LDS Church seeks to keep ‘extremely sensitive’ financial data under wraps in fight with James Huntsman

Former member says public has a right to know how tax-exempt groups spend donations as legal tussle continues at appellate court.

(Rick Egan | Tribune file photo) The Church of Jesus Christ of Latter-day Saints' Administration Building on South Temple in Salt Lake City. The Utah-based faith is trying to keep financial documents sealed in its legal fight with James Huntsman.

James Huntsman wants the public to know some of the financial secrets that he says led a California court last fall to reject his accusations of fraud against The Church of Jesus Christ of Latter-day Saints.

With the prominent former Utahn’s headline-grabbing lawsuit over millions of dollars in tithing now before the 9th U.S. Circuit Court of Appeals, he is seeking to unseal information filed under wraps by church attorneys last year as they sought to disprove his allegations that top Latter-day Saint leaders misled members about how that money was spent.

The San Diego-area resident and son of the late Utah industrialist-philanthropist Jon Huntsman Sr. asserts in a new legal brief that it appeared from the church’s redactions to documents filed with the U.S. District Court in Los Angeles “that its primary concern here is concealing the amount of money that it has.”

The sealed information in question doesn’t reveal “propriety trade secrets or corporate strategy,” Huntsman’s attorneys noted. Instead, the documents “merely purport to show the source of funds used to develop the City Creek mall,” the upscale shopping center in downtown Salt Lake City, and that information, they wrote, should be public.

“What we have here is a tax-exempt organization that claims it did not mislead the public as to how it used its tax-exempt funds,” Huntsman’s Los Angeles-based lawyers stated, “and yet is fighting hard to prevent the public from seeing how it actually used those funds.

“...It is patently unfair for the church, on the one hand, to publicly accuse Mr. Huntsman of making ‘unfounded’ allegations, while on the other hand, refusing to disclose the very documents that purport to refute Mr. Huntsman’s allegations,” the March 4 appellate brief asserts.

Attorneys for the Utah-based faith counter that Huntsman’s arguments are legally flawed as they battle to keep the disclosures away from public eyes.

In a response filed Monday, L.A.-based church lawyers said Huntsman is trying to undo a previous legal agreement to keep the “extremely sensitive information” under seal as the federal judge reviewed the case. They refer to this latest move to open up the church’s financials “highly suspect” and “a clear bait-and-switch tactic.”

“The only reasonable conclusion is that Mr. Huntsman impermissibly seeks to ‘promote public scandal’ through the publication of the church’s confidential financial materials in an effort to cause irreparable harm to the church,” they wrote. “... The real injustice would be to remove the seal on the church’s confidential financial materials simply because Mr. Huntsman disagrees with the district court’s ruling.”

It is unclear when the 9th Circuit might rule in the documents dispute.

How the legal fight began

James Huntsman has appealed his tithing dispute to the 9th U.S. Circuit Court of Appeals.

The high-profile case emerged in March 2021, when Huntsman sued his former faith, alleging that then-church President Gordon B. Hinckley and other senior Latter-day Saint authorities misrepresented how regular donations from members were spent.

Devout Latter-day Saints among the church’s 16.6 million members worldwide pay a tenth of their yearly income in tithing.

Huntsman alleged that while top leaders repeatedly told him and other members otherwise, they diverted up to $2 billion in tithing money to two private church-owned businesses, including City Creek and Beneficial Life Insurance Co.

The owner of a Los Angeles film distribution company called Blue Fox Entertainment, Huntsman sought to recover at least $5 million in his own tithing, interest and penalties, after failed negotiations to settle the matter out of court. He resigned his church membership in 2020.

His case has drawn heavily on separate allegations made by whistleblower David Nielsen, a former top portfolio manager at Ensign Peak Advisors, an investment arm of the church.

In December 2019, Nielsen filed a complaint with the IRS accusing church officials of amassing a $100 billion reserve fund meant for — but never spent on — charity in potential violation of tax laws. Nielsen also provided a sworn statement in support of Huntsman’s case, citing personal knowledge that funds in the Ensign account were all referred to as tithing.

Nielsen’s whistleblower case also put numbers to assertions about the size of church reserves and aired allegations it had diverted $1.4 billion to City Creek Center and another $600 million to Beneficial Life while its leaders assured members that tithing wasn’t used.

Partly relying on sealed documents filed in the case to detail a series of transactions behind the spending, the church successfully countered in federal court that the money in question came from investment earnings on tithing, not from tithing itself.

The church has called the reserves a “rainy day” fund to help pay, in part, for operations in impoverished parts of the world and to safeguard against the effects of future economic downturns.

Subsequent public filings have revealed Ensign Peak held more than $52 billion at the end of 2021 in a diversified portfolio of 2,100-plus separate stocks and mutual funds, including multibillion-dollar stakes in technology giants such as Apple and Microsoft.

U.S. District Judge Stephen Wilson tossed out Huntsman’s suit in September, saying that no reasonable jury would believe his assertions that church leaders had misrepresented how tithing funds would be used.

Huntsman appealed that ruling last month.

Does the public need to know?

(Trent Nelson | The Salt Lake Tribune) Funding for City Creek Center, shown in August 2021, is at the center of a legal dispute between James Huntsman and The Church of Jesus Christ of Latter-day Saints.

As an appellate court, the 9th Circuit does not consider arguments raised for a first time, church lawyers stated, and because Huntsman did not resist sensitive documents being sealed from public view during review by the lower court, he has waived that right on appeal.

Church officials have never claimed the sealed materials hold trade secrets, but court filings show they have sworn the documents contain “confidential information that provide undue insight into strategic decisions.”

Huntsman, they argue, “fails to articulate why the public interest outweighs the church’s compelling reasons to maintain the seal.”

Huntsman, through his attorneys, said the 9th Circuit instead has “a strong presumption in favor of public access to documents” and that the public has a “legitimate” interest in how tax-exempt organizations use their money.

His legal brief cites testimony from a congressional Joint Committee on Taxation in January 2000 to support the public’s interest in tax-exempt groups complying with federal tax laws.

The church’s lawyers counter that the committee’s statement “is not law and has no binding effect” — and does not address unsealing confidential financial materials belonging to a church.

Both sides offer differing views of the First Amendment and its bearing in the dispute. Church attorneys argue it gives religious organizations special rights beyond those of private corporations to keep their financial books closed, should they so choose. Moreover, they note, Wilson reviewed the materials and found no fraud occurred.

Huntsman’s lawyers cite legal precedent that the First Amendment does not protect fraudulent activity performed in the name of religion.

“Because the very financial information that the church seeks to keep under seal is the very same financial information that the church claims exonerates it of the alleged fraud,” his lawyers assert, “it cannot hide behind the First Amendment.”

Editor’s note • This story is available to Salt Lake Tribune subscribers only. Thank you for supporting local journalism. In addition, James Huntsman is a brother of Paul Huntsman, chairman of the nonprofit Salt Lake Tribune’s board of directors.