The BFA was a church-affiliated charity, one that preyed on the members of its own congregation and operated for years before church fraud detection put a stop to it. Art Toalston is a writer based in Nashville and a former editor of Baptist Press. . July 14, 1999 Arizona Corporation Commission accuses Baptist Foundation of Arizona, Arizona Southern Baptist New Church Ventures, Inc. and Christian Financial Partners, Inc. of violating Arizona Securities Act. Baptist Convention. In applying SAS 99, auditors should plan and execute every audit Arthur Anderson had the same problems with the Baptist Foundation of Arizona several years earlier when 750 million in assets was more like 125 million in assets because most of the assets booked by the Baptist Foundation were found to be substantially overvalued. In the decade since Vasquez's appeal for help, more than 250 people who worked or volunteered in Southern Baptist churches have been charged with sex crimes, an investigation by the Houston . Arthur Andersen provided unqualified clean audit opinions on return false; Andersens effort to back out of the BFA settlement focuses on its wholly owned Professional Services Insurance Co. in Hamilton, Bermuda. 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[1], The Baptist Foundation of Arizona declared bankruptcy in 1999, citing $530 million in liabilities against $70 million in assets. Site by Mere. (function() { The subsidiary then used that money to purchase the loans from the parent company. mps._queue.mpsloaded = mps._queue.mpsloaded || []; Through it all, Andersen continued to give BFA clean audits, until the Arizona Corporation Commission forced the foundation to stop selling securities in August 1999. Quotes displayed in real-time or delayed by at least 15 minutes. to these companies and received notes receivable that were recorded at the for Southern Baptist causes. CNBC_Comscore = 'CNBC_TV'; A BFA liquidation trust was set up to sell off assets to allow investors to recover part of their money. } ', window.location); At the time of BFAs bankruptcy, By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL. The BFA Liquidation Trust, which is seeking to recover the investors funds, immediately took action. The auditors were Arthur Andersen, the same firm that audited Enron. A jury on Monday found former foundation president William Crotts guilty of three counts of fraud and one count of illegally conducting an enterprise, according to the Arizona Attorney General's Office, which prosecuted the case. Under William Crotts Got a confidential news tip? Presented a detailed analysis of The Baptist Foundation of Arizona scandal and won first place among five teams. Prosecutors estimated 11,000 investors, most of them elderly, were defrauded in the 1980s and 1990s. The foundation says it will pay up to $5-million into a trust intended to pay legal fees to pursue claims against what a spokesman called any third parties that could be held liable for the foundations troubles. var dynamic_yield_enabled = 1 The Arizona Republic called it a stunning blow to 13,000 BFA investors who had been told the March 1 settlement would, by the end of the year, help recoup 44 percent of an overall $585 million loss in the nonprofit agencys collapse. [10][11] In February 2004, the jury in the Arizona Superior Court civil trial found in favor of Grabinski, with the Court ordering National Union to pay Grabinski $2.5 million (equivalent to $3.6 million in 2021). Managing editor at EthicsDaily.com from 2003-2009, Allen wrote more than 1,500 news stories during his tenure. In a typical year-end flurry of transactions to help BFA show a profit, Santa Fe Trails Ranch II was transferred from Select Trading Group to ALO on Dec. 26, 1995. [1], Each of these related companies had Bill Crotts and the BFA's chief attorney, Tom Grabinski, on their board. ideas on how fraud could occur and adjust the audit program plan so that tests from the Baptist Foundation Fraud. 'cag[configuration_franchise]' : 'American Greed' , All Rights Reserved. The Phoenix-based. Two of the most significant entities set up to hide BFAs nonperforming mps._queue.gptloaded.push(function() { [2], The collapse of the BFA did not occur in a vacuum. }; (function(){ 'title' : 'American Greed: Religious Prey: Baptist Foundation of Arizona | Medical Scams' , Please make sure your computer, VPN, or The BFA case involves the largest Chapter 11 bankruptcy filing by a nonprofit organization in U.S. history and the March 1 settlement was approximately twice the largest malpractice court settlement previously agreed to by Chicago-based Arthur Andersen. This settlement takes on a sad historical significance The news release said the attorney general also will: seek the sequestering of insurance proceeds and other Andersen assets to insure money is available for BFA victims., seek an expedited trial in the BFA lawsuit and a declaration by the BFA of Andersens actions as having been in bad faith., send a letter to victims outlining the legal steps the state will take., seek the revocation of the licenses of the Certified Public Accountants involved in the BFA at Andersen.. 'path' : '/id/100000099' , It was eventually revealed that it had over $500 million in liabilities. 'cag[related_primary]' : '' , head.insertBefore(mpsload, head.firstChild) The Mirage But sometimes in the. Crotts, one of three remaining defendants pleading innocent, says he was an innocent victim who himself lost $800,000. baptist foundation of arizona scandal. implementation is being urged. The suits against Andersen alleged that the foundation had become a Ponzi scheme, needing to raise tens of millions of dollars to pay the high returns it had promised to earlier investors., The Journal noted that, according to the lawsuits, a key reason why the scheme lasted as long as it did was that Andersen continued to certify the foundations financial statements and dismissed multiple warnings by individuals that the foundation was defrauding investors. 30. }, mpsopts = { } In 1992, records indicated that the company had lost $3.2 million due to questionable transactions. Founded in 1948, BFA was created as a nonprofit agency of the Arizona Southern Baptist Convention. }; All eyes are on Houston this week, as jury selection gets underway for the long-awaited criminal trials of former Enron leaders Kenneth Lay and Jeffrey Skilling on charges of corporate fraud. [11], In early 2007, several former members of the BFA's executive management team were sentenced for the fraudulent activities associated with the BFA. PHOENIX (BP)Following is a time table outlining the major events surrounding the embattled Baptist Foundation of Arizona: April 1996 Foundation attorney L. Kyle Tresch resigns. The Arizona Republic reported that Novak had said Andersen's circumstances have changed significantly since it was indicted March 14 on federal charges involving its auditing of Houston-based energy trader Enron. statements for periods beginning on or after December 15, 2002, and earlier The BFA became dependent upon future investors to pay older investors and loan interest. The foundation was created in 1948 by the Southern Baptist Convention to administer endowments to the church. The investors, many of whom are elderly, apparently were lured by promises of lucrative financial returns and assurances that some of their investment would benefit church ministries. The additional possibility of a bankruptcy filing by Andersen, the newspaper reported April 2, could delay any payment for years and lump the BFA investors in a pool with other Andersen creditors, including thousands of Enron stockholders.. } By 1996, ALO was more than $100 million in debt. plans to church members. console.log('PUB-GDPR-CHECK'); The Baptist Foundation does have a plan to help investors recoup at least a portion of their money. isEEARegionCheck(); SOCIAL_MEDIA: 8 BFA employees sold investment products through circulars touting not one investor has ever lost a penny of their investment or the interest they earned. But by the late 1980s, prosecutors say, the BFA was losing money as Arizonas once-robust property market began to cool off. [5], The BFA sold certificates of deposit that were non-refundable during the life of the CD. same time, it accelerated its efforts to sell IRA-type retirement investment Start Here; About Us. const url = `${window.location.pathname}${window.location.search}`; But it also "loaned" nearly $140 million to companies owned by three of the Foundation's directors. return '' 'id' : '100000099' , To this day, it is considered one of the largest affinity frauds in U.S history. return false; The most likely cause of this is a content blocker on your computer or network. 2023 Southern Baptist Convention. Over lunch in February 1997 with an auditor from Arthur Andersen LLP, a recently resigned accountant from the Baptist Foundation of Arizona had disturbing things to say about her former employer's investment practices. Oct. 11, 1999 BFA announces it is close to finalizing the restructuring plan that will be communicated to investors later in the month. Hoover was a member of the Baptist Foundation Board in the late 1970s and served on the board until 1999 when the organization filed for . Management set up independent separate } Baptist Foundation of Arizona was the largest non-profit in U.S. history. Foundation officials and others involved in the investment scandal that led to the collapse may eventually face both civil and criminal charges. BAPTIST FOUNDATION OF ARIZONA The Baptist Foundation of Arizona (BFA), which Andersen served as auditor, lost $570 million of donor funds. View Jasmine's full profile See who you know in common Get introduced . What clues did the "true" : "false") + "; expires=" + d.toUTCString() + "; path=/"; Baptist Group Ex-Leaders Guilty of Fraud. MVPNs were "fraudulently represented as one which could be redeemed at any time, although with an interest penalty. The state also is continuing to press criminal charges against five former BFA executives, including William Pierre Crotts, the former chief executive officer. console.log('PUB-GDPR-CHECK oneTrustCookie matches: ', matches); The collapse of Bryant Financial Associates was a complete scandal that exposed the fraudulent activities of its executives. const matches = oneTrustCookie.match(COOKIE_REGEX); BFA informed Arizona Southern Baptist pastors of the financial crisis at a retreat held last weekend at the Wigwam Resort. BFA invested heavily in real estate, a more speculative investment strategy than other Baptist foundations in the state traditionally used. New Church Ventures sold the stock to another BFA subsidiary, also in exchange for a $1.6 million reduction in a credit line, which turned around and sold for $3.2 million to Harold Dewayne Friend, who in September accepted a plea bargain and agreed to cooperate with the prosecutors. It is expected to last until at least March, with an estimated cost of $1.6 million to Arizona taxpayers. Two year earlier than Enron scandal, the Baptist foundation of Arizona also failed. Mutual Fund and ETF data provided by Refinitiv Lipper. "host" : 'mps.cnbc.com', if (typeof mps.getAd != "function") mps.getAd = function(adunit) { mps.insertAd("#" + slotid, adunit) the firm should have issued either a qualified or an adverse opinion on the It also says that the foundations operating overhead was maintained at excess levels and that it engaged in costly transactions with insiders. // execute Auditors must broaden the range of information that console.log('PUB-GDPR-CHECK oneTrustCookie: ', oneTrustCookie); As recounted by The Wall Street Journal March 4, many of the foundations investors were elderly churchgoers attracted by the foundations offer of above-market returns on promissory notes and other investment products, and by its mission of using earnings for good works, such as building churches and nursing homes for the poor. Site by Mere. The following were some of the key warnings: Cases like the Baptist Foundation, along with other corporate frauds, have It eventually grew into an independent nonprofit organization that sold individual retirement accounts and other investments. a sobering reminder to auditors that it is important to understand the causes More information may be obtained by contacting the Foundation at 10255 Old Columbia Rd., Columbia MD, 21046, or by contacting Tom Stolle at (800) 466-5290, ext. The BFA had issued millions of dollars in money-losing loans. The person did not actually purchase the property, but purchased the right to occupy said property. (a) The transfer or acquisition of the controlling interest oc-curred within a taxable transfer period. to mitigate the real estate losses. The following were among the major GAAP violations alleged by var _qs = window.location.href; Convention required BFA to be a profitable, self-sustaining independent entity. BFA, an agency of the Arizona Southern Baptist Convention, was founded in 1948 to raise and manage endowments for church work in Arizona. Visitor Comments. More specifically, the litigation was brought by Arizona's Corporation Commission (Securities Division), as well as the state's attorney general. 1 (803) 227-6197 kcooper@mybfsc.org. We re-invest your money and the profit we earn goes to further such ministries as Christian education, care for children and senior adults, missions and new church starts. Yet it raised most of its money by selling investment products to individuals and invested most of those funds in ALO, an allegedly phony company owned by one-time BFA director Jalma Hunsinger. script.setAttribute("async", true); . if (typeof adunit != "string") return false; fiduciary requirements governing nonbank passive trustees of IRAs. The Baptist foundation began selling investment products to church members in 1983. Its initial mission was to raise donations and support for Southern Baptist causes. Second, The real estate market did return Object.values(OneTrustCategories).filter((c) => blockedCategories.includes(c)).length > 0; Management responded to the new environment by structuring accounting transactions [8] Indictments were handed down in April 2001; by July 2006, when BFA's president and CEO William Crotts and BFA's Chief Legal Counsel Thomas Grabinski were found guilty at trial on multiple counts of fraud, five other defendants had already pleaded guilty. 'hline' : 'American Greed' , let cEnd = document.cookie.indexOf(';', cStart); The first time he attested to the value, he indicated that the property was worth $3.3 million. The Arizona Baptist Foundation. mpsload.id = "mps-load"; CONTENT_SELECTION_AND_MEASUREMENT: 7, The entities had no employees of their 'content_id' : '100000099' , "[1] Since he was working for both companies, Grabinski was able to authorize questionable transactions. See Church Loan Guidelines for details or download a Church Loan Application. they use. Who We Are; The Team . both in and outside of management. recently issued SAS 99, Consideration of Fraud in a Financial Statement some red flag warnings that fraud was occurring, led to the Andersen settlement. Kyle Cooper. Arthur Andersen Faces Court Trial Over Baptist Investment Foundation. 'is_sponsored' : '0' , if (mps.response && mps.response.dart && typeof(mps.response.dart.adunits) === 'object') { } Year after year, Arthur Anderson audits the Baptist Foundation of Arizona, giving the non-profit group its stamp of approval and a clean bill of financial health. Like many var setAdblockerCookie = function(adblocker) { We are unable to fully display the content of this page. The BFA carried out a number of illegal activities in perpetrating affinity fraud against Southern Baptist worshipers in Arizona. the Arizona Corporation Commission as required by state law. outside an entity that suggests the possibility that management fraud may changed under new management. In 1962, Pastor Glen Crotts became the organization's first president. By Jonathan Weil Staff Reporter of The Wall Street Journal. mps._ext = mps._ext || {}; Dec. 16, 1999 BFA committee proposes to form a new corporation to sell off its assets, to repay its debts and then cease operations. The BFA was associated with the Arizona Southern Baptist Convention, which was affiliated with the national organization. The clause was depicted as a housekeeping measure, Arizona Attorney General Janet Napolitano said, according to the paper, which quoted her as declaring, Arthur Andersen lied., Napolitano, according to a news release from her office, will be seeking severe penalties against Andersen LLP (formerly Arthur Andersen) and others., This is an absolute outrage, Napolitano said. Aug. 10, 1999 The Arizona Corporation Commission and Attorney General Janet Napolitano order the BFA and two related corporations to cease and desist from violating the Arizona Securities Act. Profits from investments were supposed to be used to fund the churches' ministries and numerous charitable causes. Several accountants and one attorney became concerned enough to approach senior management about ALOs deficit. The Baptist Foundation of Arizona (BFA) was a Southern Baptist charity, which executed an affinity fraud on unwitting worshippers in the Southern Baptist community in Arizona, leading to the largest collapse of a religious financial institution in U.S. history. if (typeof window === 'undefined') return; The Arizona Republic reported that Novak had said Andersens circumstances have changed significantly since it was indicted March 14 on federal charges involving its auditing of Houston-based energy trader Enron. The Baptist Foundation of Arizona was formed in 1948 by the Arizona Southern Baptist Convention (Convention) to raise and manage endowment funds for Southern Baptist charities. As for how Southern Baptists in Arizona and elsewhere will emerge from the mess created by the foundation, Bill May, president of the Arizona Church Growth Board, a unit of the state convention, says this: Its like family. Contact (909) 738-4000 info@bfcal.org. The Bear Foundation's contributions to local nonprofits easily number in the tens of millions, and include a $4.5 million contribution to a new Baptist Health Care health center at Brent Lane and . Many were elderly and invested their retirement savings in the belief not only that their money was safe, but that part of their earnings would be put to use to advance the Lords work through planting of Southern Baptist churches. Two former executives committed fraud to hide their financial mismanagement of the Baptist Foundation of Arizona, but they didn't line their own pockets, jurors said in convicting them Monday. Under his leadership, the organization held strict moral values, including its officers being forbidden to gamble or drink alcohol. It says that a new charity will be established that will be involved in traditional Baptist charitable activities, including, for example, ministries, education, and providing routine trust and estate planning. The new charity, the statement says, will be prohibited from selling debt securities. (Phoenix, Ariz. - September 5, 2006) Lawrence Dwain Hoover today pleaded guilty to one count of fraud in the criminal case involving the Baptist Foundation of Arizona (BFA). Sept. 10, 1999 BFA lays off 72 employees and closes offices in Youngtown and Tucson. leadership, the foundation engaged in a major strategic shift in its business. Andersen opposed that request in court, the trust said; the Arthur Andersen Internet site, meanwhile, makes no mention of its latest BFA actions. The Baptist The audit team requested the financial statements Andersen is accused of ignoring a series of warnings while the Baptist Foundation of Arizona (BFA), a nonprofit company that operated much like a bank and offered high interest rates on retirement . Global Business and Financial News, Stock Quotes, and Market Data and Analysis. One of the key provisions of SAS 99 if (window.mps) { if (!mps._ext || !mps._ext.loaded) { Investors Lost Millions in Church Fraud Executives Sentenced. Two former executives of the Baptist Foundation of Arizona were convicted Monday on three counts of fraudulent schemes and one count of conducting an illegal enterprise. Essentially, in a transaction that favored a former director, the BFA accepted a piece of property (which the BFA itself declined to purchase) as collateral for a loan that amounted to US$4.9M more than the property's appraisal value. about the Baptist Foundation of Arizona. let cStart = document.cookie.indexOf(`${name}=`); The Baptist Foundation of Arizona - A Case of Proper Fund Accounting Ignored and Manipulated Another major accounting scandal, and prelude to Andersen Accounting's participation in Enron's anomalous deals, was the illegal securities trading committed by the Baptist Foundation of Arizona (BFA).