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Who Named the United States?

Mormons and money: An unorthodox and messy history of church finances

There was something fishy about this $3 bill.
Everett Historical/Shutterstock.com

John Turner, George Mason University

The Church of Jesus Christ of Latter-day Saints has allegedly amassed US$100 billion in purportedly charitable assets since 1997 without ever giving any money away – a possible breach of federal tax laws.

This estimate of the size of its investment vehicle known as Ensign Peak Advisors became public knowledge when David A. Nielsen, a former employee and a member of the church, blew the whistle.

Together with his twin brother Lars, a former church member, Nielsen gave the Internal Revenue Service evidence he claims proves the church mishandled funds.

According to the Nielsens, Ensign Peak Advisors has invested the church’s annual surplus member contributions to build up a $100 billion portfolio. But the Nielsens say they could find no evidence that Ensign Peak Advisors spent a dime of this money for religious, charitable, educational or other “public” purposes as IRS rules require under most circumstances. They also allege that it diverted tax-exempt funds to finance some for-profit projects, which could also violate IRS rules banning such transactions in some situations.

If the IRS determines that the investment fund failed to act as a charity even though it benefited from tax breaks, it might find that Ensign Peak Advisors broke tax laws. If that happens, and the IRS collects back taxes, David Nielsen could receive a cut as a reward.

If the numbers are accurate, Ensign is the nation’s largest charitable endowment, with as much money as Harvard University and the Bill and Melinda Gates Foundation have at their disposal, combined, if not more.

Church leaders deny that they have violated any laws that regulate tax-exempt institutions. The church “complies with all applicable law governing our donations, investments, taxes and reserves,” said the three-member council headed by church president Russell M. Nelson.

From my vantage point as a historian of Mormonism, this news marks a new twist on an old story. For nearly two centuries, the church has conducted its finances in ways that defy the expectations Americans have for religious organizations.

Lars Nielsen, brother of whistleblower David Nielsen, explains how Ensign Peak Advisors allegedly operates.

A church-owned ‘anti-bank’

Consider what happened in the summer of 1837, when the fledgling church teetered on the brink of collapse.

At the time, Joseph Smith and many church members lived in Kirtland, a small town in northeastern Ohio. The Smith family had moved there in the early 1830s, seeking a safer gathering place for church members in the face of persecution in New York state.

Joseph Smith’s followers built this temple in Kirtland, Ohio before most of them moved westward.
Library of Congress

Smith and his followers began building a temple in Kirtland. The Saints dedicated their temple in 1836, but the project left Smith and others deep in debt. Like many communities in antebellum America, Mormon Kirtland was land-rich and cash-poor. A lack of hard currency hampered commerce.

Smith and his associates decided to start their own bank to solve their financial woes. The circulation of bank notes, they thought, would boost Kirtland’s economic prospects and make it easier for church leaders to satisfy their creditors.

Lots of currency

The idea of Mormon leaders printing their own money wasn’t as crazy as it sounds in 2019. The United States still lacked a uniform currency. A host of institutions of varying integrity – chartered banks, unchartered banks, other businesses and even counterfeiting rings – issued notes whose acceptance depended on the confidence of citizens who might accept or refuse them.

Mormon leaders bought engraving plates for printing bank notes and asked the Ohio state legislature to charter their bank. The Mormon proposal went nowhere in the legislature.

Joseph Smith: Latter-day Saints movement founder and, for a time, currency creator.
AP Photo/Douglas C. Pizac

At this point, church leaders took a more fateful and dubious step.

They had collected money from investors and had already begun printing notes of the “Kirtland Safety Society Bank.” Instead of shutting down the operation when the charter failed to come through, they doubled down. Worried about the legal risk of running an unchartered bank, church leaders altered the notes to read “anti-Banking-Co.”

A brief boom

For a while, all went well. “Kirtland bills are as safe as gold,” one church member wrote in January 1837. The town enjoyed a short-lived boom.

Soon, however, the anti-bank proved anything but safe. Non-Mormons questioned the society’s ability to redeem its notes, and church leaders could not keep it afloat. The Kirtland Safety Society’s struggles were not unusual. Scores of banks, including some of the nation’s largest, failed in what became the Panic of 1837. Real estate speculators lost their fortunes, and workers lost their jobs.

What made Kirtland different was the bank’s ownership. Many church members lost not only confidence in the society’s banknotes, but faith in the prophet who had signed them.

The crisis divided the church. At one point that summer, church members wielding pistols and bowie knives fought with each other in the temple. Smith and one of his top associates were convicted of issuing banknotes without a charter and fined $1,000 each. They soon fled the courts and their creditors, taking refuge with fellow church members in Missouri.

After anti-Mormon mobs forced the Latter-day Saints out of Missouri and then Illinois, Smith’s successor, Brigham Young, led thousands of church members to what became the Utah Territory.

From a railroad to a shopping mall

The church has never stopped blending commerce and religion.

In the late 1860s, Mormons built the Utah Central Railroad, which connected Salt Lake City with Ogden – a stop along the transcontinental railroad. Church leaders controlled the railway until 1878, when Union Pacific bought it.

Beginning in 1868, the church also operated the Zion’s Cooperative Mercantile Institution, a department store designed to put the squeeze on non-Mormon businesses.

The church sold the store in 1999, but in many ways its commercial interests have become more grandiose since its frontier days of railroading and retailing.

In 2003, the church’s for-profit real estate division purchased the land on which the store had stood. Nine years later, the estimated $1.5 billion City Creek Center development opened to the public, including a glitzy mall.

The Mormon Church’s commercial real estate arm built the lavish City Creek Center shopping mall in Salt Lake City.
AP Photo/Rick Bowmer

At the time, church officials asserted that they had not used any tithing money on the City Creek project. The church explains that tithing – the contribution of 10% of its 16 million members’ annual income – is for the construction and maintenance of church buildings, local congregational activities and the church’s educational programs. The church’s for-profit divisions handle commercial projects, including real estate and publishing.

The Nielsen brothers allege that Ensign Peak Advisors diverted $1.4 billion in tithing funds to pay for the development, a possible violation of the IRS rules that govern tax-exempt institutions.

It is impossible to confirm the accusation without greater transparency on the part of the church, which has told Religion Unplugged, a nonprofit media outlet, that it “does not provide information about specific transactions or financial decisions.”

According to Samuel Brunson, a tax law professor, the church was more open about its ledger sheet and business arrangements during the first half of the 20th century.

Then, in the mid- to late 1950s, it lost approximately $10 million in municipal bond investments. The resulting embarrassment was one factor in the church’s decision to become less forthcoming about its finances.

In this respect, the church is not unique. U.S. laws do not require churches to disclose their financial information in much detail. While some churches do so voluntarily, others – including the Catholic Church – keep their financial and commercial interests shrouded from public view.

Saving for a ‘rainy decade’

It remains to be seen whether Ensign Peak Advisors is going to become the subject of IRS investigations.

There are, of course, ethical and moral questions in addition to legal ones. For example, should the church amass so much money? And might the church use more of its excess funds and investment gains for humanitarian purposes or to make the tuition at church-owned Brigham Young University even more affordable?

What’s also at stake is confidence in the church’s leaders. Sen. Mitt Romney, the Republican Party’s 2012 presidential nominee and the nation’s most politically influential Mormon, professed to be “happy that they’ve not only saved for a rainy day, but for a rainy decade.”

Romney’s perspective makes some historical sense, given that the most obvious problem in Kirtland, Ohio, was that Joseph Smith’s financial stewardship was decidedly unwise. At least today’s church leaders earn good returns on their investments.

[ Deep knowledge, daily. Sign up for The Conversation’s newsletter. ]The Conversation

John Turner, Professor of American Religion, George Mason University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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The Spanish American War

The USA & UK as Allies

History of Hawaii Before the USA

Japanese-American Internment Camps

The American Founders made sure the president could never suspend Congress

The signing of the U.S. Constitution.
Architect of the Capitol

Eliga Gould, University of New Hampshire

The British monarch has the right to determine when Parliament is in session – or, more to the point, when it is not.

Breaking with longstanding tradition, and possibly with the United Kingdom’s unwritten constitution, new Prime Minister Boris Johnson asked Queen Elizabeth II to suspend, or “prorogue,” the national legislature for five weeks starting on Sept. 9, or shortly after. She agreed.

Freed from having to take pesky questions in the House of Commons, Johnson claims he will be able to concentrate on getting a better deal for Britain as it prepares to leave the European Union on Oct. 31. Many British lawmakers, including some in Johnson’s own party, are furious and fighting back. But if the ploy succeeds, it will be one of the longest parliamentary suspensions since the British last cut off their monarch’s head.

Given the similarities between the U.S. and U.K. political systems and the personal parallels – and affection – between Johnson and U.S. President Donald Trump, Americans might wonder whether the president has a similar power to suspend Congress.

The answer is a very clear no – thanks to the forethought, and strong historical knowledge, of the country’s Founders.

Johnson and Trump have similarities but differences too.
Erin Schaff, The New York Times, Pool

Breaking up, but still learning by example

On July 4, 1776, Congress severed all ties to Britain. The Declaration of Independence included a repudiation of George III, though Americans had initially admired him when he assumed the throne in 1760. They also rejected the monarchical form of government that King George embodied.

Initially admired: George III.
Allan Ramsay/Wikimedia Commons

Compared to other kingdoms in Europe, which were ruled by overbearing monarchs and aristocrats, the British monarchy was not that bad. In fact, the institution contained a number of features that Americans quite liked. One was the system of representative government. King George and his ministers could only enact laws, including laws that taxed the British people, with the consent of Parliament. The House of Commons, the legislature’s lower chamber, was an elective body, chosen in the 18th century by property-owning men – and occasionally property-owning women – in England, Scotland and Wales. Although Britain wasn’t a democracy, it wasn’t an absolute monarchy, and definitely not a dictatorship.

From the earliest days of English settlement, Americans held the legislative part of the British monarchy in high regard. They modeled their own colonial assemblies as far as possible on Parliament, especially the House of Commons. Each colony had a governor and a council, but the most important branch was the representative assembly. Only colonial assemblies could levy taxes, and all other laws required their approval as well.

After independence, the colonies became states. Americans, wrote David Ramsay of South Carolina in 1789, were now a “free people who collectively” had the right to rule themselves. If they were to have government based on “the consent of the governed,” as the Declaration proclaimed, they still needed legislatures, which needed to be as strong as possible. Parliament remained an example worth following.

Rejecting royalty

What Americans did not want was another king. The Founders admitted that even though the British monarchy had failed the colonists, it worked pretty well for the British, with the king’s ministers consulting Parliament on most matters of importance. But they knew that the “constitution” that required them to do so was an unwritten one based primarily in tradition, not legal statutes and documents.

A detail of a portrait of King Charles I, while his head was still attached.
Sir Anthony Van Dyck/Wikimedia Commons

They also knew that just over a century before, a different king, Charles I, had not been so accommodating. In 1629, when Parliament refused his request for taxes, Charles dissolved the legislature and governed as a personal monarch – not for five weeks, but for 11 years.

That didn’t go well for Parliament, the British people or the king. The civil war that ensued ended with Charles’ execution in 1649 on a balcony overlooking what is today Trafalgar Square. The crowd’s gasp as the axe severed his neck was a sound no one ever forgot. The kings and queens who followed him were mindful of it too. When Charles’s son, James II, suspended Parliament again, the British sent him packing, and gave the crown to William and Mary.

The lesson, however, was largely a matter of custom. During the 18th century, the king’s ministers knew how to get along with Parliament, but the law did not require them to. British monarchs still had enormous powers, and Parliament usually did what they wanted. Although it was Parliament, not George III, that sparked the American Revolution by taxing the colonists without their consent, Americans placed most of the blame on the king’s ministers, and on the king himself.

Protecting the legislature

When Americans started debating what sort of government they wanted for the United States, they knew they needed an executive with some of the vigor that they associated with a monarchy. What they had in mind, however, was different from the British crown. The monarch, as Alexander Hamilton wrote in the “Federalist” essays, was a “perpetual magistrate,” who had powers that were limited only by whatever rules he or she chose to observe.

The newly created role of U.S. president, by contrast, had clearly defined powers under the Constitution, as did Congress. Crucially, the power to summon or dismiss Congress belonged to the House of Representatives and the Senate, which together decided when to convene and when to adjourn. The position of president, in other words, was intentionally designed without the authority to reproduce the 11-year tyranny of King Charles – or the five-week suspension of Queen Elizabeth II and her current prime minister.The Conversation

Eliga Gould, Professor of History, University of New Hampshire

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Slavery Begins in America

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