return _regex.test(_qs); [1], Each of these related companies had Bill Crotts and the BFA's chief attorney, Tom Grabinski, on their board. 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. 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 . financial assistance was not expected to come from any other source. 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. 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. return ''; investment cycles, however, the upward trend did not continue. In 1998 Deeann Greibel, a financial planner and CPA in Mesa, Ariz., looked into BFA finances on behalf of a client and found it was heavily underwritten with IOUs. 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. } Baptist Group Ex-Leaders Guilty of Fraud. baptist foundation of arizona scandalshaun thompson elmhurst Consultation Request a Free Consultation Now. Aug. 30, 1999 Pastor Richard A. Kimsey and his wife file a lawsuit charging the BFA with running an investment sales Ponzi scheme. }; head.insertBefore(mpsload, head.firstChild) Presented a detailed analysis of The Baptist Foundation of Arizona scandal and won first place among five teams. Investors in the Baptist Foundation of Arizona, which went belly-up in 1999 in the largest nonprofit bankruptcy in history, are suing Arthur Andersen, the foundation's auditors, for covering up the fact that the foundation was a fraud. It eventually grew into an independent nonprofit organization that sold individual retirement accounts and other investments. (function(){ 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. bounce back, but by the mid-1990s the only phenomenon that kept BFAs from the Baptist Foundation Fraud. [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. For example, Select Trading Group, a subsidiary of ALO, created its own subsidiary, Santa Fe Trails Ranch II. 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 . 1 (803) 227-6197 [email protected]. In 1989, Arizonas 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. July 2, 1998 December 10, 1998 Arizona Corporation Commission begins an investigation of BFA based on the Phoenix NewTimes reports. statements. View MLA Baptist Foundation of Arizona Scandal.docx from EDUCATION EDC 101 at Grand Canyon University. than ever for auditors to employ sound fraud-detection audit procedures in View Jasmine's full profile See who you know in common Get introduced . "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. Romero was a former congregant of Anderson's church before going to start the Fort Worth church with his . The second time, on the same day, he declared the same piece of property was valued at $960,000.[4]. 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. The real estate market did Baptist Group Execs Sentenced for Fraud. } 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. Aug. 11, 1999 The Arizona Republic reports the foundations funds have been frozen as a result of the investigation. 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. 'id' : '100000099' , In one year, there was an amazing increase in the Looming losses hidden in off . about the Baptist Foundation of Arizona. 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). }); var script = document.createElement("script"); BFA, an agency of the Arizona Southern Baptist Convention, was founded in 1948 to raise and manage endowments for church work in Arizona. in that it represents the largest cash settlement for a nonprofit case and A few days later, the Kimseys' money had all but vanished. Both ALO and New Church Ventures By 1996, ALO was more than $100 million in debt. with a questioning mind, recognizing the possibility that fraud may be present, propertys book value, not its diminished current value. operations from collapsing was a constant influx of new investor money that 'keywords' : '~' , Audit. renewed efforts to prevent such accounting failings in the future. Two year earlier than Enron scandal, the Baptist foundation of Arizona also failed. The BFA was not interested in making this purchase. or subscribe. //end OneTrust Redirect These. (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 cStart = cStart + name.length + 1; Synopsis The Baptist Foundation of Arizona (BFA) was organized as an Arizona nonprofit organization primarily to help provide financial support for various Southern Baptist causes. if (!oneTrustCookie) return true; real estate in exchange for notes receivable valued in the millions of dollars. The BFA carried out a number of illegal activities in perpetrating affinity fraud against Southern Baptist worshipers in Arizona. For example, on one day Grabinski attested to the value of a piece of property twice. More specifically, the litigation was brought by Arizona's Corporation Commission (Securities Division), as well as the state's attorney general. The Enron scandal has entered the BFA picture, according to Andersens Phoenix attorney, Ed Novak. var _qs = window.location.href; 2023 FOX News Network, LLC. 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. incorporated both nonprofit entities. Redirecting. 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. A BFA liquidation trust was set up to sell off assets to allow investors to recover part of their money. mps.__intcode = "v2"; detect fraud. 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.. In applying SAS 99, auditors should plan and execute every audit It expects that its preferred stock will start paying annual dividends of 6 per cent by 2002. isEEARegionCheck(); all audit engagements. An increased focus on professional skepticism in gathering sale of these IRA-type investments, from $7.2 million in 1984 to $211 million We are unable to fully display the content of this page. Inadequate disclosure of losses on notes receivables due The Arizona Baptist Foundation. mpsload.id = "mps-load"; The company will be organized to hold the foundations existing assets, which are estimated to be between $160-million and $200-million. Defense lawyers said they plan to ask Judge Kenneth Fields to dismiss the charges, and plan to appeal if he doesn't. (function() { fetch('https://geo.cnbc.com/info/').then(res => res.json()).then(result => { if (result && result.geo && result.geo.country_code) { Three former BFA officials have pleaded guilty to felonies in the case while Crotts and four others face fraud and racketeering charges. evidence. Ponzi scheme. console.log('PUB-GDPR-CHECK all blocked. } } [14] Christianity Today reported that the timing of this court approved settlement avoided "the worst case scenario for Baptist Foundation investors" of Andersen being convicted in its then ongoing criminal case regarding its audits of Enron, then quickly filing "for bankruptcy-court protection" from any civil lawsuits not yet settled in a court. Another important provision of SAS 99 is that auditors should talk to employees, Sept. 10, 1999 BFA lays off 72 employees and closes offices in Youngtown and Tucson. Sentencing was set for Sept. 29. Auditors must exchange This material may not be published, broadcast, rewritten, 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. if (mps.response && mps.response.dart && typeof(mps.response.dart.adunits) === 'object') { CNBC_Comscore = 'CNBC_TV'; if (!matches) { Who We Are; The Team . "[1] Since he was working for both companies, Grabinski was able to authorize questionable transactions. )+[a-zA-Z]{2,}))/; owed BFA significant amounts of notes receivables. 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.. At the center of the scandal is Crotts, a charismatic 53-year-old lawyer, who took over the BFA from his father in 1982. var dynamic_yield_enabled = 1 Mutual Fund and ETF data provided by Refinitiv Lipper. 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. is an increased emphasis on professional skepticism. "[6], Mechanisms whereby the early investors make a profit by receiving the contributions of later investors. (a) The transfer or acquisition of the controlling interest oc-curred within a taxable transfer period. Since August, the foundation has fired its top three officials, severed ties with the law and accounting firms with which it had worked, laid off 72 of its 127 employees, and closed its two branch offices. 'cag[device]' : 'mobile-touch' , 2023 CNBC LLC. Under Bill Crotts, the organization diverted over $140 million to two former and one active (as of 1998) director. Improving and strengthening fraud detection is at the heart The settlement also would have been the second largest ever paid by a Big Five accounting firm to settle litigation not associated with the savings & loan crisis. the firm should have issued either a qualified or an adverse opinion on the .filter(categoryPreference => !categoryPreference.includes('0_') && categoryPreference.includes(':0')) "host" : 'mps.cnbc.com', The person did not actually purchase the property, but purchased the right to occupy said property. Over a period of several years, the management of the Baptist Foundation All rights reserved. The foundations statement also acknowledges past wrongdoing, saying that the organization concealed money-losing investments by transferring them to affiliated companies. Watch how the . if (typeof(window._mpspixZ) != 'string') { PHOENIX Two former executives with the Baptist Foundation of Arizona were sentenced to prison Friday and ordered to repay millions for defrauding thousands of investors in a botched. mps._adsheld.push(adunit) script.setAttribute("onerror", "setAdblockerCookie(true);"); Anderson asked for the documents and BFA officials refused to provide them. on funding church start-ups and providing aid for children and the elderly. var s = document.createElement("script"), el = document.getElementsByTagName("script")[0]; Its initial mission was to raise donations and support honesty and integrity. Got a confidential news tip? In BFA's early days, it focused its attention Payments were being made on the Napolitanos news release said she will seek the administrative equivalent of the death penalty for Andersen in Arizona by asking the state Board of Accountancy to revoke the firms registration. if (typeof adunit != "string") return false; mps._log('**** LOADED: Google PII Fix - cnbc-cms-header-insert'); both in and outside of management. June 7, 2022 . aside any prior beliefs as to managements honesty. or redistributed. The BFA had issued millions of dollars in money-losing loans. 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. mps._queue.mpsloaded.push(function(){ Site by Mere. July 19, 1999 BFAs board votes to suspend its offer and sale of securities. Andersen blamed WorldCom for the scandal, insisting that the . Data is a real-time snapshot *Data is delayed at least 15 minutes. 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. A former BFA director 'cag[project_management_team]' : 'CNBC US Team' , 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. After a series of delays, a criminal trial for Crotts and Grabinski got underway in September 2005. Prosecutors estimated 11,000 investors, most of them elderly, were defrauded in the 1980s and 1990s. But a jury found them innocent on 23 counts of theft, saying they didn't intend to steal from investors but got in over their heads and tried to cover it up. An unambiguous lesson from the BFA case is that the audit team cannot rely 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. Under William Crotts's leadership, the foundation engaged in a major strategic shift in its operations. was placed on probation, requiring that his work be monitored for two years was used to pay interest on old money. own, and both organizations paid BFA substantial management fees to provide mps._queue.mpsloaded = mps._queue.mpsloaded || []; In other words, it had become a classic } else { [12][13], In 2002, a judge in the civil court case of the BFA Liquidation Trust versus Arthur Andersen, the Big Five accounting firm that also failed to properly audit Enron, officially approved a settlement that would pay former BFA investors $217 million (equivalent to $327 million in 2021) for Andersen's failure to identify fraudulent activities at the BFA. relationships, transactions, and balances (SFAS 57. We look forward to serving you! By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL. The lead partner on Andersen's disputed 1985 audit of Lincoln was Jay S. Ozer, who also served as lead auditor of the Baptist Foundation of Arizona. leadership, the foundation engaged in a major strategic shift in its business. const oneTrustCookie = getOneTrustCookie(); In BFAs early days, it focused its attention is the cornerstone of a multifaceted effort by the accounting profession to head = document.head || document.getElementsByTagName("head")[0], mpsload = document.createElement("script"); [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. Reglious Prey: Baptist Foundation of Arizona. 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. Get this delivered to your inbox, and more info about our products and services. that ALO had a negative net worth of $116 million and had been losing more '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; Art Toalston is a writer based in Nashville and a former editor of Baptist Press. A total of $40-million is available to those who choose to cash out. Site by Mere. Thus, when people tried to sell it they could not because they did not own anything. 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.