Concealment of assets, shell companies, and $32 billion in assets. All the trappings of significant tax fraud, but the responsible party in this scheme is a church.
In 1997, the Church of Jesus Christ of Latter-Day Saints founded a non-profit investment company to manage its investments. The company, Ensign Peak Advisors, Inc., managed church investments with an initial book of $7 billion in assets. According to the Securities and Exchange Commission (SEC), the investment portfolio grew to $32 billion by 2018.
As the investments grew, Ensign Peak was required to file Form 13F on the holdings. Form 13F must be filed by all institutional managers on a quarterly basis to detail security holdings. According to the SEC, Form 13F was instituted in order to increase “investor confidence” in U.S. securities markets. The threshold amount for Form 13F is $100,000 in aggregate across all investments. Between 1997 and year-end 2019, Ensign Peak did not file Form 13F documentation as required.
The SEC reports that the Church was worried that reports of its largesse could “lead to negative consequences.” Ensign Peak operates at the behest and approval of The First Presidency of the Church, which is comprised of the President of the Church and two counselors. With their authorization, Ensign Peak created 13 shell companies located throughout the U.S. in order to disguise the full value of the investment portfolio managed by Ensign Peak.
As we routinely discuss, shell companies are a tool by which money can be skirted around the world in relative anonymity. A shell company may exist only to hold the assets of an entity and works to obscure ownership of the assets it holds. Shell companies feature prominently in offshore tax evasion—and in this case—the efforts of a church to disguise its investments.
Using the shell companies, church-employed designees signed required filings stating the shell company had authority and control of the shell company. This allowed the church and Ensign Peak to hide the true amount of investments and the authority directing those investments for years.
In February, the SEC fined the church $1 million and Ensign Peak $4 million for a total fine of $5 million for their financial behavior. The church and its investment group agreed to the fine without admitting wrongdoing.
As empty as they are, shell companies can be powerful. If you have questions about assets invested in shell companies, speak with an experienced tax attorney.
Concerned about offshore tax compliance? Speak with our tax legal group today
Serving local and international clients from offices in Chicago and Cleveland, the legal team at Robert J. Fedor, Esq., LLC delivers strategic representation and guidance with compliance questions, tax litigation, or criminal tax defense. Call 800-579-0997 or contact us online today.
