Financial system similar to old Mormon practice is called money laundering in prosecution of polygamous Kingston Group members

Brigham Young’s “united order” sure didn’t look like the financial dealings spelled out in the latest indictment against executives of Washakie Renewable Energy.

The court document describes how $6.2 million flowed into — and then out of — Washakie in 2013. Eventually, $4.5 million of that money made its way back to the company, the indictment alleges, but only after passing through other businesses associated with the polygamous Davis County Cooperative Society, also known as the Kingston Group, as well as the sect’s incorporated church.

Prosecutors are calling the transactions money laundering, and the exchanges constitute five of the counts against brothers Jacob and Isaiah Kingston, Washakie’s chief officers.

The transactions, former sect members say, are also an example of how finances are held in the Kingston Group: Personal incomes or business revenues are immediately shared with church leaders or their designees.

“You found pennies on the ground, you had to turn them in,” said Melissa Ellis, who left the Kingston Group in 2012. Some of the money she deposited would be returned to her, Ellis said, but only if she could explain why she needed it.

The practice also might offer a defense against the money-laundering counts for the Kingston brothers and at least two co-defendants — Rachel Kingston, the men’s mother; and Sally Kingston, wife of Jacob Kingston.

The transactions weren’t an effort to legitimize money obtained in a fraud, the defendants might argue; they were a religious custom.

For people who follow the teachings of Mormon founder Joseph Smith, united orders began with a revelation he received in March 1832 to organize his flock’s publishing and mercantile endeavors. Latter-day Saint businesses in Ohio and Missouri, such as tanneries and printing presses, were then coordinated so they did commerce with one another first.

Historian D. Michael Quinn, who has written extensively on Mormon finances, said in an interview the system was meant to eliminate the differences “between the spiritual and the temporal,” emphasize that everything belonged to God and boost the Latter-day Saints financially. Smith abandoned the effort in 1834. His followers fled Missouri after violent conflicts with other settlers there, which also cost the church businesses and properties. Quinn said a united order no longer was viable.

Later in the century, in Utah, Smith’s successor, Brigham Young, instituted a reformed version of a united order in which he and other Latter-day Saints owned shares in companies such as the Zion's Cooperative Mercantile Institution, or ZCMI. Young’s successor, John Taylor, scuttled such united orders and let others wither.

“John Taylor,” Quinn said, “just didn’t like what we call, with a small ‘c,’ the communal, communist nature.”

The Davis County Cooperative Society was organized in Bountiful about 1935 by so-called fundamentalist Mormons who yearned for a return to what they viewed as Smith’s true teachings. Many of these fundamentalist movements of the 20th century prioritized polygamy, which the mainstream church officially abandoned in 1890. While the Kingston family members who founded the cooperative believed in polygamy, too, they placed their emphasis on creating a united order. The cooperative was even incorporated before Kingston Group members incorporated their church, called the Latter Day Church of Christ.

Today, many people in the sect refer to it as “The Order.” Kingston Group members own perhaps hundreds of businesses. While individuals might legally own the companies, the group’s leaders consider them “stewards,” said Ron Tucker, who used to work at a sect-controlled coal mine in central Utah.

At the mine, Tucker said, any investments or out-of-the-ordinary expenses had to be approved by the cooperative’s leader, Paul Kingston, the uncle of Jacob and Isaiah Kingston. Tucker said he and other high-ranking mine employees would have regular meetings with Paul Kingston.

“He always kept track of the amount of coal we mined,” said Tucker, who left the Kingston Group in 2001. “He wanted to control everything. And [for] every other business I ever heard about, he was the same way.”

Often the business owner reports to his or her father or another male relative who heads the family unit, Tucker said. The chain of command ends at Paul Kingston. Prosecutors have suggested that’s how it worked at Washakie.

In a court hearing Jan. 22, Richard M. Rolwing, a special assistant U.S. attorney, said the alleged fraud at Washakie was meant to benefit John Daniel Kingston, the father of Jacob and Isaiah and the husband of Rachel Kingston. Rolwing said John Daniel Kingston “has some amorphous stewardship over Washakie Renewable Energy.”

Neither John Daniel nor Paul Kingston has been charged with any crimes related to Washakie.

“If Jacob followed order protocol,” Tucker said, “he would have to tithe back to his father, Daniel. [Jacob] would have to have approval for everything he did. And it’s a sin to lie to the one above you, but it’s not a sin to lie to an outsider.”

Kent Johnson, a spokesman for the Davis County Cooperative Society, issued a statement on the money-laundering allegations.

“The Davis County Cooperative Society condemns in the strongest terms fraudulent business practices and stresses to members and nonmembers alike that this behavior is not in line with our beliefs or principles,” the statement said. “Business owners who are members of the Davis County Cooperative have the autonomy to make their own business decisions. Members are encouraged to conduct business in a fair and lawful manner through every facet of their activity.”

The four defendants, as well as another co-defendant, Lev Aslan Dermen, have pleaded not guilty to all the charges.

Defense attorneys declined to comment on the money-laundering counts. But, in legal briefs and courtroom arguments, they have criticized prosecutors’ depictions of Washakie as well as the financial transactions.

They have said the U.S. Department of Justice is relying on witnesses who themselves have been accused of misusing a government tax program meant to spur biofuel production.

A recent defense motion seeking to free Jacob Kingston on a $10 million bond pending trial, for example, accused prosecutors of not understanding how the tax credits for biofuel production work. The indictments say the four Kingstons forged papers to make it look like Washakie manufactured biofuel, when it was merely buying it elsewhere and then claiming a federal tax credit. The indictments make no mention of a united order.

When federal authorities raided offices connected with the Kingston Group in 2016, it appeared as though the entire sect could be a target. A search warrant executed in an office park in South Salt Lake drew the most attention, but recent court records reveal the FBI and the IRS also seized records from church offices, businesses and homes across the valley.

Ten such businesses as well as the cooperative and the Latter Day Church of Christ itself have filed motions in federal court in Salt Lake City arguing many of the records seized contain trade secrets, religious information or communication with attorneys that should not be shared with the five defendants. A judge ruled against the motion.

“They actually came in and searched the church,” said Samuel Alba, a former federal magistrate judge who is now in private practice and representing the businesses, “and we know for a fact that when they searched the church, they took Sunday school manuals that were being drafted. We don’t see any reason for taking that material.”

But the five indictments stemming from the raid have only been against defendants accused of crimes tied to Washakie. Alba said almost as soon as the search warrants were served, federal agents began segregating Washakie records from the other seized items.

Financial records disclosed in federal court have revealed other Washakie spending that prosecutors call money laundering, including $4.5 million on advertising during Utah Jazz games and a 2010 Bugatti Veyron — a French sports car with a sticker price upward of $1.7 million.

Prosecutors have filed notice they want to seize Washakie’s Box Elder County production plant and other equipment in Plymouth, saying Jacob and Isaiah Kingston used the proceeds of a $511 million fraud to develop the business. So far, there’s no indication the federal government wants the Kingston Group or other businesses to repay money it might have received from Washakie.