The Church of Jesus Christ of Latter-day Saints (LDS) faces millions in fines after federal regulators accuse it of hiding stock holdings for over two decades.
On February 21, the Securities and Exchange Commission (SEC) announced charges against Ensign Peak Advisors, a non-profit investment firm that works with the LDS church. The SEC alleges Ensign Peak Advisors did not adequately disclose investments held by the church and valued at billions of dollars. The regulatory organization also accuses the firm of using shell companies that hid assets and understated its control over the church’s investment decisions, USA Today reported.
Ensign Peak has agreed to pay a $4 million fine as part of a resolution. The church has also agreed to pay a $1 million penalty using proceeds from investment returns in their portfolio.
The church’s portfolio has been estimated to be valued at over $100 billion, according to David Nielsen, a former employee of Ensign Peak and former church member who notified the IRS of the assets over three years ago.
“Would you pay tithing instead of water, electricity, or feeding your family if you knew that it would sit around by the billions until the Second Coming of Christ?” Nielsen wrote in his original complaint, according to Time.
According to a February 21 statement delivered by officials representing the church, Ensign Peak and the LDS church have been cooperating with investigators to help bring a close to the case.
“We confirm our commitment to comply with the law, regret mistakes made and now consider this matter closed,” the LDS church stated in a press release.
Portfolios exceeding $100 million must be disclosed via 13F forms, according to USA Today. According to the SEC, between 1997 and 2019, Ensign Peak failed to file 13F forms on multiple occasions.
The SEC suggested that the church was concerned about potential public fallout if the size of the portfolio was publicized, which at the time in 2018 was roughly $32 billion, as per USA Today.
The SEC claims that Ensign Peak used 13 shell companies, each with 13Fs filed in their names, to cloud transparency into the church’s portfolio. Instead, a single 13F should have been filed directly under the firm’s name.
“We allege that the LDS Church’s investment manager, with the Church’s knowledge, went to great lengths to avoid disclosing the Church’s investments, depriving the Commission and the investing public of accurate market information,” said Gurbir Grewal, director of the SEC’s Division of Enforcement, during the commission’s statement, per Time.
In its official statement on the matter, LDS suggested it was an error of its legal team that was rectified in 2019, writing, “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. … This settlement [with the SEC] relates to how the forms were filed previously. ”
The church’s portfolio maintains exposure to a broad range of securities, including almost 1,800 stocks valued at over $44 billion, per USA Today. Some of the largest holdings include $2 billion each of Apple and Microsoft shares, $1.2 billion in Alphabet, and $1 billion in UnitedHealth.
Outside of equities, the church also maintains exposure to fixed income and various real estate holdings.
The SEC further alleges that some of the 13F forms incorrectly listed the shell companies as having trading authority and proxy-voting privileges on the portfolios. In actuality, these decisions continued to lie with Ensign Peak the entire time.