WASHINGTON, Feb 23 – The Church of Jesus Christ of Latter-day Saints (LDS) and its investment management firm have agreed to pay a total of $5 million to settle charges that they previously concealed the church’s multibillion-dollar stock portfolio from the public, according to the Securities and Exchange Commission.
According to the markets watchdog, the LDS church, also known as the Mormon church, and its nonprofit investment company, Ensign Peak Advisors Inc, used shell companies to conceal their growing investments in public companies, which totaled $32 billion in 2018.
Between 1997 and 2019, those shell companies filed the required forms detailing the investments and falsely claimed to operate independently. According to the SEC, Ensign Peak still controlled the investments, and the church was aware of the arrangement, with church employees leading the majority of the companies.
A former Ensign Peak employee filed a whistleblower complaint in 2019, bringing the use of shell companies to light.
While it is not uncommon for the SEC to pursue cases with a religious angle, outside experts said it was unusual to see a fine assessed against a church as large as the Mormon church, which accounts for roughly 1% of Americans, according to the Public Religion Research Institute.
“The SEC routinely brings enforcement actions with a faith-based angle,” Adam Aderton, a partner at Willkie Farr & Gallagher LLP and former co-head of the SEC’s asset management unit, said.
Some lawyers cautioned that most asset managers are not encouraged to conceal their investments, and the unusual arrangement could limit the settlement’s potential impact beyond this case. However, it may have ramifications for other religious or charitable organizations that wish to reduce their investment coffers for donors.
“I doubt there are many other similar instances of concealed investments,” said Howard Fischer, a partner at Moses & Singer and former SEC attorney.
“The only likely future developments are further investigations into other non-profit and charitable institutions, such as universities.”
In a statement, the church said it had worked with legal counsel to develop a plan for reporting holdings while maintaining “the privacy of the portfolio.” It stated that it ceased the practice after the SEC raised concerns about it in 2019, and that it cooperated with the SEC’s investigation.
“We affirm our commitment to following the law, apologise for any errors, and now consider this matter closed,” the church said.
To settle charges, the church agreed to pay $1 million, while Ensign Peak agreed to pay $4 million.
Source: Reuters
