When the Securities and Exchange Commission fined the Church of Jesus Christ of Latter-day Saints and its investment manager $5 million in February 2023, the church issued a two-paragraph statement, paid, and carried on. No outside auditor arrived afterward. None could. The penalty covered a filing failure — thirteen shell companies had kept a portfolio in the tens of billions of dollars off Form 13F since the late 1990s — and the settlement order was the first time the public had seen the instrument panel of one of the largest religious endowments on earth. It will probably be the last.
That case is the exception that explains the rule. When a religious body in a constitutional democracy takes a financial hit — scandal, mismanagement, outright collapse — the response is shaped less by doctrine than by the legal instruments sitting underneath it: disclosure exemptions, bankruptcy courts, sovereign jurisdiction, statutory carve-outs, tax-collection statutes. The instruments decide the playbook. What follows is an audit of five of them.
The disclosure gap: what US churches never have to file
Most American tax-exempt organizations file a Form 990 each year, and the form is public. A donor to a soup kitchen can read the soup kitchen’s salaries. Churches do not file. The exemption sits in 26 U.S.C. § 6033, and it covers precisely the organizations with the largest intake: houses of worship and media ministries. A donor to a television ministry can read nothing at all.
Senator Charles Grassley’s Finance Committee inquiry into six media ministries, opened in 2007 and closed in January 2011, is the demonstration project. Kenneth Copeland, Creflo Dollar, Benny Hinn, and three others were asked for board minutes, compensation records, and expense policies. Most declined, or produced partial records; the committee issued no subpoenas. The final staff report described jets, unrecorded cash, and compensation without documentation. No penalty followed. None was available. The question of whether churches should file the 990 was then handed to the Evangelical Council for Financial Accountability, a self-regulatory body funded by the sector it regulates, whose commission concluded in 2011 that churches should remain exempt. The response to a disclosure failure was a commission that ratified the disclosure gap.
The exception in practice: Ensign Peak Advisors and the SEC order
The LDS case shows what happens when a regulator does hold jurisdiction. Ensign Peak Advisors, the church’s investment arm, managed the portfolio for two decades without filing the quarterly Form 13F required of large institutional investment managers. Instead it filed through thirteen limited liability companies, each under the reporting threshold on its own, so the aggregate position never appeared anywhere. A whistleblower’s 2019 IRS complaint had put the fund above $100 billion and accused leadership of hoarding it; the SEC’s order of February 2023 — the first outside document on the file — documented combined holdings in the tens of billions and assessed $4 million against Ensign Peak and $1 million against the church itself.
The First Presidency issued a brief statement expressing regret for the filing practice. Membership statistics registered no visible break. And the trust metric that actually mattered — whether anyone outside the organization can see the balance sheet — went unchanged. The securities filings cover the traded equities. The rest is voluntary. Read the order; it is the only window the public has been given.
Bankruptcy as a settlement instrument: the Catholic diocesan playbook
Portland went first, in July 2004. Spokane followed within months, Davenport the year after. More than two dozen American dioceses and eparchies have now used Chapter 11 to manage clergy-abuse liability; Baltimore became the first archdiocese in September 2023, and Rockville Centre — the Long Island diocese of roughly 1.4 million Catholics — filed in October 2020. The full pattern is catalogued in our diocesan bankruptcy trust audits.
Bankruptcy here is not distress. It is an instrument. Filing halts the civil suits, converts survivors into a creditors’ committee, and ends in a trust whose size is negotiated. San Diego settled in 2007 for about $198 million. Camden’s 2022 trust held $87.5 million for roughly 300 claimants. Milwaukee’s 2015 settlement paid about 570 survivors some $21 million, while a cemetery perpetual-care trust — funded with roughly $55 million the archdiocese had moved before filing — stayed outside the pool. The litigation over that trust went up to the Seventh Circuit and back. The money stayed put.
The paradox is the finding: the less a diocese discloses voluntarily, the more disclosure happens adversarially. A federal bankruptcy court is the only forum in which a Catholic diocese’s books are opened to parties who are not the diocese. Creditors’ committees have produced the nearest thing to an independent audit the American church has. Nobody designed them for that. They were what was available.
Sovereign adjudication: the Vatican tries its own cardinal
The Vatican’s instrument is jurisdiction itself. Banco Ambrosiano collapsed in 1982 with more than a billion dollars in bad loans on its books; the Vatican’s bank, the IOR, was its largest shareholder, and the bank’s chairman, Roberto Calvi, was found hanging under Blackfriars Bridge that June. Italian prosecutors indicted Archbishop Paul Marcinkus, the IOR’s president. He never faced them. He stayed inside Vatican walls until the warrants expired in 1991, then went home to Arizona, where he died in 2006 without ever testifying on the merits. The IOR, while denying legal liability, paid $250 million to Ambrosiano’s creditors in 1984 and kept its charter.
External pressure arrived only through instruments the Holy See accepted on paper. Council of Europe membership brought Moneyval’s evaluators in after 2011, and the first evaluation, in 2013, found the anti-money-laundering framework thin. Statutes followed. Thousands of IOR accounts were closed. The bank survived, reformed on its own terms.
The modern case is the London building. A Vatican tribunal sat from 2021 over the Secretariat of State’s purchase of a stake in 60 Sloane Avenue, a deal the prosecution said lost tens of millions of euros. The court sat in Vatican City, under Vatican procedure, before judges appointed through the same sovereign apparatus whose money was at issue. In December 2023 it convicted Cardinal Angelo Becciu, the Secretariat’s former chief of staff, and sentenced him to five and a half years.
One detail belongs in every account. That Peter’s Pence — the collection pitched to Catholics worldwide for the pope’s charities — had been used as collateral in the London transaction surfaced in the prosecution’s own filings. The scandal was disclosed by the prosecution, inside the forum the institution controls. Sovereignty did not prevent the loss. It decided who would narrate it.
Statutory shields: the ERISA church-plan exemption
ERISA, the 1974 statute that made private pensions enforceable, contains a carve-out: a plan maintained by a church is not an ERISA plan at all. No funding mandate. No PBGC insurance. The history and current reach of the carve-out are covered in our church-plan exemption audit; what matters here is how it behaved under scandal.
In the 2010s, employees of church-affiliated hospital systems — Dignity Health, Providence, Saint Peter’s among them — sued, arguing their pension plans had been re-designated “church plans” after the fact. The Third, Seventh, and Ninth Circuits agreed with the employees. The Supreme Court reversed all three in a single opinion, Advocate Health Care Networks v. Stapleton, decided 8–0 in June 2017: a plan maintained by a church-affiliated nonprofit qualifies for the exemption regardless of who originally established it. Roughly two dozen suits collapsed along with the citations.
The aftermath arrives years later, in a benefits office. Saint Peter’s Healthcare System had inherited a pension plan from the old Hospital Center at Orange; it terminated the plan in 2018. Retirees learned there was no PBGC guarantee behind the promised benefit, because the statute had said so all along. Under the operative law, no one defrauded anyone. The instrument converted the scandal into a non-event before it could occur.
The metered exit: Germany’s church tax as a trust gauge
Germany runs the one system in which individual trust is metered directly into institutional revenue. The church tax — 8 or 9 percent of one’s income-tax liability, collected by the state’s own tax offices — means a member’s departure is a bookkeeping event with a number attached. In 2022, 522,000 Catholics formally deregistered, the highest figure the German Bishops’ Conference had ever recorded, alongside roughly 380,000 Protestants. Catholic church-tax receipts run well above six billion euros a year. The statute and its collection machinery are dissected in our Kirchensteuer audit.
The Limburg affair tested the response in 2013. Bishop Franz-Peter Tebartz-van Elst’s residence renovation ran from an approved few million to €31 million. The Vatican sent a commission, suspended him, and accepted his resignation in March 2014. The personnel response was complete. The Vatican’s report on what Limburg actually spent was never published, and no German diocese opened its books.
In October 2023, Der Spiegel reported on an asset study the bishops’ conference had commissioned itself: roughly €96 billion in Catholic Church holdings in Germany, and a researchers’ figure approaching half a trillion euros once both major churches’ hospitals and welfare corporations were counted. The conference called the leaked draft preliminary and declined to publish it. The pattern holds — study commissioned, study shelved, tax machinery untouched — because in Germany the machinery is the only part that reports honestly. The exit counter tells the trust story. The institution’s own documents do not.
What the instruments predict
Across five jurisdictions, the response correlates with the instrument, not with theology. Where disclosure is optional, the first move is non-disclosure, and the gap gets defended by a commission. Where liability is uncapped, the move is Chapter 11, and the trust fund is sized by negotiation. Where adjudication can be internalized, it is internalized: the sovereign that lost the money appoints the court that reviews the loss. Where obligations can be shifted into exempt instruments, they are shifted years before anyone is looking, and the shift survives Supreme Court review. Where trust is metered by statute, the institution watches the number, and the honest metric is the exit counter.
The survey data runs parallel. Gallup’s long series had roughly two-thirds of Americans expressing confidence in organized religion in the mid-1970s; by 2022 the figure was in the low thirties. The land-use file — RLUIPA’s strict-scrutiny hook, property-tax exemptions that outlast congregations — deserves its own audit and gets one elsewhere on this site.
Public trust, in most of these systems, is not measured. It is inferred from membership rolls the institutions compile themselves and audit themselves. That asymmetry outlasts every scandal. The instruments are public. The trust data is not. When a religious body announces that trust has been restored, ask which ledger.
FAQ
Do churches in the United States have to disclose their finances?
No. Churches are exempt from the Form 990 filing requirement that binds other 501(c)(3) organizations under 26 U.S.C. § 6033. The 2007–2011 Senate Finance Committee inquiry into six media ministries documented what the exemption leaves invisible, and it closed without penalties.
How did the LDS Church respond to the SEC fine?
The church and Ensign Peak Advisors paid $5 million in February 2023 over the use of thirteen shell LLCs to avoid Form 13F filings between 1997 and 2019, issued a brief statement of regret, and announced no governance changes. No external audit followed, and none could be compelled.
Can a Catholic diocese use bankruptcy to limit what abuse survivors recover?
Yes. Chapter 11 converts pending tort suits into creditor claims and ends in a negotiated trust. Milwaukee’s 2015 settlement paid roughly 570 survivors about $21 million, while a pre-filing cemetery trust holding roughly $55 million stayed outside the pool.
What is the ERISA church-plan exemption?
A statutory carve-out (29 U.S.C. § 1002(33)) that exempts church-controlled pension plans from ERISA’s funding rules and PBGC insurance. In Advocate Health Care Networks v. Stapleton (2017), the Supreme Court held 8–0 that plans maintained by church-affiliated nonprofits qualify even where no church established them.
Does leaving a church in Germany reduce its income?
Directly. Formal deregistration (Kirchenaustritt) ends the church-tax obligation collected by state tax offices. The record 522,000 Catholic exits in 2022 are the most precise public-trust figure any major religious body currently produces.