A federal judge has dismissed a lawsuit alleging that the investment arm of The Church of Jesus Christ of Latter-day Saints misused donor contributions by investing them instead of using them for charitable purposes. The ruling was based on the expiration of the three-year statute of limitations on fraud claims in Utah, and the plaintiffs’ failure to demonstrate how fraud occurred. The lawsuit, filed in October 2023, reignited scrutiny over the financial practices of the church, which is widely known as the Mormon church and benefits from tithing contributions of 10% of income from its members.
The lawsuit targeted the church’s business and investment entities, which do not publicly disclose financial details. The plaintiffs’ attorneys sought to have an independent entity oversee the donated funds and attempted to gain class-action certification, which could have involved millions of church members. A spokesperson for the church emphasized that tithing donations are managed under the direction of senior church leaders and are used to fulfill the church’s mission. The court dismissed the legal claims against the church, and the plaintiffs’ attorney was unavailable for comment.
A similar lawsuit was filed in California in 2021 by James Huntsman, who sought the return of $5 million he donated before leaving the church. Earlier in 2023, the 9th U.S. Circuit Court of Appeals upheld a ruling in favor of the church. Both lawsuits questioned whether the church’s investments align with donors’ intentions. The U.S. Securities and Exchange Commission fined the church and Ensign Peak Advisers $5 million for using shell companies to obscure the size of its investment portfolio, with the church and Ensign Peak agreeing to pay $1 million and $4 million respectively.
The church has consistently defended its handling of member contributions, describing the fraud allegations as unfounded. It asserts that contributions support various religious purposes, including missionary work, education, humanitarian efforts, and the construction of religious buildings. The lawsuit contended that the church concealed information about donations being permanently invested in accounts rather than used charitably.
Whistleblower David Nielsen, a former investment manager at Ensign Peak, alleged financial misconduct in a memorandum to the U.S. Senate Finance Committee, which gained media attention in 2019 and 2020. The Utah plaintiffs were deemed aware of these allegations by early 2020 but failed to file their case within the statute of limitations. Ensign Peak has reportedly spent funds only twice in its history: $600 million in 2009 to rescue a church-owned insurance company, and $1.4 billion from 2010-2014 to build a mall near Temple Square.
The Bottom Line
The dismissal of this lawsuit may have significant implications for the church’s financial practices and transparency. For church members, this decision reinforces the structure of financial management within the organization, emphasizing the control exercised by senior leaders over contributions. This may impact the trust and confidence of donors, who might seek more transparency regarding how their contributions are used.
For communities and industries involved in religious and charitable activities, the ruling highlights the ongoing legal and ethical debates surrounding the management of substantial financial holdings by religious organizations. It underscores the challenges of balancing spiritual missions with financial responsibilities, potentially prompting other religious or charitable entities to reevaluate their financial practices and transparency to avoid similar legal scrutiny.
