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Tithing to the Vortex: The Secrecy of Financial Records in the Church of Jesus Christ of Latter Day Saints and the Case of D.I. v. Corp. of the Bishops of the Church of Jesus Christ of Latter Day Saints
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Tithing to the Vortex: The Secrecy of Financial Records in the Church of Jesus Christ of Latter Day Saints and the Case of D.I. v. Corp. of the Bishops of the Church of Jesus Christ of Latter Day Saints By: Lynda L. Hinkle * You must continue to bear in mind that the temporal and spiritual are blended. They are not separate. One cannot be carried on without the other, so long as we are here in mortality. President Joseph F. Smith, In July 2007, the Oregon Supreme Court ruled against The Church of Jesus Christ of Latter Day Saints (LDS) in their attempt to withhold financial information from a plaintiff in a sexual molestation case through which the church is implicated via the doctrine of vicarious liability. The case of D.I. v Corp. of Bishops of the Church of Jesus Christ of Latter Day Saints (D.I.) involved a man who purports to have been molested by a home teacher assigned to his family by the church. 2 1 *Lynda L. Hinkle is Lead New Developments Editor of the Rutgers Camden Journal of Law and Religion and a Candidate for J.D., 2009 at Rutgers School of Law- Camden. JOSEPH F. SMITH, GOSPEL DOCTRINE: SELECTIONS FROM THE SERMONS AND WRITINGS OF JOSEPH F. SMITH 208 (Deseret News Press) (1939). 2 Home Teachers are assigned to families in a ward, which is a subsection of the local church, to go and provide ministry and teach themed lessons. They are volunteers, not paid employees, though they have been set apart as priesthood members. LDS.ORG, HOME TEACHING vgnextoid=bbd508f54922d010vgnvcm d82620arcrd&locale=0&sourceid=f0862f232 4d98010VgnVCM d82620a, (last visited September 28, 2008). 1 The Plaintiff, now an adult, sought civil remedy against the church using the legal concept of respondeat superior, a form of vicarious liability through which an employer is responsible for the actions of its employee when those actions are committed in the course of their employment. Before the case could go to trial on the merits, the Plaintiff and his attorney, Kelly Clark, sought to have the finances of the LDS church revealed in discovery in order to assist a potential jury in determining what size award would be suitable should they find for the Plaintiff. The LDS Church sought to block this discovery through an injunction, which the Oregon Supreme Court denied, in a terse, one page document that provided no legal reasoning. The LDS church has long believed that it has a religious right to secret their financial records which they value as an expression of their religion. This is a right, or privilege, that they have protected by settling any case that might lead to an investigation of their financial records. 3 In fact, since 1959, the church has not released any financial information to the public. 4 This note will first investigate how D.I. has raised and informed the question. Then, it will investigate why the LDS church argues it should retain secrecy over its financial records and how the Plaintiff successfully undermined that argument to the court in Oregon. Finally, it will explore common religious 3 Attorney Timothy Kosnoff, an attorney in Seattle, Washington, calls the financial information the secret of secrets, a secret which he sought to uncover in 2001 on behalf of another Oregon man who says he was sexually abused by an LDS Sunday School teacher. The case was settled for $3 million. Associated Press, UPDATE: Ore. Court Rules Against LDS Church s Bid to Keep Finances Secret, UTAH COUNTY S DAILY HERALD, July 12, 2007, at A1. 4 In 1959, when the church last offered a financial accounting to the public, it reported expenses of $72.8 million. JOHN HEINERMAN AND ANSON SHUPE, THE MORMON CORPORATE EMPIRE 81 (Beacon Press) (1985). D. Michael Quinn argues that the church stopped releasing its financial records to sidestep criticism over deficit spending. He writes: By the end of 1959 the church spent more than $8 million more than its income that year. This was extraordinary in view of the fact that the church had surplus income of $7 million after 1958 s expenditures. To conceal the massive increase of building expenditures in the last half of 1959 which created the deficit, the church stopped releasing even abbreviated financial reports. D. MICHAEL QUINN, THE MORMON HIERARCHY: EXTENSIONS OF POWER 219 (Signature Books) (1997). 2 practice, federal law and case law and how a challenge presented to the United States Supreme Court on this matter might be decided. An Examination of D.I. v. Corporation of the Presiding Bishop of the Church of Jesus Christ of Latter Day Saints Attorney Kelly Clark of Portland, Oregon considers himself something of an expert on church sex abuse cases. 5 The case of D.I. may have given Clark a victory in pursuing the LDS church in sex abuse cases in the future, as well as in this present case: the Oregon Supreme Court refused to challenge a trial court order demanding the church reveal its finances in order to prepare for the potential vicarious liability finding against it under the doctrine of respondeat superior. Despite this seeming victory, Clark contends that the fight is not won since the Oregon Supreme Court did not give its reasoning in denying the LDS Church s injunctive motion, and that whatever their unspoken reasoning is in this matter may not apply to future cases. 6 Clark currently has multiple other cases of sexual abuse against the Mormon church in Oregon courts which he hopes to use to test the Oregon Supreme Court s true intentions in denying the stay. 7 5 Kelly Clark s website, not only advertises his practice but offer resources about church related sex abuse. His website claims about Clark that, His successes include the landmark cases of Fearing v Bucher and Archdiocese of Portland, 977 P. 2d 1163 (Oregon Supreme Court, 1999) and Lourim v Swenson and Boy Scouts, 977 P.2d 1157 (Oregon Supreme Court, 1999), which, taken together, both strengthened the statute of limitations for child sexual abuse survivors and at the same time held institutions of trust liable for abuse arising from the relationships sponsored by those institutions. He as also won victories against the LDS Mormon Church, including numerous trial court wins on questions of statutes of limitations, agency and punitive damages and in the summer of 2007, won an important victory when the Oregon Supreme Court refused to overturn a trial court order requiring the Mormon Church to disclose its financial strength and records as part of a punitive damages case against the Church. DI v Johnson and the Church of Jesus Christ of Latter Day Saints, (Oregon Supreme Court, mandamus proceeding, July, 2007). He also claims to have handled over 150 cases of childhood sexual abuse. KELLY CLARK, MORMON SEX ABUSE ATTORNEY, (last visited September 25, 2008). 6 Telephone Interview with Kelly Clark, Plaintiff s Attorney (January 29, 2008). 7 Id. 3 The D.I. case began with a home teacher, defendant Ken Johnson, allegedly sexually abusing a boy, aged when the abuse took place, in Beaverton, Oregon. The alleged sexual abuse took place as often as twice a week for two years between 1987 and According to the Plaintiff, nicknamed D.I. for anonymity, Johnson was acting as an agent of the LDS church through its home teaching program, thereby making the church vicariously liable for the damages that Johnson caused under the doctrine of respondeat superior. 8 The LDS church denies that Johnson was acting as its agent, instead stating that he visited the home as a family friend. 9 The Plaintiff is suing for $45 million in damages. 10 Plaintiff also petitioned the court that the LDS church s finances be revealed to 8 The Amended Complaint filed by the Plaintiff argues that, While working in the second ward of the Beaverton Stake, and for the purpose of furthering his assigned duties as a Home Teacher, Johnson identified Plaintiff s family as with adolescent or teenage boys; befriended the Plaintiff, Plaintiff s brother, and their family; gained the family s trust and confidence as an educational and spiritual guide, and as a valued and trustworthy mentor to Plaintiff; gained the permission, acquiescence and support of Plaintiff s family to spend substantial periods of time alone with the Plaintiff; and sought and gained the instruction of Plaintiff s parents to Plaintiff that he was to have respect for authority and to comply with Johnson s instruction and requests The above course of conduct described.is hereinafter collectively referred to as Grooming. Johnson, while acting within the course and scope of his employment and agency using the authority and position of trust as a Home Teacher for the Defendants through the Grooming process induced and directed Plaintiff to engage in various sexual acts with him.johnson used the Grooming process to accomplish his acts of sexual molestation. Johnson s Grooming was (1) committed in direct connection and for the purpose of fulfilling Johnson s employment and agency with the Defendants (2) committed within the time and space limits of his agency as Home Teacher (3) done initially and at least in part from the desire to serve the interests of Defendants; (4) done directly in the performance of his duties as a Home Teacher (5) was generally actions of a kind and nature which Johnson was required to perform as a Home Teacher; and (6) was done at the direction of, and pursuant to, the power vested in him by the Defendants. THIRD AMENDED COMPLAINT at 2-4, D.I. v Corporation of Bishops of the Church of Jesus Christ of Latter Day Saints, No (2007). The Complaint further claims that years later Plaintiff sought the counsel of the church when he realized he had been damaged, and they offered him counseling and advised him that the statute of limitations for pursuing the matter had past, a false representation that Plaintiff claims was a knowing one. Id. at In fact, the Home Teachers generally only visit once a month, not the twice a week that Ken Johnson was allegedly visiting and abusing D.I. LDS.ORG, supra note In addition to $45 million in punitive damages, the Plaintiff is seeking an additional $12.7 million in economic and non-economic damages as stated in their Complaint. See THIRD AMENDED COMPLAINT note 8 at 8. 4 assist the development of their case and their pursuit of punitive damages. 11 The Plaintiff s response to LDS Defendant s motion for a protective order argued: Because the purpose of holding a principal liable for punitive damages for the act of its agent is to deter the principal, the proper measure of damages must reflect the principal s worth 12 Likewise, the purpose of punishing a wrongdoer through an award of punitive damages justifies an award based on a principal s financial status because, under a respondeat superior theory, the acts of an agent are deemed to be the acts of the principal, making the LDS Defendants the wrongdoers in this case. Because any punitive damages awarded against the LDS Defendants should reflect their worth, discovery of the financial condition of these defendants is relevant and appropriate. 13 Because the LDS church funnels all of their money into a common pool maintained out of Salt Lake City, Utah, financial disclosure would not merely disclose the finances of the Oregon church, but of the entire LDS church Kelly Clark, plaintiff s attorney, said to the press that A jury needs to know the entire financial context to now whether a punitive award is too much or sufficient or not enough. Ashbel S. Green, Church Can t Hide It s Worth, THE OREGONIAN, July 12, 2007, available online at 7&thispage=1 (last visited on January 20, 2008). 12 See Stroud v. Denny s Restaurant Inc., 271 Or. 430, 435 (1972) (discussing deterrence). Cited in the PLAINTIFF S RESPONSE TO THE LDS DEFENDANT S MOTION FOR A PROTECTIVE ORDER, D.I. v Corporation of Bishops of the Church of Jesus Christ of Latter Day Saints, No (2007).The rule of Stroud is that if the servant has committed a tort within the scope of his employment so as to render the corporation liable for compensatory damages, and if the servant s act is such as to render him liable for punitive damages, then the corporation is likewise liable for punitive damages. `Stroud at 435. The court reasoned that this is the only way to adhere to the principle of punitive damages, which is to provide a deterrent to the behavior leading to the damage. 13 The Plaintiff s Response to the LDS Defendant s Motion for a Protective Order bases their argument on two cases on point: Laidlaw Transit, Inc. v. Crouse, 53 P.3d 1093 (S.Ct. Alaska 2002) (affirming an award of punitive damages under the doctrine of respondeat superior and held that the court was correct in admitting evidence of the principal s financial status) and Hyatt Regency Phoenix Hotel Co. v. Winston & Strawn, 184 Ariz. 120 (1995) (upholding a punitive damages award against a law firm that was vicariously liable under the doctrine of respondeat superior where the award was considered reasonable against the factual background of the law firm s financial statements). 14 According to Dan Busby, vice president of the Evangelical Council for Financial Accountability, this is an unusual system of accounting among churches. Busby says, I m not aware of any group or denomination that would funnel all money into the central repository. That would be totally unheard of in Protestantism.Most denominations require that local churches 5 Concerned about this possibility, the Church sought and failed to get injunctive relief against the court order to reveal their finances in discovery. This may seem an insignificant issue when facing a multi-million dollar lawsuit, but the priority of the Church was evidenced in their quick settlement of the matter rather than the releasing of that financial information. Since 1959, the Church of Jesus Christ of Latter Day Saints have kept their financial information secret. This includes the number of employees the church retains. 15 It includes their income from tithing. 16 It even includes their real estate and corporate holdings and other sources of potential income. 17 The church pay a percentage of per capita amount to headquarters, but usually only 10 or 15 percent used to fund headquarters operations. The Catholic church, for instance, is financed at each dioceses, even though political and spiritual power is centered at the Vatican. Peggy Fletcher Stack, Church Shuns Talk of Assets, The Salt Lake Tribune (July 13, 2007), downloaded from the archival database of September 20, The state of Utah allegedly once requested an accounting of the LDS church s employees for the purposes of putting together a prospectus for the bond market, but when church officials refused to release any data, the state noted on their prospectus that the church was believed to be one of the largest employers in the state of Utah. ROBERT GOTTLEIB AND PETER WILEY, AMERICA S SAINTS: THE RISE OF MORMON POWER at 103 (Harvest Books) (1986). 16 To be a member in good standing, members are required to give 10% of their gross income annually in tithing. Tithing is the primary income of the church. As early as 1983, the church had computerized the tithing records to easily move records with their members from one ward or stake to another. ROBERT GOTTLEIB AND PETER WILEY, AMERICA S SAINTS: THE RISE OF MORMON POWER at 97 (Harvest Books) (1986). Critics of the church often refer to mandatory tithing as a central point of their contentions against it. The tithing is mandatory in that one cannot get a temple recommend if not up to date on tithing (and also demonstrating other values central to Mormon belief, such as general morality and the keeping of the Word of Wisdom, which discourages the use of alcohol, tobacco and coffee and tea), and that recommend is necessary in order to complete many of the rituals that LDS church members believe permit them to enter the highest of three degrees of heaven. See Bill McKeever, Tithing by Coercion, available online at 17 Attempts to estimate the church s net worth are occasionally made, such as this one by a prominent author on Mormon issues, Their enterprises range from a $16 billion insurance company to perhaps $6 billion in stocks and bonds, if not more. There s a $174 million chain of radio stations (seventh largest in the country). The church s more than 150 farms and ranches, including America s largest cattle ranch, make it one of the largest landowners in the nation. The farms and ranches encompass somewhere in the neighborhood of one million acres, roughly equal to the size of the state of Delaware. RICHARD OSTLING, MORMON AMERICA: THE POWER AND THE PROMISE at 118 (HarperOne) (1999). Although Gordon B. Hinckley, President of the LDS church from March 1995 until his death in January 2008, was once quoted by the Wall Street Journal as saying The business involvement which we have is a very, very minor part of our activity, one mid s study estimated the Church s business earnings at $500 million annually, along with another half billion from tithing and other member gifts. David Briscoe and Bill Beecham, Mormon Church Controls Extensive National Business Interests, IDAHO FALLS POST REGISTER at A- 6 maintains that they since they are a non-taxable religious organization, they have the right to withhold this information from the prying eyes of the public. The Oregon Supreme Court recently disagreed in the D.I. case, but did not cite its reasoning, only producing a terse, one page order denying the Church s motion for a protective order on July 9, In response, LDS attorney Stephen F. English made a statement that may have been laying the groundwork for a potential United States Supreme Court challenge to the order, saying The church respects the rule of law, but has profound constitutional concerns based on its constitutional right to protect the free expression of its religion. 19 Oregon courts gave the LDS church an out, ordering the case into mediation, which delayed the need for them to produce financial documents as they attempted to negotiate a settlement. Quickly after this decision, the LDS church did settle the case in mediation with a sealed agreement. 20 The settlement eliminates the need for the Church to reveal its financial records, at least for now, and also demonstrates the Church s commitment to retaining the secrecy of those records. It seems more than possible, however, that now that the Pandora box of the Oregon Supreme Court s 11 (September 21, 1975).Although it is virtually impossible to guess the net worth of the church without insider information, Heinerman and Shupe made an attempt in 1983, and estimated that the church s worth was $8 billion. See supra note 4. Richard Ostling reports that Heinerman and Shupe admit that this was a very conservative estimate and that they may have been easily 30 percent low. OSTLING at The order states: Upon consideration by the court, Relators motion for leave to file a reply to the adverse party s response is granted. Relators motion to strike portions of the adverse party s response is granted. The petition for a peremptory writ of mandamus is denied. The stay of the Circuit Court order of June 28, 2007 is lifted. ORDER DENYING PETITION FOR PEREMPTORY WRIT OF MANDAMUS, LIFTING STAY, GRANTING MOTION TO FILE REPLY AND GRANTING MOTION TO STRIKE. Oregon Supreme Court No. S (July 2, 2007). 19 Quoted in Peggy Fletcher Stack, Church Shuns Talk of Assets, THE SALT LAKE TRIBUNE (July 13, 2007), np, downloaded from the archival database of September 20, The article further opines LDS spokesman Scott Trotter declined to say what the church will do next, but it may not have to do much. The decision was reached on narrow pretrial grounds, which means the trial court could ultimately side with the church s position. 20 Kelly Clark, attorney for the Plaintiff, stated that the terms of the settlement will remain secret. Telephone Interview with Kelly Clark, Plaintiff s Attorney (January 26, 2008)
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