Church fined by SEC

[Calm]

Just now, Teancum said:

s it is when you know you are trying to hide things you are supposed to legally report.

They were told it was legal to do it that way though….

 

1 minute ago, Teancum said:

Yes it is when you know you are trying to hide things you are supposed to legally report.

Well when you are subject to security law reporting you have different standards. Thus your analogy totally fails.  Ask @ttribeabout this. He is a forensic accountant and deals with this stuff all the time.

Not arguing they were wrong.

[Nofear]

6 minutes ago, SteveO said:

It’s kind of clear it wasn’t an oversight.  They did indeed get caught. All the LLCs were shell companies, not subsidiaries.  And because they weren’t subsidiaries but still granting full voting rights to the church…that’s what screwed them.  

To be fair I think they probably didn’t think it was overtly illegal and was a way to skate around the edges of legality.  But their intention was to obfuscate their assets from public knowledge 100%.  And as I already pointed out, I think their reasoning was probably justified. 

The Deseret News article made the following claim (not cited unfortunately), "Some church officials said previously that they wanted to avoid church members following church investments as a roadmap for personal investing because they might not be appropriate to their circumstances."

Given the propensity of some members to think that the Church can do no error, this makes a great deal of sense (as if we members learned nothing from the Kirtland financial incident). So, yes, it was a deliberate effort to conceal within what legal counsel suggested was within the boundaries of legality. A misguided effort, perhaps, but it wasn't for nefarious purposes designed to inflate the Church's wealth. If accurate it was to shield the Church's behavior from foolhardy members.

Ensign Peak/LDS Church civil penalty of 5 million dollars. Total civil penalties levied of about 4.2 billion dollars. 760 enforcement actions. Average civil penalty was about 5.6 million dollars.

 

[SeekingUnderstanding]

3 minutes ago, SteveO said:

So you agree the church has been transparent with their financials?

Nice dodge. You stated if the church complied with the law here by filing the appropriate SEC forms, this forum would be inundated by “Morons” who lost money following their investment strategy. Since they have been appropriately filing these forms since 2019 ( which lines up with the whistle blower report I believe), I’m merely asking if this is your vivid imagination running wild, or if you can share a post or two from the last four years that show this. 

[ksfisher]

4 minutes ago, Calm said:

The Church is currently guarding against error by taking legal advice.  It didn’t work in this case.  Not sure how to reasonably guard against making the error of trusting the wrong legal advice…maybe have a double layer of asking for outside input on decisions?  Thankfully not my stewardship.  

I deal with motor carrier regulations all the time.  The book that the federal government publishes is around 600 pages.  2/3 of this is the actual regulations, 1/3 is guidance to interpret the regulations.  When a driver is inspected at a port of entry one inspector may interpret a regulation in one manner, another in a different way.  If they want to find something wrong they can always interpret something in a way so they can find something wrong.

If tax law is anything like this (and my impression is that it's worse) I don't see how even the best legal advice and second opinions will always be 100% correct.

[OGHoosier]

7 minutes ago, Dr. Welby MD said:

A bunch of LDS members and anti- and Ex-Mo Sad Sacks on this site.

Read the comments at ZeroHedge. At least there are members and non-members defending the Church.

https://www.zerohedge.com/political/sec-charges-mormon-church-concealing-32-billion-portfolio

 

I have never seen so many references to "the Jewish conspiracy" and "Uncle Shmuel" in one place before.

[SteveO]

2 minutes ago, SeekingUnderstanding said:

Nice dodge.

It was a good question.  
 

Edited February 21, 2023 by SteveO

[Thinking]

Shell companies? Really? No. Words.

[webbles]

3 minutes ago, Calm said:

They were told it was legal to do it that way though….

Apparently the Church Auditing Department recognized that the LLC structure was risky.  This is from the SEC order - https://www.sec.gov/litigation/admin/2023/34-96951.pdf

Quote

32. The Church and Ensign Peak continued to take the same approach to filing Forms
13F through the Clone LLCs despite two Church Audit Department (“CAD”) internal audits of
Ensign Peak – one in 2014 and one in 2017—that reviewed the LLC Structure. In discussions with
Ensign Peak’s senior management, although CAD did not recommend specific changes to the LLC
Structure, CAD highlighted the risk that the SEC might disagree with the approach.

 

[Calm]

25 minutes ago, SeekingUnderstanding said:

Wait, the church has been publicly filing these in accordance with the law for almost four years now. Do you have one iota of evidence that this has been going on? Where are the “bitter morons” inundating this board with complaints. 
 

If it’s merely your vivid imagination, perhaps you should keep it to yourself? Put up or shut up as they say. 

It has been quite some time since I talked with anyone about their investment plans, but I have had conversations with members who said their plan when they got some money was to follow what the Church invested in.  I don’t know how widespread the intention is or how many follow through on intent, but it does exist.  It seemed to come up a lot when investing was discussed, but that was a long time ago and my memory may be skewed.  Maybe I will ask our investment adviser if it ever comes up in his discussions with the more hands on clients.

But if you are merely referring to complaint about it on the board…that isn’t realistic, imo.

Edited February 21, 2023 by Calm

[OGHoosier]

1 minute ago, webbles said:

Apparently the Church Auditing Department recognized that the LLC structure was risky.  This is from the SEC order - https://www.sec.gov/litigation/admin/2023/34-96951.pdf

 

The CAD acknowledged the risk of adverse regulatory interpretation. That is not the same thing as believing your actions to be illegal, no?

[webbles]

3 minutes ago, SeekingUnderstanding said:

Nice dodge. You stated if the church complied with the law here by filing the appropriate SEC forms, this forum would be inundated by “Morons” who lost money following their investment strategy. Since they have been appropriately filing these forms since 2019 ( which lines up with the whistle blower report I believe), I’m merely asking if this is your vivid imagination running wild, or if you can share a post or two from the last four years that show this. 

The SEC order puts the date of when the LLCs were discovered in 2018 (not sure if that is the whistleblower or some other entity) and the first correct filling in January 2020 (for the last quarter of 2019).  So the church kept doing the wrong thing for at least a year after it was discovered.  Not a good look.

Quote

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.
35. Ensign Peak continued to file Forms 13F through the Clone LLCs until February
14, 2020, when Ensign Peak filed a consolidated Form 13F for the quarter ended December 31,
2019. Ensign Peak’s Form 13F consolidated securities previously listed on the various Forms 13F
filed in the names of the Clone LLCs. Ensign Peak’s first Form 13F disclosed its management of
1,659 Section 13(f) Securities valued at approximately $37.8 billion.

 

[Calm]

6 minutes ago, OGHoosier said:

I have never seen so many references to "the Jewish conspiracy" and "Uncle Shmuel" in one place before.

Good to know, thanks for taking the hit.

Edited February 21, 2023 by Calm

[Thinking]

1 hour ago, bluebell said:

I’m glad to know that they fixed it when they became aware of the problem.  What more can we ask of any organization?

They fixed it when the SEC became aware of the problem.

[webbles]

1 minute ago, OGHoosier said:

The CAD acknowledged the risk of adverse regulatory interpretation. That is not the same thing as believing your actions to be illegal, no?

They probably thought they were legal.  They were still filling the 13F forms, just split up in multiple LLCs.  I don't think they were intentionally doing an illegal thing.  But they were skirting the line and the CAD rightfully pointed out that the SEC is probably not going to like it, which turned out to be true.

[The Nehor]

9 minutes ago, OGHoosier said:

I have never seen so many references to "the Jewish conspiracy" and "Uncle Shmuel" in one place before.

A nice smattering of Hitler fanboys too.

[bluebell]

18 minutes ago, Teancum said:

Umm they knew what they were doing. Setting up shell LLCs to limit reporting requirements is not an act of omission.

Apparently they didn’t, or they would not have changed to do some thing different when it was brought to their attention.

[OGHoosier]

Just now, Thinking said:

They fixed it when the SEC became aware of the problem.

They fixed it when the SEC decided it was a problem. 

That's their right as a regulatory agency, of course, but this seems to be a case of regulatory discretion going one way as opposed to another.

[bluebell]

2 minutes ago, Thinking said:

They fixed it when the SEC became aware of the problem.

That makes sense. It’s hard to fix some thing when you don’t know it’s a problem.

[ttribe]

Just now, bluebell said:

Apparently they didn’t, or they would not have changed to do some thing different when it was brought to their attention.

Actually, they very clearly intended to conceal the general wealth of the fund. They likely believed their actions were legal, but whether it was ethical is clearly up for debate. The SEC stated - "To obscure the amount of the Church’s portfolio, and with the Church’s knowledge and approval, Ensign Peak created thirteen shell LLCs, ostensibly with locations throughout the U.S., and filed Forms 13F in the names of these LLCs rather than in Ensign Peak’s name."

[Nofear]

8 minutes ago, Thinking said:

Shell companies? Really? No. Words.

They were used to inflate the Church's vast wealth and enrich the pockets of the presiding authorities. Wait, no. Taxes and everything else was paid. The fine is only that the Church attempted to conceal the extent of its financial holdings from the public, not actually avoid giving the government money.

[ttribe]

2 minutes ago, Nofear said:

They were used to inflate the Church's vast wealth and enrich the pockets of the presiding authorities. Wait, no. Taxes and everything else was paid. The fine is only that the Church attempted to conceal the extent of its financial holdings from the public, not actually avoid giving the government money.

Intentional concealment is a serious problem. Hence, the charges by the SEC. Attempting to downplay the ramifications of these acts is not helpful.

[SeekingUnderstanding]

15 minutes ago, SteveO said:

It was a good question.  
 

Nice dodge. It seems like you must have spoken in haste. As to your question the answer is obvious. The church instructs its lawyers to be as financially opaque as possible. Going as far as setting up multiple shell companies to avoid reporting. Changing only when caught and forced to. 

[Nofear]

Just now, ttribe said:

Intentional concealment is a serious problem. Hence, the charges by the SEC. Attempting to downplay the ramifications of these acts is not helpful.

It is a problem which is why the Church was fined. Concealment of such nature can be and is used various entities to avoid taxes and other abuses. The Church is not being charged with any such activity. So, agreed, let's not downplay the error. At the same time, let's not inflate the error either.

[Teancum]

19 minutes ago, Calm said:

They were told it was legal to do it that way though….

So?  Ultimately the reporting entity is responsible.  A advise clients in tax issues all the time.  I prepare tax returns.  But guess who is ultimately responsible?  The client.  Yes I can be sued by a client for bad advice and IRs can charge me penalties as well for aggressive positions.  But the client has responsibility as well. To simply say  "Oh well we were following legal council is a boguc cop out.  You can bet there were discussions on this with legal council and those managing the funds.

19 minutes ago, Calm said:

 

Not arguing they were wrong.

 

[SeekingUnderstanding]

15 minutes ago, webbles said:

The SEC order puts the date of when the LLCs were discovered in 2018 (not sure if that is the whistleblower or some other entity)

Unclear to me on timing. Whistleblowers brother went to Washington post on Dec 2019, with copies of IRS complaints submitted earlier that year. So possibly (probably separate).