Sunday night, 60 Minutes aired a 13-minute segment on Ensign Peak Advisors. And honestly, if you’ve been following the story closely (I have!), there’s not a lot of new information here.
But not a lot isn’t no new information. And, in any event, the piece featured David Nielson, the whistleblower from 2019, speaking publicly for the first time, as well as Bishop Waddell, First Counselor in the Presiding Bishopric representing the church’s point of view. (It also featured an interview with Phil Hackney, a law professor at Pitt and, full disclosure, a friend, colleague, and coauthor of mine.)
I’m not going to give a full rundown of the piece. I’ve written about the tax and securities issues previously. And anyway, at 13 minutes (half that if you watch it at 2x speed!), watching it isn’t a heavy lift. Instead, I’m going to highlight a couple things that I found interesting and important.
Beneficial Life
In 2019, Nielson wrote that the church had “silently bail[ed] out Beneficial Financial Group … to the tune of $600 million[.]” It had “paid $1.4 billion … to shore up cost over-runs … in the construction of the opulent City Creek Mall[.]” And beyond those two things, it had “distributed 0% of its assets in each of the other 16 years since it was hastily incorporated[.]”
Early in the 60 Minutes segment, Nielson says, “Like, I’m not an expert on charities. But I’ve been around the block enough to know that charitable organizations can’t bail out for-profit businesses and maintain their charitable status.”
And he’s right, kind of. That is, once you donate money to a tax-exempt organization, that money can’t just be transferred to a for-profit organization. Rather, it has to stay in the tax-exempt world.
Sometimes a tax-exempt organization stops operating and shuts down. When it does that, its remaining assets have to go to other tax-exempt organizations; it can’t just distribute them to individuals or for-profit organizations. And sometimes a tax-exempt organization decides to transform into a for-profit entity (think especially nonprofit hospitals, which often enjoy huge amounts of revenue). Without getting too deep in the weeds, this generally involves the nonprofit selling its assets to the for-profit. But then, the nonprofit has to distribute the sales proceeds to other charitable organizations.
But that doesn’t mean that a tax-exempt organization can’t ever give money to a non-exempt person or organizations. My employer is a tax-exempt, nonprofit university. But it pays me a salary. And it’s not just that it pays me a salary: it pays, for instance, Microsoft, a very for-profit corporation, for the right to use Office 365.
And it’s not just that: tax-exempt organizations can invest in for-profit entities. And honestly, that take City Creek off of the board in terms of potential wrongdoing. In his interview, Waddell is clear on this, explaining that “[t]he mall was not a bailout. The mall was an investment.” There is absolutely no question that the church can make investments.
But what about the payment to Beneficial Life, the one Nielson originally alleged represented a silent bailout? Well, Waddell also characterizes it that way: “The church actually owned Beneficial Life. And fortunately, the church had the resources to bail out Beneficial Life during the financial crisis, 2008,. 2009.” He goes on to say that most of that money has been repaid.
Honestly, it depends on what Waddell means by a “bailout.” If it had been a capital contribution, there would likely be no problem (especially as a wholly-owned subsidiary—if there were other noncontributing shareholders, that could present a problem). If it were a loan, it would probably be fine. The IRS has acknowledged that tax-exempt organizations can make loans (though there may be tax consequences to the receipt or non-receipt of interest under certain circumstances). But if it’s just a transfer of money to a for-profit organization, it’s not permissible, as Hackney points out.
Phil and I are attorneys. As such, we appreciate—and strive for—specificity in language. But here, the language of “bail-outs” doesn’t provide that kind of specificity. I suspect, based on Waddell’s statement, that this was a loan from EPA to Beneficial Life. But he’s not careful with his language and, without more information, I can’t be certain.
And this leads us to my second thought:
Bishop Waddell
Look, there’s no nice way to put this: Waddell went in unprepared and did a terrible job. It’s not just him characterizing the transfer from EPA to Beneficial Life as a bailout. At one point, the interviewer asks Waddell about the idea that “secrecy builds mistrust.” He replies, “We don’t believe it’s being secret. We believe it’s being confidential.” She proceeds to ask the logical follow-up question: what’s the difference between secret and confidential. And he’s stumped.
The thing is, this isn’t any kind of gotcha question. He posited a meaningful difference between the two words, but had no explanation of what that difference entailed. Which, to me, suggests that he went into the interview either unprepared or, at least, underprepared.
Frankly, as a practicing member of the church, I’m not shocked. I’ve been to too many Stake Conferences where a visiting General Authority gives a 40-minute talk that is clearly extemporaneous and unprepared. And almost inevitably, it’s terrible, rambling, and pointless.
And that’s not unexpected. Most of us aren’t good at speaking without preparation. And honestly, we’re nice people and we don’t boo them.
But this idea that they can speak off-the-cuff, without significant preparation, comes back to bite them when they’re not talking to an audience that won’t call them on it.
I don’t litigate, but I know litigators. And litigators who argue in front of the Supreme Court inevitably moot their argument beforehand. That is, they get a number of their colleagues to play the part of Justices and ask them hard questions. They do that both to try to determine what kinds of questions the Justices will have and practice their responses. (Heck, whenever I get an email from a journalist, I spend at least half an hour or an hour refreshing myself about whatever topic they’re asking about.)
All of the 60 Minutes questions could easily have been anticipated. Waddell could have prepared. But, for whatever reason, he chose not to.
That’s not the only thing, though: right after I watched it, a friend messaged me about the piece. My friend, who is not a member of the church but is, frankly, tremendously friendly to the church, wrote, among other things, that he came across as “[p]atronizing, know-it-all, mildly creepy.”
In short, he was unprepared for inevitable questions. He came across poorly. And he seems to have lacked understanding about the transactions he was there to talk about. That kind of lack of preparation isn’t ideal for Stake Conference talks. But it’s far worse for communications with people who aren’t inclined to give our spokespeople the benefit of the doubt in all things.
Nielson Undercut His Assertion
Finally, Nielson’s big argument that EPA had violated its tax-exempt status is that it had never used its assets for charitable purposes.
Waddell disagreed—he said that the church takes money out of EPA 8 or 9 times a month.
And the thing is, Nielson agreed with that assertion! But, he said, “Money’s going in and out of the cash accounts all the time. But Ensign Peak’s funds were never used for any charitable purpose, to my knowledge, the whole time I was there.”
There are a couple things to unpack here. First, I have to admit I don’t have any idea what Nielson means by “cash accounts.” I looked it up on the SEC’s website: a cash account is a brokerage account that doesn’t let you buy securities using borrowed money. That’s clearly not what Nielson is talking about. (Also, for tax reasons, tax-exempt organizations don’t borrow money to make investments.)
Nielson does give a metaphorical example of what he means: he compares this cash account to a checking account, as opposed to the body of the investments, which is like a savings account. But that really doesn’t do anything to help his assertion. I have savings and checking accounts, too. I pay for stuff out of my checking account. But when I need more cash there, I transfer it from my savings account. And when I have more than I need in my checking account, I transfer it to my savings account.
In fact, for purposes of allowing the church to use the invested money charitably, it’s necessary to have an account filled with cash. EPA generally isn’t going to distribute securities to the church; in most situations, it will sell the securities and distribute cash.
And that’s the thing: if making charitable distributions is a requirement for an integrated auxiliary like EPA (and I would argue that, whether or not it should be, under current law it is not), if money is going out of EPA accounts to the church “all the time” (again, Nielson’s words), then that money is, in fact, being used for charitable purposes. Which undercuts his big argument for why EPA violated its tax exemption.
Final Thoughts
I’m not trying to impugn Nielson’s or Waddell’s good intentions here. I have no doubt Nielson legitimately feels like EPA violated tax law (and he’s right that it violated securities law). And I have no doubt Waddell believes that the church acted appropriately. But neither of them manages to make a strong case for their view. And that’s my takeaway from Sunday’s 60 Minutes.
For Further Reading
Plenty of other people have written about this too. On RNS, Jana Riess wrote about six things that we might now know about the church’s wealth.
Over on the Nonprofit Law Prof Blog, my coblogger and friend Darryll Jones wrote what I find to be a remarkably (and unsurprisingly) fair and thoughtful reaction to the segment.
The Salt Lake Tribune believed that Nielson came off well, while the church didn’t. (To be fair, while Nielson undercut his allegation, he did come across as measured and confident.)
The church issued a press release saying it was “unfortunate ‘60 Minutes’ sought to elevate a story based on unfounded allegations by a former employee who has a different view on how the Church should manage its resources.” (I have to confess I have little patience for this kind of after-the-fact press release; 60 Minutes gave the church a full opportunity to respond and explain its side of the story. It’s not the show’s fault that the church flubbed its response.)
Image by National Museum of American History Smithsonian Institution. CC BY-NC 2.0