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In this week’s episode we discuss the recent news of the Temple Changes and just how far the original Endowment has been altered. And the Second half of the show will involve the recent legal settlement with the LDS Church and it’s Ensign Peak Advisors and culminating with RFM’s lightbulb moment sensing that the Landscape of Mormonism has changed and his novel idea around such.
Temple Changes Resources: https://religionnews.com/2023/02/10/more-jesus-less-touching-14-changes-to-the-mormon-temple-endowment-ceremony/ https://www.sltrib.com/religion/2023/02/09/lds-temple-ceremonies-change/ https://www.mrm.org/revised-lds-temple-endowment-ceremony-now-includes-more-pictures-of-jesus
SEC Alleged Fraud RESOURCES: SEC Report – https://www.sec.gov/litigation/admin/2023/34-96951.pdf
SEC Press statement – https://www.sec.gov/news/press-release/2023-35 Church Response – https://newsroom.churchofjesuschrist.org/article/church-issues-statement-on-sec-settlement https://bycommonconsent.com/2023/02/21/the-church-the-investment-advisor-and-the-sec/ https://www.sltrib.com/religion/2021/09/27/heres-deeper-look-how-lds/ https://www.sltrib.com/religion/2021/09/27/heres-deeper-look-how-lds/ RFM’s Lawsuit Idea https://youtu.be/hgUwpXSNlXM
I wonder: if we went to the year before the whistleblower came forward, found the the SEC fillings for all 13 fake companies and added up the totals, would it sum to 32 billion? It seems to me there was time for the church to play damage control. To move assets between the time the whistleblower came forward and the time Ensign Peak “came clean” and filed a correct, single filing showing 32 billion in assets. That may be the correct total NOW for Ensign Peak, but there may be all kinds of new, LEGAL structures set up to limit the exposure of assets, even now. SMDH…
The latest 13F filing (December 2022) by Ensign Peak shows total investment value of almost $44.4 billion!
In your last podcast it was mentioned that Nemo the Mormon had created a letter that could be sent to Church leaders and that the letter would be posted in the show notes. I can’t seem to find it and would really like to have it. Could you please post it or tell me where I can find it?
Thank you so much for a great show.
David Rogers
I accidentally wrote my email address incorrectly in the comment I just sent
I am a social worker working in a community mental health agency in Utah. This means I work with those who are struggling financially enough that they qualify for Medicaid insurance. I have heard time and again in the twenty years I have done this work my clients report that they went to their bishop for help with rent, utilities, even food and be turned away. I have watched them in the last several years be told they have to take financial responsibility classes through the church in order to get any help with their basic necessities. Then came a report a couple of years ago that the State of Utah is able to use Federal money earmarked for low income programs for other things because we have the Church in the state that says they help the poor. So now these people in Utah can’t get as much help from the State and they are not getting the help from the Church. After listening to this podcast and the Mormon Stories podcast it dawned on me that there is another ugly layer to this. If the money they are using for these funds is money from the interest on tithing, they have an additional incentive to not use tithing money to help the poor and needy. The less they use of the tithing for these purposes, the more “excess” funds they have to transfer over to Ensign Peak.
This is the worst analysis I have ever seen. RFM and Bill Reel have no idea what they are talking about. They make judgments on matters where on they have no expertise and are in way over their heads. I would admonish them to Judge not, that ye be not judged. For with what judgment ye judge, ye shall be judged: and with what measure ye mete, it shall be measured to you again.
When Christ said render unto Caesar, that which is Caesar’s and unto God, that which is God’s he was not claiming the immoral tax laws that Caesar and the Roman government imposed on Judaea were moral. In fact, we know that the rulers of the Roman Empire were among the most immoral and corrupt institutions in the history of the world. I do not believe for one moment that Judaean citizens who cheated on their taxes against the immoral tax laws of Ancient Rome were immoral people. I do believe it is immoral to be a tax cheat against a moral tax law. The problem is that as taxes creep higher and higher moral tax systems eventually become immoral tax systems. Most governments around the world today are corrupt and immoral institutions. Though the U.S. Constitution gives our government the best chance at remaining moral it in many areas has approached and even crossed the line from morality to immorality.
When it comes to the specifics of your podcast denigrating the Church over its settlement with the SEC on its cease and desist order you are highly ignorant. I know whereof I speak. I have an MBA in corporate finance from a highly rated school (not BYU) and for years was the chairman of the investment committee for both a defined benefits retirement program and a 401k retirement program both sponsored by a corporation whose stock traded on the NYSE of which is was a senior executive officer. Both of theses retirement programs exceeded the $100 million threshold which required the filings of Form 13f under section 13(f)(1) of the exchange act. The corporation I worked for by virtue of issuing publicly trade securities and having employee retirement programs exceeding threshold limitations, was subject to regulatory oversight on several fronts by the SEC. This necessitated my become familiar with their rules and regulations. I retained the top tier international law firm of O’Melveny and Myers to advise me on these rules.
I also sat on the board of a tax free corporation that oversaw a public private partnership responsible for managing groundwater used in the provision of potable water to hundreds of thousands of residential and commercial customers. We followed the same non-profit accounting rules and conventions that the LDS Church is required to comply with as a tax exempt organization.
First of all you don’t need to be an expert in corporate financial and regulatory matters to understand the morality issue. The U.S. Constitution under amendments 1, 3, 4, 9, and 14 have all been adjudicated by the Supreme Court to guarantee certain rights privacy to individuals and other entities across a broad spectrum of activities needed to live healthy free and productive lives. Privacy is the default morality and has been protected by the courts time and time again. The right to privacy is a moral imperative of any free society. The Church as an institution is governed by the constitution and has the full rights of privacy it guarantees. In other words it is not immoral to protect your privacy.
This highly moral right to individual privacy has only been impinged upon under certain circumstances where it conflicts with a higher morality. In the realm of buying, selling and issuing financial securities experience has shown that the area is rife with fraud (think of Bernie Madoff) which can negatively impact and even destroy the lives of thousands of good honest citizens. Because the issuing and trading of securities is an arcane and significantly complex activity there is a high propensity of fraud to occur. This propensity to defraud in the securities field has resulted in, under limited circumstances, American society assigning a higher level of morality to protect its citizenry from easily perpetrated fraud than the morality of privacy. In other words you cannot use your constitutional right to privacy to hide the defrauding of others and this is the purpose of section 13(f)(1) of the exchange act.
One primary area of regulation that the SEC engages in is the licensing of traders, financial advisers, brokers and investment managers. Form 13f under section 13(f)(1) of the exchange act is directed specifically toward institutional investment managers with portfolios exceeding $100 million. There is a limit set because the number of institutional managers with portfolios below the $100 million threshold is enormous. Much of the fraud that occurs, is perpetrated by investment managers not subject to the threshold.
Form 13f provides a public repository so individuals, retirement fund fiduciaries, and other institutions that allow professional managers to manage their funds, can verify, if they so choose, that trades made on their behalf are legitimate. Investment managers know this and it provides some incentive for them to avoid engaging in fraud. The LDS Church is in the position of being its own investment manager over a very large portfolio. This happens but is rare. I suspect they do it because it saves them money and there are several verses in various sections of the D&C that imply this is the responsibility of the Presiding Bishop. I personally believe those sections of the D&C are more directed toward disbursement of funds than of investment them until needed.
The second and most important difference with respect to the Church’s portfolio as compared to other large portfolio’s is that there are not thousands of retirees and or shareholders that can be damaged due to fraud or mismanagement. I as the chairman of the investment committee for my corporation’s retirement plan could be sued by both the retirees and the shareholders if I incompetently managed the investments held by the retirement plan. Form 13f is available for all shareholders and retirees if they want to second guess the decisions I made.
If the Church mismanages its investment portfolio, the only entity with standing to sue them is the Church itself. There is no higher level of morality in the case of the Church that necessitates the Church giving up their constitutionally protected right to privacy. Section 13(f)(1) is there to help protect large groups of retirees and shareholders from incompetent and unscrupulous investment managers. It was never intended to protect the Church from itself. The Church simply got swept up in a well meaning regulatory requirement that in its case, provides none of the benefits the law was intended to provide. The Church’s compliance with Form 13f provides no benefits to the general public, retirees, shareholders, the Church or to any other person, institution or entity. An entity in the Church’s situation shouldn’t have their constitutional right to privacy taken over a law that doesn’t protect anyone or anything as it applies to them.
According to the SEC’s cease and desist order there have been no allegations of fraud or mismanagement. The only accusation is that:
“Ensign Peak developed its approach to filing Forms 13F in the names of these LLCs with the knowledge and approval of the Church, which sought to avoid disclosure of the amount and nature of its assets.”
It is neither immoral nor a crime to protect your privacy. Please tell me who was damaged and what the damages were.
The only statement that even implies or infers damages is as follows:
Through their institutionalized use of this approach for almost twenty years, Ensign Peak’s significant role in the securities markets as an institutional investment manager was not disclosed to the Commission, the markets, and the investing public as required by Section 13(f) of the Exchange Act and Rule 13f-1 thereunder.
There are three groups that it is implied that damage could have occurred to. 1. the Commission, 2. the securities market, and 3. the investing public.
In what way are any of the three damaged? There was no claim of mismanagement or fraud. One could at best argue that the Church impeded the efficient operation of the securities market. There is a huge amount of literature on efficient market theory. That the Church inhibited efficient markets is laughable. First the SEC acknowledges that all Church securities were reported. Secondly there are a tremendous number of trades made by investment managers whose portfolios do not meet the threshold that don’t get reported on Form 13f. That fact by itself destroys any argument against efficient markets. Third, the NYSE, NASDAQ and other exchanges report all trades to the SEC so nothing is missed.
When I managed my Company’s retirement plan investments I used more than one investment manager. There is no limit to the number of investment managers that can be used. The fact that the Church used 13 is a nothing burger.
The fact that the LLCs used by the Church were registered in California or Delaware is not an issue. I know there are small financial institutions that partner with heating and air conditioning companies to facilitate consumer financing of air conditioning systems when a system fails and needs replacement. Many people cannot afford the $15,000 it costs to replace it. These finance companies may be located in Florida or Washington but operate in every state of the union. They have no employees in states outside of their headquarters. They set up a phone and a Dropbox often to comply with state laws. This is also true with mortgage companies. I got a home loan through Rocket Mortgage which had no office or employees in the state in which I resided.
The only mistake the Church made was not giving investment discretion to the 13 investment managers. This mistake was not immoral since under Section 13(f)(1) the top level institution which retains the investment manager has joint responsibility with the investment manger to make the filing. This in itself seems to allow the Church to do what it did and be in compliance. To know this for sure one would need to review the case law on this issue. I suspect that the Church’s attorneys did this and in typical Al Gore fashion told them there is “no controlling legal authority”. If so, it’s likely that the language of the regulatory requirements were left leeway for broader interpretation.
It is my belief that if the Church had fought this in court they would have won because the SEC could not prove damages. The cost of the lawsuit would have likely been more than the fines. Furthermore, I participated in more than a dozen lawsuits filed by others against my company over the years I worked there. These lawsuits take up enormous amounts of time and energy by the senior most officers. It was worth it to settle. The fines were likely based on the statutory penalties for each Form 13 that was misfiled. That could be as many as 13 filings multiplied by four filings per year multiplied by the number of years multiplied by the statutory penalty.
In summary, I believe the Church’s guarantees of privacy by the constitution vastly outweigh the tiny offense of a misfiled form that did zero harm to anyone. This is a case of zealous bureaucrats protecting their turf at all costs. In this case the cost was a right guaranteed by the constitution.
Except the Church didn’t “misfile a form.”
The Church engaged in a decades long strategy to knowingly file false documents with the federal government in order to conceal their vast holdings in the U.S. stock market.
Stick that in your MBA and smoke it.
Hahaha. RFM, your reply to me demonstrates that you cannot make one cogent argument about the serious issues of this case. You can’t prove the Church’s form 13f is false. That’s your unsupported claim and the SEC’s unsupported claim. You’re a lawyer. Show me the case law that demonstrates how the church filed its 13f documents falsely. The regulatory language on how to filed the document is unclear so the document could well be not false. You don’t know if it’s false even though you have the right make the claim that it is. The SEC certainly isn’t the arbiter of what’s true or false. Maybe you were absent that day in law school when they explained that courts are the arbiters of unclear laws. Those who analyze and accusingly judge others should go to great pains, to get the facts straight before pointing the finger at anyone. Researching the case law is less than great pains and you didn’t even do it.
The SEC, like you can make any claim they want. In fact, you go to the great pains to couch your analysis as you exercising your freedoms under the first amendment in your legal disclaimer at the bottom of this comment page. You love that first amendment because it allows you say what you want, but you also love it when the Church’s constitutional rights are not protected. That’s the very hypocrisy you accuse the Church of. Please tell me what great moral imperative justified the stripping away the church’s constitutional right in this case? The good, proper, and moral behavior by the government is to ensure and protect privacy.
You can’t even enumerate a single iota of damage to anyone caused by the way the Church’s form 13f was filed. Tell me who has been damaged and what that damage is? An honest analysis would have explained that in their explanation of the Church’s cease and desist order. How was the investing public damaged? How were the securities markets damaged? How was the SEC damaged?
In the SEC’s own internal review of section 13(f) entitled, “Review of the SEC’s Section 13(f)’s Reporting Requirements,” dated Feb. 15, 2022, they state, “the SEC would be expected to make extensive use of the Section 13(f) information for regulatory and oversight purposes, no SEC division or office conducts any regular or systematic review of the data filed on Form 13F.”
Hahaha! The SEC doesn’t even use the data supplied by the Church. This proves they were just being bureaucratic arses, were not protecting the investing public, and were just being buttheads simply because they could. They sure as heck weren’t harmed by whatever the Church did. You are clearly greatly lacking in your ability and experience to make any judgements about the SEC’s cease and desist order to the LDS Church. To use those judgements to make inferences about the Church’s motives shows you are highly biased and butcher the truth by omission of highly relevant information.
The lack of objectiveness, the shoddy research, and the clear biases that are demonstrated through not examining all the pertinent facts cry out to the world that your analysis of what happened in this case should be removed from your website and an apology issued. I suspect that either intellect, ego, or an evil heart will prevent you from doing that.
Either that or the fact I’m right.
Aha, your answer demonstrates it’s an evil heart, with a dash of ego. The type of case is an “ORDER INSTITUTING PROCEEDING. You as an attorney know darn well that that means a full adjudication did not occur. No evidence was presented and tried before a court. Now I know you have that knowledge and understand it, so it’s not intellect.
That my analysis is correct and your is wrong is verified by the following statement from paragraph two of the filing which states:
“In anticipation of the institution of these proceedings, Respondents have submitted Offers of Settlement (the “Offers”) which the Commission has determined to accept.”
So the case was settled before the proceedings occurred. You didn’t explain that to your audience. Now those words in the above quoted sentence, “which the Commission has determined to accept” means the SEC agrees to everything written in the following paragraphs of the order.
Furthermore, one of the following sentences (which the commission agrees with) from the order proves there has been no finding that the Church falsified any document or violated any rule. That statement from paragraph two states:
“…without admitting or denying the findings herein,… Respondents consent to the entry of this Order…”
So the SEC agreed that there has been no proof, facts, or evidence, that has deemed to have been presented before a court that show the Church intentionally, unintentionally, purposely or inadvertently submitted anything to the SEC which was false, misleading, in error, or dishonest.
This agreement by the SEC means that you are in fact not right. You as an attorney know this is what the language of the settlement means and yet you still make the false claim that you are right.
Why would the SEC agree to such language if they had a slam dunk case that they were deceived by the Church? The answer is that they knew their case had problems and wasn’t a slam dunk.
I have participated in dozens of administrative law cases and investigations before various state and federal regulatory agencies including the FERC, EPA, numerous state public utility commissions, federal and state departments of health, and they don’t settle slam dunk cases. They settle when they know their case isn’t strong and it will be difficult to prove their allegations and show the accused caused any harm to any entity.
I’ve participated in both types of cases. Both settled and non settled cases. The vast majority of settled cases are because the regulatory case is weak and there is a good chance they will lose the case. The never settle slam dunk cases. On the other hand, the institutions which have proceedings brought against them by regulatory agencies decide to settle based upon an internal cost benefit analysis which evaluates the impact both financially and administratively to their organization and not as to whether the claims made by the regulators are true or false. This is especially true in cases where there are no damages claimed or charges of fraud made against the organization such as the SEC case against the Church. You can bet if the SEC made some bogus claim of fraud or damages by the Church against any entity that the Church would not have settled.
I have just proved your claim of being right is false. You also know I’m right because what I tell you is backed with substance, reason, and logic and supported by the documents, while everything you say is some blithe dismissive comment because you cannot defend your position with substance.
Oh, by the way,
I had an email tête-à-tête with your super expert finance guy Spencer Anderson about Ensign Peak . He gladly responded to my emails when he thought he was instructing me like one of his students. However, when I exposed his lack of expertise with regards to the SEC and demonstrated he had made erroneous statements he quickly clammed up and would no longer defend his erroneous positions he clammed up. I’ll share them with you if you like so you will know he doesn’t have the level of expertise you think he has.
As I read it, the SEC order claims that the church (as Ensign Peak and the top leaders) knew by 1998 that Ensign Peak was required to file firm 13f, but that no firm 13f was filed until after the creation of the first shell company, at around four years later. So there was a four year period where EP knowingly didn’t file at all, rather than what happened later, which was filling in a manner that is claimed by the SEC to be incorrect.
Am I reading the order correctly? I don’t think I’ve seen anyone specifically point this out, and now I’m questioning my Holiday Inn Express-level comprehension skills.
The problem with an arbitrary threshold such as $100 million in a fluctuating environment like the stock market is that there will be managed investment portfolios that hover near the threshold. One year the portfolio value can exceed the threshold where the following year the portfolio value falls below the threshold. To properly answer your question as to the SEC’s claim; “did the Church knowingly not file when they exceeded the threshold”? – requires more information as to the portfolio’s annual fluctuations. There comes a time when with a growing portfolio, that even during the years when portfolios are down that they still exceed the $100 million threshold.
The first filing made by an investment manager on behalf of a fund is a triggering event which notifies the SEC of a portfolio which must start filing Form 13F. It’s telling that the SEC did no investigation upon the triggering event of any of the 13 LLC’s. It’s obvious the SEC didn’t view any of these 13 LLC’s as anything significant until years later when disgruntled Church employees complained. Even if the Church knowingly did not file Form 13F as required (and that’s arguable), there was zero harm to any person, institution, or regulatory body. RFM cannot articulate one iota of harm caused to anyone or anything by the way the Church filed its Form 13F’s, even if they knowingly misfiled them. RFM reads all these comments and as smart as he thinks he is, he will not be able to identify one dust speck worth of harm to anyone; and believe me, if he could have he would have already done it. Until someone can articulate even a driblet of harm caused by how the Church Filed its Form 13F’s then this whole issue is a nothing burger.
Richard: “To properly answer your question as to the SEC’s claim; ‘did the Church knowingly not file when they exceeded the threshold’? – requires more information as to the portfolio’s annual fluctuations.”
Considering Ensign Peak started with seven billion dollars, and I assume they didn’t split the money or remove a significant portion until the creation of the first shell company, I think it’s unlikely that Ensign Peak’s value fluctuated to anywhere close to one hundred million dollars during that time. That is an implausible explanation.
The seven billion includes real estate, meaning churches, temples, farms, welfare facilities Etc. it includes bond and private debt as well. The SEC claims a significant portion was equity. So I’ll agree that put the the Church had over $100 million in stock.
That the Church’s filing actions somehow harmed anyone is highly doubtful. The SEC collects the Form 13f data and does nothing with it. This is documented by the SEC itself. In the SEC’s own internal review of section 13(f) entitled, “Review of the SEC’s Section 13(f)’s Reporting Requirements,” dated Feb. 15, 2022, they state, “the SEC would be expected to make extensive use of the Section 13(f) information for regulatory and oversight purposes, no SEC division or office conducts any regular or systematic review of the data filed on Form 13F.”
So if the data is not utilized, you explain to me how the Church did even $1 of harm to anyone. What the Church did was a meaningless paper work snafu. If it was more than that, then you explain to me how anyone was harmed. Unless someone is harmed, this is much ado about nothing.