatements, not wire fraud, not perjury, not false statements, not any of the many things that they could have accused the Church of.   I don't know who this Doug Fabrizio is but if he used perjury, then I don't have a lot of confidence in his legal opinions.

In the immortal words of El Guapo "Well, you told me I have a plethora. And I just would like to know if you know what a plethora is. I would not like to think that a person would tell someone he has a plethora, and then find out that that person has *no idea* what it means to have a plethora."

You’re not really addressing my response.  See:

“Expecting them to lie on legal documents is an ethics violation, legal/perjury or not.”  The rest of the legal jargon is less important to me personally.  He was interviewing Sam Brunson and other legal experts, so it may have been Brunson that used the word perjury.  Honestly, I have more reason to trust their opinion than yours.  But like I said, perjury or not, you are ignoring the ethics of what they did.  To expect “managers” who don’t really manage anything, but were designated because of their common/generic names and small social media presence, to sign off on these documents was just morally wrong.  No legal argument will convince me otherwise.  You are free to use your own moral judgment in this matter, but I will listen to the still small voice in my own heart, and it tells me to RUN as fast as you can from a company that puts you in a position like that.  And that is exactly what some of them ended up doing.  

 

 

Edited March 7, 2023 by pogi

[smac97]

4 hours ago, Danzo said:

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. 

I have not been following this part of the discussion, but I'll dive in anyway.

Wouldn't Rule 10b-5 (17 CFR § 240.10b-5) apply to inaccurately filling out 13F forms?

Quote

Employment of manipulative and deceptive devices.

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

This rule has been applied to misstated 13F forms (see, e.g., here (an "Order Instituting Cease-and-Desist regarding "Lion Biotechnologies, Inc.")

However, paragraph 36 of the SEC Order against EPA does not cite to Rule 10b-5, but instead states that "Ensign Peak violated Section 13(f)(1) of the Exchange Act {codified as 15 U.S.C. § 78m(f)(1)} and Rule 13f-1 thereunder {codified as 17 CFR 240.13f-1}."  These recite the requirements for filling out Form 13F.

Thanks,

-Smac

[jkwilliams]

6 hours ago, smac97 said:

I have not been following this part of the discussion, but I'll dive in anyway.

Wouldn't Rule 10b-5 (17 CFR § 240.10b-5) apply to inaccurately filling out 13F forms?

This rule has been applied to misstated 13F forms (see, e.g., here (an "Order Instituting Cease-and-Desist regarding "Lion Biotechnologies, Inc.")

However, paragraph 36 of the SEC Order against EPA does not cite to Rule 10b-5, but instead states that "Ensign Peak violated Section 13(f)(1) of the Exchange Act {codified as 15 U.S.C. § 78m(f)(1)} and Rule 13f-1 thereunder {codified as 17 CFR 240.13f-1}."  These recite the requirements for filling out Form 13F.

Thanks,

-Smac

Just a guess, but maybe the settlement involved avoiding the invocation of Rule 10b-5 in favor of 13(f)(1). 

[Amulek]

On 3/6/2023 at 5:44 PM, pogi said:

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

In Sam's more recent Twitter comments about the EPA complaint he says the following [link].

Complaint: If EPA has not operated for religious or charitable purposes, then it clearly falls short of the requirements of IRC § 501 (c)(3) and is not exempt...

Sam: Finally (for now, at least), this is true. To be a tax-exempt "integrated auxiliary," EPA has to have been operated for certain listed charitable purposes.

Was it? 

In 1971 (Rev. Rule 71-529 for anyone who wants to follow along), the IRS asks whether a putatively tax-exempt org, the purpose of which is to manage and invest funds for other tax-exempt orgs with a below-market fee, qualified as exempt. https://www.taxnotes.com/research/federal/irs-guidance/revenue-rulings/rev.-rul.-71-529/d81s

The IRS ruled that it was.

This looks really similar to the business model of EPA to me. I don't know its fee arrangement, but I'd be shocked if it weren't well below market.

Which is to say, I suspect EPA meets the terms of tax exemption laid out by the IRS. 

(There are also a handful of IRS rulings that say that an integrated auxiliary that manages church money is exempt. Most of them have been superceded, though not contradicted.)

Edited March 8, 2023 by Amulek
Remove unintended emoji.

[Teancum]

11 hours ago, Danzo said:

I don't think it is very moral to falsely accuse someone of something when you don't even know what that something is.  If someone is using the word perjury then it just means that they want to use Hyperbole or that they just  don't know what that word means.  The SEC Report accuses the Church of misstatements, not wire fraud, not perjury, not false statements, not any of the many things that they could have accused the Church of.   I don't know who this Doug Fabrizio is but if he used perjury, then I don't have a lot of confidence in his legal opinions.

In the immortal words of El Guapo "Well, you told me I have a plethora. And I just would like to know if you know what a plethora is. I would not like to think that a person would tell someone he has a plethora, and then find out that that person has *no idea* what it means to have a plethora."

I  am curious as to your thoughts on EPA in the tax issue.  I am not an expert at all on NFP tax issue having intentionally avoided that area of tax law my entire career.   In general and tax exempt organization is allowed to invest $$ that will be used for their tax exempt purpose and pay no tax on the income correct?  I assume endowment funds for colleges can invest $$ and pay no tax on the earnings or capital gains.  I have consulted with clients who want to donate appreciated property to a charitable organization ad as you are aware the client can deduct the fair value of the asset and avoid paying the capital gain tax on the asset.  The NFP can then sell the asset and not incur tax.  Are there requirements for endowment funds to distribute a certain amount of their assets annually to not run into issues with tax regulations?  It appears that Harvard distributes a certain % of their endowment fund annually.  Perhaps they are not required to do so but rather they do it as a policy.  It would seem that the Church uses EPA as an endowment fund of sorts.  But it least to date it has not really distributed any of it for charitable purposes.  I am wondering if that could be problematic in the future if that pattern is continued.

[MrShorty]

19 hours ago, pogi said:

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.  

Yes, this. A couple of pages back, @rockpond called for something from church leadership to explain, "The purpose of those holdings and how they fit within the mission of the Church." I think there is a significant conversation to be had. One thing that bothers me about the secrecy of it all (even if it had been completely legal) is that I can't tell if the church is trying to avoid this conversation. The only thing the church says is the somewhat glib, incomplete, "the church believes in spending less than it brings in, just like it recommends to everyone else." Now that we have beaucoup bucks, can we talk about how this rainy day fund really fits into the mission of the church, including a conversation about all of the things we could be doing in the present that we are not doing because we believe it is more important to continue to grow the rainy day fund?

Inertia is an interesting word choice here. It reminds me of the conversation I started about how the church seems heavily inclined towards "conservativism" (resisting change) and avoids "progressivism" (seeking and embracing changes). If "inertia" is an accurate word to describe what happened, it suggests to me another example of how our general resistance to change seems to be a part of how the church operates. It is interesting (and a bit problematic, IMO) how "inertia" (or some descriptor like it) fits into the difficult issues the church faces. In other conversations, we have suggested that "truth" will represent a good balance between conservative and progressive, between inertia to keep us headed in our current direction with enough force to be able to change direction when needed. This feels to me like another example when our inertia is keeping us from doing our best good in the world.

Edited March 7, 2023 by MrShorty
minor typos

[Malc]

42 minutes ago, Teancum said:

I  am curious as to your thoughts on EPA in the tax issue.  I am not an expert at all on NFP tax issue having intentionally avoided that area of tax law my entire career.   In general and tax exempt organization is allowed to invest $$ that will be used for their tax exempt purpose and pay no tax on the income correct?  I assume endowment funds for colleges can invest $$ and pay no tax on the earnings or capital gains.  I have consulted with clients who want to donate appreciated property to a charitable organization ad as you are aware the client can deduct the fair value of the asset and avoid paying the capital gain tax on the asset.  The NFP can then sell the asset and not incur tax.  Are there requirements for endowment funds to distribute a certain amount of their assets annually to not run into issues with tax regulations?  It appears that Harvard distributes a certain % of their endowment fund annually.  Perhaps they are not required to do so but rather they do it as a policy.  It would seem that the Church uses EPA as an endowment fund of sorts.  But it least to date it has not really distributed any of it for charitable purposes.  I am wondering if that could be problematic in the future if that pattern is continued.

On the contrary, has EPA not distributed funds to at least one for-profit business - Beneficial Life Insurance Co?

[Teancum]

39 minutes ago, Malc said:

On the contrary, has EPA not distributed funds to at least one for-profit business - Beneficial Life Insurance Co?

Yes that is my point.  As far as I know there are three distributions of cash out of EPA.  For Beneficial Life, for City Creek Mall and now for an SEC fine.  Not a dime for charitable.  I guess one could argue that funds to a for profit business the church owns is indirectly for charity but that might be a big leap.  And being able to use $$ form an investment fund that pays no tax to fund a for profit venture gives an unfair competitive advantage to the church.

[ttribe]

11 hours ago, smac97 said:

I have not been following this part of the discussion, but I'll dive in anyway.

Wouldn't Rule 10b-5 (17 CFR § 240.10b-5) apply to inaccurately filling out 13F forms?

This rule has been applied to misstated 13F forms (see, e.g., here (an "Order Instituting Cease-and-Desist regarding "Lion Biotechnologies, Inc.")

However, paragraph 36 of the SEC Order against EPA does not cite to Rule 10b-5, but instead states that "Ensign Peak violated Section 13(f)(1) of the Exchange Act {codified as 15 U.S.C. § 78m(f)(1)} and Rule 13f-1 thereunder {codified as 17 CFR 240.13f-1}."  These recite the requirements for filling out Form 13F.

Thanks,

-Smac

I don't claim complete knowledge, but I've only ever seen Rule 10b-5 used for financial statement fraud (i.e. intentional misstatements on the Balance Sheet, Profit and Loss Statement, Statement of Cash Flows, Statement of Stockholders' Equity, and/or related footnotes and disclosures). Perhaps the Lion Bio example was a novel application of Rule 10b-5, or their actions so egregious that the SEC elevated the charges.

[ttribe]

13 hours ago, Danzo said:

I don't think it is very moral to falsely accuse someone of something when you don't even know what that something is.  If someone is using the word perjury then it just means that they want to use Hyperbole or that they just  don't know what that word means.  The SEC Report accuses the Church of misstatements, not wire fraud, not perjury, not false statements, not any of the many things that they could have accused the Church of.   I don't know who this Doug Fabrizio is but if he used perjury, then I don't have a lot of confidence in his legal opinions.

In the immortal words of El Guapo "Well, you told me I have a plethora. And I just would like to know if you know what a plethora is. I would not like to think that a person would tell someone he has a plethora, and then find out that that person has *no idea* what it means to have a plethora."

The signatory language on Form 13-f states the following:

"The institutional investment manager filing this report and the person by whom it is signed hereby
represent that the person signing the report is authorized to submit it, that all information
contained herein is true, correct and complete, and that it is understood that all required items,
statements, schedules, lists, and tables, are considered integral parts of this form."

While the form does not specifically make use of the term "perjury," there is a pretty clear honesty assertion being made by the signor. I don't think you see any mention of sanctioning the individuals who signed these documents because the SEC is not generally in the business of pursuing individuals who were signing something they didn't understand at the behest of their employer. Both Ensign Peak and the Church were held accountable for those actions:

36. As a result of the conduct described above, Ensign Peak violated Section 13(f)(1) of
the Exchange Act and Rule 13f-1 thereunder by failing to file Forms 13F in Ensign Peak’s name.
Ensign Peak also violated Section 13(f)(1) of the Exchange Act and Rule 13f-1 thereunder by
filing misstated Forms 13F in the names of LLCs created for the sole purpose of filing Forms 13F.

37. As a result of the conduct described above, the Church caused Ensign Peak’s
violations of Section 13(f)(1) of the Exchange Act and Rule 13f-1 thereunder.

 

[Hamilton Porter]

16 hours ago, pogi said:

The legal experts who spoke about this on Doug Fabrizio used the word "perjury".

They have every incentive to lie. They're not under oath.

[ttribe]

11 minutes ago, Hamilton Porter said:

They have every incentive to lie. They're not under oath.

Why do "they have every incentive to lie?"

[Hamilton Porter]

1 minute ago, ttribe said:

Why do "they have every incentive to lie?"

They're on Doug Fabrizio's show.

[ttribe]

3 minutes ago, Hamilton Porter said:

They're on Doug Fabrizio's show.

Well, I'm not from Utah and I don't reside there, so I don't really know what that's supposed to mean. But, your logic seems rather circular. Spencer can correct if I'm wrong, but I believe there are significant repercussions for attorneys who knowingly make false public statements.

[jkwilliams]

14 minutes ago, ttribe said:

Well, I'm not from Utah and I don't reside there, so I don't really know what that's supposed to mean. But, your logic seems rather circular. Spencer can correct if I'm wrong, but I believe there are significant repercussions for attorneys who knowingly make false public statements.

Doug Fabrizio is the Anti-Christ. You should know that. 

[ttribe]

5 minutes ago, jkwilliams said:

Doug Fabrizio is the Anti-Christ. You should know that. 

Apparently.

[pogi]

38 minutes ago, Hamilton Porter said:

They're on Doug Fabrizio's show.

I'm not sure what you have against Doug Fabrizio, I think he is great.  Sam Brunson was interviewed.  What is his incentive to lie?  They frequently interview representatives and spokespeople from the church on the show - I guess they are all liars too since they are not under oath. 

52 minutes ago, Hamilton Porter said:

They have every incentive to lie. They're not under oath.

Not being under oath is not an "incentive" to lie.  No one here is under oath either, so why should I trust opinions here over legal experts (some of which are members) interviewed on his show?   

Edited March 7, 2023 by pogi