Ensign Peak Advisors Inc., which oversees a $32 billion equities portfolio for the Church of Jesus Christ of Latter-day Saints, will pay $4 million to settle regulatory claims that the money manager obscured the church’s investment holdings.
The church will also pay a $1 million fine, the Securities and Exchange Commission said Tuesday. The money manager and the church settled the SEC’s investigation without admitting or denying wrongdoing.
The SEC’s investigation examined past efforts to keep the church’s giant investment portfolio a secret, a practice that ended after a former employee revealed in 2019 that the church had amassed a total of $100 billion of holdings, which includes other investments such as fixed-income securities, private companies or funds.
In a statement on its website, the church said: “Since 2000, Ensign Peak received and relied upon legal counsel regarding how to comply with its reporting obligations while attempting to maintain the privacy of the portfolio.” The SEC first expressed concerns about Ensign Peak’s reporting approach in June 2019, the statement said.
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“Ensign Peak and the Church have cooperated with the government over a period of time as we sought resolution,” the church said. “We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed.”
The SEC’s investigation focused on misleading filings that Ensign Peak submitted for almost 20 years, according to a settlement order. Investment managers with at least $100 million under management publicly report their stockholdings quarterly, on a form known as a 13F. These are closely watched by investors who track what big fund managers are doing with their money.
Instead of submitting the filings under Ensign Peak’s name, the church and Ensign Peak filed them under the name of 13 shell corporations with addresses located throughout the U.S., the SEC said.
The filings effectively hid the scale of the church’s wealth. In a 2020 interview, Roger Clarke, who at the time was Ensign Peak’s president, described the firm’s holdings as a rainy-day account to be used in difficult times.
Mr. Clarke said he believed church leaders were concerned that public knowledge of the fund’s wealth might discourage tithing, which is the requirement that church members give 10% of their income to the church. Other former Ensign Peak employees have said the church was concerned that members might view the firm’s holdings as endorsements and try to buy stocks the church owned.
The church was aware of Ensign Peak’s misleading disclosures, the SEC said. Church officials wanted to avoid disclosure of the amount and nature of their financial assets, the SEC found.
The SEC’s order explained the lengths to which the church and Ensign Peak went to cover their tracks. At first, in 2001, Ensign Peak used a single limited liability company under a different name to file disclosures with the SEC. That entity was assigned a location in Glendale, Calif., although Ensign Peak conducted no business there.
By 2005, as Ensign Peak’s holdings grew larger, the church approved the creation of a second shell company, located in Delaware, which made its own SEC filings and claimed to be managing the money, even though that authority remained with Ensign Peak. The SEC said the church did this out of concern the public might link the first shell company back to the church because the person signing its SEC forms was listed in a public directory as a church employee.
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Ensign Peak later added more shell companies, all of which had addresses outside of Utah, where the church has its headquarters, and given phone numbers that went straight to voice mail, according to the settlement order.
Ensign Peak chose church members with common names and little social-media presence to be the managers of the shell companies to reduce the chances they could be traced back to the church, the SEC said. The shell companies’ disclosure documents were generally filed with the SEC before they were signed by the people in charge of the shell companies, the SEC said.
The shell-company structure was first exposed publicly in May 2018 when a website called MormonLeaks published an article that connected the entities to the church, using website domain names that matched the names for each LLC and were registered to an entity managed by the church. The SEC’s order said that two business managers then resigned their roles, “voicing concerns about what they had been asked to do.”
The size of the church’s investment holdings first came to light in 2019, after a former Ensign Peak investment manager, David Nielsen, filed a whistleblower complaint with the Internal Revenue Service, claiming that Ensign Peak shouldn’t be treated as a tax-exempt charity because it didn’t engage in any charitable activities.
Ensign Peak continued to file SEC disclosures using the shell companies until February 2020, when it began filing a consolidated report under its own name.
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Mr. Nielsen’s complaint showed for the first time how big Ensign Peak had grown. At the time its $100 billion in assets were more than twice the size of the Harvard endowment and on par with some of the biggest sovereign-wealth funds in the world. “We’ve tried to be somewhat anonymous,” Mr. Clarke said. The firm operated out of a fourth-floor office, above a Salt Lake City food court.
Ensign Peak managed about $7 billion of church assets when it was formed in 1997, according to the SEC. Ensign Peak has made required disclosures under its own name since February 2020.