Church fined by SEC

[Analytics]

41 minutes ago, CV75 said:

It would seem that the SEC, which provides oversight for the PCAOB, uses the following definition for "misstatement" : Appendix A: Definitions | PCAOB (pcaobus.org) , hardly "its term for lying."

"Misstatement – A misstatement, if material individually or in combination with other misstatements, causes the financial statements not to be presented fairly in conformity with the applicable financial reporting framework.1/ A misstatement may relate to a difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that should be reported in conformity with the applicable financial reporting framework. Misstatements can arise from error (i.e., unintentional misstatement) or fraud."

In this case, the misstatements the Church has been found guilty of did not arise from error (i.e. unintentional misstatement). They arose from fraud.

[webbles]

57 minutes ago, Tacenda said:

On Fox 13 News at 5:00 they mentioned it was to hide the large amount of money the fund had. Quincy Newell came right out and said it at mark 2:21. 

Hamilton College religious studies professor, Quincy Newell, explained why the Church itself would want to keep the sums in its billion dollar portfolio from becoming widely known.

“It was precisely that discomfort that people have with a religious organization having a lot of wealth that led the Church and its investment advisors at Ensign Peak to pursue the strategy that ultimately led to these charges by the SEC,” said Newell.

How would Quincy Newell know why the EPA or the church did it?  I don't believe he has any connections to EPA or the general authorities so his statement isn't any more authoritative then the rest of the ideas that people have proposed on this forum.

[OGHoosier]

5 minutes ago, Analytics said:

In this case, the misstatements the Church has been found guilty of did not arise from error (i.e. unintentional misstatement). They arose from fraud.

I'll leave it to the SEC to make that clear, thanks.

[Tacenda]

11 minutes ago, webbles said:

How would Quincy Newell know why the EPA or the church did it?  I don't believe he has any connections to EPA or the general authorities so his statement isn't any more authoritative then the rest of the ideas that people have proposed on this forum.

It's a woman, and that came to my mind as well, it didn't say how she was connected or how she was able to know for sure. 

[Analytics]

1 hour ago, bluebell said:

Do we have a reference for the bolded? [

two of the “business managers,” both Church employees, who had to sign the SEC forms resigned, because they knew signing the forms was dishonest. ]

[Quotes from the SEC are in blue]

33. In May 2018, a public website reported that various entities that appeared to have ties to the Church had filed Forms 13F revealing holdings of approximately $32 billion. The website referenced evidence indicating that these entities’ domain names were all registered to an entity tasked with overseeing and protecting the intellectual property of the Church, and that each of the LLCs identified listed a Business Manager whose name matched that of a Church employee.

34. After the website reported this information, two Business Managers resigned their roles, voicing concerns about what they had been asked to do. Rather than changing the LLC Structure, two new Business Managers were assigned to replace the two who resigned.

https://www.sec.gov/litigation/admin/2023/34-96951.pdf

If your employer required you to lie to the SEC as part of your job, would you resign?

1 hour ago, bluebell said:

And, did the SEC fine the church for intentionally deceptive SEC filings?  I'm sincerely confused on that issue because it doesn't make sense that when the SEC says "misstated" they actually mean "intentionally deceptive filings".

You really need to read the SEC's report in context. It lays out how the Church and Ensign Peaks "went to great lengths" to avoid submitting honest reports to the SEC.

8. To prevent disclosure of the securities portfolio managed by Ensign Peak, the Church approved Ensign Peak’s plan of using other entities, instead of Ensign Peak, to file Forms 13F. The Church was concerned that disclosure of the assets in the name of Ensign Peak, a known Church affiliate, would lead to negative consequences in light of the size of the Church’s portfolio. Ensign Peak did not have the authority to implement this approach without the approval of theChurch’s First Presidency.

In other words, the reason the Churchdid this was to "prevent disclosure," i.e. the very thing they knew they were required to do. It was intentional!

10. The first LLC was assigned a location in Glendale, California, although it conducted no business at that site. Ensign Peak signed an investment management agreement (“IMA”) with the LLC, and certain of Ensign Peak’s employees were assigned to be investment managers for the LLC. However, notwithstanding the IMA, Ensign Peak failed to transfer investment discretion to the LLC. Ensign Peak filed the first Form 13F in the name of this LLC on February 26, 2003, for the year ended December 31, 2002. Ensign Peak filed later Forms 13F using the name of the LLC through the quarter ended September 30, 2006.

 All of that was intentional. The Church didn't have any people in Glendale California. That city was chosen at random because it isn't Salt Lake City. They intentionally didn't transfer assets. They intentionally filed the 13F in the name of this company, even though it really didn't actually hold any assets. It was intentional, and it was all done "to prevent disclosure of the securities portfolio managed by Ensign Peak."

11. On March 15, 2005, the Church became aware that the public might link this first LLC to the Church because the person signing the Forms 13F was listed in a public directory as a Church employee. To address this issue, on March 21, 2005, the senior leadership of the Church approved a new reporting entity to be created with “better care being taken to ensure that neither the ‘Street’ nor the media [could] connect the new entity to Ensign Peak.”

Again, this was intentional, and it was done to make sure nobody would figure out the truth about this entity.

12. On December 1, 2005, Ensign Peak formed a second LLC as a Delaware nonprofit corporation, located in Wilmington, and named Ensign Peak’s Managing Director as its general manager. Ensign Peak then filed Forms 13F in the name of this new LLC.

13. Several years later, in 2011, Ensign Peak became concerned that its portfolio had become so large that the Form 13F filings it made using the name of the second LLC might attract unwanted attention and sought the Church’s approval to form additional LLCs to file Forms 13F. On May 19, 2011, the Church’s senior leadership approved Ensign Peak’s recommendation to “clone” the second LLC to create new Form 13F filers.

Again, the SEC spelled out why this was done: "to prevent unwanted attention." The idea that it was to prevent members from replicating their investments was an excuse made up after the fact.

 14. After obtaining Church approval, Ensign Peak formed new Clone LLCs for the purposes of filing Forms 13F. Five new entities were formed and given Delaware addresses, although none conducted business in Delaware.

Note why this was done. They created new entities not for any legitimate business, religious, or charitable purpose. They did so "for purposes of filing Forms 13F." They intentionally gave these shell entities Delaware addresses. This was to be deceptive.

 

16. On November 6, 2015, the senior leadership of the Church approved Ensign Peak’s plan for the creation of additional Clone LLCs to further prevent disclosure of the Church’s holdings managed by Ensign Peak. Ensign Peak formed six additional Clone LLCs, bringing the total to twelve.

Why did they create more clone LLC's? For one reason only: "to further prevent disclosure of the Church's holdings." Remember, disclosing the Church's holdings is what the law requires. All of this was done for the explicit purpose of skirting this legal responsibility.

21. Each Clone LLC was set up with a “Business Manager,” who, according to the terms of the LLC agreements, had responsibility for “the preparation and filing of the Company’s governmental reports, returns, notices and the like, including reports required by law of investment managers or entities exercising investment discretion.” However, the Business Managers performed no functions for the Clone LLCs outside of signing the Form 13F signature pages each quarter.

22. Ensign Peak was responsible for designating the Clone LLCs’ Business Managers, many of whom were Church employees. Business Managers were selected because they had common names and a limited presence on social media, and were therefore less likely to be publicly connected to Ensign Peak or the Church. Ensign Peak provided the Business Managers very limited information about the Clone LLCs or why they were created.

Do you see the intentionality here? The business managers didn't actually run any businesses, and they weren't selected based on their qualifications. They were selected based on how unlikely they would be publicly connected to the Church. But it was clearly intentional that the business managers only job was to sign documents and not actually manage any businesses.

23. Each Clone LLC was given an address outside of Utah although none of them conducted any business at those locations other than the receipt of mail. Ensign Peak chose multiple locations across the country for these purported offices to create the impression that the Clone LLCs conducted business operations throughout the U.S., making it more difficult to trace the Clone LLCs back to Ensign Peak or the Church.

Can you see the intentionality here? The intention was to be deceptive. 

25. After the Clone LLCs were formed, Ensign Peak prepared and filed Forms 13F with the Commission under the names of the Clone LLCs.

26. To prepare the filings, Ensign Peak maintained a list of all Section 13(f) Securities within its portfolio, and allocated these securities to the various Clone LLCs. Ensign Peak allocated newly-held Section 13(f) Securities to a Clone LLC at the end of a quarter, and also reallocated other Section 13(f) Securities to new LLCs as the number of LLCs increased. Ensign Peak’s senior management then drafted the Forms 13F and filed them, generally before obtaining the BusinessManagers’ signatures.

27. Each Form 13F filed in the name of a Clone LLC misstated that the LLC had sole investment discretion for the securities listed, that there were no other managers for these securities, and that the Clone LLC had sole voting discretion over these securities. Even though the IMAs stated that Ensign Peak had delegated investment discretion, Ensign Peak continued to manage the entire portfolio and at all times maintained investment and voting discretion over all the securities listed in the Forms 13F.

28. Each Form 13F was signed by the designated Business Manager. The signature page stated, “The institutional investment manager filing this report and the person by whom it is signed hereby represent . . . that all information contained herein is true, correct and complete[.]” However, Ensign Peak provided the Business Managers with insufficient information about the Clone LLCs or the securities assigned to them that would enable the Business Managers to make this representation. When Ensign Peak obtained the Business Managers’ signatures for the Forms 13F, Ensign Peak gave the Business Managers only the signature pages of the Forms 13F and not the complete documents. In addition, the Forms 13F were often filed with electronic signatures before Ensign Peak actually obtained the Business Managers’ handwritten signatures.

29. Each Form 13F also misstated that the Business Manager signed the Form 13F from the address listed on the signature page. In fact, all Business Managers were located in Salt Lake City, and the addresses on the forms were used to convey the impression that the Clone LLCs were located across the country.

This document is dripping with intentional deception--for the purpose of preventing disclosure of the securities portfolio managed by Ensign Peak, they set up fake companies with fake addresses, fake telephone numbers, and fake business managers. The Church then had the fake business managers sign things that they weren't even given the chance to read and in fact weren't the least bit true. This was all done in order to deceive the church membership, the public, and the SEC.

30. The Church and Ensign Peak understood that Ensign Peak continued to make investment and voting decisions relating to the portfolio, and that the LLC Structure was created for the sole purpose of filing Forms 13F.

These misstatements weren't an honest mistake. The Church "went to great lengths" to create these deceptions. Quoting the SEC's press release:

"The Securities and Exchange Commission today announced charges against Ensign Peak Advisers Inc., a non-profit entity operated by The Church of Jesus Christ of Latter-day Saints to manage the Church’s investments, for failing to file forms that would have disclosed the Church’s equity investments, and for instead filing forms for shell companies that obscured the Church’s portfolio and misstated Ensign Peak’s control over the Church’s investment decisions.... 

The LDS Church’s investment manager, with the Church’s knowledge, went to great lengths to avoid disclosing the Church’s investments, depriving the Commission and the investing public of accurate market information...the requirement to file timely and accurate information on Forms 13F applies to all institutional investment managers, including non-profit and charitable organizations.”

Going "to great lengths" to file inaccurate reports in order to deceive the church membership, the public, and the SEC, is a big deal.

Edited February 22, 2023 by Analytics

[Analytics]

36 minutes ago, OGHoosier said:

I'll leave it to the SEC to make that clear, thanks.

Please do. Here is the link:

https://www.sec.gov/litigation/admin/2023/34-96951.pdf

[pogi]

1 hour ago, webbles said:

How would Quincy Newell know why the EPA or the church did it?  I don't believe he has any connections to EPA or the general authorities so his statement isn't any more authoritative then the rest of the ideas that people have proposed on this forum.

Quincy Newell is reporting from the SEC report:

Quote

 

The Church was concerned that disclosure of the assets in the name of Ensign Peak, a known Church affiliate, would lead to negative consequences in light of the size of the Church’s portfolio.

https://www.sec.gov/litigation/admin/2023/34-96951.pdf

and this:

Quote

the Church and Ensign Peak created thirteen limited liability corporations (“LLCs”), including twelve similar LLCs (the “Clone LLCs”) with addresses located throughout the U.S., for the sole purpose of filing Forms 13F and preventing public disclosure by Ensign Peak of the Church’s equity securities holdings

https://www.sec.gov/litigation/admin/2023/34-96951.pdf

This aligns with what Roger Clarke revealed to the Wall Street Journal:

Quote

Latter-day Saint officials kept the size of the church’s $100 billion investment reserves secret for fear that public knowledge of the fund’s wealth might discourage members from paying tithing, according to the top executive who oversees the account.

For members of The Church of Jesus Christ of Latter-day Saints, tithing — donating 10% of one’s income to the faith — “is more of a sense of commitment than it is the church needing the money,” Roger Clarke, head of Ensign Peak Advisors, which manages the denomination’s investing holdings, told The Wall Street Journal.

“So they never wanted to be in a position where people felt like, you know, they shouldn’t make a contribution,” Clarke said."

https://www.sltrib.com/news/2020/02/08/lds-church-kept-lid-its-b/

Two reliable sources have confirmed this, but the EPA nor the church has addressed this issue, instead they make it seem like an unintentional mistake equivalent to a "traffic ticket".   That is misleading.  It appears that they are being misleading to cover up their misleading ventures. Seems like  it is turning into a trend or a habit.  Trust is going to wear thin unless the EPA and the church are forthright with what has already been revealed in a spirit of contriteness.  Not seeing that yet.  

Edited February 22, 2023 by pogi

[webbles]

5 minutes ago, pogi said:

Quincy Newell is reporting from the SEC report:

The SEC report just says "negative consequences".  It doesn't define them.  Several people have proposed various "negative consequences": members following the church's holdings and getting burned because of it, people not liking the size of the fund, people not wanting to pay tithing, etc.  Quincy Newell gives one suggestion of what the "negative consequence" is (discomfort in seeing a church with that much wealth) but I don't see it any more definitive than the others.

Roger Clarke is probably the most likely since he manages it and would have been in the meetings that discussed the reasons why.

 

[2BizE]

Here is a link to the 9-page order from the SEC.

“
8. To prevent disclosure of the securities portfolio managed by Ensign Peak, the Church approved Ensign Peak’s plan of using other entities, instead of Ensign Peak, to file Forms 13F. The Church was concerned that disclosure of the assets in the name of Ensign Peak, a known Church affiliate, would lead to negative consequences in light of the size of the Church’s portfolio. Ensign Peak did not have the authority to implement this approach without the approval of the Church’s First Presidency.
 

https://www.sec.gov/news/press-release/2023-35

[bluebell]

2 hours ago, Analytics said:

In this case, the misstatements the Church has been found guilty of did not arise from error (i.e. unintentional misstatement). They arose from fraud.

So unlike tribe, you disagree with the article the deseret news has published (linked by calm) and find it to be a dishonest account of what happened?

(asking for clarity, not to argue)

Edited February 22, 2023 by bluebell

[bluebell]

1 hour ago, OGHoosier said:

I'll leave it to the SEC to make that clear, thanks.

That’s what’s confusing to me. The wording they use is not very clear. 

[sunstoned]

10 hours ago, ttribe said:

I sincerely hope this prompts the Church to be more transparent with its finances.

At least I would hope that they reevaluate their message and tailor it to me more honest.  Case in point:

"There has been no attempt on the part of the church leaders to try to hide anything from anybody." —M. Russell Ballard

[pogi]

1 hour ago, Analytics said:

Please do. Here is the link:

https://www.sec.gov/litigation/admin/2023/34-96951.pdf

Thanks for the link.  I just read the full report and am really troubled by the extent and levels taken to deceive.  I am even more angry at the continued effort to cover up their lies with more lies. 

Anyone who thinks they were not intentionally deceiving and lying:

Quote

Each Form 13F filed in the name of a Clone LLC misstated that the LLC had sole investment discretion for the securities listed, that there were no other managers for these securities, and that the Clone LLC had sole voting discretion over these securities.  Even though the IMAs stated that Ensign Peak had delegated investment discretion, Ensign Peak continued to manage the entire portfolio and at all times maintained investment and voting discretion over all the securities listed in the Forms 13F. 

That is called lying.  That is dishonest.  Own up to it already!  Instead we get this coverup attempt:

Quote

Sometimes mistakes are made, and often inadvertently are, but that doesn’t mean there was any intention in the violation

Most penalties imposed by the SEC are the result of unintentional violations.”

these kinds of fines are commonplace even among organizations doing their best to be in compliance because of the extraordinarily complicated nature of the regulations.

https://publicsquaremag.org/faith/church-state/ensign-peak-clarifying-the-sec-announcement/

Does the above lying sound like an "inadvertent" "mistake" to anyone here?  Knowingly misrepresenting facts in government filings doesn't sound like an unintentional violation to me. 

Is lying about delegating investment discretion to these LLCs really "doing their best to be in compliance..."  It doesn't seem "extraordinarily complicated" to me that falsifying statements and unethically causing Business managers to sign documents attesting to the correctness of the documents without giving them the documents to review might be illegal.  It is all just more lies to cover up lies and deception.  

Quote

Each Form 13F was signed by the designated Business Manager. The signature page stated, “The institutional investment manager filing this report and the person by whom it is signed hereby represent . . . that all information contained herein is true, correct and complete[.]” However, Ensign Peak provided the Business Managers with insufficient information about the Clone LLCs or the securities assigned to them that would enable the Business Managers to make this representation. When Ensign Peak obtained the Business Managers’ signatures for the Forms 13F, Ensign Peak gave the Business Managers only the signature pages of the Forms 13F and not the complete documents.

This revelation of violated trust and deception caused some managers to resign.

Beyond the illegality of it, the level of intentional deceit to keep this secret is disturbing:

Quote

Ensign Peak was responsible for designating the Clone LLCs’ Business Managers, many of whom were Church employees. Business Managers were selected because they had common names and a limited presence on social media, and were therefore less likely to be publicly connected to Ensign Peak or the Church. Ensign Peak provided the Business Managers very limited information about the Clone LLCs or why they were created.

Quote

Each Clone LLC was given an address outside of Utah although none of them conducted any business at those locations other than the receipt of mail. Ensign Peak chose multiple locations across the country for these purported offices to create the impression that the Clone LLCs conducted business operations throughout the U.S., making it more difficult to trace the Clone LLCs back to Ensign Peak or the Church.

Quote

After the website reported this information, two Business Managers resigned their roles, voicing concerns about what they had been asked to do. Rather than changing the LLC Structure, two new Business Managers were assigned to replace the two who resigned.

But they didn't know what they were doing was unethical and potentially illegal, right?  Despite being warned by the CAD, and despite the resignations for unethical treatment, despite knowingly falsifying information on government fillings, despite intricate efforts to mislead the public...it was all an unintentional mistake.  BS! 

Edited February 22, 2023 by pogi

[bluebell]

1 hour ago, Analytics said:

[Quotes from the SEC are in blue]

33. In May 2018, a public website reported that various entities that appeared to have ties to the Church had filed Forms 13F revealing holdings of approximately $32 billion. The website referenced evidence indicating that these entities’ domain names were all registered to an entity tasked with overseeing and protecting the intellectual property of the Church, and that each of the LLCs identified listed a Business Manager whose name matched that of a Church employee.

34. After the website reported this information, two Business Managers resigned their roles, voicing concerns about what they had been asked to do. Rather than changing the LLC Structure, two new Business Managers were assigned to replace the two who resigned.

https://www.sec.gov/litigation/admin/2023/34-96951.pdf

If your employer required you to lie to the SEC as part of your job, would you resign?

You really need to read the SEC's report in context. It lays out how the Church and Ensign Peaks "went to great lengths" to avoid submitting honest reports to the SEC.

8. To prevent disclosure of the securities portfolio managed by Ensign Peak, the Church approved Ensign Peak’s plan of using other entities, instead of Ensign Peak, to file Forms 13F. The Church was concerned that disclosure of the assets in the name of Ensign Peak, a known Church affiliate, would lead to negative consequences in light of the size of the Church’s portfolio. Ensign Peak did not have the authority to implement this approach without the approval of theChurch’s First Presidency.

In other words, the reason the Churchdid this was to "prevent disclosure," i.e. the very thing they knew they were required to do. It was intentional!

10. The first LLC was assigned a location in Glendale, California, although it conducted no business at that site. Ensign Peak signed an investment management agreement (“IMA”) with the LLC, and certain of Ensign Peak’s employees were assigned to be investment managers for the LLC. However, notwithstanding the IMA, Ensign Peak failed to transfer investment discretion to the LLC. Ensign Peak filed the first Form 13F in the name of this LLC on February 26, 2003, for the year ended December 31, 2002. Ensign Peak filed later Forms 13F using the name of the LLC through the quarter ended September 30, 2006.

 All of that was intentional. The Church didn't have any people in Glendale California. That city was chosen at random because it isn't Salt Lake City. They intentionally didn't transfer assets. They intentionally filed the 13F in the name of this company, even though it really didn't actually hold any assets. It was intentional, and it was all done "to prevent disclosure of the securities portfolio managed by Ensign Peak."

11. On March 15, 2005, the Church became aware that the public might link this first LLC to the Church because the person signing the Forms 13F was listed in a public directory as a Church employee. To address this issue, on March 21, 2005, the senior leadership of the Church approved a new reporting entity to be created with “better care being taken to ensure that neither the ‘Street’ nor the media [could] connect the new entity to Ensign Peak.”

Again, this was intentional, and it was done to make sure nobody would figure out the truth about this entity.

12. On December 1, 2005, Ensign Peak formed a second LLC as a Delaware nonprofit corporation, located in Wilmington, and named Ensign Peak’s Managing Director as its general manager. Ensign Peak then filed Forms 13F in the name of this new LLC.

13. Several years later, in 2011, Ensign Peak became concerned that its portfolio had become so large that the Form 13F filings it made using the name of the second LLC might attract unwanted attention and sought the Church’s approval to form additional LLCs to file Forms 13F. On May 19, 2011, the Church’s senior leadership approved Ensign Peak’s recommendation to “clone” the second LLC to create new Form 13F filers.

Again, the SEC spelled out why this was done: "to prevent unwanted attention." The idea that it was to prevent members from replicating their investments was an excuse made up after the fact.

 14. After obtaining Church approval, Ensign Peak formed new Clone LLCs for the purposes of filing Forms 13F. Five new entities were formed and given Delaware addresses, although none conducted business in Delaware.

Note why this was done. They created new entities not for any legitimate business, religious, or charitable purpose. They did so "for purposes of filing Forms 13F." They intentionally gave these shell entities Delaware addresses. This was to be deceptive.

 

16. On November 6, 2015, the senior leadership of the Church approved Ensign Peak’s plan for the creation of additional Clone LLCs to further prevent disclosure of the Church’s holdings managed by Ensign Peak. Ensign Peak formed six additional Clone LLCs, bringing the total to twelve.

Why did they create more clone LLC's? For one reason only: "to further prevent disclosure of the Church's holdings." Remember, disclosing the Church's holdings is what the law requires. All of this was done for the explicit purpose of skirting this legal responsibility.

21. Each Clone LLC was set up with a “Business Manager,” who, according to the terms of the LLC agreements, had responsibility for “the preparation and filing of the Company’s governmental reports, returns, notices and the like, including reports required by law of investment managers or entities exercising investment discretion.” However, the Business Managers performed no functions for the Clone LLCs outside of signing the Form 13F signature pages each quarter.

22. Ensign Peak was responsible for designating the Clone LLCs’ Business Managers, many of whom were Church employees. Business Managers were selected because they had common names and a limited presence on social media, and were therefore less likely to be publicly connected to Ensign Peak or the Church. Ensign Peak provided the Business Managers very limited information about the Clone LLCs or why they were created.

Do you see the intentionality here? The business managers didn't actually run any businesses, and they weren't selected based on their qualifications. They were selected based on how unlikely they would be publicly connected to the Church. But it was clearly intentional that the business managers only job was to sign documents and not actually manage any businesses.

23. Each Clone LLC was given an address outside of Utah although none of them conducted any business at those locations other than the receipt of mail. Ensign Peak chose multiple locations across the country for these purported offices to create the impression that the Clone LLCs conducted business operations throughout the U.S., making it more difficult to trace the Clone LLCs back to Ensign Peak or the Church.

Can you see the intentionality here? The intention was to be deceptive. 

25. After the Clone LLCs were formed, Ensign Peak prepared and filed Forms 13F with the Commission under the names of the Clone LLCs.

26. To prepare the filings, Ensign Peak maintained a list of all Section 13(f) Securities within its portfolio, and allocated these securities to the various Clone LLCs. Ensign Peak allocated newly-held Section 13(f) Securities to a Clone LLC at the end of a quarter, and also reallocated other Section 13(f) Securities to new LLCs as the number of LLCs increased. Ensign Peak’s senior management then drafted the Forms 13F and filed them, generally before obtaining the BusinessManagers’ signatures.

27. Each Form 13F filed in the name of a Clone LLC misstated that the LLC had sole investment discretion for the securities listed, that there were no other managers for these securities, and that the Clone LLC had sole voting discretion over these securities. Even though the IMAs stated that Ensign Peak had delegated investment discretion, Ensign Peak continued to manage the entire portfolio and at all times maintained investment and voting discretion over all the securities listed in the Forms 13F.

28. Each Form 13F was signed by the designated Business Manager. The signature page stated, “The institutional investment manager filing this report and the person by whom it is signed hereby represent . . . that all information contained herein is true, correct and complete[.]” However, Ensign Peak provided the Business Managers with insufficient information about the Clone LLCs or the securities assigned to them that would enable the Business Managers to make this representation. When Ensign Peak obtained the Business Managers’ signatures for the Forms 13F, Ensign Peak gave the Business Managers only the signature pages of the Forms 13F and not the complete documents. In addition, the Forms 13F were often filed with electronic signatures before Ensign Peak actually obtained the Business Managers’ handwritten signatures.

29. Each Form 13F also misstated that the Business Manager signed the Form 13F from the address listed on the signature page. In fact, all Business Managers were located in Salt Lake City, and the addresses on the forms were used to convey the impression that the Clone LLCs were located across the country.

This document is dripping with intentional deception--for the purpose of preventing disclosure of the securities portfolio managed by Ensign Peak, they set up fake companies with fake addresses, fake telephone numbers, and fake business managers. The Church then had the fake business managers sign things that they weren't even given the chance to read and in fact weren't the least bit true. This was all done in order to deceive the church membership, the public, and the SEC.

30. The Church and Ensign Peak understood that Ensign Peak continued to make investment and voting decisions relating to the portfolio, and that the LLC Structure was created for the sole purpose of filing Forms 13F.

These misstatements weren't an honest mistake. The Church "went to great lengths" to create these deceptions. Quoting the SEC's press release:

"The Securities and Exchange Commission today announced charges against Ensign Peak Advisers Inc., a non-profit entity operated by The Church of Jesus Christ of Latter-day Saints to manage the Church’s investments, for failing to file forms that would have disclosed the Church’s equity investments, and for instead filing forms for shell companies that obscured the Church’s portfolio and misstated Ensign Peak’s control over the Church’s investment decisions.... 

The LDS Church’s investment manager, with the Church’s knowledge, went to great lengths to avoid disclosing the Church’s investments, depriving the Commission and the investing public of accurate market information...the requirement to file timely and accurate information on Forms 13F applies to all institutional investment managers, including non-profit and charitable organizations.”

Going "to great lengths" to file inaccurate reports in order to deceive the church membership, the public, and the SEC, is a big deal.

My question is, were they trying to prevent disclosure to the public, or were they trying to prevent disclosure to the SEC?

Does the report ever make that clear?  I haven’t had a chance to read everything yet, but I will. And I’m not asking you to do the research for me, I’m just outlining the questions that I have. 

[SeekingUnderstanding]

5 minutes ago, bluebell said:

So you unlike tribe, you disagree with the article the deseret news has published (linked by calm) and find it to be a dishonest account of what happened?

(asking for clarity, not to argue)

Are you talking about the public square editorial? https://publicsquaremag.org/faith/church-state/ensign-peak-clarifying-the-sec-announcement/

[pogi]

2 minutes ago, sunstoned said:

At least I would hope that they reevaluate their message and tailor it to me more honest.  Case in point:

"There has been no attempt on the part of the church leaders to try to hide anything from anybody." —M. Russell Ballard

To be fair, this was hidden from the quorum of the 12.  Elder Ballard had no idea.  It was hidden from them too.  The First Presidency and the Presiding Bishopric made the decision to hide this stuff from the public in order to keep us obedient (according to Roger Clarke). 

[bluebell]

1 minute ago, SeekingUnderstanding said:

Are you talking about the public square editorial? https://publicsquaremag.org/faith/church-state/ensign-peak-clarifying-the-sec-announcement/

Yes sorry about the misattribution. 

[sunstoned]

Just now, pogi said:

To be fair, this was hidden from the quorum of the 12.  Elder Ballard had no idea.  It was hidden from them too.  The First Presidency and the Presiding Bishopric made the decision to hide this stuff from the public in order to keep us obedient (according to Roger Clarke). 

valid point. He probably didn't know because like almost everyone, it was hidden from him.  Maybe the 12 could call the first presidency to an accounting on this.

[pogi]

8 minutes ago, bluebell said:

My question is, were they trying to prevent disclosure to the public, or were they trying to prevent disclosure to the SEC?

Does the report ever make that clear?  I haven’t had a chance to read everything yet, but I will. And I’m not asking you to do the research for me, I’m just outlining the questions that I have. 

Both.  The report makes it very clear. As does Roger Clarke. 

Quote

On March 15, 2005, the Church became aware that the public might link this first LLC to the Church because the person signing the Forms 13F was listed in a public directory as a Church employee. To address this issue, on March 21, 2005, the senior leadership of the Church approved a new reporting entity to be created with “better care being taken to ensure that neither the ‘Street’ nor the media [could] connect the new entity to Ensign Peak.”

Quote

Ensign Peak was responsible for designating the Clone LLCs’ Business Managers, many of whom were Church employees. Business Managers were selected because they had common names and a limited presence on social media, and were therefore less likely to be publicly connected to Ensign Peak or the Church. Ensign Peak provided the Business Managers very limited information about the Clone LLCs or why they were created.

Quote

Each Clone LLC was given an address outside of Utah although none of them conducted any business at those locations other than the receipt of mail. Ensign Peak chose multiple locations across the country for these purported offices to create the impression that the Clone LLCs conducted business operations throughout the U.S., making it more difficult to trace the Clone LLCs back to Ensign Peak or the Church.

The extent of the efforts to deceive the public is pretty astounding. 

Edited February 22, 2023 by pogi

[pogi]

49 minutes ago, sunstoned said:

valid point. He probably didn't know because like almost everyone, it was hidden from him.  Maybe the 12 could call the first presidency to an accounting on this.

I can only imagine that there have been some very upset members of the 12 over this.

Edited February 22, 2023 by pogi

[webbles]

10 minutes ago, bluebell said:

My question is, were they trying to prevent disclosure to the public, or were they trying to prevent disclosure to the SEC?

Does the report ever make that clear?  I haven’t had a chance to read everything yet, but I will. And I’m not asking you to do the research for me, I’m just outlining the questions that I have. 

Everything was actually disclosed to the SEC.  The 13 LLCs filled the 13F forms every quarter.  But they didn't tell the SEC (and therefore the public) that all 13 LLCs were actually a single investment firm.  And that is the misuse of the 13Fs.  If they had actually made the LLCs independent investment firms (kind of like 13 mini EPAs), they would not have been penalized.

[OGHoosier]

2 hours ago, Analytics said:

10. The first LLC was assigned a location in Glendale, California, although it conducted no business at that site. Ensign Peak signed an investment management agreement (“IMA”) with the LLC, and certain of Ensign Peak’s employees were assigned to be investment managers for the LLC. However, notwithstanding the IMA, Ensign Peak failed to transfer investment discretion to the LLC. Ensign Peak filed the first Form 13F in the name of this LLC on February 26, 2003, for the year ended December 31, 2002. Ensign Peak filed later Forms 13F using the name of the LLC through the quarter ended September 30, 2006.

 All of that was intentional. The Church didn't have any people in Glendale California. That city was chosen at random because it isn't Salt Lake City. They intentionally didn't transfer assets. They intentionally filed the 13F in the name of this company, even though it really didn't actually hold any assets. It was intentional, and it was all done "to prevent disclosure of the securities portfolio managed by Ensign Peak."

The above bolding is mine, and I have a question regarding it. Do you mean to interpret Point 10 to imply that the Church did not transfer assets to the clone LLCs? If you know from other sources that EP didn't transfer assets to the clone LLCs, then what follows will be immaterial. However, the SEC filing does not explicitly establish that EP never transferred assets to the clone LLCs.  Per the SEC's Form 13F FAQ, "investment discretion" means the following: 

Quote

An institutional investment manager exercises investment discretion if: (i) the manager has the power to determine which securities are bought or sold for the account(s) under management; or (ii) the manager makes decisions about which securities are bought or sold for the account(s), even though someone else is responsible for the investment decisions. See Securities Exchange Act Section 3(a)(35), and Rule 13f-1(b) under the Securities Exchange Act.

A manager also has investment discretion with respect to all accounts over which any natural person, company, or government instrumentality under its control exercises investment discretion. See Rule 13f-1(b). For example, by virtue of their corporate relationship, bank holding companies share investment discretion with their bank trust departments, and parent corporations share investment discretion with their subsidiaries.

- Question 6, "Frequently Asked Questions About Form 13F", https://www.sec.gov/divisions/investment/13ffaq

So "investment discretion" concerns the ability to dispose of assets held, per the SEC's current definition. I didn't see anything in the SEC report about the clone LLCs not holding assets. Clone LLCs filing 13F forms citing assets they don't hold would be an entirely different kind of violation than what we're actually talking about here. In fact, point 19 of the SEC filing implies that assets were assigned to the Clone LLCs:

Quote

19. Despite the provisions in the IMAs stating that the Clone LLCs would have management authority, the Clone LLCs never exercised investment discretion over the Church’s assets. Although Ensign Peak designated several of its own investment managers to serve as investment managers for each Clone LLC, these investment managers continued to manage the Section 13(f) Securities on behalf of Ensign Peak. They did not know which assets were allocated to the Clone LLCs and performed no functions for the LLCs outside of their existing responsibilities for Ensign Peak.

That would imply that there were assets allocated to the Clone LLCs. It might be a quibble, make of it what you will. It might also imply that EP maintained ownership of the assets but the Clone LLCs were given "stewardship" over the assets. If so, I don't see how that would obscure the size of EP's asset portfolio - it would just obscure the transfers. For that reason I expect they transferred assets.

To me, it looks like the SEC is calling EP and the Church on the de facto absence of investment discretion, not its de jure absence. Basically, EP transfers assets to Clone LLCs with an IMA granting the Business Manager authority over the whole, including the authority to "make decisions about which securities are bought or sold for the account(s), even though someone else is responsible for the investment decisions." The Business Managers exist to rubberstamp in perpetuity the decisions made by the EP investment managers, who govern the whole web of securities as a unity. Legally and on paper, the Business Managers have the discretion, but not in practice, and the SEC disapproved. It would not surprise me if this approach to splitting securities is fairly common for those trying to hedge against liability or preserve privacy, but EP was too on the nose with it. 

Edit:

EP has for the past few years reconsolidated its holdings. This might be a PR move, might not be. They could spread these out again among a bunch of shell LLCs, but as long as they allow for more autonomy among the managers, they won't come under SEC fire again for the same thing. We can expect scrutiny to be high. 

Edited February 22, 2023 by OGHoosier

[Analytics]

1 hour ago, bluebell said:

So unlike tribe, you disagree with the article the deseret news has published (linked by calm) and find it to be a dishonest account of what happened?

(asking for clarity, not to argue)

Yes, I think that "Public Square" article is deceptive in its own right.

[Analytics]

1 hour ago, bluebell said:

My question is, were they trying to prevent disclosure to the public, or were they trying to prevent disclosure to the SEC?

Does the report ever make that clear?  I haven’t had a chance to read everything yet, but I will. And I’m not asking you to do the research for me, I’m just outlining the questions that I have. 

It's clear to me that they were trying to hide the information from the membership and the public, and that in order to do that they needed to be deceptive to the SEC.

[Analytics]

23 minutes ago, OGHoosier said:

The above bolding is mine, and I have a question regarding it. Do you mean to interpret Point 10 to imply that the Church did not transfer assets to the clone LLCs? If you know from other sources that EP didn't transfer assets to the clone LLCs, then what follows will be immaterial. However, the SEC filing does not establish that EP never transferred assets to the clone LLCs.  Per the SEC's Form 13F FAQ, "investment discretion" means the following: 

So "investment discretion" concerns the ability to dispose of assets held, per the SEC's current definition. I didn't see anything in the SEC report about the clone LLCs not holding assets. Clone LLCs filing 13F forms citing assets they don't hold would be an entirely different kind of violation than what we're actually talking about here. In fact, point 19 of the SEC filing implies that assets were assigned to the Clone LLCs:

That would imply that there were assets allocated to the Clone LLCs. It might be a quibble, make of it what you will. 

To me, it looks like the SEC is calling EP and the Church on the de facto absence of investment discretion, not its de jure absence. Basically, EP transfers assets to Clone LLCs with an IMA granting the Business Manager authority over the whole, including the authority to "make decisions about which securities are bought or sold for the account(s), even though someone else is responsible for the investment decisions." The Business Managers exist to rubberstamp in perpetuity the decisions made by the EP investment managers, who govern the whole web of securities as a unity. Legally and on paper, the Business Managers have the discretion, but not in practice, and the SEC disapproved. It would not surprise me if this approach to splitting securities is fairly common for those trying to hedge against liability or preserve privacy, but EP was too on the nose with it.

My understanding is that the clone LLC's didn't legally own any assets. The Church pretended they did on Form 13F, but no assets were ever legally transferred. 

25. After the Clone LLCs were formed, Ensign Peak prepared and filed Forms 13F with the Commission under the names of the Clone LLCs.

26. To prepare the filings, Ensign Peak maintained a list of all Section 13(f) Securities within its portfolio, and allocated these securities to the various Clone LLCs. Ensign Peak allocated newly-held Section 13(f) Securities to a Clone LLC at the end of a quarter, and also reallocated other Section 13(f) Securities to new LLCs as the number of LLCs increased. Ensign Peak’s senior management then drafted the Forms 13F and filed them, generally before obtaining the Business Managers’ signatures.

27. Each Form 13F filed in the name of a Clone LLC misstated that the LLC had sole investment discretion for the securities listed, that there were no other managers for these securities, and that the Clone LLC had sole voting discretion over these securities. Even though the IMAs stated that Ensign Peak had delegated investment discretion, Ensign Peak continued to manage the entire portfolio and at all times maintained investment and voting discretion over all the securities listed in the Forms 13F.

In an Excel workbook, Ensign Peaks allocated its own securities to the various shell companies, but never legally transferred them.