We want to hear from you. outside an entity that suggests the possibility that management fraud may leadership, the foundation engaged in a major strategic shift in its business. People of faith vulnerable to 'affinity frauds,' authorities say. var _qs = window.location.href; } 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. return false; 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. The entities had no employees of their Star Stacy Keach (voice) See production, box office & company info Add to Watchlist Photos Global Business and Financial News, Stock Quotes, and Market Data and Analysis. 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. Redirecting. aside any prior beliefs as to managements honesty. 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. But the foundation has operated independently of the convention, and state regulators say it is unlikely that the statewide group would be held liable for the foundations actions. Crotts, one of three remaining defendants pleading innocent, says he was an innocent victim who himself lost $800,000. detect fraud. if (EEA_REGION_COUNTRY_CODES.includes(result.geo.country_code)) { isEEARegionCheck(); The following were among the major GAAP violations alleged by (Phoenix, Ariz. - June 10, 2009) Attorney General Terry Goddard today announced that the Arizona Court of Appeals has upheld the convictions and sentences of former Baptist Foundation of Arizona executives William Crotts and Thomas Grabinski. See Church Loan Guidelines for details or download a Church Loan Application. cEnd = document.cookie.length; Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation 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. if (cStart !== -1) { 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. We are unable to fully display the content of this page. from the Baptist Foundation Fraud. Accusations of New IFB being a cult were also made by former New IFB preacher Adam Fannin, who left after the Romero scandal in January 2019. 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. By watching and reviewing the videos about the Baptist Found of Arizona (BFA), I noticed that Arthur Andersen was used to pay interest on old money. The New Independent Fundamental Baptist Movement (New IFB) was spearheaded in part by Steven Anderson, another well-known anti-LGBTQ pastor. One of the key provisions of SAS 99 Date.now() : (function() { return +new Date })(); 'cag[type_creator]' : 'Stacy Keach' , 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 BFA won a religious exemption from both Arizona statutes governing securities and banking laws. Login Here. 3210 E. Guasti Road Ontario, 91761 View on map. "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. })(); Still it functioned much like a financial institution, raising funds through sale of investment agreements and mortgage-backed notes, which in turned were invested in real estate. In 1948, the Baptist Foundation of Arizona was founded in 1948 and initially sought to provide a financial revenue for participants while supporting Baptist-motivated causes. to these companies and received notes receivable that were recorded at the The principal allegation of the lawsuit is that Arthur Anderson ignored clear signs and evidence that one of its clientsthe Baptist Foundation of Arizona (BFA)was engaged in ongoing fraud . ALOs stated purpose was to develop real estate. The new company will, like its not-for-profit predecessor, invest its assets in real estate, venture-capital deals, and some equities. More specifically, the litigation was brought by Arizona's Corporation Commission (Securities Division), as well as the state's attorney general. A BFA liquidation trust was set up to sell off assets to allow investors to recover part of their money. Site by Mere. [4], The BFA sold property to the elderly that was marketed as a retirement community with a nursing home. The newspaper also quoted Arizona Corporation Commission Chairman Bill Mundell as saying, How do you break the news to an elderly couple who risked their life savings? Lessons These. owed BFA significant amounts of notes receivables. var script = document.createElement("script"); statements. console.log('PUB-GDPR-CHECK oneTrustCookie: ', oneTrustCookie); One of ALOs primary purposes was to buy and hold non-producing or overvalued investments in real estate so BFA could avoid writing them down as losses. Arizona Officials Say Andersen Auditors Played Role in Fraud by a Baptist Group. } const ONE_TRUST_COOKIE_NAME = 'OptanonConsent'; Under William Crotts Third point is "Baptist Foundation of Arizona". var CNBC_MPS_FRANCHISE_TAG='american_greed'; Two of the most significant entities set up to hide BFAs nonperforming 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. if (typeof window === 'undefined') return; for Southern Baptist causes. The Baptist Foundation of Arizona was founded in 1948 to raise money to back up Baptist causes and to pay a return for investors. During its history, it did indeed return about $1.3 million to Baptist causes. 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. 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. statements for periods beginning on or after December 15, 2002, and earlier Several accountants and one attorney became concerned enough to approach senior management about ALOs deficit. In order to remove those loans from its books, the BFA secretly funneled money to a subsidiary. succeeded in 1984 by his son, William P. Crotts. Baptist Foundation of Arizona Scandal Andersen ignored a CPA's uncovering of fraud and gave clean audit opinions. Quotes displayed in real-time or delayed by at least 15 minutes. The previously announced cash out plan is shelved after talking to more than 4,000 investors. The subsidiary then used that money to purchase the loans from the parent company. 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 . const name = ONE_TRUST_COOKIE_NAME; Unfortunately, the issuing of unqualified opinions, even after receiving if (typeof mps.getAd != "function") mps.getAd = function(adunit) { 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. 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Napolitanos office began its legal initiatives against Andersen on behalf of the Arizona Accountancy Board in December 2000 over allegations the firm failed to conduct proper audits on BFAs financial statements. mpsload.src = "//" + mpsopts.host + "/fetch/ext/load-" + mpscall.site + ".js?nowrite=2"; Under his leadership, the organization held strict moral values, including its officers being forbidden to gamble or drink alcohol. The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. (function() { 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 . if (!mps._ext || !mps._ext.loaded) { the villa pacific palisades, ca. mps.__intcode = "v2"; You have to deal with the embarrassment of it, the cleanup of it, but it doesnt put you out of business., Debra E. Blum is a freelance writer and has been a contributor to, An Update for Readers on Our New Nonprofit Status. for (var i in mps.response.dart.adunits) { Aug. 30, 1999 Pastor Richard A. Kimsey and his wife file a lawsuit charging the BFA with running an investment sales Ponzi scheme. 'cag[brand]' : 'none' , 'cag[attribution_source]' : 'CNBC US Source' , } else { or subscribe. have a responsibility to expand their work to obtain independent corroborating Dec. 16, 1999 BFA committee proposes to form a new corporation to sell off its assets, to repay its debts and then cease operations. 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. .filter(categoryPreference => !categoryPreference.includes('0_') && categoryPreference.includes(':0')) } (function(){ Investors who agree to receive any money recovered in such litigation must give up their rights to pursue other legal action against the foundation, such as joining the two class-action lawsuits that have already been filed against the foundation and its affiliates. The audit team must put BAPTIST FOUNDATION OF ARIZONA The Baptist Foundation of Arizona (BFA), which Andersen served as auditor, lost $570 million of donor funds. PC Phone Home .split(',') MVPNs were marketed with the notion that they received a higher than average yield and that part of the investment's return was used for God's mission. The auditors were Arthur Andersen, the same firm that audited Enron. "[6], Mechanisms whereby the early investors make a profit by receiving the contributions of later investors. If you continue to experience issues, contact us at 202-466-1032 or help@chronicle.com. 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. The Baptist foundation began selling investment products to church members in 1983. baptist foundation of arizona scandal. 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. mps._queue.refreshads = mps._queue.refreshads || []; 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). financial assistance was not expected to come from any other source. disguise BFAs tenuous financial condition. The foundations statement also acknowledges past wrongdoing, saying that the organization concealed money-losing investments by transferring them to affiliated companies. 'cag[project_management_team]' : 'CNBC US Team' , Got a confidential news tip? be taking place requires a higher degree of due diligence by auditors. accounting, marketing, and administrative services. In 1962, Pastor Glen Crotts became the organization's first president. Over a period of several years, the management of the Baptist Foundation 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,". Its bankruptcy late in 2001 caused about 4,000 employees to lose their jobs, while stock losses wiped out their retirement savings and prompted many business reforms. same time, it accelerated its efforts to sell IRA-type retirement investment Andersen opposed that request in court, the trust said; the Arthur Andersen Internet site, meanwhile, makes no mention of its latest BFA actions. 1991 to 1994 statements and an adverse opinion on the 1995 to 1997 financial }; On this Wikipedia the language links are at the top of the page across from the article title. Perceiving a lack of response, most resigned. 'keywords' : '~' , By 1996, ALO was more than $100 million in debt. CT previously covered the scandal involving Jack Schaapformer pastor of the largest independent Baptist congregation, First Baptist Church of Hammond, Indianawho was fired in 2012 and . Prosecutors said investors were promised high returns and a safe investment for using their money to build churches and retirement homes, but their combined losses totaled more than a half-billion dollars. 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. Kyle Cooper. var mpscall = { In 2002 Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron. We look forward to serving you! 'content_id' : '100000099' , receivables only because of funds being obtained from either New Church Ventures, It expects that its preferred stock will start paying annual dividends of 6 per cent by 2002. Its initial mission was to raise donations and support In a short time, it had created a complicated web of dozens of interlocking non-profit and for-profit subsidiaries to operate its real-estate and other investment deals. mps._queue.gptloaded = mps._queue.gptloaded || []; const COOKIE_REGEX = /groups=([^&]*)/; real estate properties were ALO and New Church Ventures. 'id' : '100000099' , Three former BFA officials have pleaded guilty to felonies in the case while Crotts and four others face fraud and racketeering charges. typeof mps._gptfirst == "function" && mps._gptfirst(adunit, slotid); }; Also in 1998, an alternative Phoenix newspaper, the New Times, ran a series of 13 investigative reports alleging fraud and insider deals. var slotid = "mps-getad-" + adunit.replace(/\W/g, ""); 'cag[related_primary]' : '' , the auditors would have discovered that ALO was insolvent. At the time BFA filed for bankruptcy in November 1999, it had total liabilities of approximately $650 million and listed assets of approximately $290 million. Then, BFA sold property const oneTrustCookie = getOneTrustCookie(); [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. Griebel said she left messages at Andersens offices in Phoenix and Chicago warning the Foundation was broke, but they were never answered. Robert H. Colson, PhD, CPA June 2, 2010, 9:03 AM. A grand jury in April 2001 returned indictments charging former BFA officials with 32 counts of fraud, theft and racketeering. At the time of its failure in 1999, it was the largest affinity fraud that had ever occurred in the United States, with a total loss estimated at US$550 million (equivalent to $895 million in 2021). The 1996 information, a complex mesh of over 90 insider-controlled entities had been used to help 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. Wednesday, June 10, 2009. This material may not be published, broadcast, rewritten, or redistributed. Investors take a leap of faith and believe their money will be secure. Mutual Fund and ETF data provided by Refinitiv Lipper. Feb. 19, 2002 4:00 pm ET. "They had their faith shattered and faced the possible loss of all their retirement investments.". } document.addEventListener("DOMContentLoaded", function(event) { To this day, it is considered one of the largest affinity frauds in U.S history. The foundation's bankruptcy marks one of the biggest financial collapses ever by a charity. The foundation was created in 1948 by the Southern Baptist Convention to administer endowments to the church. The BFA was not interested in making this purchase. mps._urlContainsEmail = function() { implementation is being urged. Jalma Hunsinger, President and Director of Church Ventures (a company whose stated purpose was to build churches), paid $150,000 (equivalent to $196,000 in 2021). "[6] Elder law attorney Leas wondered why BFA would sell the elderly, "an investment that would tie up more than two-thirds of their non-residential assets in an investment that would be unavailable for five years! Inadequate disclosure of losses on notes receivables due Both ALO and New Church Ventures Baptist Foundation indictments thrown out. 'cag[type_source]' : 'CNBC US Source' , })(); Last July, two executives from the Baptist Foundation of Arizona were convicted of fraud and racketeering after more than 11,000 investors lost more than $550 million perhaps the largest case of Christian fraud in American history. Start Here; Testimonials; Contact Us; Start Here; Testimonials; Contact Us; Location. A new management committee of Joe Panter, Mark Roberts and Mark Dickerson is installed. Aug. 28, 1999 The BFA board of directors votes to terminate the employment of William Crotts, Thomas Grabinski, and Donald Deardorff. 'type' : 'mobile: episode' , Tuesday, September 5, 2006. Sept. 20, 1999 Pastor Richard A. Kimsey amends his lawsuit against BFA to include the Arizona Southern Baptist Convention and Steve Bass, executive director treasurer of the conventions Executive Board. In a March 29 statement, the day after receiving notice from Andersen, the trust said one of the first steps will be to ask the mediator who presided over the settlement negotiations, retired federal judge Layn Phillips, to rule that Andersen has breached the agreement and to order Andersen to pay the $217 million as promised.. sale of these IRA-type investments, from $7.2 million in 1984 to $211 million Money & Investing. In 1992, records indicated that the company had lost $3.2 million due to questionable transactions. 'stitle' : 'Religious Prey | Dr. Mikos: American Greed 5' , }; Some Baptist leaders worry that fund-raising efforts by Baptist agencies and local churches may be hampered not only by ill will created by the foundations troubles, but also simply because some donors will not have money to give. Auditors must broaden the range of information that } The BFA became dependent upon future investors to pay older investors and loan interest. The second time, on the same day, he declared the same piece of property was valued at $960,000.[4]. Among Southern Baptists in Arizona and the neighboring states, where many of the investors live, the impact of the case may be more direct. Improving and strengthening fraud detection is at the heart The collapse of Bryant Financial Associates was a complete scandal that exposed the fraudulent activities of its executives. 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.. Pope Francis I said in an interview with the Associated Press that "homosexuality is not a crime" and encouraged bishops to stop practicing forms of conversion therapy. var pixelurl = ((document.location.protocol === 'https') ? } 'path' : '/id/100000099' , Second, Two years earlier, the Baptist Foundation of Arizona also failed, wiping out savings of 11,000 investors that had $570 million in the fund. 'template' : 'special_reports' , Novak contended that Andersen and its insurance company are two separate entities, The Republic reported, while Napolitano depicted the two as one and the same and thus Andersen in actuality is reneging on the settlement. if (result && result.geo && result.geo.country_code) { console.log('PUB-GDPR-CHECK oneTrustCookie matches: ', matches); Investors Lost Millions in Church Fraud Executives Sentenced. //end OneTrust Redirect The Baptist Foundation of Arizona -- a non-profit fundraiser dedicated to the church. 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. Sept. 20, 1999 Pastor Richard A. Kimsey amends his lawsuit against BFA to include the Arizona Southern Baptist Convention and Steve Bass, executive director treasurer of the convention's Executive Board. It is expected to last until at least March, with an estimated cost of $1.6 million to Arizona taxpayers. return ''; 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 foundation halted security sales in August, however, when state regulators found that it did not have the money to cover its debts to investors. The CPA Journal. fiduciary requirements governing nonbank passive trustees of IRAs. Also, as a condition to the court-approved arrangement, the partner and the Its only significant asset was 1,357 acres of undeveloped land in San Miguel County, New Mexico. corporations, with individuals closely associated with BFA, such as Anderson asked for the documents and BFA officials refused to provide them. 1 (803) 227-6197 kcooper@mybfsc.org. For example, the Phoenix New Times reported a case wherein an individual wanted to sell a US$1.9M (million) piece of asbestos-contaminated property to the BFA for US$1 as a tax write off. Data is a real-time snapshot *Data is delayed at least 15 minutes. renewed efforts to prevent such accounting failings in the future. mps.response.dart.adunits[i].data = ''; Up to $40 million is available for the cash-out plan. He is pastor of Faithful Word Baptist Church, an anti-LGBTQ hate group in Tempe, Arizona. Sept. 22, 1999 Former BFA director James Cook files a lawsuit against BFA in Maricopa Superior Court. Powered and implemented by FactSet Digital Solutions. 2023 Southern Baptist Convention. 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. July 19, 1999 BFAs board votes to suspend its offer and sale of securities. 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. The Baptist CNBC_Comscore = 'CNBC_TV'; . The foundations plan -- which is still subject to approval by investors -- includes one other way people might get back some of their money: litigation. "true" : "false") + "; expires=" + d.toUTCString() + "; path=/"; A smaller-but-similar scandal hit Baptists in the 1990s, when 11,000 investors in the Baptist Foundation of Arizona fell victim to a $550 million Ponzi scheme. Aug. 27, 1999 A class action lawsuit filed by investor Franklin Kestner Sr. charges the BFA bilked investors by funneling their money into projects that resulted in personal gain and profit for BFA officers. A total of $40-million is available to those who choose to cash out. their life savings. head.insertBefore(mpsload, head.firstChild) 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.. } PHOENIX -- In 1999, Richard Kimsey and his wife, Susan, deposited $100,000 with a Phoenix-based Southern Baptist agency that promised to do the Lord's work. el.parentNode.insertBefore(s, el); to mitigate the real estate losses. 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. that audit public companies, in todays environment it is more important } 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. Here we see that Andersen chose to victimize BFAs victims yet again.. var CNBC_Premium = CNBC_Premium || {}; })(); About 11,000 investorsmany of them elderly members of Baptist churches in Arizona and elsewherelost more than $550 million. if (!oneTrustCookie) return true; . In BFAs early days, it focused its attention in 1985, which highlights just how dramatically the foundations mission from ALO and New Church Ventures (SFAS 5. Reglious Prey: Baptist Foundation of Arizona. }); The Arizona Baptist Foundation. 'https' : 'http') + '://pix.nbcuni.com/a-pii.gif?X=piiblock&S=' + mps.pagevars.instance + '&P=' + mps.pagevars.mpsid + '&A=' + i + '&U=' + encodeURIComponent(window.location.href) + '&_=' + window._mpspixZ; 'adunits' : 'Default' , Things are moving quickly now in the sex scandal involving the three oldest sons of Steven Anderson of Tempe, Arizona's favorite SPLC hate group Faithful Word Baptist Church. Baptist Group Execs Sentenced for Fraud. In BFA's early days, it focused its attention