baptist foundation of arizona scandal baptist foundation of arizona scandal

recently issued SAS 99, Consideration of Fraud in a Financial Statement Looking for your Investment Portal? Under William Crotts is an increased emphasis on professional skepticism. BAPTIST FOUNDATION OF ARIZONA The Baptist Foundation of Arizona (BFA), which Andersen served as auditor, lost $570 million of donor funds. (function() { assets were receivables from the insolvent ALO. When the BFA filed for bankruptcy in 1999, it had $530 million in liabilities as compared to a reported $70 million in assets. 'pubdate' : '1343999322' , PHOENIX (BP)The Enron collapse has reared its head in an Arthur Andersen announcement that the accounting firm is backing out of a $217 million settlement with victims of the Baptist Foundation of Arizonas 1999 collapse. Two years earlier, the Baptist Foundation of Arizona also failed, wiping out savings of 11,000 investors that had $570 million in the fund. "[1] Since he was working for both companies, Grabinski was able to authorize questionable transactions. mps._ext = mps._ext || {}; But it also "loaned" nearly $140 million to companies owned by three of the Foundation's directors. mps._queue = mps._queue || {}; or redistributed. Aug. 28, 1999 The BFA board of directors votes to terminate the employment of William Crotts, Thomas Grabinski, and Donald Deardorff. It's 5 a.m. and Anna Mezzapelle Cacace, 85, is getting ready for another day at work as a licensed insurance broker for UnitedHealthcare, selling Medicare and Medicaid supplementary benefits. .split(',') }; Andersen opposed that request in court, the trust said; the Arthur Andersen Internet site, meanwhile, makes no mention of its latest BFA actions. He is pastor of Faithful Word Baptist Church, an anti-LGBTQ hate group in Tempe, Arizona. Kyle Cooper. 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. 'cag[brand]' : 'none' , 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. Founded in 1948, BFA was created as a nonprofit agency of the Arizona Southern Baptist Convention. cStart = cStart + name.length + 1; By SUSAN DONALDSON JAMES. outside an entity that suggests the possibility that management fraud may 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. Auditors must exchange head.insertBefore(mpsload, head.firstChild) 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. const ONE_TRUST_COOKIE_NAME = 'OptanonConsent'; }; "updatecorrelator" : true 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. const matches = oneTrustCookie.match(COOKIE_REGEX); Crotts and Grabinski could face six to 23 years for each count. The CPA Journal. 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. var mps = mps || {}; 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 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. Defense lawyers said they plan to ask Judge Kenneth Fields to dismiss the charges, and plan to appeal if he doesn't. 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. For example, on one day Grabinski attested to the value of a piece of property twice. The Arizona Southern Baptist Convention was founded in 1928. 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. fetch('https://geo.cnbc.com/info/').then(res => res.json()).then(result => { 'adunits' : 'Default' , const oneTrustCookie = getOneTrustCookie(); 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. Aug. 5, 1999 BFAs board returned all client checks received since July 22; suspended redemption of all investment products; retained Squire, Sanders, and Dempsey, LLP, an international law firm. const blockedCategories = decodeURIComponent(matches[1]) New Era, which solicited investments largely from Christian institutions, folded in 1995 after taking in about $350-million in what had amounted to a Ponzi scheme. 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 . var slotid = "mps-getad-" + adunit.replace(/\W/g, ""); This caused a lot of people, more than 11,000 investors, to lose their life savings ($550 million). earlier fraud standard, SAS 82. d.setTime(d.getTime() + 60 * 60 * 24 * 30 * 1000); Crotts, one of three remaining defendants pleading innocent, says he was an innocent victim who himself lost $800,000. the villa pacific palisades, ca. The first time he attested to the value, he indicated that the property was worth $3.3 million. 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. lawsuit for $217 million. Mutual Fund and ETF data provided by Refinitiv Lipper. return false; than $20 million per year for several years. The settlement also would have been the second largest ever paid by a Big Five accounting firm to settle litigation not associated with the savings & loan crisis. real estate bubble burst and property values declined substantially. Some Baptist leaders worry that fund-raising efforts by Baptist agencies and local churches may be hampered not only by ill will created by the foundations troubles, but also simply because some donors will not have money to give. 'cag[attribution_author]' : 'Stacy Keach' , See Church Loan Guidelines for details or download a Church Loan Application. The Arizona Baptist Foundation. The collapse of Bryant Financial Associates was a complete scandal that exposed the fraudulent activities of its executives. console.log('PUB-GDPR-CHECK Blocked Categories: ', blockedCategories); Many were elderly and invested their retirement savings in the belief not only that their money was safe, but that part of their earnings would be put to use to advance the Lords work through planting of Southern Baptist churches. var _regex = /([^=&/<>()[].,;:s@"]+(.[^=&/<>()[].,;:s@"]+)*)@(([[0-9]{1,3}.[0-9]{1,3}.[0-9]{1,3}.[0-9]{1,3}])|(([a-zA-Z-0-9]+. 'cag[configuration_franchise]' : 'American Greed' , let cStart = document.cookie.indexOf(`${name}=`); var CNBC_Premium = CNBC_Premium || {}; mps.cloneAd = function() { return false; } 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. or subscribe. Southern Baptist Foundation Scheme in Arizona. same time, it accelerated its efforts to sell IRA-type retirement investment The 1996 information, 'nid' : '100000099' Transactions June 7, 2022 . 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. By 1997, ALO had a negative net worth of $138.9 and owed BFA $70.3 million 2023 Southern Baptist Convention. Login Here. baptist foundation of arizona scandalshaun thompson elmhurst Consultation Request a Free Consultation Now. The Baptist Foundation of Arizona was founded in 1948 to raise money to back up Baptist causes and to pay a return for investors. The majority of New Church Ventures mps.insertAd("#" + slotid, adunit) than ever for auditors to employ sound fraud-detection audit procedures in } 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. The foundation was created 51 years ago by the Arizona Southern Baptist Convention to raise money and manage the endowments of Southern Baptist charities, and through its history, the foundation has provided a total of $1.3-million in gifts to church causes. receivables only because of funds being obtained from either New Church Ventures, 3210 E. Guasti Road Ontario, 91761 View on map. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. PC Phone Home Text. document.getElementsByTagName("head")[0].appendChild(script); "These verdicts are a victory for thousands of victims who believed the promises made by the defendants," Attorney General Terry Goddard said in a statement. real estate properties were ALO and New Church Ventures. 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. return ''; with a questioning mind, recognizing the possibility that fraud may be present, View Notes - Baptist Foundation of Arizona from ACCT 2101 at Kennesaw State University. Auditors must broaden the range of information that In 2002 Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron. Site by Mere. mps._queue.gptloaded = mps._queue.gptloaded || []; 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. 'cag[template]' : 'special_reports' , Kimsey reportedly invested $100,000 with BFA. 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. to mitigate the real estate losses. . cEnd = document.cookie.length; Southern Baptist Media Day Added to SBC Calendar, Appalachian Church Boosted by Zions Cause Baptist Church in Western Kentucky, Southern Baptist Editors Challenged to Press On, Relationships, conversations key to sharing the hope of Christ, former missionary says, SBC DIGEST: Stolle to lead BCM/D; IMB pipeline tops 1,200, Spurgeon College basketball coach Billy Livezey wins Coach of the Year Award, FIRST-PERSON: Georgia Baptist bicentennial: Lamenting a heritage of racism and slavery, As Church Staffs Grow, Ministry Leaders Look to the Bible for Titles, Churches Declare Their Stance on Pastorship Through Ordination, Jesus Revolution heads into second weekend after 3rd-place box office opening, Second Daytona 500 win in three years shows moments matter in racing and life, Walgreens action on abortion pill falls short, ERLC says, ARITF releases video interview with Samantha Kilpatrick of Guideposts Faith-Based Solutions, SBC DIGEST: Unify Project prayer guide; Barber gives CP lesson at SBTC conference. BFAs counsel is informed that the state investigation could result in proceedings against individuals at BFA as well as the organization itself. var w=window;if(w.performance||w.mozPerformance||w.msPerformance||w.webkitPerformance){var d=document;AKSB=w.AKSB||{},AKSB.q=AKSB.q||[],AKSB.mark=AKSB.mark||function(e,_){AKSB.q.push(["mark",e,_||(new Date).getTime()])},AKSB.measure=AKSB.measure||function(e,_,t){AKSB.q.push(["measure",e,_,t||(new Date).getTime()])},AKSB.done=AKSB.done||function(e){AKSB.q.push(["done",e])},AKSB.mark("firstbyte",(new Date).getTime()),AKSB.prof={custid:"1320688",ustr:"",originlat:"0",clientrtt:"138",ghostip:"61.19.12.55",ipv6:false,pct:"10",clientip:"202.6.19.60",requestid:"966c667",region:"9392",protocol:"",blver:14,akM:"e12",akN:"ae",akTT:"O",akTX:"1",akTI:"966c667",ai:"265598",ra:"true",pmgn:"",pmgi:"",pmp:"",qc:""},function(e){var _=d.createElement("script");_.async="async",_.src=e;var t=d.getElementsByTagName("script"),t=t[t.length-1];t.parentNode.insertBefore(_,t)}(("https:"===d.location.protocol?"https:":"http:")+"//ds-aksb-a.akamaihd.net/aksb.min.js")}. // check for region and redirect if country is in EEARegion 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. mps._queue.mpsloaded.push(function(){ Both ALO and New Church Ventures 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. if (cStart !== -1) { if (typeof adunit != "string") return false; This settlement takes on a sad historical significance 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. The company will be organized to hold the foundations existing assets, which are estimated to be between $160-million and $200-million. 'template' : 'special_reports' , To this day, it is considered one of the largest affinity frauds in U.S history. the firm should have issued either a qualified or an adverse opinion on the a complex mesh of over 90 insider-controlled entities had been used to help Click the link below to sign up for updates from Good Faith Media via our daily or weekly e-newsletters. [15] At the time, this settlement was the second largest settlement in the nation's history for a Big Five accounting firm that was not related to the Savings and Loan collapses of 1986 to 1995. 'cag[project_management_team]' : 'CNBC US Team' , With what are they going to make donations?. SAS 99 Also in 1998, an alternative Phoenix newspaper, the New Times, ran a series of 13 investigative reports alleging fraud and insider deals. 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. Baptist Foundation of Arizona WorldCom Enron Sunbeam scandal Andersen knew of the bill-and-hold schemes Waste Management Scandal Avoided depreciation expenses, Andersen knew about it and received bribes for issuing clean audit opinions. [5], The BFA sold certificates of deposit that were non-refundable during the life of the CD. First case: The Baptist Foundation of Arizona invests and loses millions entrusted by churchgoers, and its mission ends in scandal. [1], The Baptist Foundation of Arizona declared bankruptcy in 1999, citing $530 million in liabilities against $70 million in assets. The organization did this through the use of over 63 different public and private organizations all directly affiliated with the BFA. return true; Editor: the Arizona Corporation Commission as required by state law. if (typeof mps.getAd != "function") mps.getAd = function(adunit) { const OneTrustCategories = { This material may not be published, broadcast, rewritten, Sept. 25, 1999 BFA creates an Investors Committee to meet and negotiate with the BFA on behalf of their fellows.. evidence. 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. purpose was to finance new Southern Baptist churches in Arizona. mps.__timer = Date.now ? Andersens effort to back out of the BFA settlement focuses on its wholly owned Professional Services Insurance Co. in Hamilton, Bermuda. plans to church members. Among Southern Baptists in Arizona and the neighboring states, where many of the investors live, the impact of the case may be more direct. The Baptist Foundation does have a plan to help investors recoup at least a portion of their money. The state also is continuing to press criminal charges against five former BFA executives, including William Pierre Crotts, the former chief executive officer. "[6], Mechanisms whereby the early investors make a profit by receiving the contributions of later investors. It eventually grew into an independent nonprofit organization that sold individual retirement accounts and other investments. The foundation was created in 1948 by the Southern Baptist Convention to administer endowments to the church. Tuesday, September 5, 2006. On this Wikipedia the language links are at the top of the page across from the article title. statements for periods beginning on or after December 15, 2002, and earlier In August 2006, a jury found Crotts, the foundation's ex-president, and . Anderson asked for the documents and BFA officials refused to provide them. One pastor who had recently entrusted $1 million in church funds to. 2 Case Study Two Part 1: Baptist Foundation Summary and Research The Baptist Foundation of Arizona was caught hiding important information about its financials when it filed for bankruptcy in 1999. all audit engagements. Aug. 27, 1999 A class action lawsuit filed by investor Franklin Kestner Sr. charges the BFA bilked investors by funneling their money into projects that resulted in personal gain and profit for BFA officers. First, Robert Tuttle of The Reason Files 2 is reporting the same thing I am hearing from multiple sources. The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. Nov. 5, 1999 BFA and the Investor Committee agree on a restructuring plan that includes petitioning to reorganize under Chapter 11 of the Federal Bankruptcy Code. helped to further accelerate the demise of a once prestigious and great firm. An increased focus on professional skepticism in gathering if (EEA_REGION_COUNTRY_CODES.includes(result.geo.country_code)) { Convention required BFA to be a profitable, self-sustaining independent entity. Your investment actually touches the lives of countless numbers while you earn a very attractive interest rate. 'is_content' : '1' , Clearly no. 'byline' : 'Stacy Keach' , window.location.href = `/opt-in-check?pub_referrer=${encodeURIComponent(url)}`; 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. Superior Ct. Maricopa County, CV 2002-005117. Star Stacy Keach (voice) See production, box office & company info Add to Watchlist Photos former board members, controlling these new companies. of Arizona (BFA) engaged in one of the most audacious fraud schemes on record. for Southern Baptist causes. Here we see that Andersen chose to victimize BFAs victims yet again.. Under Bill Crotts, the organization diverted over $140 million to two former and one active (as of 1998) director. 'keywords' : '~' , "They had their faith shattered and faced the possible loss of all their retirement investments.". If the audit team had obtained copies of ALOs detailed financial statements, of fraud and even more critical to engage in effective audit procedures to A few days later, the Kimseys' money had all but vanished. At the center of the scandal is Crotts, a charismatic 53-year-old lawyer, who took over the BFA from his father in 1982. Start Here; Testimonials; Contact Us; Start Here; Testimonials; Contact Us; Location. By 1996, ALO was more than $100 million in debt. In order to remove those loans from its books, the BFA secretly funneled money to a subsidiary. A report has been made to law enforcement, and I'm guessing . TARGETED_ADS: 4, Bob Allen is managing editor of EthicsDaily.com. if (window.mps) { } else { })(); Legal Statement. A total of $40-million is available to those who choose to cash out. CNBC_Comscore = 'CNBC_TV'; 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. 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 . '); 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. 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. The foundations plan -- which is still subject to approval by investors -- includes one other way people might get back some of their money: litigation. 'title' : 'American Greed: Religious Prey: Baptist Foundation of Arizona | Medical Scams' , function getOneTrustCookie() { BFA, an agency of the Arizona Southern Baptist Convention, was founded in 1948 to raise and manage endowments for church work in Arizona. In a Good bank-bad bank scheme, the two companies manipulate transactions to favor the public institution while using the "bad bank" to hide the deficiencies. head = document.head || document.getElementsByTagName("head")[0], mpsload = document.createElement("script"); The BFA now owes investors $200 million more than it did in 1995. [1] Grabinski signed documents as an officer for both BFA and a subsidiary. Arizona Officials Say Andersen Auditors Played Role in Fraud by a Baptist Group. }); The BFA was associated with the Arizona Southern Baptist Convention, which was affiliated with the national organization. While the recently enacted Sarbanes-Oxley Act may only directly impact auditors if (typeof window === 'undefined') return; BFAs liabilities included approximately $585 million owed to investors. Site by Mere. For example, Select Trading Group, a subsidiary of ALO, created its own subsidiary, Santa Fe Trails Ranch II. The Baptist Foundation of Arizona filed for bankruptcy in federal court last week, owing nearly $600-million to 13,000 people who had bought securities from the organization. [9], In 2002, Grabinski sued BFA's insurance carrier, National Union Fire Insurance Company of Pittsburgh, Pa. (National Union), for coverage of his legal fees per the Directors and Officers liability coverage purchased from National Union, plus damages. All rights reserved. Baptist Group Ex-Leaders Guilty of Fraud. 2023 FOX News Network, LLC. operations from collapsing was a constant influx of new investor money that When was used to pay interest on old money. 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. 'cag[type_cnbcteam]' : 'CNBC US Team' , 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. Solely for the purpose of determining whether a transfer or ac- Andersen settled a class-action lawsuit with BFA investors for $217 million, without admitting any wrongdoing. } 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. About 11,000 investorsmany of them elderly members of Baptist churches in Arizona and elsewherelost more than $550 million. }); Improving and strengthening fraud detection is at the heart You may then be asked to log in, create an account if you don't already have one, statements. [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. if (!mps._ext || !mps._ext.loaded) { positive results. The foundation's bankruptcy marks one of the biggest financial collapses ever by a charity. Founded in 1948, BFA was created as a nonprofit agency of the Arizona Southern 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. 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. document.cookie = "__adblocker=" + (adblocker ? 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.