May 24, 2023

Pressure builds to investigate LDS Church wealth

David A. Nielsen’s lawyer says the government “must not shrink from the responsibility of enforcing the rule of law.”

Salt Lake Tribune

By Tony Semerad

May 20, 2023

Whistleblower David A. Nielsen is stepping up his push for federal authorities to fully investigate his billion-dollar allegations of financial wrongdoing by The Church of Jesus Christ of Latter-day Saints and its investment arm, Ensign Peak Advisors.

So far, though, there’s little public indication that major investigations are underway.

In a statement issued to The Salt Lake Tribune days after the former Ensign Peak portfolio manager appeared on “60 Minutes,” Nielsen’s attorney said the IRS and U.S. Department of Justice “must not shrink from the responsibility of enforcing the rule of law” in exploring allegations the church violated its tax-exempt status by amassing upward of $100 billion from investments of tithing funds from members, without spending any of it on charity.

Nielsen has provided enough evidence of church actions in avoiding paying billions in taxes, Atlanta-based lawyer Michael Sullivan said, to warrant deeper government scrutiny.

“Otherwise,” Sullivan said in the release, “a powerful, well-connected organization will be seen as escaping the equal application of our laws.”

He issued the statement after church officials called the “60 Minutes” report “unfortunate,” saying it was based on “unfounded allegations.”

While the Salt Lake City-headquartered faith now disputes Nielsen’s allegation the investment fund was never used for religious, charitable or educational purposes, Sullivan said, when “60 Minutes” challenged church officials to provide documents disproving it, “the church apparently declined.”

The attorney also referred to a settlement filed in February by the U.S. Securities and Exchange Commission in which the church and Ensign Peak agreed to pay $5 million in fines for intentionally hiding nearly $32 billion in past stock holdings under a series of shell companies.

“Why would an organization violate the law and ‘misstate’ — for almost 20 years — facts it was legally required to disclose?” Nielsen’s lawyer wrote. “...The SEC’s action is but the first of many steps in essential government scrutiny, and next are the IRS and the Department of Justice. ... Since ordinary citizens must obey the law, should the IRS and Department of Justice permit politically powerful church organizations to flout the law?”

Nielsen worked as a top manager for Ensign Peak for nine years but resigned shortly before his late 2019 complaint to the IRS. He has since expanded on it in court testimony and in a memo sent to Congress, as well as, the Salt Lake City resident has said, in follow-up interviews with federal investigators.

The “60 Minutes” interview marked Nielsen’s first public comments on his explosive assertions. The business executive said he initially started at Ensign Peak with optimistic visions that he was “going to change the world” by assisting in managing its charitable resources, only to find the reserve account was instead operated as “a clandestine hedge fund” — one that only built wealth, Nielsen insists, and hoarded more than $100 billion while spending nothing on the church’s philanthropic missions.

Nielsen said he decided to speak publicly after giving government authorities “all the professional courtesy.”

“It’s time,” he told “60 Minutes” correspondent Sharyn Alfonsi. “This is just too important to fall through the cracks.”

Few signs the government is investigating

If federal investigators continue to press the matter, they aren’t confirming that publicly.

In response to Tribune inquiries, an IRS spokesperson said the agency can neither confirm or deny anything involving its interactions with whistleblowers. “That is completely protected,” the representative said, “under the ironclad laws that protect us all.”

For his part, Sullivan said in an interview Friday the IRS has confirmed within the past six weeks “that the evidence and analysis submitted on Nielsen’s behalf is under consideration by the appropriate people.”

Officials in the tax division of the Department of Justice did not respond to requests for comment.

The SEC’s public affairs office also did not reply to Tribune inquiries. That agency, tasked with enforcing securities law, said earlier this year it had assigned investigators from its Salt Lake City and Denver offices to the probe that resulted in the $5 million in penalties against Ensign Peak and the church.

It’s unclear, though, if the SEC’s scrutiny continues after February’s settlement.

At the time of the settlement, the Utah-based faith, while expressing “regret” for its filing “mistakes,” said it considers “this matter closed.” Church officials blamed the reporting violations flagged by the SEC on misguided advice from attorneys, saying “we affirm our commitment to comply with the law.”

Sullivan said Friday that blaming church attorneys for the deception was not credible.

“It’s incredibly disingenuous to say that, ‘Well, we were relying on our lawyers in making misstatements for 20 years in violation of the law,’” he said. If that were true, Sullivan added, “the SEC would have prosecuted the lawyers. Those lawyers probably wouldn’t have licenses.”

In calling for a congressional inquiry, Nielsen also submitted a 90-page memo in earlier this year outlining and expanding on his IRS allegations to the U.S. Senate Finance Committee and its Subcommittee on Taxation and IRS Oversight, where it so far appears to have languished.

The offices of committee chairman Sen. Ron Wyden, D-Ore., and its ranking Republican member, Sen. Mike Crapo, R-Idaho and a Latter-day Saint, did not respond to Tribune requests for information on the memo’s status or whether the committee planned any official review. Staffers for Sen. Michael Bennet, D-Colo., who heads the panel’s taxation subcommittee, also did not reply to the newspaper’s requests.

Sullivan said he has spoken to Senate staffers on the matter “more than once, but I couldn’t really say more than that.”

In the 13-minute “60 Minutes” segment, a former IRS official, Phil Hackney, said a full-blown investigation of the church’s finances was unlikely.

“The political risk is so great that it comes with real danger,” he said, while adding that “there’s a real risk to the rule of law if the IRS does not come in and enforce those rules.”

Questions about a key ‘bailout’

Sullivan underscored a sense of urgency in his statement. He affirmed Nielsen’s interview in the face of church criticisms and said Sunday’s broadcast brought new “bombshell” admissions that strengthened some of the whistleblower’s key claims.

Among them, he asserted, was an acknowledgment from W. Christopher Waddell, first counselor in the church’s Presiding Bishopric, regarding a $600 million payment from Ensign Peak to “bail out” church-owned insurance company Beneficial Life, which Nielsen and Hackney said appeared to violate rules barring the nonprofit church fund from allocating money to a for-profit firm.

Sullivan said under U.S. law, the payment amounted to a “private benefit” to Beneficial Life’s policyholders, meaning that “Ensign Peak cannot be tax-exempt and thus owes billions in taxes.”

In the broadcast, Waddell said “fortunately the church had the resources to bail out Beneficial Life during the financial crisis” that led to the Great Recession. He characterized another controversial payment from Ensign Peak — $1.4 billion for the City Creek Center mall in downtown Salt Lake City — as “an investment.”

Both, Waddell said, were legal and made as part of Ensign Peak’s function as “the church’s treasury” — an auxiliary, he later added, “providing us with those resources that we need in order to operate as a church.”

Sam Brunson, a popular Latter-day blogger and a tax law professor at Loyola University Chicago, said the legal status of the $600 million payment could hinge on what Waddell meant when he called it a “bailout.”

Waddell made reference at another point to Beneficial Life paying back the money. If the sum were indeed a loan, Brunson said, “it would probably be fine.”

“But if it’s just a transfer of money to a for-profit organization,” Brunson wrote on his By Common Consent blog, “it’s not permissible.”

Another Latter-day Saint scholar, Nathan Oman, a professor at Virginia’s William & Mary Law School, said in a blog post that it was “not surprising” the church was using Ensign Peak to invest in City Creek and Beneficial Life.

“Many of the allegations about Ensign Peak don’t seem to hold much water,” Oman said. “It’s an investment vehicle, and it seems to have made investments.”

Even so, Oman and Brunson also echoed a torrent of comments from Latter-day Saints calling on their church to be more generous with its charitable spending — which the faith says topped $1 billion last year — and more open about its wealth.

“This issue would go away,” Brunson has argued, “if the worldwide church were transparent about its finances, a thing entirely within its power.”

Oman suggested Latter-day Saint leaders “ditch the model of absolute secrecy and just publish some stripped-down, audited, financial disclosures.”

The scholar wrote that by his calculation — gleaned from the “60 Minutes” report that the church collects about $7 billion and year in tithing and spends some $6 billion on operations, with savings of about $150 billion in Ensign Peak — the faith annually spends about 4% of its wealth, which he said was “more or less exactly the rate of a conservatively managed university.”

“I am surprised by that number. I expected it to be smaller,” Oman acknowledged. “... Viewed in another way, the church spends at exactly the rate it needs to spend in order to operate indefinitely.

“... Once people accept that institutions that seek to operate indefinitely must maintain constant reserves and spend relative to those reserves only a small percentage,” he wrote, “there’s not really much to see.”



tsemerad@sltrib.comFollow @tonysemerad




https://www.sltrib.com/religion/2023/05/20/whistleblower-heightens-call/

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