Whistleblower Complaint Accuses LDS Church Of Hoarding $100 Billion In Tax-Exempt Fund
A whistleblower complaint to the Internal Revenue Service alleges the Church of Jesus Christ of Latter-day Saints is hoarding billions of dollars in a tax-exempt investment fund that hasn’t been going to charitable works as required by federal law, and has misled members in how their tithes are used.
KUER’s Caroline Ballard spoke to Washington Post reporter Doug MacMillan, who helped break the story.
This interview has been edited for length and clarity.
CB: Who is the whistleblower and what do we know about him?
DM: It’s a man named David Nielsen, and he worked as an investment manager for a number of years inside the fund called Ensign Peak Advisors. [Editor’s Note: Ensign Peak Advisors is a non-profit investment firm and a supporting, auxiliary organization of the Church.]
I think he had kind of a crisis of conscience. He was concerned that church members who were barely able to survive were being encouraged to pay their tithings when they couldn't even pay their rent or their electricity or water or basic life necessities.
He was concerned that this has been deceptive to members, and that, in the end, the Church should be doing more with its huge stockpile of wealth to help people like that.
CB: In your headline in the story, you use the word “misled” — that the Church “misled” members in what it was doing with their money. Is that based on what you've heard from church members, or is that your interpretation of what happened?
DM: So this is very much part of the allegations that this whistleblower is making. One of the specific allegations is that there are at least two instances in which the investment fund assets are made up of church member tithings. This person is alleging that this tax-exempt fund paid out some of those funds to for-profit arms of the Mormon Church.
In one case, they paid out $600 million to [Church affiliated insurance firm] Beneficial Life when it was hit by the financial crisis, which, if true, potentially would violate the terms of [the fund’s] tax-exempt status. What he's saying is that the church repeatedly told its members that it was not using tithings to pay for Beneficial Life.
The other example was the building of the mall in downtown Salt Lake City, City Creek Center. The Church of Jesus Christ of Latter-day Saints told members that their tithings were not being used to build that operation. However, this whistleblower is pointing to a document that he provided to us that shows this investment fund used $1.4 billion from its tax-exempt fund to inject into the construction of City Creek Center.
CB: Where does this put the Church of Jesus Christ of Latter-day Saints and its wealth among other businesses, philanthropic ventures or religious institutions?
DM: It's twice as large as Harvard's endowment, which is about $40 billion. And it's also twice as large as the Bill and Melinda Gates Foundation, one of the largest philanthropic endowments.
It's definitely one of the largest charitable foundations in the world, and it's approaching the net worth of some of the largest companies. Apple, Google and Microsoft are all of the companies with the largest cash reserves in the world. They all have more than $100 billion. So it's definitely one of the largest concentrations of wealth in the world.
CB: Why would the Church be sitting on $100 billion in member tithes and investments?
DM: We don't have a full explanation because the Church, when we reached out to them with our story, did not engage us on the specific allegations that are being made. But we spent a lot of time trying to answer this question and going through what the leaders of the Church have said, and also looking at what the leaders of the investment fund said in reaction to this.
One of the leaders of this investment fund told the whistleblower that the reason for amassing this wealth was to prepare for the second coming of Christ, and that this is a stockpile that is going to be necessary for the future.
This is backed up in what the Church leaders have said over the years — that they are preparing for the future.
CB: If this goes forward, what laws are the Church potentially violating and what might it be on the hook for?
DM: There's no easy answer to what the IRS will do here or whether they actually would proceed with an audit. But the tax expert we spoke to said there are legitimate concerns here.
This is a fund that is claiming to be tax exempt under the terms of a 501(c)(3) organization that is supposed to be doing some kind of good in the world in exchange for this tax-exempt status. If the IRS looks at this and decides that the fund is not meeting that obligation, it could revoke the tax-exempt status and could potentially seek back taxes on income.
But potentially going forward, revoking the tax exempt status of this fund would be a significant burden that it certainly hasn't had to deal with before.