A federal lawsuit filed on Tuesday alleges that the investment arm of The Church of Jesus Christ of Latter-day Saints misappropriated hundreds of thousands of dollars donated by three men by investing the funds instead of using them for charitable purposes as promised.
The legal action increases scrutiny of how the religion commonly known as the Mormon church manages its enormous financial holdings, which are bolstered by members’ 10% “tithing” contributions. The church does not make its financial information public.
This new lawsuit filed in U.S. District Court in Salt Lake City against the church’s business and investment entities is similar to one filed in federal court in California by James Huntsman, brother of former Utah governor Jon Huntsman, Jr., which recently won a partial victory on appeal and remains pending. That lawsuit seeks the return of $5 million he donated before he departed the church.
The U.S. Securities and Exchange Commission fined the church and Ensign Peak $5 million in February for using shell companies to conceal the extent of the church’s investment portfolio. Ensign Peak will pay $4 million, while the church will pay $1 million.
Church officials didn’t immediately respond for comment on the lawsuit.
The church has previously defended how it handles member contributions, dismissing Huntsman’s claims as unfounded and asserting that contributions are used for a variety of religious purposes, including missionary work, education, humanitarian causes, and the construction of churches, temples, and other structures essential to church operations.
In both disputes, the question at hand is whether the church’s investments in stocks, bonds, real estate, and agriculture reflect the donors’ wishes.
The church’s corporate entity, the Corporation of the President of the Church of Jesus Christ of Latter-day Saints, solicits donations for humanitarian relief with the assurance that all contributions will be used to aid those in need. The latest litigation, however, asserts that these claims are false.
Instead, the church allegedly concealed the fact that some or all donations are perpetually invested in accounts that are never used for charitable purposes. This includes tithes, which are regular contributions of 10% of a person’s income expected from church members. The money instead went to Ensign Peak Advisors, a nonprofit founded in 1997 that has grown to be worth more than $100 billion, according to the lawsuit.
The complaint is filed by Daniel Chappell, of Virginia, and Masen Christensen and John Oaks, both of Utah. They claim that they have contributed approximately $350,000 to the church over the past decade. Their lawsuit seeks class-action certification, which could involve millions of church members, and an independent body to supervise the collection and use of church donations.
As with the lawsuit brought by Huntsman, the lawsuit filed by the three men is based on allegations made by whistleblower David Nielsen, a former Ensign Peak investment manager who this year submitted a 90-page memorandum demanding oversight of the church’s finances.
In its 26-year existence, Ensign Peak has only spent money twice, according to both lawsuits. Ensign Peak bailed out a failing church-owned, for-profit life insurance corporation in 2009 with $600 million. Between 2010 and 2014, $1.4 billion was invested to construct a multiplex near Temple Square in downtown Salt Lake City.
In Huntsman’s case, a judge ruled in favor of the church, but the U.S. Ninth Circuit Court of Appeals disagreed in part and sent the case back to district court for further proceedings in August. The church has petitioned the appeals court for a rehearing, arguing that the church president had explained that the initiative would be funded by investment earnings and not tithes.
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