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Church fined by SEC


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4 minutes ago, SeekingUnderstanding said:

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. 

Okay good.  I’m glad we agree and that my hypothetical statement still stands.

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28 minutes ago, Calm said:

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

Having dealt with a ton of lawyers back in my day as an environmental manager at a refinery, I would guess it wasn’t so black and white. There are levels of risk that lawyers will communicate. They will share the law, case law, and other important regulatory information. I would be willing to bet a large sum that the lawyers communicated there was a good amount of risk involved in structuring the reporting like that. Risk that should only be incurred if the need (to keep the fund secret) matched the risk. That’s how every lawyer I’ve ever dealt with communicates anyway. 

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1 hour ago, Teancum said:

You think?  The only reason to do things like this is to hide things.  

Is this being honest in dealing with your fellow men?

The only reason? I know your world of possibilities is small, but LLCs are a legal way to make a tax shelter, if only Ensign was willing to relinquish its control over them. The church may have approved the LLCs, but it looks like Ensign was too incompetent to do something, that was legal, correctly. If it were sinisterly "hiding" money, I'd imagine someone would be imprisoned for fraud instead of fined for "improper paperwork". Only the biased would insist otherwise now that the matter has been settled in court. Settlements don't always answer who's guilty of what and why, it's just the easiest way to resolve what could be a longer legal dispute.

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1 hour ago, bsjkki said:

Church settles case with SEC over financial reporting - Deseret News

Church and Ensign Peak leaders received legal counsel, the SEC order and church statement said, that they could create a trust to own a separate limited liability company to file Forms 13F. That trust was formed in April 2001 and a single LLC filed its first disclosure, or Form 13F, in February 2003, the SEC said.

The SEC said that the LLC could do so only if Ensign Peak transferred operational investment discretion to the LLC, but the SEC alleged that it did not.

 

“Since 2000, Ensign Peak received and relied upon legal counsel regarding how to comply with its reporting obligations while attempting to maintain the privacy of the portfolio. As a result, Ensign Peak established separate companies (LLCs) that each filed Forms 13F instead of a single aggregated filing. Ensign Peak and the church believe that all securities required to be reported were included in the filings by the separate companies,” the church said in a statement released Tuesday.

This is an old trick where the church tells the lawyers to do something and then hide behind the lawyers if it back fires.  
Church lawyers did not do this blindly. They knew the risks and certainly conveyed those risks to the church and EPA.

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15 minutes ago, Nofear said:

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.

Outside of not wanting to be used as a template for investment strategy by members which is likely an unusual reason for an organization to hide wealth, are there valid, ethical reasons for a business to hide its wealth that are accounted for in the law?

Are there good, generally recognized moral reasons to hide wealth for a business organization?

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10 minutes ago, ttribe said:

Perhaps your response to @Thinking was intended to be a dose of prevention, but I don't see anyone trying to inflate anything in this discussion thus far. General business knowledge informs decision makers that once you are stepping into the realm of "shell companies" you are engaging in very risky activities. For me, "avoiding the very appearance of evil" comes to mind on this. It doesn't look honest but they intentionally did it anyway.

It is a bit of proactive hedging on the appropriate boundaries of what was done and what was not. I made and make no attempt to absolve the Church of this error. Mistakes have been made and will be made in the future. The Church isn't perfect (ironically, which appears to be one of the motivating factors in the illegal concealment -- that some members think it is and would have mirrored their investments with the Church's and the Church wanted to avoid that).

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2 minutes ago, Calm said:

Outside of not wanting to be used as a template for investment strategy by members which is likely an unusual reason for an organization to hide wealth, are there valid, ethical reasons for a business to hide its wealth that are accounted for in the law?

Are there good, generally recognized moral reasons to hide wealth for a business organization?

Alas, I'm not a business person and lack the fiscal savvy to venture reasonable speculation. :(

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10 minutes ago, SeekingUnderstanding said:

Having dealt with a ton of lawyers back in my day as an environmental manager at a refinery, I would guess it wasn’t so black and white. There are levels of risk that lawyers will communicate. They will share the law, case law, and other important regulatory information. I would be willing to bet a large sum that the lawyers communicated there was a good amount of risk involved in structuring the reporting like that. Risk that should only be incurred if the need (to keep the fund secret) matched the risk. That’s how every lawyer I’ve ever dealt with communicates anyway. 

The Church Auditing Department sounded less than enthusiastic from the SEC report.  Got to wonder who actually made the decision and if the risks discussion was passed on fully along with the decision they were going to go ahead with it to whoever in the Church leadership oversees the financial guys….I am assuming here it was the finance guys at Ensign Peak that made the decision, I could be wrong.

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3 minutes ago, SeekingUnderstanding said:

I’d love to see an official (church) source for this…

Also agreed. I doubt one is forthcoming. The statement is based off the Deseret News article claim but which offered no citation.

I also find it reasonable that the Church would not want to be seen as "endorsing" a particular business because it invested stocks in it.

Edited by Nofear
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35 minutes ago, bluebell said:

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

So you think the attorneys just did this on their own without consulting at least the key management people at EPA?  

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11 minutes ago, 2BizE said:

This is an old trick where the church tells the lawyers to do something and then hide behind the lawyers if it back fires.  
Church lawyers did not do this blindly. They knew the risks and certainly conveyed those risks to the church and EPA.

Unless the lawyers were incompetent, after all, they weren't charged with fraud. I mean I know you are a psychic and all but, you still need to prove malicious intent, not just infer it.

Edited by Pyreaux
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22 minutes ago, ttribe said:

If it were any business organization, there would be a scramble to apologize. I do wish the Church would do the same.

This needs to be qualified with, “it happens ALL THE TIME on Wall Street.”  All.  The.  Time.  The government screwed up with $163 billion of the $873 billion COVID relief bill that was improperly spent.  Big organizations waste money, have corruption and fraud all the time.

Church needs to be better and held to a higher standard, no doubt.  But I’ve never liked the “business side” of the church ever since they found a loophole to avoid paying for my brother’s cancer he developed while on his mission.  The business side of the church acts like a business.  They do business things.  They’re gonna look for ways to skirt transparency as far as they can possibly take it.  
 

As I said, someone should lose their job, but this isn’t some nefarious crime that was committed.

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7 minutes ago, Calm said:

Are there good, generally recognized moral reasons to hide wealth for a business organization?

I mean, this is one of my more libertarian takes (I am not known for libertarianism) but I think that assets-transparency is (or only ought to be) an expectation for two reasons:

1) if people will be making investment decisions based on your actions, ie a publicly-traded company reporting its revenues.

2) Taxes to be paid. 

#2 doesn't seem to be in play seeing as, to my knowledge, the Church is not on the hook for any tax evasion. Nor is it a publicly traded entity. So I am not really viscerally reacting to this. To be honest I don't think it's any of my business how much money some large fund has.

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“Gurbir S. Grewal, director of the SEC’s enforcement division, said the church’s investment manager, “with the church’s knowledge,” went to “great lengths” to avoid disclosing the church’s investments.

This deprived the SEC and the investing public of “accurate market information,” Grewal added in the release. “The requirement to file timely and accurate information on Forms 13F applies to all institutional investment managers, including nonprofit and charitable organizations.”

https://www.sltrib.com/religion/2023/02/21/lds-church-investment-firm-agree/

 

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11 minutes ago, SteveO said:

This needs to be qualified with, “it happens ALL THE TIME on Wall Street.”  All.  The.  Time.  The government screwed up with $163 billion of the $873 billion COVID relief bill that was improperly spent.  Big organizations waste money, have corruption and fraud all the time.

Church needs to be better and held to a higher standard, no doubt.  But I’ve never liked the “business side” of the church ever since they found a loophole to avoid paying for my brother’s cancer he developed while on his mission.  The business side of the church acts like a business.  They do business things.  They’re gonna look for ways to skirt transparency as far as they can possibly take it.  
 

As I said, someone should lose their job, but this isn’t some nefarious crime that was committed.

I hear where you are coming from, but in this case the SEC plainly stated that Church leadership knew of this plan; hence the $1M fine for the Church, itself. I think that changes the complexion of the matter somewhat.

Edited by ttribe
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6 minutes ago, ttribe said:

I hear where you are coming from, but in this case the SEC plainly stated that Church leadership new of this plan; hence the $1M fine for the Church, itself. I think that changes the complexion of the matter somewhat.

You could maybe make a case for the buck stopping at the presiding Bishopric.  Any higher, and I would think that “knowing” was more like “deferring” judgement to more knowledgeable persons.

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12 minutes ago, 2BizE said:

“Gurbir S. Grewal, director of the SEC’s enforcement division, said the church’s investment manager, “with the church’s knowledge,” went to “great lengths” to avoid disclosing the church’s investments.

This deprived the SEC and the investing public of “accurate market information,” Grewal added in the release. “The requirement to file timely and accurate information on Forms 13F applies to all institutional investment managers, including nonprofit and charitable organizations.”

https://www.sltrib.com/religion/2023/02/21/lds-church-investment-firm-agree/

Great legal lengths to avoid disclosing funds by legally making the LLCs, everything would have been legal if Ensign simply relinquished its control over the LLCs. A legal error not even worthy of sending anyone to jail or losing their law licenses.

Edited by Pyreaux
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5 minutes ago, SteveO said:

You could maybe make a case for the buck stopping at the presiding Bishopric.  Any higher, and I would think that “knowing” was more like “deferring” judgement to more knowledgeable persons.

The order itself repeatedly refers to "senior leadership." I'm not sure who that means, but it's certainly open for interpretation.

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

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9 minutes ago, Pyreaux said:

legal error not even worthy of sending anyone to jail or losing their law licenses.

Can you lose your law license for incompetence?

When it costs their client billions (if I read what webbles posted correctly), at least it is worthy of losing the account. 

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12 minutes ago, SteveO said:

You could maybe make a case for the buck stopping at the presiding Bishopric.  Any higher, and I would think that “knowing” was more like “deferring” judgement to more knowledgeable persons.

I agree for the most part, but even a layman can decide whether they want to make a risky decision when dealing with government or investments.  Even I have made that decision.  This is the bit that is very disappointing for me. 

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What does the SEC do with a Form 13F?  Why is it required to be filled?  Wikipedia says (https://en.wikipedia.org/wiki/Form_13F)

Quote

Absent access to privileged access to manager holdings, Form 13F provides a baseline level of data with which to analyze investment manager exposures, performance attribution, and associated risks.

That looks like it is just informational.  What's the purpose of it?

Edited by webbles
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1 minute ago, webbles said:

What does the SEC do with a Form 13F?  Why is it required to be filled?  Wikipedia says:

That looks like it is just informational.  What's the purpose of it?

It looks like the information is made public so it can be used for making investment decisions, I assume to help predict company performance. A guess of course. 

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