A former employee of a $100 billion investment fund owned by The Church of Jesus Christ of Latter-day Saints has submitted a memorandum to the U.S. Senate Finance Committee and its subcommittee on taxation and IRS oversight about the operations of the Salt Lake City-based Ensign Peak Advisors Inc.

The 90-page memorandum obtained by ReligionUnplugged.com and embedded in this story “summarizes evidence of false statements, systematic accounting fraud, private inurement violations of the Internal Revenue Code and other federal statutes and a ‘Klein conspiracy’ by Ensign Peak Advisors, Inc. (‘EPA’) and others.”

David A. Nielsen, a former employee at EPA, says in the filing that the new memorandum contains more information than the document he submitted to the IRS Whistleblower Office in November of 2019 that was a “placeholder” submission and was given to ReligionUnplugged.com and other outlets by Nielsen’s twin brother, Lars Nielsen, in the fall of 2019. The new document updates, reframes and renews allegations about Ensign Peak Advisors and the Latter-day Saints church.

“For at least 22 years, EPA and certain senior executives have perpetrated an unlawful scheme that relies on willfully and materially false statements to the IRS and the SEC, so this for-profit, securities investment business that unfairly competes with large hedge funds can masquerade as a tax-exempt, charitable organization,” the memorandum says. “EPA’s senior managers for years have regularly permitted large assets to simply “disappear” from EPA’s books and have failed to apply basic internal controls to themselves.”

ReligionUnplugged.com reporters sent emails and made phone calls to Nielsen and his lawyers as well as to members and staff of the U.S. Senate Committee on Finance to ask about the status of the memorandum and a schedule for any possible hearings in Washington.

According to lead counsel for Mr. Nielsen, Michael A. Sullivan of Finch McCranie, LLP, the team representing Mr. Nielsen includes a former senior official of the SEC, more than one former federal criminal prosecutor, a former IRS Criminal Investigative Division agent, another former IRS official, and an international tax lawyer, all with decades of experience.

ReligionUnplugged.com reporters also made similar calls and sent emails to leaders of Ensign Peak Advisors and to the media relations office of The Church of Jesus Christ of Latter-day Saints in Salt Lake City.

“The church along with our investment manager, Ensign Peak Advisors, have only recently been made aware of allegations brought forward by a former Ensign Peak employee,” said Doug Andersen, a church spokesman. “We have not seen the actual document in question; however, it appears they are dated allegations. We are always willing to work with government regulators to resolve concerns and are committed to full compliance.”

Nielsen’s document claims the EPA firm was involved in a “Klein conspiracy” to “subvert the lawful functioning of the IRS, through EPA’s false and fraudulent statements in SEC and IRS filings, and other corrupt actions intended to conceal EPA’s billions of dollars of income obtained through EPA’s $100 billion for-profit investment business – income on which EPA should have paid tax.”

New accusations in the memo

The new document alleges several new violations by EPA and its leaders.

• Foreign accounts: “EPA now admits having foreign accounts, after denying it under oath for 10+ years: Mr. Nielsen’s prior submissions demonstrated that EPA has falsely denied under oath each year since at least 2007 that EPA has long had foreign bank and investment accounts, estimated to exceed $9 billion — and thus EPA is liable for FBAR (Report of Foreign Bank and Financial Accounts) penalties of more than $2 billion. Now, EPA has finally admitted in a recently published Form 990-T filing in November 2020 (for 2019) that EPA does have foreign bank and investment accounts.” Nielsen’s document argues that EPA should be liable for more than $2 billion in penalties.

•  Deceptive statements: Nielsen’s document states that EPA was deceptive in describing its assets to regulators even after the stories broke in 2019 and the firm came under national scrutiny. “EPA has always had billions in assets since its formation in 1997. The deception began in 2007 with the false statement of EPA’s having only ‘$1,000,000’ in assets,” says Nielsen’s document. “In the 2019 filing, EPA continued to withhold that required information from the IRS, and to repeat the annual, false and deceptive statement, ‘OVER 1,000,000.’“

• Fraudulent SEC filings: Nielsen’s document says EPA disguised its massive investment business by making filings with the SEC of Form 13F in the names of various LLCs more than 260 times over 10+ years, rather than in EPA’s own name. “Upon learning of Mr. Nielsen’s IRS submission in December 2019, EPA abruptly began filing in its own name as required. EPA’s change in approach is an admission by conduct that its more than 260 fraudulent SEC filings were improper and were acts in furtherance of a Klein conspiracy to defraud the IRS, by concealing its massive securities investment business,” the document reads.

• Tax avoidance: Nielsen’s document claims EPA has not disputed his original allegations that 1) EPA engaged in no “religious, charitable or … educational” activities in the entire relevant period, 1997-2019, and 2) “EPA’s only distributions over 22 years were for the for-profit operations of an insurance company and a luxury shopping mall. This was approximately $2 billion to fund classic ‘private’ interests.”

An expose resurfacing from 2019

A series of stories by ReligionUnplugged.com in December of 2019 revealed a whistleblower complaint filed with the Internal Revenue Service that alleged The Church of Jesus Christ of Latter-day Saints funneled member tithes into EPA, a nonprofit supporting organization controlled by the church, and amassed more than $100 billion in owned assets under management over 23 years. The complaint alleged that EPA, a nonprofit registered as a 501(c)3 and a 509(a)3 supporting organization, did not make charitable distributions but that it did send $2 billion to help two for-profit companies.

If EPA were a hedge fund, it would rank among the top five hedge funds for assets under management. Its holdings dwarf those of endowments at any university, such as Stanford, Harvard or Yale. The financial acumen of the church and its members, often referred to as “Mormons,” is a significant attribute of a distinctly American religious minority that recently celebrated its bicentennial — a 200-year history that includes persecution, resilience and ambition.

The 2019 stories in ReligionUnplugged.com and other outlets rocked both the investment world and the religion world, gaining hundreds of thousands of page views as readers were intrigued by the revelation of previously hidden church finances. More than 150 other stories followed in other media outlets. The whistleblower complaint and related YouTube videos were also hot topics by Mormon and ex-Mormon communities on social media.

For the original stories in December of 2019, ReligionUnplugged.com received awards from Religion News Association and The Society for Advancing Business Editing and Writing and was a finalist for an EPPY Award for best business reporting from Editor & Publisher. Although the stories broke in 2019, the continued coverage and fallout was included among the top 25 religion stories of 2020 by the Religion News Association.

EPA started filing a quarterly 13F form on Feb. 14, 2020, with the Securities and Exchange Commission, which regulates publicly traded companies and other financial firms. Its initial filing revealed EPA had $38 billion in stocks and mutual funds at the end of 2019, including $1.5 billion in Apple and Microsoft. The firm had nearly $1 billion worth of shares in Amazon and Google’s parent company, Alphabet, as well. The filings do not include all the church’s financial holdings, such as bonds, and the church isn’t required to disclose its holdings in property or private companies. The SEC requires any institutional investor with more than $100 million in assets to file a 13F.

“It wouldn’t completely shock me if the reporting kickstarted the disclosure,” said Sam Brunson, a law professor specializing in tax law at Loyola University of Chicago and a practicing Latter-day Saint.  

Along with the quarterly SEC filings, EPA appears to be more recognizable as an institutional investor in public companies now. It shows up increasingly in reports and press releases from those publicly traded companies. Some companies like to show when large and established institutional investors are taking positions in their company, considering that a vote of confidence in the company. And those companies might consider it an honor when a morally and financially scrutinizing investor such as EPA buys shares. 

Penske Automotive Group, for example, released its quarterly earnings on Nov. 21, 2020, and noted in its press release that, among institutional and hedge fund investors, Ensign Peak Advisors increased its stake in Penske by 2,651% and now owns 181,578 shares of Penske’s stock, valued at $7 million. SEC filings and online finance sites show that EPA still has large stock ownership positions totaling billions of dollars in major companies such as Apple Inc., Microsoft Corp., Amazon.com Inc. and Alphabet Inc.

A prominent former Latter-day Saint, James Huntsman, filed a federal lawsuit against the church, seeking to regain more than $5 million in tithing he gave the church over 25 years. Huntsman, who owns the film distribution company Blue Fox Entertainment, is the son of the late billionaire Jon Huntsman Sr. and brother of former Utah governor and U.S. Presidential candidate Jon Huntsman Jr. 

“Mr. Huntsman seeks to recover his tithing funds that were fraudulently obtained by the LDS Corporation,” the lawsuit stated. It said Huntsman would donate the money to groups he viewed as marginalized by the church’s teaching. such as LGBTQ, African American and women’s rights groups. “Unlike the Corporation, Mr. Huntsman is confident that these charities will actually use his donations for their intended purposes.”

Huntsman’s lawsuit was thrown out in September of 2021. But he filed an appeal in February of 2022 to the 9th U.S. Circuit Court of Appeals. A judge could issue a ruling any day in that appellate case.

Leaders of EPA declined to comment in the original stories at ReligionUnplugged.com. They also did not respond to a request to comment this week for this update story. After the stories broke in 2019, the church published a statement to its members and constituents worldwide and posted three short videos to YouTube. 

“We take seriously the responsibility to care for the tithes and donations received from members,” the church statement said. “The vast majority of these funds are used immediately to meet the needs of the growing Church including more meetinghouses, temples, education, humanitarian work and missionary efforts throughout the world. Over many years, a portion is methodically safeguarded through wise financial management and the building of a prudent reserve for the future.”

The Wall Street Journal, which didn’t cover the story until February 2020, made a unique contribution by visiting Salt Lake City and interviewing leaders of EPA and the church who confirmed the previous reporting of ReligionUnplugged and the Post. It noted that the whistleblower report and media reporting on it “heaped pressure on the church to be more transparent about its finances, something the church has avoided for decades.”

The Journal reported that employees of the firm sign lifetime confidentiality agreements and most current employees were no longer told the assets under management figures for the firm. The Ensign Peak Advisors office is located above a food court in Salt Lake City and doesn’t appear in the list of companies at that building lobby.

The head of EPA, Roger Clarke, indicated to the Journal that EPA is a “rainy-day account to be used in difficult economic times.” Some church leaders suggested the fund could be used in the event of an economic or financial crisis. Other former employees said the firm’s war chest related to preparation for the second coming of Jesus Christ. Clarke told the Journal, “We don’t have any idea whether financial assets will have any value at all” during a second coming. 

An insider turned whistleblower

David Nielsen explains in his new document to the Senate Finance Committee that he was a lifelong member of The Church of Jesus Christ of Latter-day Saints, a person whose family was part of the church since the mid-1800s, who graduated from Brigham Young University and who served as a missionary for the church for two years in Brazil.

Nielsen was also someone who had experience on Wall Street, working at a major New York hedge fund for five years and obtaining an MBA at UCLA before EPA recruited him in 2010 as an investment portfolio manager. Staff members at EPA needed to be in good standing with the church to work at the investment firm in downtown Salt Lake City.  

The document says Nielsen left a “financially lucrative career” to work for EPA because he believed it was a worthy cause and organization. “Although Mr. Nielsen could have earned significantly more working for a traditional hedge fund, Mr. Nielsen accepted EPA’s offer because he believed at that time that EPA actually supported the Church’s religious and charitable activities,” the document states.

Nielsen notes that EPA was operated by people with similarly impressive backgrounds in finance, including advanced degrees from institutions such as Stanford University and experience at hedge fund and Wall Street firms such as Credit Suisse and UBS.

The document states in several places that Nielsen became more disillusioned over time as he worked at the firm and believed EPA was not using its resources for charitable, educational or religious purposes.

“When Mr. Nielsen became aware that EPA served no charitable or religious purpose, and that EPA’s management led to assets “going missing” within EPA, he attempted to correct these problems,” the document says. As he grew disillusioned with leadership, the document says he eventually resigned on Aug. 29, 2019, and filed a document to the IRS Whistleblower Office in November of 2019. This new memorandum to the U.S. Senate clarifies and follows up on his complaint about EPA.

“In criminal conduct, EPA has engaged in a Klein conspiracy to defraud the IRS by pretending to be tax-exempt while concealing and falsifying the facts of its massive securities investment business,” the document states.

Whistleblower’s call to Senate to act

Nielsen’s document notes the media attention to the original IRS whistleblower document generated great interest from the public. And he suggested Congress and regulators have a duty to act upon the disclosures.

“Ordinary taxpayers now see that, while they are expected to honor the tax laws, a double standard in enforcement exists with respect to a wealthy and politically-connected organization such as EPA,” says the document from Mr. Nielsen. “If the IRS and DOJ do not hold EPA and its management accountable, this case will erode respect for the tax laws and criminal statutes by every American and every other entity required to pay taxes. That result also would encourage fraudulent claims of exempt status and weaken tax administration within the tax-exempt sector generally, and within non-exempt religious organizations in particular.”

In the document, he estimates that his former employer has evaded payments of more than $20 billion in taxes and concealed foreign accounts that should total $2 billion in penalties.

In the document, he argues that holding EPA accountable will promote better compliance by religious and other nonprofits with tax laws and will “discourage fraudulent attempts by other organizations tempted to abuse exempt status.”

His document argues that EPA’s tax avoidance gave it a “distinct competitive advantage over other investment firms.” The document alleges the firm’s cash-rich position and secretive, stable status made it a preferred investor in private equity institutions.

“EPA did not need cash from its investments to pay tax, private equity funds could rely upon EPA to leave their investments intact for the long term,” the document said.

His document alleges that during its 22-year period, the EPA firm was never audited by independent auditors and had no audit committee. The document said it also had no nonexecutive directors or a board to which EPA had to report. He wrote that it avoided having a compliance officer between 1997 and 2015.

Nielsen’s document says that If EPA is not held accountable, “this case will undermine confidence among ordinary citizens that our tax laws are enforced even-handedly when wealthy, influential organizations are involved. That result would also encourage fraudulent claims of exempt status within the tax-exempt sector generally, and by non-exempt religious organizations in particular.”

Note: ReligionUnplugged.com will update this story with responses from relevant parties.

Paul Glader is executive editor of ReligionUnplugged.com and a professor of journalism at The King’s College NYC. He has reported from dozens of countries for outlets ranging from The Wall Street Journal, The Washington Post, Der Spiegel Online and others. He’s on Twitter @PaulGlader.