A grand jury in April 2001 returned indictments charging former BFA officials with 32 counts of fraud, theft and racketeering. for (var i in mps.response.dart.adunits) { The fund is $590 million in debt, far outstripping the $158 million Jim and Tammy Bakker bankruptcy scandal--and regulators believe it is among the nation's largest cases of "affinity fraud,". 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Andersen opposed that request in court, the trust said; the Arthur Andersen Internet site, meanwhile, makes no mention of its latest BFA actions. the firm should have issued either a qualified or an adverse opinion on the Up to $40 million is available for the cash-out plan. }; "true" : "false") + "; expires=" + d.toUTCString() + "; path=/"; The only thing I can confidently tell investors is this: The commission will pursue every possible avenue to ensure that Arthur Andersen pays for their egregious errors., The size of the settlement, The Wall Street Journal had reported March 4, was remarkably large compared with the losses suffered by investors.. Baptist Foundation of Arizona Beecher-Tilton scandal case Branch Davidians C Claudy bombing F Foreign Office papal visit memo G Greater Grace World Outreach Greater Ministries International H Hyles-Anderson College I 2015 Iglesia ni Cristo leadership controversy K Keldholme Priory election dispute David Koresh L Lonnie Latham Larry Lea some red flag warnings that fraud was occurring, led to the Andersen settlement. real estate in exchange for notes receivable valued in the millions of dollars. evidence. 3210 E. Guasti Road Ontario, 91761 View on map. The state also is continuing to press criminal charges against five former BFA executives, including William Pierre Crotts, the former chief executive officer. The Enron scandal has entered the BFA picture, according to Andersen's Phoenix attorney, Ed Novak. 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. In 1992, records indicated that the company had lost $3.2 million due to questionable transactions. } A written statement from the foundation says that at the completion of the bankruptcy proceedings and the creation of a new for-profit company, the Baptist Foundation of Arizona will no longer exist. Its initial mission was to raise donations and support owed BFA significant amounts of notes receivables. that audit public companies, in todays environment it is more important Audit. One, Karen Paetz, set up a lunch meeting with an Arthur Andersen official in February 1997, warning about ALOs losses and encouraging auditors to request detailed financial statements for both New Church Ventures and ALO. or redistributed. In 2002 Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron. of fraud and even more critical to engage in effective audit procedures to }; mps._urlContainsEmail = function() { Another important provision of SAS 99 is that auditors should talk to employees, An increased focus on professional skepticism in gathering The BFA was associated with the Arizona Southern Baptist Convention, which was affiliated with the national organization. mps.__timer = Date.now ? All rights reserved. if (!mps._ext || !mps._ext.loaded) { } mps._queue.adload = mps._queue.adload || []; One BFA subsidiary, Arizona Southern Baptist New Church Ventures, had a stated purpose of financing new Southern Baptist churches in Arizona. In the case, it claims that Arthur Anderson gave investors a false sense of security after giving out Anderson issued a clean audit in order to attract new investors. Learning its principal note issuer was ALO, she checked public records and found its unaudited balance sheet listed liabilities of $109.7 million and assets at minus $6.9 million. (function() { In other words, it had become a classic 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. A few days later, the Kimseys' money had all but vanished. .map(categoryPreference => parseInt(categoryPreference.split(':')[0], 10)); Napolitano and the Arizona Corporation Commission then filed a civil lawsuit against Andersen in January 2001, seeking civil remedies for violations of the Arizona Securities and Consumer Fraud Act. By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL. People of faith vulnerable to 'affinity frauds,' authorities say. [11] National Union appealed that ruling, leading to Grabinski suing them in July 2004 for damages due to abuse of process; the abuse of process claim was denied by the United States District Court for the District of Arizona in a September 2005 ruling on National Union's motion to dismiss. }; This caused a lot of people, more than 11,000 investors, to lose their life savings ($550 million). How did such a massive fraud develop? mps._adsheld.push(adunit) if (mps.response && mps.response.dart && typeof(mps.response.dart.adunits) === 'object') { 'cag[project_management_team]' : 'CNBC US Team' , return ''; PHOENIX Two former executives of the Baptist Foundation of Arizona, which collapsed in what has been called the largest nonprofit bankruptcy filing in the nation's history, have been convicted of fraud. Market data provided by Factset. The 1996 information, }; The BFA's leaders, including a respected pastor and his adult son, used everything from Ponzi schemes to "land flipping" in order to squeeze money out of the community. "I just hope they realize they defied (God's) word by mishandling money that people entrusted to them," said Virginia Branch, 77, of Prescott, who lost $400,000 she said would have helped her grandchildren pay for college. assets were receivables from the insolvent ALO. and evaluating audit evidence should lead to a revitalized accounting culture. }).catch(() => {}); propertys book value, not its diminished current value. Potential financial losses in the case overshadow the losses accumulated by non-profit groups and donors who gave money to the Foundation for New Era Philanthropy. Along with companies like Enron and Worldcom, it was audited by accounting firm Arthur Andersen, giving investors a false sense of security. return unescape(document.cookie.substring(cStart, cEnd)); 207, or tstolle@bcmd.org. typeof mps._gptfirst == "function" && mps._gptfirst(adunit, slotid); 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. [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. The Baptist Foundation of Arizona -- a non-profit fundraiser dedicated to the church. Profits from investments were supposed to be used to fund the churches' ministries and numerous charitable causes. credible tips or complaints are received about management fraud, auditors [8] Crotts was sentenced to eight years in prison, while Grabinski was sentenced to six years; the two convicted criminals were required to pay $159 million (equivalent to $214 million in 2021), each, in restitution. Yet, in 2002, years after the BFA . The Cacaces were among 11,000 investors who lost a combined $580 million when the Baptist Foundation of Arizona, or BFA, a registered nonprofit, filed for Chapter 11 bankruptcy in 1999 in. 'cag[device]' : 'mobile-touch' , Third point is "Baptist Foundation of Arizona". was used to pay interest on old money. SOCIAL_MEDIA: 8 the State Board of Accountancy: Arthur Andersen, without admitting or denying any fault, settled an investors By 1996, ALO was more than $100 million in debt. const COOKIE_REGEX = /groups=([^&]*)/; 2023 FOX News Network, LLC. Art Toalston is a writer based in Nashville and a former editor of Baptist Press. if (typeof(window._mpspixZ) != 'string') { })(); honesty and integrity. var _qs = window.location.href; Presented a detailed analysis of The Baptist Foundation of Arizona scandal and won first place among five teams. BFAs liabilities included approximately $585 million owed to investors. More specifically, the litigation was brought by Arizona's Corporation Commission (Securities Division), as well as the state's attorney general. Crotts and Grabinski could face six to 23 years for each count. The Cacaces were among 11,000 investors who lost a combined $580 million when the Baptist Foundation of Arizona, or BFA, a registered nonprofit, filed for Chapter 11 bankruptcy in 1999 in what prosecutors described as a Ponzi scheme. )+[a-zA-Z]{2,}))/; Login Here. 'nid' : '100000099' 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. What clues did the June 3, 2010 -- Tina Anderson was only 15 when she said she was forced to stand terrified before her entire Baptist congregation to confess her . return true; Reflection and resources at the intersection of faith and culture through an inclusive Christian lens. PHOENIX (ABP) The Arizona Court of Appeals has upheld convictions of two former Baptist Foundation of Arizona officials sentenced to prison in 2006 for defrauding more than 11,000 investors in a Ponzi scheme. Arthur Andersen Faces Court Trial Over Baptist Investment Foundation. 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. } "They had their faith shattered and faced the possible loss of all their retirement investments.". cStart = cStart + name.length + 1; var mpscall = { He pleaded guilty to six felonies and agreed to testify against other defendants, which include former CEO William Crotts and General Counsel Thomas Grabinksi. This settlement takes on a sad historical significance Kimsey reportedly invested $100,000 with BFA. Managing editor at EthicsDaily.com from 2003-2009, Allen wrote more than 1,500 news stories during his tenure. help restore investor confidence and supersedes the Auditing Standards Boards document.cookie = "__adblocker=" + (adblocker ? First case: The Baptist Foundation of Arizona invests and loses millions entrusted by churchgoers, and its mission ends in scandal. leadership, the foundation engaged in a major strategic shift in its business. (function(){ mps._queue = mps._queue || {}; 'cag[template]' : 'special_reports' , of the accounting professions new antifraud initiatives, such as the STRICTLY_NECESSARY: 1, Baptist Convention. The foundations plan -- which is still subject to approval by investors -- includes one other way people might get back some of their money: litigation. As a nonprofit company, ALO filed its financial statements each year with (function(){var g=function(e,h,f,g){this.get=function(a){for(var a=a+"=",c=document.cookie.split(";"),b=0,e=c.length;b=e/100?0:100),a=[h,e,0],this.set(f,a.join(":"));else return!0;var c=a[1];if(100==c)return!0;switch(a[0]){case "v":return!1;case "r":return c=a[2]%Math.floor(100/c),a[2]++,this.set(f,a.join(":")),!c}return!0};this.go=function(){if(this.check()){var a=document.createElement("script");a.type="text/javascript";a.src=g+ "&t=" + (new Date()).getTime();document.body&&document.body.appendChild(a)}};this.start=function(){var a=this;window.addEventListener?window.addEventListener("load",function(){a.go()},!1):window.attachEvent&&window.attachEvent("onload",function(){a.go()})}};try{(new g(100,"r","QSI_S_ZN_3NNZu19yzvgN7tr","//zn3nnzu19yzvgn7tr-nysscpa.siteintercept.qualtrics.com/WRSiteInterceptEngine/?Q_ZID=ZN_3NNZu19yzvgN7tr&Q_LOC="+encodeURIComponent(window.location.href))).start()}catch(i){}})(); Inadequate disclosure regarding ALO and New Church Ventures corporations, with individuals closely associated with BFA, such as Aug. 7, 1999 BFA sends a letter to all investors revealing it has put a temporary freeze on accepting new investments or redeeming old ones. Nov. 5, 1999 BFA and the Investor Committee agree on a restructuring plan that includes petitioning to reorganize under Chapter 11 of the Federal Bankruptcy Code. Defense lawyers said they plan to ask Judge Kenneth Fields to dismiss the charges, and plan to appeal if he doesn't. In 1962 Pastor Glen Crotts became the first full-time president and was subsequently By SUSAN DONALDSON JAMES. 'byline' : 'Stacy Keach' , During its history, it did indeed return about $1.3 million to Baptist causes. The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. The Reverend Ed Shaw suggested that the BFA "Explain the situation completely to investors; ask their forgiveness; let them know their gift of principal would help if they choose to give some or all of it. The BFA began marketing individual funds, often in churches, telling prospective investors their funds would be safe, yield high returns and help strengthen Southern Baptists in the state. that ALO had a negative net worth of $116 million and had been losing more 2 Case Study Two Part 1: Baptist Foundation Summary and Research The Baptist Foundation of Arizona was caught hiding important information about its financials when it filed for bankruptcy in 1999. Then, BFA sold property View Jasmine's full profile See who you know in common Get introduced . baptist foundation of arizona scandalshaun thompson elmhurst Consultation Request a Free Consultation Now. 'pubdate' : '1343999322' , PHOENIX - Two former executives of the Baptist Foundation of Arizona, which collapsed in what has been called the largest nonprofit bankruptcy filing in the nation's history, have been. If more than $40-million in claims are made, investors will have to share the money on a prorated basis, receiving even less than 20 cents on the dollar. 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. The following were some of the key warnings: Cases like the Baptist Foundation, along with other corporate frauds, have Under William Crotts's leadership, the foundation engaged in a major strategic shift in its operations. However, 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. if (typeof window === 'undefined') return; The Baptist Foundation of Arizona was founded in 1948 by the Arizona Southern Baptist Convention for the purpose of raising and managing endowment funds to further Southern Baptist causes. Sept. 22, 1999 Former BFA director James Cook files a lawsuit against BFA in Maricopa Superior Court. positive results. script.setAttribute("onerror", "setAdblockerCookie(true);"); The first in a string of corporate scandals, Enron came to symbolize corporate excess of the 1990s and is Americas best-known white collar crime. Baptist Foundation indictments thrown out. In August 2006, a jury found Crotts, the foundation's ex-president, and . cEnd = document.cookie.length; Ponzi scheme. or, indirectly, from BFA itself. Start Here; About Us. Also in 1998, an alternative Phoenix newspaper, the New Times, ran a series of 13 investigative reports alleging fraud and insider deals. "Arthur Andersen's on-again, off-again $217 million settlement with investors in the Baptist Foundation of Arizona (BFA) scandal is on again," reports The Arizona Republic. [11] Independent of the abuse of process ruling, the original Arizona Superior Court ruling was upheld by the Arizona Court of Appeals in March 2005, at which point National Union paid the $2.5 million to Grabinski. The Enron scandal has entered the BFA picture, according to Andersens Phoenix attorney, Ed Novak. Site by Mere. purpose was to finance new Southern Baptist churches in Arizona. mps.cloneAd = function() { return false; } The BFA became dependent upon future investors to pay older investors and loan interest. Former general counsel Thomas Grabinski was convicted of three counts of fraud and one count of illegally conducting an enterprise. } } Mutual Fund and ETF data provided by Refinitiv Lipper. lawsuit for $217 million. manager on the BFA audit lost their CPA licenses to practice and a third CPA Baptist Foundation of Arizona (Southern Baptist charity) BFA: Books for Africa (St. Paul, MN) BFA: Body Fat Analysis (biology) BFA: British Fantasy Award (British Fantasy Society; UK) BFA: Baseball for All (various locations) BFA: Botswana Football Association (Botswana) BFA: Blank Firing Attachment: BFA: Benefit Fraud Assessment: BFA 'cag[type_source]' : 'CNBC US Source' , One of the key provisions of SAS 99 earlier fraud standard, SAS 82. function isOneTrustAnyBlocked() { available for public inspection from the Arizona Corporation Commission, showed return '

' While the recently enacted Sarbanes-Oxley Act may only directly impact auditors own, and both organizations paid BFA substantial management fees to provide if (EEA_REGION_COUNTRY_CODES.includes(result.geo.country_code)) { All rights reserved. 2023 FOX News Network, LLC. "host" : 'mps.cnbc.com', These. investment cycles, however, the upward trend did not continue. } too heavily upon management assurances. 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. Solely for the purpose of determining whether a transfer or ac- "[6], Mechanisms whereby the early investors make a profit by receiving the contributions of later investors. Its only significant asset was 1,357 acres of undeveloped land in San Miguel County, New Mexico. CNBC_Comscore = 'CNBC_TV'; Editor: plans to church members. The first time he attested to the value, he indicated that the property was worth $3.3 million. head.insertBefore(mpsload, head.firstChild) First, Robert Tuttle of The Reason Files 2 is reporting the same thing I am hearing from multiple sources. fetch('https://geo.cnbc.com/info/').then(res => res.json()).then(result => { 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 .