Lawyers for The Church of Jesus Christ of Latter-day Saints fought Friday to fend off what one called “a broadscale attack” on the Utah-based faith’s constitutional right to govern their own financial affairs.
In the first public airing for a would-be class-action lawsuit over tithing, church attorneys tried to convince federal Judge Robert J. Shelby that the legal doctrine of religious autonomy should bar the suit accusing church leaders of fraud over soliciting donations for charitable causes and investing those funds in a then-hidden reserve account.
Nine plaintiffs from six states are suing the global faith in a case springing from an IRS whistleblower’s 2019 allegations that the church’s investment arm, Ensign Peak Advisors, amassed a $100 billion-plus portfolio built from tithing while not spending a penny of it on the faith’s religious efforts.
They argued Friday this is a secular case of fraud involving billions of dollars accumulated over two decades, one that hinges instead on deception, not faith.
Tasked with deciding a church motion to toss out the federal case in its infancy, Shelby peppered lawyers on both sides Friday with questions that revealed fault lines in their arguments.
His ruling is expected later.
‘No way for secular courts to mediate this’
As part of nearly three hours of back-and-forth, Paul Clement, a former U.S. solicitor general and a prominent religious-freedom attorney arguing for the church, told Shelby that because the tithing was seen as a sacred obligation, probing the plaintiffs’ fraud assertions would mean delving into issues of faith and belief that the First Amendment declares off-limits.
Clement argued that faiths could be liable for fraud in cases of embezzlement or when funds were solicited for specific causes — helping, for example, victims of the Los Angeles wildfires — and then used those funds for other purposes, like buying a pastor new clothes.
But fraud claims over tithing, Clement continued, are necessarily out of bounds because they would involve parsing personal motives for giving that are rooted in spirituality as well as what commandments from God or statements from religious leaders on which the donors may have relied.
“There is no way for secular courts to mediate this dispute,” he said. The plaintiffs, Clement argued, are seeking to interject themselves into the church’s financial decisions in a clear violation of legal protections.
Shelby pushed back, challenging whether Utah’s predominant religion was seeking to expand the church autonomy doctrine and questioning the notion of creating “a safe harbor” in U.S. law from all fraud allegations for anyone who invokes religion and labels any cash in question as “tithing.”
“You don’t escape fraud liability,” the judge said, “just by creating a church.”
Clement countered that cases involving tithing do indeed merit a safe harbor from judicial probing. “That,” he said, “is the price we have to pay to have freedom of religion and keeping secular courts out of faith.”
The lawyer said some of the remedies the plaintiffs are seeking in the case — a freeze to all tithing while the court appoints a special monitor over the funds — also would violate the U.S. Constitution.
Church attorneys insist the plaintiffs have failed to state a complete fraud claim in their lawsuit — and that they missed a three-year window for filing their case after the whistleblower’s allegations. In a separate motion, they challenge any basis for certifying a class action of plaintiffs.
At one point, Clement warned that courts risked sparking “a great schism” within the faith by approving a class, saying it could drive a wedge between future plaintiffs joining the class and faithful Latter-day Saints who want no part of it.
‘We know that is false’
Christopher Seeger, a New Jersey attorney representing the plaintiffs, argued the church collected tithing and other philanthropic gifts with promises that the money was “always used” on charity and church needs.
“We know that is false,” Seeger said.
He pointed to nearly $122 billion the church had built up in investment returns at Ensign Peak at one point without devoting any funds to charity over two decades, while at the same time the faith spent $1.4 billion from the reserve account on its City Creek Center development in downtown Salt Lake City and to prop up a church insurance company, Beneficial Life.
Plaintiffs have labeled the church practices “hoarding” and called Ensign Peak “a slush fund.”
Seeger and other attorneys also cited a 2023 settlement with the U.S. Securities and Exchange Commission that levied $4 million in penalties against Ensign Peak and $1 million against the church for failing to properly disclose past stock holdings and going to “great lengths,” regulators said, to deliberately “obscure” the size and scale of its investment portfolio.
Officials with the church and Ensign Peak made no mention of church autonomy when they signed the SEC settlement, Seeger noted. What’s more, he pointed to statements by the head of Ensign Peak saying church officials sought to hide the size of the account for fear that some Latter-day Saints would stop donating.
These occurrences all support assertions of fraud and misrepresentation, the lawyer added, without entangling matters of faith for proof.
“This is a secular case,” Seeger said. “This can be decided by the courts.”
Hoarding vs. ‘prudent investment’
At one point, Shelby questioned whether the plaintiffs had identified actual false statements by church officials in their complaint. He also challenged whether they had adequately argued specifics on how individual plaintiffs were misled.
Because some tithing funds might have been invested, the judge said, “doesn’t mean they are not being used for the purpose they were raised.”
Clement said that plaintiffs seemed to be trying to second-guess the church solely on the timing of its spending.
And in its briefs, the church has stated that putting surplus donations in Ensign Peak has been part of a “prudent investment” strategy to advance the church’s long-range mission, with mentions of its temple-building blitz and “ever-growing” philanthropic efforts as examples.
Seeger noted church statements that the contributions were used “immediately” and “100%” for charity. Meanwhile, he noted, the church hadn’t spent out of Ensign Peak for charitable purchases since it was created two decades ago.
He said, “We don’t see that happening anytime soon.”
