Church fined by SEC

[JAHS]

Probably a dumb question but what exactly is the SEC going to do with that 5 million? 

[ttribe]

1 minute ago, webbles said:

They also picked 'managers' with common names so it would make it harder to search for them.

Correct.
 

 

[pogi]

16 minutes ago, Calm said:

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

What troubles me the most about all of this is the why, which is conveniently not addressed.  
 

I also find the bit about it being an unintentional mistake to be misleading.  They received a clear warning by the CAD that this may be illegal.   I also don’t like how they are concealing what the leaders actually knew by hiding them behind legal advisors.  What did the legal advisors disclose to them about the gray legal (not to mention ethical) implications and risk.  Did they know it was potentially illegal or not?  If so, why didn’t they clarify with the SEC before signing on to the concealment scheme?

[ttribe]

Just now, JAHS said:

Probably a dumb question but what exactly is the SEC going to do with that 5 million? 

It goes into the U.S. Treasury.

[bluebell]

1 minute ago, ttribe said:

I don't specifically disagree with any of it. I do find some of the explanations a little self-serving, but it is accurate. It would be foolish for the Church to issue any statement that was inaccurate at this point.

I guess I'm surprised since you have repeatedly accused the church of lying, and of SEC proving they lied, but the article is blatant in that this was an honest mistake that happens when legal counsel doesn't understand the complexities of SEC regulations.

How can the article be accurate, and also your explanation?  (again, not being snarky.  Trying to figure out what I'm missing).

[ttribe]

Just now, bluebell said:

I guess I'm surprised since you have repeatedly accused the church of lying, and of SEC proving they lied, but the article is blatant in that this was an honest mistake that happens when legal counsel doesn't understand the complexities of SEC regulations.

How can the article be accurate, and also your explanation?  (again, not being snarky.  Trying to figure out what I'm missing).

Whoa! Where did this 'repeatedly accused the church of lying.." thing come from? What I've done is repeatedly quoted from and directed you to read the Order. I understand that is the Church's argument, but the SEC says it resulted in a violation of the law. I suspect both things can be true. They can think it was legal, but it still be a lie.

[bluebell]

4 minutes ago, Analytics said:

I think they have a problem with all of that, because the reason they did all of those things was to deceive the SEC and the public.

If true, it's interesting to me that the SEC didn't actually charge them with lying or misleading or fraud.  They haven't been shy about charging other companies with that kind of stuff when they've been able to prove that was the intent.  So why not charge the EP similarly?

[webbles]

I found the 2018 discovery of the LLCs.  It wasn't the whistleblower but instead mormonleaks.  This might have been discussed on this forum back then.  The page about it is at https://mormonleaks.io/wiki/index.php?title=Investment_Portfolios_Connected_to_the_Mormon_Church.  They were able to track down the LLCs because they noticed common elements in the DNS records of the companies and they had a church employee list that they used to match up the business managers.

The church also released a statement at that time.  You can see that statement at http://web.archive.org/web/20180612192824/https://www.mormonnewsroom.org/article/church-finances-and-a-growing-global-church

[Analytics]

2 minutes ago, bluebell said:

I guess I'm surprised since you have repeatedly accused the church of lying, and of SEC proving they lied, but the article is blatant in that this was an honest mistake that happens when legal counsel doesn't understand the complexities of SEC regulations.

How can the article be accurate, and also your explanation?  (again, not being snarky.  Trying to figure out what I'm missing).

When some people figured out that these various shell companies across the country were controlled by the Church and leaked that to the public, two of the “business managers,” both Church employees, who had to sign the SEC forms resigned, because they knew signing the forms was dishonest. 

At that point the Church could have reconsidered whether it was acting ethically and legally when it required people to sign intentionally deceptive SEC filings. But it didn’t. And now it is paying the price.

[bluebell]

6 minutes ago, ttribe said:

Whoa! Where did this 'repeatedly accused the church of lying.." thing come from? What I've done is repeatedly quoted from and directed you to read the Order. I understand that is the Church's argument, but the SEC says it resulted in a violation of the law. I suspect both things can be true. They can think it was legal, but it still be a lie.

Sorry, I wasn't trying to be extreme.  You've repeated used the terms deceived in your posts and I assumed that deceiving someone and lying to them is the same thing.

But to address the bold, are you saying that EP thought it was legal to deceive the SEC?

[SteveO]

1 hour ago, california boy said:

Is there a huge problem with Church members mirroring those investments since 2019?

Couldn’t say.  Is it greater or lesser than those who stopped paying tithing because they thought the church had too much money?

Edited February 22, 2023 by SteveO

[ttribe]

2 minutes ago, bluebell said:

Sorry, I wasn't trying to be extreme.  You've repeated used the terms deceived in your posts and I assumed that deceiving someone and lying to them is the same thing.

But to address the bold, are you saying that EP thought it was legal to deceive the SEC?

Again, I'm trying to help with understanding the documents and how I read them. It seems to me that the Church is saying it thought the scheme was a legal way to report the assets under management and not make it obvious to prying eyes that it was all owned by the Church. I cannot tell you whether they considered the action to be a deception of regulators, although the SEC seems to think that is the case and charged them with that.

[Calm]

1 minute ago, ttribe said:

Again, I'm trying to help with understanding the documents and how I read them. It seems to me that the Church is saying it thought the scheme was a legal way to report the assets under management and not make it obvious to prying eyes that it was all owned by the Church. I cannot tell you whether they considered the action to be a deception of regulators, although the SEC seems to think that is the case and charged them with that.

Quite clear, thank you. 
 

Out of curiosity, if one doesn’t pay taxes and aren’t trying to situate the appearance of a company as a better buy than it is, what benefit could come from deceiving regulators?

I can see the general public as we see plenty of complaints about the church being wealthy, but the SEC doesn’t make those kinds of judgments. 

Edited February 22, 2023 by Calm

[Tacenda]

10 minutes ago, Analytics said:

I think they have a problem with all of that, because the reason they did all of those things was to deceive the SEC and the public.

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.

[bluebell]

10 minutes ago, Analytics said:

When some people figured out that these various shell companies across the country were controlled by the Church and leaked that to the public, two of the “business managers,” both Church employees, who had to sign the SEC forms resigned, because they knew signing the forms was dishonest. 

At that point the Church could have reconsidered whether it was acting ethically and legally when it required people to sign intentionally deceptive SEC filings. But it didn’t. And now it is paying the price.

Do we have a reference for the bolded?

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".

[Ginger Snaps]

2 minutes ago, bluebell said:

Do we have a reference for the bolded?

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".

It’s in the SEC filing, item 34

[JustAnAustralian]

1 minute ago, ttribe said:

Again, I'm trying to help with understanding the documents and how I read them. It seems to me that the Church is saying it thought the scheme was a legal way to report the assets under management and not make it obvious to prying eyes that it was all owned by the Church. I cannot tell you whether they considered the action to be a deception of regulators, although the SEC seems to think that is the case and charged them with that.

Which goes back to my earlier question/comment.

IF the church or EPA had set up 13 companies, completely separate from each other, given them the same basic rules to follow (i.e. don't invest in stuff that goes against church doctrines etc), wouldn't it essentially be the same thing we have now?

It'd still be 13 companies reporting instead of 1, it'd still be making it harder to see what the church's total investments were, but it would be following the SEC rules of separate control right? After all the SEC documents point say that the shell companies being controlled by EPA was the issue, not them being owned by the church.

 

[CV75]

1 hour ago, Analytics said:

The SEC's term for "lying" is "misstating", and that is one of the things they were sanctioned for:

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.

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."

[Danzo]

The issue over whether an LLC (or Corporation for that matter) is a shell company is one that I deal with often.   It comes down to the form over substance doctrine.   I am always trying to explain to people that just because you file the paperwork to create an entity, doesn't necessarily mean that the entity really exists.  You have to observe the formalities of the entity and the entity has to actually be distinct, not just distinct on paper.  Otherwise you risk having the corporate veil pierced.  Sometimes it can be pretty iffy on whether or not a company is a separate entity or just an alter ego of a person (or organization in this case).   

It looks like the church took the steps to form the entities without actually going through the effort to make them actual separate entities.  

[ttribe]

12 minutes ago, JustAnAustralian said:

Which goes back to my earlier question/comment.

IF the church or EPA had set up 13 companies, completely separate from each other, given them the same basic rules to follow (i.e. don't invest in stuff that goes against church doctrines etc), wouldn't it essentially be the same thing we have now?

It'd still be 13 companies reporting instead of 1, it'd still be making it harder to see what the church's total investments were, but it would be following the SEC rules of separate control right? After all the SEC documents point say that the shell companies being controlled by EPA was the issue, not them being owned by the church.

 

I think the final paragraph of this post below explains the issue best.

 

https://www.mormondialogue.org/topic/75133-church-fined-by-sec/?do=findComment&comment=1210137373

[Tacenda]

https://widowsmitereport.wordpress.com/translate/?fbclid=IwAR0DkNgzx8Tap0D1m0ZmApKhRzoz7e-xhdkSadGx_dSWiBcNieKJQudJfFg

Don't know how accurate...

[bluebell]

26 minutes ago, ttribe said:

Again, I'm trying to help with understanding the documents and how I read them. It seems to me that the Church is saying it thought the scheme was a legal way to report the assets under management and not make it obvious to prying eyes that it was all owned by the Church. I cannot tell you whether they considered the action to be a deception of regulators, although the SEC seems to think that is the case and charged them with that.

If the SEC believed that they were not intentionally deceiving but had accidentally don't so, would the charge still likely have been one of 'misstated' filings?  Or would that be called something else?

Sorry if that seems like I want you to read minds.  I'm trying to figure out if the SEC differentiates between when it finds someone has intentionally been deceptive or was accidentally in the wrong.

Because "misstated" is pretty ambiguous considered some of the charges that I've seen them hand out where they did not mince words.

[bluebell]

16 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."

Thanks for this.  It's very helpful!

[Duncan]

2 hours ago, ttribe said:

As to transparency - I hope I don't sound snarky (it's not my intent to be), but there should be no more specific efforts to hide any assets. Also, once upon a time (pre-1959), the Church issued financial statements showing how donor funds were used. I think they should return to that. As it stands, in many ways, the Church is a black hole into which donations flow with no disclosure to their donors (i.e. tithe-payers) on the money was used.

Yes, shell LLCs in and of themselves are legal to establish and there are legitimate uses. I commented earlier in the thread that they are frequently used for separating assets to limit liability and that real estate transactions often have layers of LLCs. But, in all cases, there has to be a legitimate business purpose. In this case, the principal reason was to hide assets from regulators. Each LLC lacked independence in fact and specific steps were taken to throw off inquiries as to their true nature.

Growing up our ward had a yearly budget meeting in which the Bishopric had a meeting with the ward and told how they spent the money for the year previously. In our ward the only one I recall is when they said that half the ward budget was spent on photocopying😬

[Analytics]

1 hour ago, bluebell said:

If true, it's interesting to me that the SEC didn't actually charge them with lying or misleading or fraud.  They haven't been shy about charging other companies with that kind of stuff when they've been able to prove that was the intent.  So why not charge the EP similarly?

The SEC did charge them similarly. That is why they got a $5,000,000 fine.