A self-described whistleblower, whose December 2019 complaint to the IRS set off a firestorm of debate about how The Church of Jesus Christ of Latter-day Saints stashes and spends tens of billions of dollars, is now taking his fraud allegations to the U.S. Senate.
In a 90-page document submitted to the Senate Finance Committee and its Subcommittee on Taxes and IRS Oversight, David A. Nielsen shares what he says is “evidence of false statements, systematic accounting fraud” and violations of tax laws and other federal statutes by Ensign Peak Advisors, the Utah-based faith’s investment arm.
On Thursday, Religion Unplugged obtained and posted a copy of Nielsen’s new document, which, it reported, “reframes and renews allegations about Ensign Peak Advisors and the…church” while also making new accusations.
In his Jan. 31 memorandum submitted to the Senate panel, Nielsen, himself a former fund manager with EPA, asserts the Salt Lake City-based investment firm used deception and false books, records and statements “to masquerade as tax-exempt, even though EPA failed to engage in any charitable activities for 22 years.”
“[I]t is clear that EPA has never been tax-exempt,” he wrote to the committee. “As a result, EPA improperly has reaped billions in untaxed income that should have been taxed” and is “thus liable to the [U.S.] Treasury for billions in unpaid tax and penalties.”
Nielsen, who has not responded to inquiries from The Salt Lake Tribune, asserts that his former employer has dodged more than $20 billion in taxes as well as another $2 billion in fines for what he says amount to criminal violations of U.S. tax and securities laws.
The whistleblower also explains why he is calling on the Senate to investigate, arguing that the committee’s failure to do so would be a disservice to law-abiding taxpayers.
“Ordinary taxpayers now see that, while they are expected to honor the tax laws,” Nielsen states in the document, “a double standard in enforcement exists with respect to a wealthy and politically connected organization such as EPA.
“If the IRS and [Department of Justice] 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,” Nielsen adds. “That result also would encourage fraudulent claims of exempt status and weaken tax administration within the tax-exempt sector generally, and within nonexempt religious organizations in particular.”
In response to a Tribune request for comment Thursday, church spokesperson Doug Andersen said that church leaders and EPA “have only recently been made aware of allegations brought forward by a former Ensign Peak employee. We have not seen the actual documents in question; however, it appears they are dated allegations.”
Andersen added: “We are always willing to work with government regulators to resolve concerns and are committed to full compliance.”
Nielsen’s Atlanta-based attorneys, who reportedly helped him prepare and submit the memo, did not respond to email or voice messages seeking comment.
(Christopher Cherrington | The Salt Lake Tribune)
The new allegations
Among Nielsen’s new accusations in his Senate filing against EPA:
• It frequently “deleted” assets from its accounting system over the course of a decade and deceptively continued the practice even after Nielsen brought it to the attention of senior managers.
• It lacked internal controls on those managers and their handling of cash and engaged in a “sham” audit at one point. All that left the firm susceptible to financial malfeasance, he says, while also offering “strong evidence” of accounting fraud and the possibility that EPA officials benefited privately from their actions.
• It told portfolio managers that it was hiding its ownership of nearly $32 billion in investments by filing reports with federal regulators — more than 260 times — under the names of a series of limited liability corporations instead of its own. EPA’s chief information officer later acknowledged using the ruse because the firm wanted “to avoid ‘attention’ that would be ‘potentially damaging.’”
• It made false statements “and other nondisclosures” to the IRS to conceal its “vast business enterprise” — including its ownership and authority over a series of foreign accounts valued in the billions.
• Its actions, taken in total, amount to criminal violations, including fraud, conspiracy, perjury and tax evasion.
About the initial IRS complaint
Despite being among the world’s largest investment funds, Ensign Peak Advisors functioned largely unseen until late 2019, when Nielsen first alleged to the IRS that the Utah firm had amassed a $100 billion reserve portfolio using church donations intended for — but never spent on — charity in violation of tax laws.
While making no charitable contributions from its coffers for 22 years, Nielsen asserted in his IRS complaint, EPA spent $2 billion to benefit “private interests” — namely, two church-owned commercial enterprises, the upscale City Creek Center shopping mall in downtown Salt Lake City and the insurance company Beneficial Life.
Latter-day Saint leaders rejected the accusations, stating in a news release, that the church “complies with all applicable law governing our donations, investments, taxes and reserves.” They also insisted that money for the commercial ventures came from “earnings on invested reserve funds,” rather than the tithing donations themselves.
Church officials also have said the “rainy day” reserves are intended to help pay for operations in poorer parts of the world and to see the nearly 17 million-member faith through economic downturns.
“I don’t think David Nielsen will be able to retire on the reward from this case,” Forbes contributor Peter J. Reilly wrote days after the whistleblower complaint surfaced. “That’s because there is not much of a case. … Ensign is not a private foundation. It is an integrated auxiliary of a church. And there is nothing in the tax law that prevents churches from accumulating wealth.”
The IRS has taken no public action against the church since receiving the 2019 complaint.
Nielsen also submitted a sworn declaration in support of a federal lawsuit brought in March 2021 against the church by James Huntsman, prominent ex-Utahn and brother of former Utah Gov. Jon Huntsman.
In that case, James Huntsman, who has resigned his church membership, alleged senior church leaders engaged in fraud and deceptive statements on how it spent tithing from its members, while diverting $1.4 billion to City Creek and $600,000 to Beneficial.
Huntsman’s suit was dismissed by a federal judge in September 2021 and is now on appeal before the 9th U.S. Circuit Court of Appeals.
The latest memo says Nielsen subsequently updated his complaint with the IRS with additional information in March 2022 and that his original whistleblower filing was “a placeholder” in advance of lodging the fresh allegations in late January with the Senate committee.
Will the Senate act?
It is unclear whether the powerful Senate committee, including its chair, Sen. Ron Wyden, D-Ore., or its ranking minority member, Sen. Mike Crapo, R-Idaho, who is also a Latter-day Saint, will act on the whistleblower’s request.
Committee staffers did not respond Thursday to Tribune inquiries.
Nielsen’s Senate filing is “purely a publicity stunt,” tweeted Sam Brunson, a Latter-day Saint and a tax law professor at Loyola University Chicago. It has been sent to the committee, Brunson said, “but that’s meaningless, because there’s no formal submission policy.”
If it gets opened, “it’ll be ignored because this isn’t the kind of thing, frankly, that Senate Finance is going to be interested in,” the tax expert said, “and they’re under no obligation to do anything.”
Brunson said he doesn’t question Nielsen’s motives but instead wonders if the former money manager fully understands the intricacies of tax laws, especially for nonprofits.
”He reads terms with a normal colloquial meaning but they have a more technical meaning,” Brunson said in an interview. “Ensign Peak doesn’t seem to violate the technical terms, even if they seem inconsistent with the common connotation of the words.”
Nielsen’s memo emerges as the church also faces increased scrutiny over its finances and charitable giving in Canada and Australia.
Follow @religiongal