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Whistleblower Says Mormon Church Abuses Its Tax Exempt Status

NOEL KING, HOST:

The Church of Jesus Christ of Latter-day Saints, whose members are known as Mormons, is facing allegations of financial fraud. A former investment manager for the church has filed a complaint with the IRS. He says the institution holds and misuses charitable contributions, close to $100 billion.

Lee Hale is reporting on this story from member station KUER in Salt Lake City. Good morning, Lee.

LEE HALE, BYLINE: Good morning.

KING: Before we get into the specific allegations, this is a big deal because donations are very important to this church, right?

HALE: Yeah. I mean, the Church of Jesus Christ of Latter-day Saints, like most churches - or a lot of churches, I should say - asks for 10% of all income of their members be paid in tithing. The interesting thing is that while they use most of that money for facilities, missions, humanitarian work, what's left over, they invest. And that's where David Nielsen comes in.

KING: OK. So who is David Nielsen, and what is he alleging?

HALE: So he's the whistleblower who filed the complaint to the IRS. And he's a former employee of the church's nonprofit investment arm that's called Ensign Peak Advisors. And he says Ensign Peak would receive about $1 billion of excess tithing a year. And over time, and through some clearly successful investment strategy, they ended up with $100 billion.

The church has not confirmed that figure. They don't have to by law. But Nielsen argues that Ensign Peak, this investment arm, they're out of compliance with their tax-exempt status because they receive this tithing money, they invest it, and they haven't made any charitable donations from that money. They have no charitable contributions. And so instead, they've used it to bail out for-profit companies the church also owns.

KING: How are Mormons reacting to these allegations about misuse of money that they've donated?

HALE: Yeah. When it comes to, like, tithe-paying members of the church, I think most of them will likely agree with church leadership. And the official response from the church has been that the vast majority of tithing is used for the purpose of helping - meeting the needs of the church. And the church leaders have also said that the claims being circulated are based on narrow perspective and limited information. They've even defended their right to invest the money, invoking the Parable of the Talents, saying it's the sound doctrinal and financial principle taught by Jesus in the New Testament.

Other members of the church have had a different reaction. They've referred to this as hoarding, and they're really upset that this 100 billion from investments isn't being used in religious or humanitarian efforts.

KING: What is the Parable of the Talents that you mentioned there?

HALE: Basically, Jesus is instructing these disciples to go and basically magnify what they've been given, you know, to kind of grow what they've been given and basically that this is an example of them growing the money they've received.

KING: Investing, yeah. OK.

HALE: Investing.

KING: Now if these claims do turn out to be true, what are the consequences for the church, potentially?

HALE: Well, I spoke with law professor Sam Brunson at Loyola University in Chicago, who's an expert on this kind of stuff. And he says if the whistleblower is correct, that no money has gone to charity, then this investment arm of the church risks losing its tax-exempt status.

KING: Wow.

HALE: But importantly, he says that the church itself is not at risk.

KING: The church itself is not at risk. Why?

HALE: Well, because they have this separate investment arm, which caused the problem, but it's also going to shield them from potential fallout.

KING: Lee Hale with member station KUER, thanks so much for your reporting.

HALE: Thank you. Transcript provided by NPR, Copyright NPR.