Baptist Foundation of Arizona Scandal Andersen ignored a CPA's uncovering of fraud and gave clean audit opinions. Reglious Prey: Baptist Foundation of Arizona. Market data provided by Factset. Market data provided by Factset. The BFA now owes investors $200 million more than it did in 1995. He pleaded guilty to six felonies and agreed to testify against other defendants, which include former CEO William Crotts and General Counsel Thomas Grabinksi. Prosecutors estimated 11,000 investors, most of them elderly, were defrauded in the 1980s and 1990s. By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL. console.log('PUB-GDPR-CHECK oneTrustCookie: ', oneTrustCookie); The BFA opens a web site address www.bfaz.org to answer questions. As a nonprofit company, ALO filed its financial statements each year with The second time, on the same day, he declared the same piece of property was valued at $960,000.[4]. The foundations plan -- which is still subject to approval by investors -- includes one other way people might get back some of their money: litigation. 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. ALO in turn sold the stock to New Church Ventures, in exchange for a $1.6 million reduction in ALOs credit line owed to New Church Ventures. 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. })(); Auditors must broaden the range of information that In BFAs early days, it focused its attention [8] The trial of Grabinski and Crotts was the longest criminal jury trial in the history of the state of Arizona. [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). 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. STORAGE: 6, The subsidiary then used that money to purchase the loans from the parent company. of fraud and even more critical to engage in effective audit procedures to The BFA became dependent upon future investors to pay older investors and loan interest. 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]+. Five other defendants pleaded guilty to fraud or other charges and agreed to pay fines, Goddard said. help restore investor confidence and supersedes the Auditing Standards Boards is the cornerstone of a multifaceted effort by the accounting profession to 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. } real estate in exchange for notes receivable valued in the millions of dollars. renewed efforts to prevent such accounting failings in the future. '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; Crotts denies any wrongdoing, as he has since the story broke in the Phoenix New Times. mps._queue.refreshads = mps._queue.refreshads || []; 'cag[device]' : 'mobile-touch' , statements for periods beginning on or after December 15, 2002, and earlier The BFA carried out a number of illegal activities in perpetrating affinity fraud against Southern Baptist worshipers in Arizona. the substance of ALOs actions was to buy and hold BFAs overvalued 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. Please make sure your computer, VPN, or A grand jury in April 2001 returned indictments charging former BFA officials with 32 counts of fraud, theft and racketeering. 'cag[project_management_team]' : 'CNBC US Team' , if (!_qs) { too heavily upon management assurances. 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). or, indirectly, from BFA itself. Once javascript and access to those URLs are allowed, please refresh this page. 2023 FOX News Network, LLC. mps._adsheld.push(adunit) Solely for the purpose of determining whether a transfer or ac- for Southern Baptist causes. 2023 FOX News Network, LLC. BFAs failure and the subsequent penalties provide 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. 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. can are designed to be unpredictable and unexpected. 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. A Division of NBCUniversal. Powered and implemented by FactSet Digital Solutions. }; if (!oneTrustCookie) return true; Both options for investors have limitations. It also says that the foundations operating overhead was maintained at excess levels and that it engaged in costly transactions with insiders. It expects that its preferred stock will start paying annual dividends of 6 per cent by 2002. Superior Ct. Maricopa County, CV 2002-005117. }).catch(() => {}); The Enron scandal has entered the BFA picture, according to Andersen's Phoenix attorney, Ed Novak. One pastor who had recently entrusted $1 million in church funds to. script.setAttribute("src", "//www.npttech.com/advertising.js"); Like many How did such a massive fraud develop? baptist foundation of arizona scandal. corporations, with individuals closely associated with BFA, such as 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. By watching and reviewing the videos about the Baptist Found of Arizona (BFA), I noticed that Arthur Andersen the auditors would have discovered that ALO was insolvent. Arthur Andersen provided unqualified clean audit opinions on The audit team must put 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. 207, or tstolle@bcmd.org. It was eventually revealed that it had over $500 million in liabilities. Andersen settled a class-action lawsuit with BFA investors for $217 million, without admitting any wrongdoing. [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. } Got a confidential news tip? 'subtype' : 'primetime_show' , 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. 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. Crotts and Grabinski could face six to 23 years for each count. The Enron scandal has entered the BFA picture, according to Andersens Phoenix attorney, Ed Novak. In 1962 Pastor Glen Crotts became the first full-time president and was subsequently } Investors who choose to roll their money into securities may be risking even bigger losses. of Accountancy alleged that because of the very material departures from GAAP head.insertBefore(mpsload, head.firstChild) On this Wikipedia the language links are at the top of the page across from the article title. 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. script.setAttribute("onload", "setAdblockerCookie(false);"); 'path' : '/id/100000099' , The Arizona Southern Baptist Convention was founded in 1928. 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. TARGETED_ADS: 4, } 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. Andersens effort to back out of the BFA settlement focuses on its wholly owned Professional Services Insurance Co. in Hamilton, Bermuda. in 1985, which highlights just how dramatically the foundations mission The foundations statement also acknowledges past wrongdoing, saying that the organization concealed money-losing investments by transferring them to affiliated companies. return unescape(document.cookie.substring(cStart, cEnd)); 'title' : 'American Greed: Religious Prey: Baptist Foundation of Arizona | Medical Scams' , Nov. 7, 1999 BFA unveils a restructuring plan that would give investors the choice of a cash-out option worth 20 cents on the dollar or shares in a newly created for-profit company. 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. ', window.location); Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation mps.__intcode = "v2"; receivables only because of funds being obtained from either New Church Ventures, mps._queue.mpsloaded = mps._queue.mpsloaded || []; 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 . STRICTLY_NECESSARY: 1, var mpscall = { But the value of the investors shares will depend on the performance of the new companys investments and how it fares in the stock market. Sept. 22, 1999 Former BFA director James Cook files a lawsuit against BFA in Maricopa Superior Court. 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. 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. CNBC_Comscore = 'CNBC_TV'; 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. Oct. 7, 2009 -- It's a practice that appeals to some people but disturbs many others: freezing the deceased in the hope . 2023 Southern Baptist Convention. The BFA Liquidation Trust, which is seeking to recover the investors funds, immediately took action. 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. 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Baptist Group Ex-Leaders Guilty of Fraud. Quotes displayed in real-time or delayed by at least 15 minutes. The insurance company is refusing to honor the settlement, based on a clause added at the last minute allowing the insurance company to void the March 1 settlement, The Arizona Republic reported. June 7, 2022 . 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. First, it was critical for BFA to meet the Treasury regulations {"@context": "https://schema.org","@type": "WebPage","url": "https://www.cnbc.com/id/100000099","keywords": ["CNBC TV","Primetime Shows 2","American Greed","source:tagname:CNBC US Source"]} const matches = oneTrustCookie.match(COOKIE_REGEX); regarding the disclosure of related parties and the recognition of losses, 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. 'adunits' : 'Default' , Money & Investing. 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. The following were some of the key warnings: Cases like the Baptist Foundation, along with other corporate frauds, have 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. In applying SAS 99, auditors should plan and execute every audit 'cag[attribution_author]' : 'Stacy Keach' , [5], The BFA sold certificates of deposit that were non-refundable during the life of the CD. The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. Scandals and stock market crashes . 'content_id' : '100000099' , 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. 'cag[type_cnbcteam]' : 'CNBC US Team' , if (typeof window === 'undefined') return; Data is a real-time snapshot *Data is delayed at least 15 minutes. Along with companies like Enron and Worldcom, it was audited by accounting firm Arthur Andersen, giving investors a false sense of security. function getOneTrustCookie() { var d = new Date(); on funding church start-ups and providing aid for children and the elderly. Management responded to the new environment by structuring accounting transactions for (var i in mps.response.dart.adunits) { 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")}. if (!matches) { Arizona has had its fair share of scams and schemes over the years, but none was more prominent than the Baptist Foundation of Arizona financial collapse and bankruptcy. Sept. 10, 1999 BFA lays off 72 employees and closes offices in Youngtown and Tucson. mpsload.id = "mps-load"; Andersen opposed that request in court, the trust said; the Arthur Andersen Internet site, meanwhile, makes no mention of its latest BFA actions. There are thousands and thousands of people in our communities who have lost their savings or what they counted on for monthly income, says C. Truett Baker, former president of the Arizona Baptist Childrens Services, an agency of the states Southern Baptist Convention. }; Romero was a former congregant of Anderson's church before going to start the Fort Worth church with his . 'stitle' : 'Religious Prey | Dr. Mikos: American Greed 5' , Also in 1998, an alternative Phoenix newspaper, the New Times, ran a series of 13 investigative reports alleging fraud and insider deals. However, Three former BFA officials have pleaded guilty to felonies in the case while Crotts and four others face fraud and racketeering charges. if (!mps._ext || !mps._ext.loaded) { Controversial Arizona pastor Steven Anderson, the firebrand KJV-Onlyist from Faithful word Baptist Church in Tempe, AZ, has been permanently banned from Youtube, having his entire operation shout down from multiple accounts. Mutual Fund and ETF data provided by Refinitiv Lipper. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Baptist Foundation indictments thrown out. was used to pay interest on old money. (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. All rights reserved. About 11,000 investorsmany of them elderly members of Baptist churches in Arizona and elsewherelost more than $550 million. With Enrons collapse, Andersen earned the distinction of having been auditor for both the largest corporate bankruptcy and largest bankruptcy of a non-profit in U.S. history. 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 . Paul D. Nelson, president of the Evangelical Council for Financial Accountability, a watchdog group in Winchester, Va., says that the Arizona foundations bankruptcy, like New Eras high-profile collapse, reflects poorly on religious organizations as a whole. Former general counsel Thomas Grabinski was convicted of three counts of fraud and one count of illegally conducting an enterprise. } 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. return false; mps._urlContainsEmail = function() { The real estate market did } Convention required BFA to be a profitable, self-sustaining independent entity. BFAs counsel is informed that the state investigation could result in proceedings against individuals at BFA as well as the organization itself. Yet, in 2002, years after the BFA . BFA ultimately filed for bankruptcy, and thousands of elderly investors lost Hunsinger subsequently used the property as collateral to obtain a US$6.8M loan from the BFA. 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. 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. Officials at the Arizona Southern Baptist Convention were unavailable for comment. "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. Baptist Foundation of Arizona was the largest non-profit in U.S. history.