Corruption and the Future of the Church

Stephen C

•

Note: It looks like we’ve missed our monthly “cutting-edge research” installment, but I haven’t forgotten…there was just no peer-reviewed articles dealing primarily with the Church this month! Hopefully to be continued next month.

One of the more interesting studies in political science was the famous diplomat parking paper. In New York City and Washington DC one often sees vehicles with blue-plated tags that signal that its owner has diplomatic immunity. Among other things this means that they can basically park where they want and they don’t ever have to pay traffic tickets. Researchers measured how many traffic tickets each country’s diplomatic corps received and plotted it against various empirical measures of corruption, finding that they strongly correlated; if you live in a country that has been empirically scored as being corrupt you tend to incur a lot of traffic tickets that you have no intention of paying, whereas diplomats from less corrupt countries tend to obey parking rules even though they don’t have to. 

This provides evidence that some countries are more corruption-tolerant than others. Yes we have our issues too, but it’s a bit gaslighty to pretend that bribing the cop in Russia or Mali will be met with the same response as bribing the cop in, say, Sweden. (When my parents were on a mission in Russia they explained that in Russian culture you’re sort of a jerk if you don’t offer the police officer a bribe. The man has a family to feed after all, or as a member stated “they pay them enough for their bread, that is what they need to do for their butter.”) 

The fact is that different countries have different tolerances for different kinds of corruption, and there is a boatload of empirical evidence for this, not just the parking study. Perhaps the most well-known, established indicator of these differences is Transparency International’s Corruption Perceptions Index. 

So what does this have to do with the Church? 

The Church runs an extremely tight ship financially. No objective, honest appraisal of Church finances would conclude that it has a corruption or embezzlement problem; you have to really want to see it to see anything there. When the slush fund came to light I remember mentioning it to a person of another faith that has had its own share of bona fide financial scandals, and they were sincerely confused. It went something like this. 

“I thought I saw something about that. A leader stole money?”   

“No,” 

“So what’s the problem again?” 

“They’re saving a lot of money, and it’s a lot more money than people thought.” 

“?”

I don’t mean to be dismissive of people who are struggling with the Church’s finances, but let’s at least admit that it’s not in the same category as a traditional “financial scandal.”

So far the Church’s center of gravity has been in the United States, a sort of middle-tier country for corruptness. However, as I have mentioned many times, over the next century the demographic ballast of the Church (and other religions, and just about everything else because they are the only ones still producing families) will shift over to the developing world. So, all things being equal, if a judge, police officer, store clerk, or politician is more likely to take money from the till in Uganda, there is no reason to think that it would be any different for Church members or leaders in those same countries, and as the Church center of gravity moves from a place with middling corruption to places with higher corruption I suspect financial malfeasance is going to become more of an issue to get used to in the Church when it is simply not one right now. 

To be clear, I’m not making some essentialist statement about Africa or Africans and I’m going to push back hard on any accusations that I’m doing some sort of racial dog whistling. I’m making a statement about low corruption/high corruption countries. If the Church was growing fast in Russia we’d have issues with Church members and leaders in a high corruption context that happens to be white. It’s just that Africa is the intersection of a place where 1) the Church is growing, and 2) objectively speaking a lot of countries in that specific area of the world have significant corruption. Also, there is variation within Africa; presumably the Church is going to have more of these issues in a high corruption African country like the DRC and less in a low corruption African country like Botswana. Finally, plenty of white Mormons have stolen money (e.g. Joseph F. Smith accusing John Willard Young of embezzling Church funds during his time in New York City, and of course the issues during the Utah United Order attempts). 

Also, I’m not passing any kind of a cultural or institutional judgment. If the Swedes aren’t replacing themselves it doesn’t really matter how scrupulous their bank tellers are. They have their own issues, and this one variable shouldn’t be taken as some holistic grade for a society or people at large.

Comments

27 responses to “Corruption and the Future of the Church”

  1. Kent Gibb

    I have served as a mission accountant, (1965), Ward financial clerk a number of times and Stake financial clerk. I have to attest that the financial controls and audits are extremely tight. It would take a very skilled, determined and clever to manage to take any money from the church in those positions, especially today. On the Ward and Stake levels, the church runs a very tight ship and I feel we can be assured the finances are well monitored and free of corruption.

  2. Last Lemming

    Allow me to fix your explanation of the financial scandal.

    “So what’s the problem again?”

    “They’re saving a lot of money, and they tried to hide it from the membership by setting up a series of mafia-like shell corporations in violation of SEC rules. Then they got caught, exposed, and fined.”

    Sure, for some people, it’s about the amount. But for many of us, it is about the lying and cheating and the pretending that such behavior is not a big deal. I continued to pay tithing to the Church until the SEC report came out. Those days are now over.

  3. Stephen C

    Kent Gibb: I agree the rules are fairly solid (one difficulty the Church has in some of these countries is that they don’t pay the bribes that are necessary to get anything built), but I still think that if you had a couple people cooperating at particular choke points you could pull it off. Fast offerings, for example, seem like a route where you could have some plausible deniability for embezzlement.

    Last Lemming: I don’t want to turn this into a back and forth about the SEC business, but I kind of was asking for it by including my little aside, so sure: shell corporations are not mafia-like. A lot of people use them; I know very upstanding people who have been paid through shell corporations. I’m more sympathetic to the idea that the Church could have been more transparent (if for no other reason than it is clear that it would have come out eventually anyway), but “mafia-like” is being dramatic. Any large, complex corporation or institution occasionally runs into fines.

  4. A Turtle Named Mack

    Aside from whether people in countries with higher levels of corruption would be more willing to misappropriate Church funds, I wonder about how the Church (institutionally) will go about conducting business in these countries. If, as you suggest, the center of gravity shifts towards such countries, will the Church need to engage in dealings that are less-than above board to get things done? Will they provide bribes for building permits, or look the other way as contractors take their cut, or grease the wheels to gain access for missionary work? Will the expectations of leaders in these countries prevent the Church from expanding in those areas? I do think there are tight controls in place to mitigate fraud and corruption at the individual level. But systemic corruption is a different animal. I think about the (un)successful attempts to clean up Olympic and World Cup selection committees. Of course, aside from the moral issues, I don’t think the Church can afford to get into the bribing business. If they do it one time (assuming they haven’t, already), word will get out and it will be open season on an organization that now everyone knows has A LOT of money to spread around.

  5. Tom

    I’m less concerned that the Church broke the law and paid a small fine than that the Church has a hundred billion dollars stashed away while we have scores of homeless people in Salt Lake City. They say they’re saving it for a rainy day? For many people, it rains every day.

  6. REC911

    Maybe now that members pretty much have heard about the rather large “rainy day” fund, perhaps the church will spill the beans as to what this is for. It’s one thing to have tons of money sitting around but no plans for it is altogether another issue. 100+ temples in the pipe-line is taking a decent chunk but I hope they are not just spending $ on temples to make it look like we are not hoarding the $.

    I dont have a problem with the SEC deal as those reports we hid are to protect the investors in these managed funds. Church is the only investor in those funds. Spirit/letter thing here for me.

  7. ji

    I don’t know any details, but I did hear mention of a fast offering scandal in Tbilisi when I was there a while back.

    One of the ways the church avoids paying bribes or baksheesh in parts of the world where “facilitation payments” are standard procedure is by using local contractors or other intermediaries — the contractors get the job done, and the “facilitation payments” are not visible to church officials.

  8. RL

    Watch the Education sector and the March released Charitable Report releasing this month for what is getting focused on for spending. The endowment still isn’t large enough to sustain the Church in perpetuity but will likely get there in the next 20 years. Growth is starting to pick up overseas in developing nations. The Church growth rate will tick up closer to 2% for the year.

    On “corruption” there may be cases where money will be needed to keep Visas going or get things done. I get in general it shouldn’t be done but there might be cases it may be justified.

    I listened to an interesting podcast on how much more corrupt Israel has gotten with the influx of Russians. There are places like Russia or China or Israel where the Church is making accommodations it wouldn’t in other locations.

  9. D

    It definitely isn’t that they saved more than people thought, and for a lot of people, it isn’t even that they hid it from the SEC and the membership. It’s more like what Tom says. They have enough to literally end hunger and they just keep the money stashed away. They have people who don’t have enough to survive on giving 10% of their income when they have enough to cover all their expenses indefinitely (based on how much interest all their investments generate). The money they do spend on charity is a drop in the bucket compared to how much they have in their investments (and the numbers they report as charitable giving often include regular member’s and volunteer missionaries’ time. i.e. things that individuals give and cost the institution itself nothing) . I think that sums up most people’s issue with it.

  10. Jack

    Just to bring a little perspective to the debate: the average net worth of an American adult is a little over a million dollars. And so, going by that metric alone there shouldn’t be any hunger–not in the U.S. at least.

    That said, if the church were to divvy up its rainy day fund among all of its members it would amount to something like 5 or 6 thousand per individual–not a lot.

    So–yes–100 billion certainly seems like a lot of cash. But when we consider how large the church is in terms of its operations, properties, and welfare services, that amount would keep the church afloat for maybe a few months–that is, if it had to rely on its rainy day fund as its sole source of income.

    That said, I rejoice in the church’s prosperity. It opens the doors to all kinds of wondrous possibilities in the future–especially with regard to the church’s growth among the poor.

  11. Amira

    I have lived in two different countries in Africa for a total of five years so far, and I see hungry children at church every week. I see kids at church whose parents can’t afford to pay their school fees, so they’re not in school. I was a Relief Society president for some of that time, so I was painfully aware of the needs of those children that were not being met.

    I am far more concerned about church leaders (whether they are local or foreign—I’ve seen it both ways) underspending on essential assistance like food and schooling for families than about church leaders potentially embezzling funds. But you do you, and continue to blog about your perceived risks to the institutional church in this part of the world. For me, the future of the church is the children in our wards and branches, and food and education are essential for them.

    Also, diplomats don’t get diplomatic immunity for everything they do. Diplomats are certainly required to pay traffic tickets. It would have been more accurate for you to say that the study relied on the fact that diplomats used to be able park where they wanted and didn’t have to pay tickets, but that rule changed way back in 2002. It’s not helpful to assume that diplomats anywhere have a get-out-of-jail-free card, just like it’s not helpful to encourage the perception that church leaders who are from (no matter where they live) countries with higher levels of corruption are somehow more likely to not follow church guidelines surrounding money than people who are from countries with lower levels of corruption.

  12. Juan Reta

    But corruption does not only come from the possible misappropriation of financial resources or theft. It also occurs in construction and service contracts. I believe that no serious investigation has been done into the relationship between the contracted companies and budget allocations. In countries like Mexico, companies related to corporate leaders and their families are often favored. Nepotism is also another factor to consider.

  13. ji

    Amira, you raise a good point. In a ward or branch where members commonly attend while hungry, why not use church funds to provide some food on Sunday? After all, Jesus fed the multitude.

  14. Dsc

    “When the slush fund came to light….” It’s worth pointing out that the term “slush fund” is typically understood to mean a fund that exists specifically for illicit purposes. The Church does not have a slush fund—or at least not one that has come to light.

  15. Dsc

    Last Lemming, I’m not sure what mafiosos you hang out with, but typically mafia shell organizations exist to hide money from the government, which the Church most certainly didn’t do. We can disagree about the extent to which a church should be financially transparent to its members, but unless you’re willing to to compare every person who sets up an LLC to hold a vacation home or a charitable trust for philanthropic activity while naming the entity in a way that preserves anonymity to the mafia, I think we can steer well clear of that kind of hyperbolic rhetoric.

  16. RLD

    Corruption is really hard to fight once it’s normalized in a society. Most people are heavily influenced by what most people do. If they regularly see generally good people offering or accepting bribes, insisting those people are criminals is a tough sell.

    For a comedic take on it, watch Servant of the People. Zelenksy’s character (yes, that Zelensky) is elected President on an anti-corruption platform and spends most of the show fighting corrupt oligarchs, but at first his family is like “What do you mean we can’t take the free stuff people keep giving us?” They just don’t see the problem.

    I do Church audits, and yes, the controls are tight. But they depend on people. I will not be surprised if there are instances where local leaders in areas with higher levels of corruption need to be educated by high-level leaders about what the Church considers acceptable and what it does not. And that really shouldn’t be held against them.

    Which highlights that we in the US need to guard against our standards slipping. It should raise all sorts of red flags if a candidate were to suddenly flip their position on a major issue (say, cryptocurrency, to pick one at not-at-all random) after meeting with people who are invested in it and receiving large donations from them. Or if a politician were to let an oligarch play a major role in running the government in exchange for a few hundred million dollars and support from the oligarch’s political machine.

  17. Frank

    I think that the problem of embezzlement by lay people is fairly well monitored, however, the construction contracts, both for the maintenance of the chapels and those related to the maintenance of the Temples, are a much more relevant aspect. The Church (corporation) must better control the related expenses where there are contracts with friends and with fine print that charge additionally for activities that should naturally be considered in the contracts. In addition, outsourced work is done with an inappropriate margin, making them pass as a main contractor. I think that we will know in the next few years how there is already a money-making machine for the maintenance of the Temples.

  18. John Mansfield

    As reported by Deseret News fifteen years ago, here’s how it’s done:
    Mormons contribute $300,000 to Philadelphia prisoner-reentry program

    As it prepares to build a large temple in Center City, The Church of Jesus Christ of Latter-day Saints has agreed to donate $300,000 to the city’s prisoner-reentry program. The contribution was announced Wednesday by Mayor Nutter, who said the idea originated with the Mormon church’s leadership and was not prompted by City Hall. “We did not ask,” he said, “but gladly accepted.” The lump-sum donation will be directed to the Mayor’s Office of Reintegration Services for Ex-Offenders (RISE), which assists former prisoners reentering society with schooling, job training, job placement, housing, drug and alcohol treatment, and “life coaches.”

    Or, as reported by WHYY:
    Church and Philadelphia Mayor Michael Nutter insist it was a coincidence that the donation came when a proposed temple was stuck. A major donation by the Mormon Church will help the city’s ex-offender recovery program. Both sides say it has nothing to do with the Mormon Temple construction project moving forward. The $300,000 donation from the Church of Jesus Christ of Latter Day Saints will be used for the Mayor’s Office of Reintegration Services for ex-offenders. Mayor Michael Nutter says it’s a coincidence that the donation happened at a time when the construction of a new Mormon temple on Vine Street was at a critical period. “This was not something we asked for. Every negotiation has its own character this happened to come up there were a lot of circumstances at play all at the same time, this was something we saw as a little bit of a breakthrough quite frankly, but also a demonstration of the church’s support for the for the city of Philadelphia.”

  19. Dave

    Just wanted to respond to Jack’s statistic that the average American adult has a net worth of one million dollars. US News and World Report (I’ll provide a link at the bottom, no idea how link friendly T&S is) has data from the US Federal Reserve that the average net worth of an American Family in 2022 was just over $1M. Jack seems to have conflated individuals with families. Some families are just one person, many are more. But this stat is terrible for a different reason:

    The MEDIAN net worth of American families in 2022 was $192,900. An average of a million bucks sounds great, until you realize that Bill Gates and 100,000 people with a net worth of ZERO have an *average* net worth of a million bucks. It’s just all in the hands of one person. Half of American families have a net worth of less than $193,000. Half have more than that.

    I know this is beside the point, but I love numbers, and like to see them treated well. Here’s a link:
    https://money.usnews.com/money/personal-finance/articles/what-is-the-average-american-net-worth-by-age#:~:text=Net%20worth%20is%20the%20difference,for%20those%2075%20and%20older.

  20. A Turtle Named Mack

    Yes, Dave! This is the classic example of why the Mean (average) is such a poor metric for so many things. In this case, the Median tells the relevant story. Using average family net worth is almost deliberately misleading. The Mean does not, in any meaningful way, reflect reality. Even the Median isn’t perfect because so many of those below that $192,900 are in real poverty (closer to $0 than $192K). When Jack says “there shouldn’t be any hunger–not in the U.S. at least”, the reality is that there are more people in the U.S. who are hungry than there are people with a net worth of a million dollars.

  21. John Mansfield

    For this case, though, mean is a very relevant measure pretty much by definition. Mean = total/population. For a comparison of the church’s assets with the sum of its members’ assets, it does not matter that most of those assets are owned by a small fraction of the population. Similarly, most of the donations to the church (as measured in dollars, not in faith) were given by a small fraction of the church’s members.

  22. RLD

    Sorry, can’t resist weighing in on statistics…

    In ordinary language we use “average” to mean “typical,” which is true if the data are normally distributed. Then the average is the most likely outcome and outcomes that are close to the average are more likely than outcomes that are far from the average. And a lot of things are normally distributed, or close to it, so that makes sense. The normal distribution is also symmetric, so the mean is in the middle. But incomes and wealth are almost always “right skewed,” meaning there are more outliers above the average than below the average. (No one’s wealth can be as far below average as Elon Musks’s is above average.) Thus the average is higher than the median and does not reflect what’s typical.

    But I agree with John that Jack was using average in the sense of per capita, making the point that there is more than enough wealth in the United States to eliminate hunger (and the Church’s assets are a drop in the bucket). The problem is how it’s distributed: 30% of the wealth in the US is owned by the wealthiest 1%, and the poorest 50% of Americans own only 2.6% of the country’s wealth. It’s reminiscent of the Nephite society in the first half of 3rd Nephi, and we know how that ends. If Jack were to decide that government is more likely to be effective at fixing economic problems than social problems, we’d welcome him on the left. :)

  23. gadianton rocker

    Much of the developing world is cash based. Reimbursements for church auxiliaries’ expenses typically are paid for out of “petty cash,” which just means the ward finance clerk has to carry around cash to pay for this, who then gets the “reimbursement.” Despite protests all the way up to the area presidency, the church refuses to set up a separate bank account to handle such “petty” transactions, so the ward finance clerk has no choice but to mix funds in order to do their calling. This policy put the clerk in an impossible position, assuming you agree that mixing is unethical and asking for trouble. This same clerk is run through the wringer during audits bi-annual audits, with the initial statement that the misplacement of one “penny” will lead to excommunication. This, combined with the millions the church pays in penalties essentially out of tithing, indicates that the church might be a bit penny wise pound foolish. I don’t know if this is corruption per se, but it definitely is irresponsible.

  24. gadianton rocker

    *Gets the reimbursement into their personal bank account. Having a personal bank account for the church to send these reimbursements is a requirement to get this calling (which might be rare in some parts ofthe world). By refusing to set up an account for these “petty” reimbursements, the church iessentially is pushing off legal and ethical issues onto its ward finance clerks, which isn’t very nice, to say the least.

  25. Comet

    A little too much hand waving I think in some comments. The Ensign Peak/SEC matters are worthy of more serious attention within the church than the arch-dismissal they’ve received. Total church wealth amounts to over 200 billion dollars is the latest I’m hearing. Could be more or less. Whatever the amount, the church needs to move beyond variations of the simple “trust us” trope. Dial down the paternalism, level with the members, and inaugurate a more mature discourse around institutional wealth and its responsibilities.

  26. Robert

    Not to zombify this discussion, but I wonder how many members share Jack’s intuitive assessment of the Church’s wealth:

    “So–yes–100 billion certainly seems like a lot of cash. But when we consider how large the church is in terms of its operations, properties, and welfare services, that amount would keep the church afloat for maybe a few months–that is, if it had to rely on its rainy day fund as its sole source of income.”

    For a different assessment, see the Widow’s Mite Report, which estimates the value of the Church’s investments at $200 billion and the Church’s annual operating expenses at $7 billion. So that $200 billion would fund the Church not just for a few months, but a few decades. If we take into account the earnings, the Church could theoretically run forever without touching the principal — no tithing needed.

  27. TexasAbuelo

    Couple of funny observations:
    Re: “strict audits (ha,ha) some US stakes violated for decades the IRS rules on youth fund raising (not to mention church related rules) and no one cared. Just now people are getting into line
    As to “corruption “ outside the US, the gringos tend to see things as too black and white and locals attempting to ingratiate themselves with their gringos senior ecclesiastical and professional church leadership become anal compulsive in their persnickety compliance —- all in the hopes that’ll help them move up the hierarchy. I saw it in the three latin American countries we worked in (multinational company) and I simultaneously served as the bishop of a local wards

    Better to relax and learn to be practical

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.