In Kirtland, the Church also sought to organize a bank—the Kirtland Safety Society. Its purpose was to assist with the gathering of the Latter-day Saints in Kirtland by providing credit and liquidity to the local economy and by assisting in financing the construction of the Kirtland Temple. Ohio law required that banks receive a charter of incorporation from the state legislature in order to issue notes, and this was the initial route taken by Joseph Smith and his associates. They drew up a “constitution” for their bank and petitioned the legislature for a charter. When this effort proved unsuccessful, they pursued two other routes. First, Latter-day Saint leaders organized the Kirtland Safety Society as a joint stock company, drawing up a new set of “articles of agreement.” This was an unincorporated entity that functioned much like a partnership, with unlimited liability for the stockholders and no separate legal personality for the bank. Second, the Latter-day Saints acquired a controlling interest in the Bank of Monroe, which was incorporated under Michigan law. They then set up the Kirtland Safety Society as a branch of the Michigan bank. Ohio law allowed “foreign” banks to operate branches in the state. This effort to circumvent Ohio’s anti-banking laws, however, proved ineffective when the Bank of Monroe was forced to close its door in the Panic of 1837. Michigan also enacted a “free banking” law, which allowed unincorporated joint stock companies to operate banks, throwing into doubt Ohio’s recognition of the Ohio branches of Michigan banks. While it initially sold stock and issued notes backed up by the resulting capital and loans, the Safety Society rapidly ran into trouble. In part, the bank was built on the expectation of increasing land prices, an expectation that was disappointed during the Panic of 1837 when land prices became depressed. More importantly, as a joint stock company, the legal enforceability of the notes that the bank issued was questionable under Ohio law. The result was that the notes rapidly traded at a steep discount, which made it difficult for the Safety Society to build up its assert book by issuing loans.

An 1816 Ohio law provided that the officer of any unincorporated bank issuing notes “shall, for every such offence, forfeit and pay the sum of one thousand dollars.” The law also contained a qui tam provision that allowed a private party to sue on behalf of the state and keep one half of the recovery as bounty. In 1837, a Samuel Rounds brought suit against Joseph Smith and other promoters of the Kirtland Safety Society. Rounds, however, was a strawman paid $200 by Grandison Newell, an anti-Mormon agitator in Ohio, to bring the suit. The suits against most of the other defendants were dropped, but those against Joseph Smith and his counselor Sidney Rigdon proceeded to trial. In 1824, the Ohio State legislature amended the 1816 law involved in the Rounds suit, and Smith and Rigdon likely could have successfully argued that the 1816 law was no longer in force. The Ohio Supreme Court later ruled this way in another case. However, their counsel at trial never made this argument, and a judgment was entered against them. A short time later, fearing violence, Smith and Rigdon fled Ohio for Missouri. Until the end of his life, Smith made efforts to repay his Ohio debts, and both the judgments in the Rounds case were collected upon. After Smith’s death, Grandison Newell fraudulently persuaded the Ohio legislature to revive the judgments against Smith in a special act passed in 1859. Newell then had an administrator appointed for the Smith estate in Ohio and sought to sell the Kirtland Temple to “satisfy” the already paid judgments, further clouding the already murky chain of title to the property.