The LDS Church's Billion Dollar Investments

The news hit early this week about a hefty fine levied by the US Securities and Exchange Commission against the LDS Church. The LDS Church has a huge investment portfolio and has violated some reporting requirements. This points to the vast wealth of LDS Church. Just how wealthy are they? How was this wealth obtained? How is it used? These massive investments have created some problems inside and outside of the church.

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

Tithing in Mormonism

• Active Mormons are expected to pay one-tenth of their income to the LDS Church
• Access to temples depends on paying a full tithe
• Members meet with local church leaders annually to verify their tithe-paying status
• This generates a large amount of income for the Church
• Again → impossible to verify
• One study (2012) based on countries that require more disclosure than the US
• Estimated tithing income of $7 billion / year
• Used to build and maintain meetinghouses
• To build and maintain temples
• To support the global missionary program
• To help needy people around the world
• 2.3 billion since 1985
• May seem like a lot → until we see later how much $$ the Church has
• To educate Church members - seminary, institute, universities
• To carry out the general administration of the Church
• Many LDS will offer tithe-paying testimonies
• When paying a full tithe was a sacrifice, God provided
• Others offer testimonies of abuse
• Counseled to take out a 2nd mortgage in order to tithe / or other drastic measures
• Understanding the tithing culture & expectations is a key part of making sense of the news that came out this week about LDS investments

Creation of a “Rainy Day” Fund

• LDS Church was not always wealthy
• In 1960’s = started settling aside $$ from contributions for future contingencies
• In late 1970’s → investments estimated at around $1 billion
• Ensign Peak Investors established in 1997 as agent / arm of the LDS Church to manage investments
• Employs around 70 people
• BTW: you have to be an active member in good standing to work there
• The rainy-day fund has grown beyond what anyone imagined
• In 2012, LDS investments estimated at about $40 billion
• Much more today

LDS Financial Wealth Exposed

• For decades, financial analysts have speculated about just how wealthy the LDS Church is
• But those are only outside estimates → without full data
• Bc the Church is very secretive about its financial dealings
• 2019 - a whistleblower report filed with IRS
• Former Ensign Peak employee = David Nielsen (a senior portfolio manager)
• Filed along with brother Lars Nielsen
• Lars went farther → gave the info to the Washington Post
• Revealed in this filing = Church’s investment fund worth as much as $100 billion
• $40 billion in US stock
• Over $1 billion in Apple, $1B in Microsoft, $B in Alphabet
• Also: Chevron, Visa, JPMorgan Chase, Home Depot, etc.
• Timberland in Florida panhandle
• Investments in prominent hedge funds
• For all we know, the Church has other assets not managed by EP
• Unknown how much foreign investment it might have
• That may not be required to report by SEC rules

Problems with the U.S. Government

• Earlier this week, SEC fined LDS Church and Ensign Peak $5M in penalties
• Failure to properly disclose past stock holdings
• Going to great lengths to deliberately obscure their investment portfolio
• Quote from SEC:
• “The church was concerned that disclosure of its portfolio, which by 2018 grew to approximately $32 billion, would lead to negative consequences. To obscure the amount of the church’s portfolio, and with the church’s knowledge and approval, Ensign Peak created 13 shell LLCs, ostensibly with locations throughout the U.S., and filed forms 13F in the names of those LLCs rather than in Ensign Peak’s name.”
• Breaking down what Ensign Peak did
• Required to file form annually to disclose the Church’s equity investments: Form 13F
• Instead, EP created a number of shell corporations
• Could not be traced back to the Church
• Completely owned / controlled by EP
• Created for sole purpose of preventing public disclosure of the amount and nature of the Church’s assets
• Each one filed the required form
• Nowhere could anyone see the actual total
• This secrecy was out of fear of discouraging members from paying tithing (WSJ 2020)
• Practiced this approach to reporting for about 20 years prior to 2019
• After whistleblower → been filing correctly
• The latest SEC filing = $44B → reports only those investments that must be disclosed by law
• Does not reflect the portfolio’s total holdings
• The Church’s finances are now also under scrutiny in Canada & Australia

What Members Think

• Many don’t see the problem
• The church didn’t really do anything wrong; it’s a minor issue like a traffic ticket
• The church relied on lawyers; it’s their fault
• Believe the church was secretive bc as a big player in markets, it didn’t want to cause market swings
• Others: the church didn’t want individual investors to mimic the church’s investment strategy (thinking it inspired?), bc it would not apply to individual investors
• Others have raised questions / critiques
• Critique #1 = What the $$ could be used for
• In spite of overall wealth → yet still heavy-handed tithing techniques
• Still ask members to do more and more
• Spend very little (proportionally) on caring for needy
• Avg $60M / yr
• Compared to annual tithing of 7B
• Compared to annual investment growth of 7% of 100B
• Critique #2 = What the money is actually used for
• $1.4 billion for City Creek Mall in SLC
• $600K to bail out Beneficial Life Insurance
• Two church-owned commercial enterprises
• Critique #3 = the LDS Church should pay taxes, or lose its tax-exempt status for using contributions for commercial purposes
• A lot of $$ not being spent on its stated charitable purposes
• Critique #4 = Hiding the actual amount
• Church claims that use of $$ is guided by prayer
• Temple recommend question: are you honest in all your dealings?
• Undermines credibility of apostles & prophets
• Deliberately trying to evade an applicable law → to shield reputation
• Mistakes?
• The Church’s statement on the matter expresses regret for mistakes made
• But this wasn’t a mistake → a deliberate strategy to circumvent reporting requirements put in place for the public good
• Sam Brunson, a Mormon who teaches tax law at Loyola U Chicago
• “The apparent hypocrisy is potentially harmful in its relationship with its members.”