Deseret News Opinion Piece: Perspective: I teach tax law. This is what I wish reporters understood about church finances

[Analytics]

On 9/15/2023 at 2:04 PM, smac97 said:

Thoughts?

1. As a legal matter, I believe good arguments can be made that Ensign Peak Advisors is actually a Private Foundation and not an integrated auxiliary of the Church. If Eric Smith is concerned about the nuances and complexities of tax law being reported, he should examine in detail the arguments on both sides about whether or not it is a Private Foundation.
    
2. Given the extraordinary lengths the Church goes to in order to hide the details of its finances from the public and from its own membership, reporters should be given some slack about not understanding the details.
    
3. I don't believe Churches should be tax exempt. Beyond lobbying congress directly on this matter, it is valid for pundits and citizens to try to influence public opinion by using their free speech.
    
4. Arguing that the Church's actions are legal is an awfully low standard. Ultimately the Church is free to do whatever it legally wants with its money, but by the same token, pundits and citizens are free to criticize it. 

[ksfisher]

1 hour ago, Diamondhands69 said:

are you approving of the first pres hiding money

After I donate the money it is out of my hands.  I've done what the Lord has asked me to do. 

 

1 hour ago, Diamondhands69 said:

because they feel it will bring in more revenue

If my donation can be wisely invested and grow, as in the parable of the talents, I'm fine with that.

 

1 hour ago, Diamondhands69 said:

or may compel people to pay tithing who otherwise wouldn’t?

i really don't think anyone is paying tithing because they believe the church is going to run out of money or is low on funds.  People pay tithing to the church because they desire to obey the Lord's commandments.

 

1 hour ago, Diamondhands69 said:

Are those the types of people we should be following?

I don't think your inference here is descriptive of those whom the Lord has called to lead His church.

[LoudmouthMormon]

On 9/18/2023 at 9:05 AM, Diamondhands69 said:

When you put the name of a business manager on a form 13f and that “manager” does nothing in terms of managing the llc other than forwarding voicemail from the sec to EP supervisors you are lying about the manager’s role since he/she is not managing the company. 

Heh.  For the last umpteen years in our personal taxes, my wife's occupation has been listed as "Domestic goddess".   Maybe I should be worried the IRS will come after us for lying on our taxes.

[Vanguard]

52 minutes ago, Diamondhands69 said:

Pretty much. I refuse to pay tithing at this point as I know they have and will engage in deceptive behavior with no good reason. If the reason is good then they need to be public with it and announce that they lie to us… for our own good of course. 
 

I also refuse to take callings at this point as I don’t currently support the brethren. 
 

The gospel is true but they are not prophets

I appreciate your candor though I don't agree with the position. Do you think you would be taking the same action had the Church not - as you say - "engage[d] in deceptive behavior for no good reason"? Let's say this issue with the SEC had not happened but instead you still found out the Church has amassed the large amount of money it has. In that scenario, would you stop paying your tithing?

[Analytics]

On 9/18/2023 at 9:25 AM, smac97 said:

I found this February 2023 article worth a read: ENSIGN PEAK: CLARIFYING THE SEC ANNOUNCEMENT.  Some excerpts:

Only reading your excerpts, here is what I take issue with:

On 9/18/2023 at 9:25 AM, smac97 said:

If nothing was hidden and the organization was legal, why was the SEC concerned?

Because the subsidiaries were all under the control of EPA the SEC believed they needed to file one joint form 13F.

This is deliberately misleading and false. A lie. The SEC has absolutely no opinion on whether the Church files one joint 13F or files multiple. That isn't the issue; this isn't a case involving obscure regulations involving filing one or multiple form 13Fs.

It's a case of the Church flagrantly lying on the forms it had various Church employees sign who were posing as "Business Managers" when they actually didn't "manage" the "business" of the LLC's in any way whatsoever.

On 9/18/2023 at 9:25 AM, smac97 said:

Does the evidence suggest that Ensign Peak Advisors purposely violated the SEC’s disclosure requirements? Are Ensign Peak Advisors and/or the Church of Jesus Christ culpable for breaking the law?

The SEC’s announcement included nothing of the sort. And these regulations don’t really work that way. As this same lawyer said, “Yes, there are rules that dictate how money managers disclose the existence of funds. But there is no culpability requirement to trigger a penalty or a violation of these rules. Sometimes mistakes are made, and often inadvertently are, but that doesn’t mean there was any intention in the violation and certainly does not mean a crime has been committed. Most penalties imposed by the SEC are the result of unintentional violations.”

The regulatory systems in place by the SEC are very complex—according to one lawyer, “some of the most complex disclosure regimes found anywhere on the planet.” Even very sophisticated financial professionals don’t always fully understand the nuances of those regulations. A large number of fines take place simply because of a misunderstanding of various overlapping rules.  

The Church and EPA obviously hire experts and have to rely upon those experts to give advice regarding compliance with all applicable laws and regulations, including SEC regulations. 

This case isn't about obscure elements of a complex disclosure regime that in this incidence even the sophisticated financial professionals didn't fully understand. It is about the Church blatantly filling out false reports and then having Church employees pretend to be "Business Managers" and sign blatantly false statements.

On 9/18/2023 at 9:25 AM, smac97 said:

What changes have Ensign Peak Advisors made to avoid these issues in the future?

This was a narrow issue. And the narrow issue has been fixed for more than three years now. While it is unfortunate that there was ever a misunderstanding about disclosure requirements based on the advice of counsel...

Full stop. I call B.S. here. I don't believe the Church's attorney advised them to lie on these reports. And why would any professional need to the opinion of an attorney about whether or not to lie?

On 9/18/2023 at 9:25 AM, smac97 said:

What do this investigation and penalty say about the Church’s priorities and values? 

Not much. The Church invests in its fund to fulfill its mission, which in addition to its religious mission, includes humanitarian aid that totaled nearly a billion dollars last year. 

While it’s appropriate that the Church expressed regrets for mistakes made, 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.

Wrong. The Church wasn't "doing their best to be in compliance" but screwed up this one time "because of the extraordinarily complicated nature of the regulations." Rather, this is a case of the Church going to extraordinary lengths to keep their financial situation secret, and to that end they created an extraordinarily complicated set of businesses with fake phone numbers and fake addresses and fake business managers. They weren't merely trying to "do their best" to fulfill its religious mission and comply with the regulations. They were going to extraordinary measures to keep their financial empire hidden.

The truth is that when you consider all of the Church's annual income, both investment income and donations, in all likelihood the Church uses most of its money--over 50%--to increase the size of its for-profit business empire. And they go to extraordinary lengths to hide this reality from the public and the general membership. This does say a lot about the Church's priorities and values.

Edited September 20, 2023 by Analytics

[smac97]

57 minutes ago, Analytics said:

As a legal matter, I believe good arguments can be made that Ensign Peak Advisors is actually a Private Foundation and not an integrated auxiliary of the Church.

I don't think this is in real dispute, and more likely a bit of wishful thinking in some quarters. 

The SEC Order, for example, apparently considers EPA an integrated auxiliary:

Quote

3. The Church created Ensign Peak in 1997 as an integrated auxiliary of the Church to manage the Church’s investment securities. Ensign Peak has no shareholders or members. The securities portfolio managed by Ensign Peak consists of what the Church calls “reserve funds” or “reserves,” which include U.S. equity and debt securities purchased with excess tithing, income and returns generated by Ensign Peak, and the assets of other Church integrated auxiliaries. Ensign Peak does not charge the Church management fees.  

The Washington Post:

Quote

Nonprofit organizations, including religious groups, are exempted in the United States from paying taxes on their income. Ensign is registered with authorities as a supporting organization and integrated auxiliary of the Mormon Church. This permits it to operate as a nonprofit and to make money largely free from U.S. taxes.

The AP:

Quote

Increasingly, the church and its Salt Lake City-based investment arm have faced scrutiny over the fact that tax law largely exempts religious groups from paying U.S. taxes. Ensign Peak is registered as a supporting organization and integrated auxiliary of the church. Investment managers of its size are required to report stockholdings quarterly.

The Deseret News (quoting this Forbes article) (see also here) :

Quote

The headline was based on a former employee of a church-integrated auxiliary, Ensign Peak Advisors. The claim seems to be centered on the idea that the private foundation had not distributed 5% of its assets annually as required by the IRS.

Peter J. Reilly, a tax expert, disputed that assertion in Forbes, saying, “Ensign is not a private foundation. It is an integrated auxiliary of a church. And there is nothing in the tax law that prevents churches from accumulating wealth.” In the same article, Paul Streckfus of the EO Tax Journal agreed, stating, “this matter does not merit IRS attention.” 

Public Square Mag:

Quote

Are the Church’s reserve funds illegal or somehow evading taxes?

For tax purposes, as an integrated auxiliary, the investment arm of the Church, Ensign Peak Advisors, is under no obligation to make minimum distributions. The allegations appear to stem from the whistleblower’s misunderstanding of tax law. For unknown reasons, the whistleblower apparently didn’t hire an attorney or a tax expert to help write this report.
...

Ensign Peak Advisors, the legal entity where The Church of Jesus Christ of Latter-day Saints holds these investments, is exempt as a separate 501(c)(3) Supporting Organization. (Notably, the whistleblower also disputes this status, but without directly addressing how Ensign Peak fails to meet the legal definition. He instead focuses on the “spirit” of the status.) As a Supporting Organization, Ensign Peak is an independent nonprofit. The whistleblower claims that this requires Ensign Peak to pass the commensurate test all on its own—and not as part of the larger whole of the Church.

But according to the IRS’s own definition, Ensign Peak is also an “integrated auxiliary” managed by the Church, a legal treatment that combines their activities in certain ways. This is a critical detail that the whistleblower report only briefly mentions and seems to misunderstand.

If the Church directly held these investments, it would likely pass any legal tests without concern. Does it make a legal difference if Ensign Peak does the investing for the Church as an integrated auxiliary? This difference—a relatively narrow and technical one—has never been questioned by the IRS or a court, according to Sam Brunson, a Latter-day Saint and Loyola law professor who specializes in tax-exempt organizations.

After looking at the facts and allegations involved, Peter J. Reilly, a non-Latter-day Saint CPA and tax specialist, observed in Forbes that “Ensign is not a private foundation. It is an integrated auxiliary of a church. And there is nothing in the tax law that prevents churches from accumulating wealth.” Reilly reached out to Paul Streckfus, another tax expert who runs a trusted publication focusing on tax-exempt organizations. He, too, concluded that the “matter does not merit IRS attention.”

Sam Brunson (!) :

Quote

And this is potentially a tax problem. Ensign Peak Advisers is a “supporting organization” and an “integrated auxiliary.” To qualify for a tax exemption, it (probably) has to meet the requirements of section 501(c)(3) of the Code independently. And, uncontroversially, managing a securities portfolio isn’t one of the tax-exempt purposes listed in section 501(c)(3).
...
There are no judicial or agency pronouncements I’m aware of applying the test to integrated auxiliaries. This is likely the first time this particular question has come up, at least to this degree. And, fwiw, under the Internal Revenue Code, integrated auxiliaries of churches are, like churches, treated differently from other tax-exempt organizations. They’re presumptively not private foundations and they’re not required to file returns. So are they also exempt from the commensurate-in-scope rules? I sincerely don’t know.

Sam even got the attention of Lars Nielsen, and had this exchange with him (same link) :

Quote

1. Lars Nielsen says:

   December 22, 2019 at 4:51 pm

   Hi Sam,
   I am the author of “Letter to an IRS Director” and the source for the WaPo article.
   Thanks for all you do and for the time you spent on this in the past week or so. Not every entity that calls itself an “integrated auxiliary” is one, or behaves like one. Saying that you aspire to be one in the Articles of Incorporation can’t be sufficient. How can a “control,” “attentiveness,” or “responsiveness” test be passed between a religion and its “integrated auxiliary” if the first never shares a budget with the second, and the second never shares a balance sheet or income statement with the first? In other words, the IRS should look at the meeting minutes of the Investment Policy Committee (IPC) for each quarter going back 22 years. If no one inside EPA itself ever has any details, priorities, plans or activities from the COP side, and no one on the COP side itself knows what EPA resources could help them plan, improve, or expand, then there is no question that the supporting organization is not functionally integrated. It would then have to be a Type III non-FISO (despite whatever declarations it may make of itself otherwise). As you know, a Type III non-FISO does have minimum distribution requirements. If something in this thinking needs to be refined, please help me know how to refine it.
   Much appreciated, Lars

    
2. Sam Brunson says:

   December 22, 2019 at 7:11 pm

   Hey Lars, thanks for stopping by. I totally get what you’re saying; as a policy matter, sharing budgets, etc., could certainly be a requirement to qualify as an integrated auxiliary. Current law, however, requires affiliation and internal support. The relevant regulation provide three tests for determining affiliation. My guess is EPA would meet the second (that is, operated, controlled, it supervised by a church). That test doesn’t require sharing budgets, etc.

   And even if that test doesn’t apply, there’s a third facts-and-circumstances test.

   Like I’ve said, you and your brother have raised a really interesting, and in many ways troubling, issue. And I think that, at least in part because of you, the church (and it’s members) are going to have to engage in some careful and comprehensive thought and moral analysis. But the tax law isn’t always intuitive, and is much more ambiguous than people think. And here, there’s probably not a tax problem. There may be, but it’s a heavy lift.

   Again, thanks for stopping by, and thanks for starting a really important conversation.

 

57 minutes ago, Analytics said:

If Eric Smith is concerned about the nuances and complexities of tax law being reported, he should examine in detail the arguments on both sides about whether or not it is a Private Foundation.

Phrases "asked and answered" and "not in dispute" come to mind.

57 minutes ago, Analytics said:

Given the extraordinary lengths the Church goes to in order to hide the details of its finances from the public and from its own membership,

I don't think the steps the Church took are "extraordinary."  They are, instead, pretty darn ordinary.  The Church apparently erred in some of the particulars, and for those lapses they have paid fines and the SEC matter has been resolved.

I don't fault the Church - or any other private party - including you - from "hid{ing} the details of its finances from the public."  Absent a duty to disclose, I think private individuals and groups have every right to maintain levels of privacy preferable to them. 

Meanwhile, I think that most reasonably-informed members understand and appreciate that the people who have access to and control over the Church's finances have put in place numerous safeguards, oversights, checks and balances, etc. so as to reduce the risk of misuse of such funds.  We have the Council on the Disposition of Tithes, the Budget Committee, the Appropriations Committee, the Church Budget Office, the Church Audit Committee, and more.  We get annual reports from the Audit Committee.  Moreover, we see the beautiful temples, the tens of thousands of missionaries, the thousands of church buildings, the Church's humanitarian and philanthropic efforts, the canneries and storehouses, Welfare Square, Humanitarian Square, and so on.

I also think that it bears repetition and emphasis that there is no allegation of financial impropriety by the Church.  The largest (and perhaps even sole) substantive criticism is that it doesn't spend enough money on philanthropic/humanitarian efforts.  And boy, we've been on that merry-go-round a bunch of times.

57 minutes ago, Analytics said:

reporters should be given some slack about not understanding the details.

Given the complexity and nuance and ambiguity inherent in the applicable law (note that even Sam Brunson - who has been pretty critical of the Church's handling of this matter, and who is an apparent expert in tax law - was reduced to "I sincerely don’t know"), perhaps everyone should be "given some slack about not understanding the details"?  Even . . . the folks in the Church of Jesus Christ of Latter-day Saints who manage and oversee its finances?

57 minutes ago, Analytics said:

I don't believe Churches should be tax exempt.

And no doubt you actively speak out against all these other churches, on a regular basis, for years on end.  

Anyhoo, churches are tax exempt.  Consequently, criticisms of the Church of Jesus Christ of Latter-day Saints based on personal preferences and irrelevant principles doesn't do much.

57 minutes ago, Analytics said:

Beyond lobbying congress directly on this matter, it is valid for pundits and citizens to try to influence public opinion by using their free speech.

Absolutely.

It is less valid to fabricate, embellish, distort, etc.  There has been quite a bit of that.

57 minutes ago, Analytics said:

Arguing that the Church's actions are legal is an awfully low standard.

With respect, I disagree.  i think compliance with the law as to arcane legal complexities is a pretty reasonable standard.  I also think that faulting the Church for obeying the law but not complying with the preferences of anonymous online critics is unreasonable.

57 minutes ago, Analytics said:

Ultimately the Church is free to do whatever it legally wants with its money, but by the same token, pundits and citizens are free to criticize it. 

Absolutely.

Thanks,

-Smac

[Calm]

38 minutes ago, LoudmouthMormon said:

Heh.  For the last umpteen years in our personal taxes, my wife's occupation has been listed as "Domestic goddess".   Maybe I should be worried the IRS will come after us for lying on our taxes.

If there are laws attached to the term “domestic goddess” and your wife does not meet those, that would be an appropriate analogy imo.

The problem here is (going from memory so details may be off) that managers of the companies were required by law to be making the decisions for those companies and iirc some of them weren’t involved in the process at all and that the forms stated that by signing they were stating they knew the details of the documents included when some didn’t even see those documents when they were told to sign on the dotted line. (I find these practices problematic, though I don’t believe higher ups necessarily approved of them in anything more than a vague ‘divide the assets among multiple companies while avoiding obvious links to the Church’ way.)

Edited September 20, 2023 by Calm

[Diamondhands69]

21 minutes ago, Vanguard said:

I appreciate your candor though I don't agree with the position. Do you think you would be taking the same action had the Church not - as you say - "engage[d] in deceptive behavior for no good reason"? Let's say this issue with the SEC had not happened but instead you still found out the Church has amassed the large amount of money it has. In that scenario, would you stop paying your tithing?

I expect them to invest responsively as it appears they have been.
 

I also expect they not lie on govt paperwork and hide money with the hopes it will keep the members paying. Be honest with me and I’ll be loyal. Once someone shows me they will lie about silly stuff, I assume they will lie about anything.
 

up to the pint I learned this happened, I was a full tithe payer. I have been working in the securities industry a long time and once I read the sec report it is clear to me and my colleagues ( most of whom are Mormons) I/ we were like “wtf?” 

[LoudmouthMormon]

2 hours ago, Analytics said:

The Church wasn't "doing their best to be in compliance" but screwed up this one time "because of the extraordinarily complicated nature of the regulations." Rather, this is a case of the Church going to extraordinary lengths to keep their financial situation secret, and to that end they created an extraordinarily complicated set of businesses with fake phone numbers and fake addresses and fake business managers. They weren't merely trying to "do their best" to fulfill its religious mission and comply with the regulations. They were going to extraordinary measures to keep their financial empire hidden.
[...]
And they go to extraordinary lengths to hide this reality from the public and the general membership. This does say a lot about the Church's priorities and values.

Ain't a font large enough, or a loud red color loud enough, to capture my "Meh".   Boy do I think your opinion is one of the worst to have on the subject.     IMO, the more legal effort the church puts into being invisible and hidden from the government, the better.  And you keep saying "They", referring to us as if we weren't present.   How rude.  I'm very much happy that we go to such extraordinary measures.  I'd like us to take thrice the amount of extraordinary measures, please.   

Why?
1. It's none of anyone's business.
2. The more visible church finances, the more people pay attention, the more effort the church has to put into dealing with the impact caused by judgmental gossipers like you.  It takes energy away from the church's main missions and goals.  I bet y'all would be happy if thrice the litigation got pointed at the church, wouldn't you.   While at the same time you'd be pointing at the church's efforts to keep you at bay/in the dark, and characterizing those efforts as illustrative of the church's REAL priorities and values. 
3. Opposing armchair quarterbacks is a noble and worthy endeavor.  Tantamount to keeping the 2nd great commandment by giving you less to be unrighteously judgmental about. 

 

Quote

The truth is that when you consider all of the Church's annual income, both investment income and donations, in all likelihood the Church uses most of its money--over 50%--to increase the size of its for-profit business empire.

How cool is that?   I'm so glad the church is running a surplus these decades.  I'm so comforted to know they are investing the money wisely, not just to hold the value, but increase it.  Laying up stores against the season, by employing how many?  Thousands?  Tens of thousands?   I'm utterly tickled pink at the Mormonleaks documents pointing out how much we invest in the health of various communities, not to mention all the productive farmland.

I'm bored with folks who think the world's problems can be solved by throwing money at them.  It's the world's greatest yawn to hear "If I had their money, I'd solve poverty.  I'd help all the hungry and poor.  I'd really make a difference."  Feel free to put your money towards those ends.  Leave us alone, we're trying to help hearts and souls, with a side gig of paying attention to temporal matters.  And we're playing the conservative game to ensure that we can keep our priorities going if there's a decade or two of hard times.

I'm professionally employed to watch large sums of money flow from place to place.  (Nothing regulatory, I just help manage a yearly budget for a for-profit company.)  I think it's cool that I can ascertain something about someone's motivation by looking at their department's budgetary choices.  And as I read threads like this and opinions like yours, my respect for church leadership grows.

 

Edited September 20, 2023 by LoudmouthMormon

[Diamondhands69]

4 hours ago, Analytics said:

 

1. Arguing that the Church's actions are legal is an awfully low standard. Ultimately the Church is free to do whatever it legally wants with its money, but by the same token, pundits and citizens are free to criticize it. 

Amen

[smac97]

38 minutes ago, Diamondhands69 said:

I expect them to invest responsively as it appears they have been.

I am glad we can agree on that.  This is, perhaps, the most singularly important facet of the issue.  Is the Church a good steward of sacred funds?  I think the broad answer is "yes."

38 minutes ago, Diamondhands69 said:

I also expect they not lie on govt paperwork

Who is "they"?  Specifically?

38 minutes ago, Diamondhands69 said:

and hide money with the hopes it will keep the members paying.

The Church has largely kept its finances private since, IIRC, 1959.

I think imputing motives is not helpful.

38 minutes ago, Diamondhands69 said:

Be honest with me

I think we need to first establish that the Church has not "been honest" with you (or anyone else).

38 minutes ago, Diamondhands69 said:

and I’ll be loyal.

Your commentary so far has been caustic.  Acerbic.  Condemnatory.  I hope you can take a step back from this fiery rhetoric and accord the Church and its various leaders, employees, etc. a bit of patience and grace.

38 minutes ago, Diamondhands69 said:

Once someone shows me they will lie about silly stuff, I assume they will lie about anything.

Again, who is "they"?  Specifically?

38 minutes ago, Diamondhands69 said:

up to the pint I learned this happened, I was a full tithe payer. I have been working in the securities industry a long time and once I read the sec report it is clear to me and my colleagues (most of whom are Mormons) I/ we were like “wtf?” 

I am an attorney.  I have discussed this issue at some length with a number of different attorneys, and I have also read several written critiques of the SEC / EPA / Lars Nielsen issues.  I have also examined the legalities rather extensively in my own right.  A number of these attorneys have real experience in federal regulatory compliance, including SEC compliance.  I think the emerging consensus is that

• A) the Church, if it erred in complying with SEC regulatory requirements, did not do so in any way involving financial mismanagement or corruption, 
• B) EPA is registered as an integrated auxiliary of the Church, and the IRS is, it seems, largely or totally indifferent to contrary allegations,
• C) to the extent functionaries in the Church or at EPA erred in some particulars, it has rectified those errors/mistakes, such that the SEC is now satisfied that the Church and EPA are fully compliant with regulatory guidelines,
• D) there is no indication that the leaders of the Church "lied" (your preferred deprecation, it seems),
• E) there is no indication that the Church's use of LLCs was illegal (though some of the particulars of how it used them was apparently flawed),
• F) the SEC regularly investigates investment funds, regularly issues fines, etc.
• G) the SEC has the option of imposing punitive conditions on a target of an investigation (disgorgment, acknowledgement of wrongdoing), none of which were imposed against the Church or EPA,
• H) the leaders of the Church were relying on legal advice in relation to EPA using LLCs,
• I) the Church has not admitted to violating the law, and the SEC has not established that it has, and
• J) SEC regulations are quite complex, and sometimes compliance has an "eye of the beholder" component.

I think the Church is going to be facing far more serious challenges in the days and years ahead than a controversy over compliance with SEC regulations.  I think we as Latter-day Saints need to examine and re-examine presuppositions regarding continuing in loyalty and devotion to the Restored Gospel of Jesus Christ (which includes, as a component, sustaining the brethren, not speaking evil of them, etc.).  In particular, I think some Latter-day Saints harbor implicit (and unexamined) presumption/expectation of perfection/infallibility in relation to the leaders of the Church.  Once that presumption/expectation is set aside, and once we apply Christlike principles such as faith, love, forgiveness, patience, study, covenant-keeping, etc., examining controversies in the Church becomes a markedly less volatile and faith-shaking endeavor.

In the immortal words of Marilla Cuthbert (of Anne of Green Gables fame) : "God does not want you for a fair-weather friend."  We are, instead, commanded to be vigilant and constant in our devotions:

• "And let us not be weary in well doing: for in due season we shall reap, if we faint not."  (Galatians 6:9)
• "Wherefore, be not weary in well-doing, for ye are laying the foundation of a great work. And out of small things proceedeth that which is great.  Behold, the Lord requireth the heart and a willing mind; and the willing and obedient shall eat the good of the land of Zion in these last days."  (D&C 6433-34).
• "Behold, we count them happy which endure. Ye have heard of the patience of Job, and have seen the end of the Lord; that the Lord is very pitiful, and of tender mercy."  (James 5:11)
• "And blessed are they who shall seek to bring forth my Zion at that day, for they shall have the gift and the power of the Holy Ghost; and if they endure unto the end they shall be lifted up at the last day, and shall be saved in the everlasting kingdom of the Lamb."  (1 Nephi 13:37)
• "Behold, I am the law, and the light. Look unto me, and endure to the end, and ye shall live; for unto him that endureth to the end will I give eternal life."  (3 Nephi 15:9)
• "And, if you keep my commandments and endure to the end you shall have eternal life, which gift is the greatest of all the gifts of God."  (D&C 14:7)
• "And as many as repent and are baptized in my name, which is Jesus Christ, and endure to the end, the same shall be saved."  (D&C 18:22)
• "But blessed are they who are faithful and endure, whether in life or in death, for they shall inherit eternal life."  (D&C 50:5)
• "Now this was a great trial to those that did stand fast in the faith; nevertheless, they were steadfast and immovable in keeping the commandments of God."  (Alma 1:25)
• "And he also spake unto Lemuel: O that thou mightest be like unto this valley, firm and steadfast, and immovable in keeping the commandments of the Lord!"  (1 Nephi 2:10)
• "And he spake a parable unto them to this end, that men ought always to pray, and not to faint."  (Luke 18:1)
• "To them who by patient continuance in well doing seek for glory and honour and immortality, eternal life."  (Romans 2:7)
• "If thou wilt do good, yea, and hold out faithful to the end, thou shalt be saved in the kingdom of God, which is the greatest of all the gifts of God; for there is no gift greater than the gift of salvation."  (D&C 6:13)
• "And that thou mayest more fully keep thyself unspotted from the world, thou shalt go to the house of prayer and offer up thy sacraments upon my holy day; For verily this is a day appointed unto you to rest from your labors, and to pay thy devotions unto the Most High; Nevertheless thy vows shall be offered up in righteousness on all days and at all times; But remember that on this, the Lord’s day, thou shalt offer thine oblations and thy sacraments unto the Most High, confessing thy sins unto thy brethren, and before the Lord."  (D&C 59:9-12)
• "And behold, I tell you these things that ye may learn wisdom; that ye may learn that when ye are in the service of your fellow beings ye are only in the service of your God."  (Mosiah 2:17)
• "So then because thou art lukewarm, and neither cold nor hot, I will spue thee out of my mouth."  (Revelation 3:16)

When a leader of the Church errs, that can be troubling, even very much so.  Such errors, however, do not retroactively negate the reality of the First Vision and the other theophanies experienced by Joseph Smith, or the Gold Plates and the inspired translation of them, or the restoration of priesthood keys, and so on.  

If the Church is what it claims to be, I think we need to have a sense of steadfastness and loyalty to it.  Not because it and its leaders are infallible, but because we ought to do so despite apparent instances of fallibility.

Thanks,

-Smac

[Analytics]

1 hour ago, smac97 said:

I don't think this is in real dispute, and more likely a bit of wishful thinking in some quarters. 

The SEC Order, for example, apparently considers EPA an integrated auxiliary:

The Washington Post:

The AP:

The Deseret News (quoting this Forbes article) (see also here) :

Public Square Mag:

 Remember the context of this is Eric Smith's article about how news articles typically don't address the complexities and nuances of the law. I merely suggested he follow his own advice. You providing examples that illustrate his point doesn't somehow indicate I'm wrong about mine.

1 hour ago, smac97 said:

Sam Brunson (!) :

Sam even got the attention of Lars Nielsen, and had this exchange with him (same link) :

Yes, Sam Brunson acknowledges this issue:

Quote

Hey Lars, thanks for stopping by. I totally get what you’re saying; as a policy matter, sharing budgets, etc., could certainly be a requirement to qualify as an integrated auxiliary. Current law, however, requires affiliation and internal support. The relevant regulation provide three tests for determining affiliation. My guess is EPA would meet the second (that is, operated, controlled, it supervised by a church). That test doesn’t require sharing budgets, etc.

And even if that test doesn’t apply, there’s a third facts-and-circumstances test.

Like I’ve said, you and your brother have raised a really interesting, and in many ways troubling, issue. And I think that, at least in part because of you, the church (and it’s members) are going to have to engage in some careful and comprehensive thought and moral analysis. But the tax law isn’t always intuitive, and is much more ambiguous than people think. And here, there’s probably not a tax problem. There may be, but it’s a heavy lift.

Again, thanks for stopping by, and thanks for starting a really important conversation.

 

1 hour ago, smac97 said:

I don't think the steps the Church took are "extraordinary."  They are, instead, pretty darn ordinary. 

That's simply not true. In the words of the Director of theSEC's Division of Enforcement, the Church "went to great lengths to avoid disclosing the Church’s investments, depriving the Commission and the investing public of accurate market information."

1 hour ago, smac97 said:

The Church apparently erred in some of the particulars....

The entire scheme was a mistake. 

1 hour ago, smac97 said:

I don't fault the Church - or any other private party - including you - from "hid{ing} the details of its finances from the public." 

Few things in life are as certain as the fact that you will always ignore the widely-held belief that non-profits and churches ought to be transparent, and instead will insinuate that since private individuals don't need to be transparent, organizations don't either.

1 hour ago, smac97 said:

Absent a duty to disclose, I think private individuals and groups have every right to maintain levels of privacy preferable to them. 

In this case, the Church didn't perform its legal duty for a period of about 20 years. 

1 hour ago, smac97 said:

Meanwhile, I think that most reasonably-informed members understand and appreciate that the people who have access to and control over the Church's finances have put in place numerous safeguards, oversights, checks and balances, etc. so as to reduce the risk of misuse of such funds. 

"Misuse" of such funds isn't the issue. 

1 hour ago, smac97 said:

 We have the Council on the Disposition of Tithes, the Budget Committee, the Appropriations Committee, the Church Budget Office, the Church Audit Committee, and more. 

The problem with your argument here is that not even the apostles are authorized to see the Church's full financial statements. If members of these various committees aren't privy to how much money the Church has, how can they effectively decide whether it is allocating its resources in an optimal manner?

The biggest issue here is whether the reserve fund is too big, and only seven people (First Presidency, Presiding Bishopric, Controller), are allowed to know how much money is in the reserves.

1 hour ago, smac97 said:

Moreover, we see the beautiful temples, the tens of thousands of missionaries, the thousands of church buildings, the Church's humanitarian and philanthropic efforts, the canneries and storehouses, Welfare Square, Humanitarian Square, and so on.

But we also know that less than 50% of the Church's annual income goes towards those things, and that over 50% of its income goes towards increasing the size of its for-profit, commercial empire. At what point is it rightly called a hedge fund with a church rather than a church with a rainy day fund? Based upon what it does with most of its income, it already is primarily a hedge fund.

1 hour ago, smac97 said:

Given the complexity and nuance and ambiguity inherent in the applicable law (note that even Sam Brunson - who has been pretty critical of the Church's handling of this matter, and who is an apparent expert in tax law - was reduced to "I sincerely don’t know"), perhaps everyone should be "given some slack about not understanding the details"?  Even . . . the folks in the Church of Jesus Christ of Latter-day Saints who manage and oversee its finances?

When the reason the Church breaks the regulations is because of the "great lengths" it went to in order "to avoid disclosing the Church’s investments," there is a certain poetic justice when the scheme blows up in their face. There is a difference between 1- an individual getting in trouble with the IRS for making an honest mistake filling out a tax form, and 2- a multi-billion dollar corporation getting in trouble because a highly complex and shady tax avoidance scheme goes sideways.

1 hour ago, smac97 said:

And no doubt you actively speak out against all these other churches, on a regular basis, for years on end.  

Whenever the topic comes up, I share my thoughts.

1 hour ago, smac97 said:

It is less valid to fabricate, embellish, distort, etc.  There has been quite a bit of that.

Of course if the Church was more transparent, it would be more clear who is actually doing the distorting.

[LoudmouthMormon]

25 minutes ago, Analytics said:

"Misuse" of such funds isn't the issue. 

25 minutes ago, Analytics said:

But we also know that less than 50% of the Church's annual income goes towards those things, and that over 50% of its income goes towards increasing the size of its for-profit, commercial empire. At what point is it rightly called a hedge fund with a church rather than a church with a rainy day fund?

 

I see London I see France...

[webbles]

3 hours ago, Calm said:

The problem here is (going from memory so details may be off) that managers of the companies were required by law to be making the decisions for those companies and iirc some of them weren’t involved in the process at all and that the forms stated that by signing they were stating they knew the details of the documents included when some didn’t even see those documents when they were told to sign on the dotted line. (I find these practices problematic, though I don’t believe higher ups necessarily approved of them in anything more than a vague ‘divide the assets among multiple companies while avoiding obvious links to the Church’ way.)

The "Business Managers" are the ones that signed the document and no one (including the SEC) expected them to be in the decision process.  Their entire job was to sign the legal documents.  That's all they had authority to do and it isn't a problem.  The problem is that the LLCs were supposed to have control over their investments but instead were being told what to do by the EPA.  And the documents that the "Business Managers" signed stated that the LLCs did have management over the investments.

[Calm]

56 minutes ago, Analytics said:

In this case, the Church didn't perform its legal duty for a period of about 20 years. 

But it wasn’t a duty to disclose they failed on, but not allowing the LLCs the independence level required.  If the LLCs  had assigned competent investors who made the decisions for the business, even if they took advice from EPA, and had their business managers who oversaw the paperwork and thus knew what was in it, even if they had an accounting department provided by EPA doing the work for them (the managers), the (the Church and EPA) wouldn’t have gotten in trouble if I understand the ruling correctly.  If not, please point out where I went wrong.  It seems to me the actual guys running the show were lazy and took shortcuts and maybe saved on salaries by not getting investors and managers who could do all of what was needed instead of EPA taking over duties inappropriately.

They weren’t penalized for registering the companies and their phones out of state or under names that wouldn’t draw attention.

Edited September 20, 2023 by Calm

[Calm]

26 minutes ago, webbles said:

The problem is that the LLCs were supposed to have control over their investments but instead were being told what to do by the EPA.  And the documents that the "Business Managers" signed stated that the LLCs did have management over the investments.

So business managers don’t usually make the investment decisions?  I am not that informed on who does what in businesses.  Perhaps the mangers are just in charge of the administrative stuff?  The companies I am familiar with are owned and run by couples or a single owner overseeing everything even if they hire a part time accountant to do the paperwork for them.

If so, how could the LLC have demonstrated they had control over their investments if the managers were not supposed to be doing it?

Edited September 20, 2023 by Calm

[Analytics]

9 minutes ago, Calm said:

But it wasn’t a duty to disclose they failed on, but not allowing the LLCs the independence level required.  If they had assigned competent managers who made the decisions for the business, even if they took advice from EPA, and who oversaw the paperwork and thus knew what was in it, even if they had an accounting department provided by EPA, they wouldn’t have gotten in trouble if I understand the ruling correctly.  If not, please point out where I went wrong.  It seems to me the actual guys running the show were lazy and took shortcuts and maybe saved on salaries by not getting managers who could do all of what was needed instead of EPA taking over duties inappropriately.

When the Wikileaks group figured out that these various LLC's are all controlled by the Church, I assumed the SEC reports were honest and that the Church divided up its assets into independent LLC's that actually had accounts, assets, employees, and investment discretion. I figured that it was doing this to make the funds look less significant in size, hide their relationship to the Church, and as diversification. 

It's now clear that this was never their intention. Ensign Peak Advisors had all of the accounts and all of the investment managers. EPA ran the show as a single unit. It wasn't lazy or taking shortcuts--it was a deliberate keep-all-your-eggs-in-one-basket-and-keep-your-eyes-on-that-basket strategy. The LLC's existed for one and only one purpose: as a vehicle to "avoid disclosing the Church’s investments" and create the impression that these were all completely independent, moderately-sized funds that had absolutely nothing to do with the Church. There was no other reason for the LLCs to exist in the first place. When the whistleblower report came out, they didn't give the "Business Managers" investment discretion--they couldn't have; the "business managers" weren't qualified and there was never any intention for these to be actual businesses that did anything. That's why they simply started creating accurate reports.

It's vital to keep in mind that the moment the IRS whistleblower report came out, EPA immediately began filing consolidated 13F's and stopped filing 13F's under the shell LLC's. They didn't wait for the SEC to tell them they had been doing it wrong. They already knew.

 

[smac97]

28 minutes ago, Analytics said:

 Remember the context of this is Eric Smith's article about how news articles typically don't address the complexities and nuances of the law.

And he was correct to point that out.

28 minutes ago, Analytics said:

I merely suggested he follow his own advice.

You are assuming he has not.

28 minutes ago, Analytics said:

Quote

I don't think the steps the Church took are "extraordinary."  They are, instead, pretty darn ordinary. 

That's simply not true.

I think it's almost self-evidently true.  The Church's use of LLCs was not an innovation, and is instead a fairly common (and, broadly speaking, perfectly legal) practice.

28 minutes ago, Analytics said:

In the words of the Director of the SEC's Division of Enforcement, the Church "went to great lengths to avoid disclosing the Church’s investments, depriving the Commission and the investing public of accurate market information."

First, "great lengths" are not, in my view, synonymous with "extraordinary."  I may go to great lengths to lose weight by daily exercise and eating right.  That doesn't make exercise and eating right "extraordinary."

Second, the above statement begins with "We allege..."  That the SEC "alleges" X is not evidence of X.

Third, I decline to take the untested, unproven, unadjudicated, unadmitted-to say-so of the SEC as the unfiltered truth. 

28 minutes ago, Analytics said:

Quote

The Church apparently erred in some of the particulars....

The entire scheme was a mistake. 

Reasonable minds can disagree about that, I suppose.

28 minutes ago, Analytics said:

Quote

 

I don't fault the Church - or any other private party - including you - from "hid{ing} the details of its finances from the public." 

 

 

Few things in life are as certain as the fact that you will always ignore the widely-held belief that non-profits and churches ought to be transparent,

I don't "ignore" this.  I just don't happen to agree with it across the board.

In contrast, you pretty much always ignore the reality that the people who have access to and control over the Church's finances have put in place numerous safeguards, oversights, checks and balances, etc. so as to reduce the risk of misuse of such funds.  We have the Council on the Disposition of Tithes, the Budget Committee, the Appropriations Committee, the Church Budget Office, the Church Audit Committee, and more.  We get annual reports from the Audit Committee.  Moreover, we see the beautiful temples, the tens of thousands of missionaries, the thousands of church buildings, the Church's humanitarian and philanthropic efforts, the canneries and storehouses, Welfare Square, Humanitarian Square, and so on.

28 minutes ago, Analytics said:

and instead will insinuate that since private individuals don't need to be transparent, organizations don't either.

It's not an insinuation.  I've said it many times.  

28 minutes ago, Analytics said:

Quote

Absent a duty to disclose, I think private individuals and groups have every right to maintain levels of privacy preferable to them. 

In this case, the Church didn't perform its legal duty for a period of about 20 years. 

The Church initiated this plan on advise of attorneys, and then maintained it.  

The SEC eventually caught wind of it, found some aspects of it problematic, and settled the matter - with no findings or admissions of wrongdoing.

28 minutes ago, Analytics said:

Quote

Meanwhile, I think that most reasonably-informed members understand and appreciate that the people who have access to and control over the Church's finances have put in place numerous safeguards, oversights, checks and balances, etc. so as to reduce the risk of misuse of such funds. 

"Misuse" of such funds isn't the issue. 

I know.  Critics would much prefer to cast the Church in the worst possible light, and give it no credit for its impressive track record of financial competence and regulatory compliance.

As far as scandals go, failing to fully comply with arcane (and, in my view, questionable) regulatory expectations of the SEC is just this side of a nothingburger.  I think the Church's prudent and ethical and legal management of its finances is, or ought to be, heralded and praised to the skies.

28 minutes ago, Analytics said:

Quote

We have the Council on the Disposition of Tithes, the Budget Committee, the Appropriations Committee, the Church Budget Office, the Church Audit Committee, and more. 

The problem with your argument here is that not even the apostles are authorized to see the Church's full financial statements.

First, we don't know that.

Second, your supposed "problem" is almost entirely theoretical.  Regardless of which particular persons have access to which information, the reality is that the Church does an outstanding job of managing its finances.

28 minutes ago, Analytics said:

If members of these various committees aren't privy to how much money the Church has, how can they effectively decide whether it is allocating its resources in an optimal manner?

Seems like they manage.

28 minutes ago, Analytics said:

The biggest issue here is whether the reserve fund is too big,

Which is, notably, not a legal issue, and is instead a pretty darn subjective and eye-of-the-beholder issue.

And which is also one that fails to address what I think may be a substantial and important factor, which I have previously raised here:

Quote

My sense, though, is that the Church - particularly the Presiding Bishopric - is very careful in partnering with other groups.  Purported charitable groups, NGOs and such are well known for all sorts of corruption, mismanagement, and so on.  By way of example, take a look at the dumpster fire that is California's homeless crisis.  They're spending billions, and the problem is just getting worse, largely because the groups that are receiving those billions have a vested interest in keeping that cash cow alive as long as possible, and so - ironically - are incentivized to make homelessness issues last as long as possible.  The Brethren are aware of this, and so vet potential partners carefully.  I think that the Church has plenty of money to spend, but not a sufficient number of trustworthy/competent partners to spend it on.

Strangely, you agreed with me:

Quote

Quote

I think that the Church has plenty of money to spend, but not a sufficient number of trustworthy/competent partners to spend it on.

For the record, I agree with your point here. 100%. And that is the basis for my argument that it really does have too much money. 

And since it uses most of its annual income to grow the size of the nest egg, the problem is getting worse at an exponential rate.

So you acknowledge the "problem," but continue to fault the Church for it?  The Church has, in recent years, greatly increased its humanitarian/philanthropic efforts, but still faces a fairly substantial bottleneck, an impediment to spending even more than the many billions it spends now, and yet still excoriate the Church for this state of affairs.  Don't you find that a bit . . . odd?

28 minutes ago, Analytics said:

and only seven people (First Presidency, Presiding Bishopric, Controller), are allowed to know how much money is in the reserves.

Maybe.  We don't really know.

And again, this criticism ignores the plain reality of the Church's excellent track record of financial management.

28 minutes ago, Analytics said:

Quote

Moreover, we see the beautiful temples, the tens of thousands of missionaries, the thousands of church buildings, the Church's humanitarian and philanthropic efforts, the canneries and storehouses, Welfare Square, Humanitarian Square, and so on.

But we also know that less than 50% of the Church's annual income goes towards those things, and that over 50% of its income goes towards increasing the size of its for-profit, commercial empire. At what point is it rightly called a hedge fund with a church rather than a church with a rainy day fund? Based upon what it does with most of its income, it already is primarily a hedge fund.

Yes, yes.  You've been banging this drum for a while now.  And I've responded.  E.g., here:

Quote

Nor are the Brethren or the Church reasonably compared to Ebenezer Scrooge, as Analytics has repeatedly done (here, here, here) (and if that comparison was not sufficiently on-the-nose, he has also characterized the Brethren as "miserly"), as well as "SeekingUnderstanding" (here).  Analytics has also characterized the Church as being "primarily a giant hedge fund that happens to also have a religious operation," and has compared it to a hypothetical "Pharaoh {who} starved his own people now because he wanted to save up food for himself for a hypothetical 20-year famine."  He has also said that it is "obscene" for the Church to look to and plan for its long-term existence.

So, yeah.  Both explicit and implicit accusations are going on here.  

And here (same link) :

Quote

Quote

 

Quote

2. Ensign Peak Foregoes Problematic Investments: Per the above article, Ensign Peak could invest in industries which, though often very lucrative, can be viewed as morally problematic according to the Church.  But it doesn't.

So? This would seem like a given. 

 

And yet, it's not treated "like a given."  The Church has been characterized as being "primarily a giant hedge fund that happens to also have a religious operation."  As having the "hoarding" of "wealth" as an end unto itself.  But if that were the case, EPA would look to maximize its investments by including problematic industries.  And yet . . . it doesn't.

And here:

Quote

And noticeably absent from you statement is any indication of enrichment of the Brethren.  I keep coming back to that because I think Analytics' comparison of the Church to a hedge fund is absurd to the point of dishonesty.  If the purpose of the Church's investments was to enrich investors - and the people in control of the Church's - then I could understand the venom and outrage.  If the Church was going skint on missionary work, physical facilities, schools, humanitarian/charitable work, etc., then I could understand the venom and outrage.

But those things aren't happening.  The Church is spending huge amounts of money on good and proper things.  The Church is also growing in areas that are nowhere near being self-sustaining.  The Church's management of its funds is plainly within the bounds of the law, as even folks like Analytics seem to be conceding.  So all the hooplah is less about what the Church is doing, and more about what critics and opponents think the Church should be doing.

Well, fine.  Free Speech and all that.  But then let's stop pretending that Hunstman's lawsuit is anything but a pretext.  It's not about "fraud."  It's about Huntsman wanting to vent his spleen and tell the Church what to do.

I get why you want to sneak these sorts of loaded terms in, but they just don't work as applied to the Church.

28 minutes ago, Analytics said:

Quote

Quote

reporters should be given some slack about not understanding the details.

Given the complexity and nuance and ambiguity inherent in the applicable law (note that even Sam Brunson - who has been pretty critical of the Church's handling of this matter, and who is an apparent expert in tax law - was reduced to "I sincerely don’t know"), perhaps everyone should be "given some slack about not understanding the details"?  Even . . . the folks in the Church of Jesus Christ of Latter-day Saints who manage and oversee its finances?

When the reason the Church breaks the regulations is because of the "great lengths" it went to in order "to avoid disclosing the Church’s investments," there is a certain poetic justice when the scheme blows up in their face.

You are dodging the point.  

Again: Given the complexity and nuance and ambiguity inherent in the applicable law (note that even Sam Brunson - who has been pretty critical of the Church's handling of this matter, and who is an apparent expert in tax law - was reduced to "I sincerely don’t know"), perhaps everyone should be "given some slack about not understanding the details"?  Even . . . the folks in the Church of Jesus Christ of Latter-day Saints who manage and oversee its finances?

28 minutes ago, Analytics said:

There is a difference between 1- an individual getting in trouble with the IRS for making an honest mistake filling out a tax form, and 2- a multi-billion dollar corporation getting in trouble because a highly complex and shady tax avoidance scheme goes sideways.

You are just making this up.  Nothing about the SEC issue has ever been characterized as a "tax avoidance scheme," let alone a "shady" one.

The issue here is with the SEC, not the IRS.

Thanks,

-Smac

 

[Analytics]

1 hour ago, LoudmouthMormon said:

Ain't a font large enough, or a loud red color loud enough, to capture my "Meh".   Boy do I think your opinion is one of the worst to have on the subject.     IMO, the more legal effort the church puts into being invisible and hidden from the government, the better.  And you keep saying "They", referring to us as if we weren't present.   How rude.  I'm very much happy that we go to such extraordinary measures.  I'd like us to take thrice the amount of extraordinary measures, please.   

When I talk about they, I am talking about the decision makers. And if your calling is anything other than a member of the presiding bishopric or a member of the first presidency, then these decisions are above your pay grade.  

 

1 hour ago, LoudmouthMormon said:

Why?
1. It's none of anyone's business.
2. The more visible church finances, the more people pay attention, the more effort the church has to put into dealing with the impact caused by judgmental gossipers like you.  It takes energy away from the church's main missions and goals.  I bet y'all would be happy if thrice the litigation got pointed at the church, wouldn't you.   While at the same time you'd be pointing at the church's efforts to keep you at bay/in the dark, and characterizing those efforts as illustrative of the church's REAL priorities and values. 
3. Opposing armchair quarterbacks is a noble and worthy endeavor.  Tantamount to keeping the 2nd great commandment by giving you less to be unrighteously judgmental about. 

I appreciate the candor here. Your sentiments remind me of the excuses Joseph Smith made for not telling Emma about all of the women he was marrying, and about the Church's excuses for lying about polygamy to the public, to investigators, and to the general membership until August of 1852.

 

1 hour ago, LoudmouthMormon said:

How cool is that?   I'm so glad the church is running a surplus these decades.  I'm so comforted to know they are investing the money wisely, not just to hold the value, but increase it.

I thought you said you didn't want to know...

[webbles]

41 minutes ago, Analytics said:

It's vital to keep in mind that the moment the IRS whistleblower report came out, EPA immediately began filing consolidated 13F's and stopped filing 13F's under the shell LLC's. They didn't wait for the SEC to tell them they had been doing it wrong. They already knew.

The SEC reached out to them in June 2019 (https://www.deseret.com/u-s-world/2023/2/21/23602967/church-settles-case-with-sec-over-financial-reporting).  Considering that they starting filing correct forms for the last quarter of 2019, I would expect that it was because of the SEC and not because of the whistleblower.

 

[webbles]

1 hour ago, Calm said:

So business managers don’t usually make the investment decisions?  I am not that informed on who does what in businesses.  Perhaps the mangers are just in charge of the administrative stuff?  The companies I am familiar with are owned and run by couples or a single owner overseeing everything even if they hire a part time accountant to do the paperwork for them.

If so, how could the LLC have demonstrated they had control over their investments if the managers were not supposed to be doing it?

"business managers" is a pretty catch-all title that can mean anything depending on the business.  For these LLCs, it was a title for a person with responsibilities 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" (this is a quote from the SEC complaint which appears to be a quote from the LLCs agreements).  Notice that it has nothing to do with investments.

The LLCs were supposed to have their own investment managers to control the investments.  This could have been done by an EPA employee as long as that person had sole discretion over the investments and was not following directions from their EPA manager.  I think that would have been extremely difficult to pull off.  A better way would be to have separate employees for the LLCs that managed the investments.

[Analytics]

[Ignoring everything that we've already come to an impasse on]

1 hour ago, smac97 said:

You are assuming he has not.

No, I was providing an example that he had not.

1 hour ago, smac97 said:

The Church initiated this plan on advise of attorneys, and then maintained it.  

Not really. Look at the timeline:

August 4, 1997: TIME Magazine its infamous "Mormons, Inc." cover story.

September 29, 1997: The Church incorporated Ensign Peak Advisors, Inc. in the state of Utah, and donates the bulk of its commercial assets to this new entity. The intended result was that if somebody wanted to see the Church's balance sheet, these assets would not be on it and the Church would appear to have less money than it really did.

1998-2019: The Church starts creating shell LLCs and reports to the SEC that the LLCs control the assets that Ensign Peak Advisors actually controls.

May 22, 2018: MormonLeaks "uncovered 13 LLCs that appear to have ties to the Mormon Church." 

June 2019: "the SEC first expressed concern about Ensign Peak’s reporting approach." [Thanks webbles]

December 17, 2019:The Washington Post publishes bombshell "Mormon Church has misled members on $100 billion tax-exempt investment fund, whistleblower alleges."

February 14, 2020: Ensign Peak Advisors files its very first 13F.

February 10, 2023: It is publicly announced that the SEC is investigating the Church

February 21, 2023: The SEC's settlement is released and Ensign Peak agrees to a $4,000,000 fine, and the Church itself agrees to an additional $1,000,000 fine

So here is my question for you:

Why did the Church start filing the forms correctly immediately after the IRS whistleblower report came out, and in all likelihood before the SEC investigation even began? If it was sincerely trying to live by its own values of honestly and obeying the law, why did it unilaterally make such a radical change to its reporting practices when the IRS report came out?

To me the answer is obvious. They knew that what they had been doing was wrong. When the whistleblower report came out, they knew they were going to be investigated. And they knew that the SEC would have a problem with the dishonest reports. Because of all those things, they immediately rectified the situation before it got any worse.

But what's your take? If they "initiated this plan on advise of attorneys, and then maintained it," why did they change directions when they did?

1 hour ago, smac97 said:

The SEC eventually caught wind of it, found some aspects of it problematic, and settled the matter - with no findings or admissions of wrongdoing.

But why did the Church change its practices before the SEC investigation began? If they could look themselves in the mirror and tell themselves they weren't doing anything wrong, why did they change?

1 hour ago, smac97 said:

Which is, notably, not a legal issue, and is instead a pretty darn subjective and eye-of-the-beholder issue.

That is a fundamentally important question in finance, and does have answers. Reasonable minds can disagree about what the right level of surplus is, but only if they have access to the information. The Church needs to decide what to do with its money. So do the members: should they contribute to the Church so that the Church can further build up its reserves, or should they worry about putting their own financial house in order? Furthermore, the public needs to decide how it is going to fund the government: nobody likes taxes, and taxes aren't punitive in nature. But granting an organization like Ensign Peak Advisors tax exemption is a massive subsidization. Should Ensign Peak Advisors be entitled to all of the benefits of being incorporated in America, but not have to pay its fair share of taxes like the rest of us?

To answer these questions, there needs to be transparency. The Church ought to make a public report of all its assets available to the apostles. And to the lower general authorities. And to the general membership. And to the public. With transparency, we can make intelligent decisions about whether the donations and subsidizations we give it are worth it.

1 hour ago, smac97 said:

And which is also one that fails to address what I think may be a substantial and important factor, which I have previously raised here:

Strangely, you agreed with me:

It's only strange because you have a fantasy that I have a pathological need to cast the Church in the worst possible light.

1 hour ago, smac97 said:

So you acknowledge the "problem," but continue to fault the Church for it? 

The problem is in fact a problem, and the Church did in fact create it. I don't fault the Church for literally having more money than they know what to do with, and I do appreciate them wanting to be good stewards. However, this all just highlights the need for financial transparency, a rigorous analysis of whether EPA is really a public charity, and possible changes to the tax laws. We shouldn't be giving massive multi-billion dollar tax subsidies to charities whose contributions to the world are not commensurate with the size of the subsidies.

These questions could be answered with transparency.

1 hour ago, smac97 said:

The Church has, in recent years, greatly increased its humanitarian/philanthropic efforts, but still faces a fairly substantial bottleneck, an impediment to spending even more than the many billions it spends now, and yet still excoriate the Church for this state of affairs.  Don't you find that a bit . . . odd?

A couple of things. First, you are exaggerating how much it spends. Second, why has it greatly increased its humanitarian/philanthropic efforts? Would it have done that anyway without critics and whistleblowers pointing out that what it's been doing isn't commensurate with its income? I suspect things are slowly moving in the right direction, and I think more transparency would provide more incentive for it to continue in the right direction.

1 hour ago, smac97 said:

Again: Given the complexity and nuance and ambiguity inherent in the applicable law (note that even Sam Brunson - who has been pretty critical of the Church's handling of this matter, and who is an apparent expert in tax law - was reduced to "I sincerely don’t know"), perhaps everyone should be "given some slack about not understanding the details"?  Even . . . the folks in the Church of Jesus Christ of Latter-day Saints who manage and oversee its finances?

Look at my timeline again. Why did the Church suddenly start reporting to the SEC correctly when David Nielsen shone some unwanted transparency on what SEC does?

1 hour ago, smac97 said:

You are just making this up.  Nothing about the SEC issue has ever been characterized as a "tax avoidance scheme," let alone a "shady" one.

That was a metaphor. 

Edit: I fixed the timeline based on the additional info Webbles provided while I was writing this, but didn't rewrite the rest of the post. The general point still remains, though. Mormonleaks likely influenced the SEC looking at something that was problematic, which caused the Church to be fixed. Transparency makes things better.

Edited September 21, 2023 by Analytics

[Analytics]

21 minutes ago, webbles said:

The SEC reached out to them in June 2019 (https://www.deseret.com/u-s-world/2023/2/21/23602967/church-settles-case-with-sec-over-financial-reporting).  Considering that they starting filing correct forms for the last quarter of 2019, I would expect that it was because of the SEC and not because of the whistleblower.

 

I didn't know that. Thanks.

[webbles]

12 minutes ago, Analytics said:

I didn't know that. Thanks.

Also, the LLCS were first discovered in 2018 by mormonleaks and reported on by KUTV in Utah.  EPA knew of that reporting and apparently had a meeting to discuss changes to the structure per the whistleblower.

Quote

In May 2018, KUTV reported (their source was Mormonleaks.io) that 13 holding companies - potentially owned by the Mormon Church - collectively owned $32.7 billion in U.S. stocks at year-end 2017. The next day, an emergency staff meeting, led by CIO Mr. Nydegger, was called at EPA to discuss whether new holding companies needed to be created since the current structure could no longer obfuscate EPA's equity positions.

Quote

EPA decided that creating new entities would draw unwanted attention and be obvious.  To avoid follow-on stories in the media and re-enforced public perceptions to obfuscation, EPA concluded that a slower strategy over many years might be more effective for full re-concealment.

If his assumptions are correct, it sounds more like the EPA doesn't see anything illegal in what they are doing.  When they were first found out, the initial reaction was to do more of it.  It doesn't sound like they were worried about being investigated.  And it was the 2018 report that triggered the SEC investigation.

[Diamondhands69]

5 hours ago, Calm said:

If there are laws attached to the term “domestic goddess” and your wife does not meet those, that would be an appropriate analogy imo.

The problem here is (going from memory so details may be off) that managers of the companies were required by law to be making the decisions for those companies and iirc some of them weren’t involved in the process at all and that the forms stated that by signing they were stating they knew the details of the documents included when some didn’t even see those documents when they were told to sign on the dotted line. (I find these practices problematic, though I don’t believe higher ups necessarily approved of them in anything more than a vague ‘divide the assets among multiple companies while avoiding obvious links to the Church’ way.)

It would be interesting to learn whether or not the SEC asked to see the employee performance reviews of the “managers” of the llcs. How much they were compensated  for managing all those billions of dollars in equities and the responsibility of voting all those shares as well. 
 

I bet exactly zero of the signers reviews even mentioned the “managers” performance or role as a company manager.