const COOKIE_REGEX = /groups=([^&]*)/; Baptist Foundation of Arizona fraud case: 20 years later - Phoenix const OneTrustCategories = { in 1985, which highlights just how dramatically the foundations mission mps._queue = mps._queue || {}; of Accountancy alleged that because of the very material departures from GAAP 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 CNBC_MPS_FRANCHISE_TAG='american_greed'; Kyle Cooper. return ''; was used to pay interest on old money. "host" : 'mps.cnbc.com', July 2, 1998 December 10, 1998 Arizona Corporation Commission begins an investigation of BFA based on the Phoenix NewTimes reports. document.cookie = "__adblocker=" + (adblocker ? The BFA opens a web site address www.bfaz.org to answer questions. Feb. 19, 2002 4:00 pm ET. }; 'cag[brand]' : 'none' , 'pubdate' : '1343999322' , The 1996 information, Carleton College Christina Farhart, political science Jonathan Lafky, economics Adam Loy, statistics Andrew Poppick, statistics Sandra Rousseau, French Juliane Schicker, German Ithaca College Kyle Armbrust, performance studies Patricia Capaldi, art Mat Fournier, world languages, literatures and cultures David Hajjar, speech-language pathology and audiology Carly Jo Hosbach-Cannon, speech . When asked if a conflict of interest existed, the BFA indicated that both parties "had waived any conflicts of interest. The foundation's bankruptcy marks one of the biggest financial collapses ever by a charity. Under William Crotts's leadership, the foundation engaged in a major strategic shift in its operations. 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. Foundation officials and others involved in the investment scandal that led to the collapse may eventually face both civil and criminal charges. 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. Watch how the . to these companies and received notes receivable that were recorded at the const oneTrustCookie = getOneTrustCookie(); with a questioning mind, recognizing the possibility that fraud may be present, In BFAs early days, it focused its attention Instead, they referred the individual to former BFA Director, Jalma Hunsinger, who then purchased the property for US$1. Andersen opposed that request in court, the trust said; the Arthur Andersen Internet site, meanwhile, makes no mention of its latest BFA actions. [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. implementation is being urged. is the cornerstone of a multifaceted effort by the accounting profession to They can either cash out of the foundation, receiving 20 per cent of the value of their investments and the interest due to them, or elect to receive shares of stock in a new for-profit company that will be publicly traded. the State Board of Accountancy: Arthur Andersen, without admitting or denying any fault, settled an investors 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. (function(){ In the Midst of Infighting, Anti-LGBTQ Church Network's Website and 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 . Arizona real estate prices were skyrocketing in the early 1980s. 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? var CNBC_Premium = CNBC_Premium || {}; 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. Once javascript and access to those URLs are allowed, please refresh this page. When the foundation was closed by the Arizona attorney general's office, it owed $570 million to investors and had assets worth an estimated $220 million. ALOs stated purpose was to develop real estate. Two year earlier than Enron scandal, the Baptist foundation of Arizona also failed. Its an investment scam, yes, Mr. Nelson says, but because it is a religious organization, it only fuels stereotypes about taking advantage of people based on their faith.. 'cag[device]' : 'mobile-touch' , baptist foundation of arizona scandal. The collapse of Bryant Financial Associates was a complete scandal that exposed the fraudulent activities of its executives. A BFA liquidation trust was set up to sell off assets to allow investors to recover part of their money. the substance of ALOs actions was to buy and hold BFAs overvalued credible tips or complaints are received about management fraud, auditors return _regex.test(_qs); The BFA had issued millions of dollars in money-losing loans. Investors take a leap of faith and believe their money will be secure. Scandal - Fall from grace: the Baptist Foundation collapse 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. They were acquitted of 23 counts of theft. Here we see that Andersen chose to victimize BFAs victims yet again.. The organization did this through the use of over 63 different public and private organizations all directly affiliated with the BFA. Baptist Foundation of Arizona - Wikipedia a sobering reminder to auditors that it is important to understand the causes Baptist Foundation of Arizona - How is Baptist Foundation of Arizona With what are they going to make donations?. 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). have a responsibility to expand their work to obtain independent corroborating 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. Investors who choose to roll their money into securities may be risking even bigger losses. (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. 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. 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. for ALO and New Church Ventures, but management refused to release the statements. console.log('PUB-GDPR-CHECK all blocked. Sign up for free newsletters and get more CNBC delivered to your inbox. help restore investor confidence and supersedes the Auditing Standards Boards return true; A grand jury in April 2001 returned indictments charging former BFA officials with 32 counts of fraud, theft and racketeering. PC Phone Home honesty and integrity. One of the key provisions of SAS 99 owed BFA significant amounts of notes receivables. Appeals court upholds convictions of Baptist Foundation of Arizona mps.__intcode = "v2"; [11], In early 2007, several former members of the BFA's executive management team were sentenced for the fraudulent activities associated with the BFA. Under Bill Crotts, the organization diverted over $140 million to two former and one active (as of 1998) director. By 1997, ALO had a negative net worth of $138.9 and owed BFA $70.3 million if (cStart !== -1) { .split(',') Hunsinger subsequently used the property as collateral to obtain a US$6.8M loan from the BFA. As a nonprofit company, ALO filed its financial statements each year with BFA ultimately filed for bankruptcy, and thousands of elderly investors lost } The BFA carried out a number of illegal activities in perpetrating affinity fraud against Southern Baptist worshipers in Arizona. if (!oneTrustCookie) return true; Market data provided by Factset. Along with companies like Enron and Worldcom, it was audited by accounting firm Arthur Andersen, giving investors a false sense of security. BFA management was highly motivated not to show any losses and to report only earlier fraud standard, SAS 82. 'cat' : 'CNBC TV|Primetime Shows 2|American Greed' , 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 'keywords' : '~' , 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. that audit public companies, in todays environment it is more important The Baptist foundation began selling investment products to church members in 1983. accounting treatment desired by management. 1991 to 1994 statements and an adverse opinion on the 1995 to 1997 financial Click the link below to sign up for updates from Good Faith Media via our daily or weekly e-newsletters. 2019. - Washington Could Enron have been prevented? - International Due Diligence Organization One pastor who had recently entrusted $1 million in church funds to. Mutual Fund and ETF data provided by Refinitiv Lipper. If the audit team had obtained copies of ALOs detailed financial statements, A few days later, the Kimseys' money had all but vanished. In 1962, Pastor Glen Crotts became the organization's first president. Its initial mission was to raise donations and support for Southern Baptist causes. Feeling pressure to show profits, investigators say, BFA officials hid losses in a web of for-profit and non-profit subsidiaries, which were supposed to be economically independent but really werent. network allows javascript and allows content to be delivered from v144.philanthropy.com and chronicle.blueconic.net. }); At the center of the scandal is Crotts, a charismatic 53-year-old lawyer, who took over the BFA from his father in 1982. if (typeof adunit != "string") return false; 1 (803) 227-6197 kcooper@mybfsc.org. if (typeof(window._mpspixZ) != 'string') { [3], The Arizona Attorney General's Office and the Arizona Corporation Commission conducted the criminal investigation that resulted in the convictions of eight defendants. 'is_content' : '1' , if (cEnd === -1) { Scandals and stock market crashes . "They had their faith shattered and faced the possible loss of all their retirement investments.". 10 Major Accounting Scandals That Caught the Public's Eye: What Do They 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. Appeals Court Upholds Baptist Foundation Convictions 'cag[type_creator]' : 'Stacy Keach' , 'cag[project_management_team]' : 'CNBC US Team' , Reglious Prey: Baptist Foundation of Arizona - CNBC Legal Statement. Login Here. Redirecting. 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. } fiduciary requirements governing nonbank passive trustees of IRAs. aside any prior beliefs as to managements honesty. Site by Mere. Both options for investors have limitations. el.parentNode.insertBefore(s, el); 207, or tstolle@bcmd.org. By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL. BFA invested heavily in real estate, a more speculative investment strategy than other Baptist foundations in the state traditionally used. 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. Victims of Baptist Foundation scheme still recovering | News regardless of past experience with the entity or prior beliefs about managements Aug. 11, 1999 The Arizona Republic reports the foundations funds have been frozen as a result of the investigation. The Enron scandal has entered the BFA picture, according to Andersen's Phoenix attorney, Ed Novak. 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. 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. 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. 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. He is pastor of Faithful Word Baptist Church, an anti-LGBTQ hate group in Tempe, Arizona. In 1997 a former employee sought a job at Buckner Baptist Benevolences in Dallas that BFA was hiding losses in bad bank loans, while conducting a Ponzi scheme, which at one point included a strategy of encouraging elderly people to borrow against their homes and invest proceeds with the Foundation. Two of the most significant entities set up to hide BFAs nonperforming 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. "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. fetch('https://geo.cnbc.com/info/').then(res => res.json()).then(result => { mps._queue.gptloaded.push(function() { 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. 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. 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. Baptist Convention. "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. from the Baptist Foundation Fraud. mps._debug('[MPS]: email address detected in url, bypass gpt. The Mirage But sometimes in the. Who We Are; The Team . 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. Andersen Assailed Over Audits - The Washington Post Aug. 30, 1999 Pastor Richard A. Kimsey and his wife file a lawsuit charging the BFA with running an investment sales Ponzi scheme. Andersens effort to back out of the BFA settlement focuses on its wholly owned Professional Services Insurance Co. in Hamilton, Bermuda. At the time of BFAs bankruptcy, 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. Officials at the Arizona Southern Baptist Convention were unavailable for comment. relationships, transactions, and balances (SFAS 57. Arizona Officials Say Andersen Auditors Played Role in Fraud by a Baptist Group. A former BFA director Istoria Ministries Article Archive: Southern Baptists Who Break the Law Market data provided by Factset. The foundation was created in 1948 by the Southern Baptist Convention to administer endowments to the church. The CPA Journal. return false; script.setAttribute("async", true); 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. Griebel said she left messages at Andersens offices in Phoenix and Chicago warning the Foundation was broke, but they were never answered. Your investment actually touches the lives of countless numbers while you earn a very attractive interest rate. To this day, it is considered one of the largest affinity frauds in U.S history. Management responded to the new environment by structuring accounting transactions 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. Aug. 28, 1999 The BFA board of directors votes to terminate the employment of William Crotts, Thomas Grabinski, and Donald Deardorff. The majority of New Church Ventures 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. 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. During its history, it did indeed return about $1.3 million to Baptist causes. If you continue to experience issues, contact us at 202-466-1032 or help@chronicle.com. cEnd = document.cookie.length; The BFA won a religious exemption from both Arizona statutes governing securities and banking laws. 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 . 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. By Jonathan Weil Staff Reporter of The Wall Street Journal. Auditors must broaden the range of information that mps._queue.adload = mps._queue.adload || []; Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Over a period of several years, the management of the Baptist Foundation by the Arizona State Board of Accountancy. Lessons accounting, marketing, and administrative services. 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. Legal Statement. })(); }; When 'cag[type_source]' : 'CNBC US Source' , investment cycles, however, the upward trend did not continue. In August 2006, a jury found Crotts, the foundation's ex-president, and . The state also is continuing to press criminal charges against five former BFA executives, including William Pierre Crotts, the former chief executive officer. Investors Lost Millions in Church Fraud Executives Sentenced. 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. 'path' : '/id/100000099' , from ALO and New Church Ventures (SFAS 5. purpose was to finance new Southern Baptist churches in Arizona. 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. Former general counsel Thomas Grabinski was convicted of three counts of fraud and one count of illegally conducting an enterprise. to mitigate the real estate losses. Another important provision of SAS 99 is that auditors should talk to employees, An unambiguous lesson from the BFA case is that the audit team cannot rely 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. if (window.mps) { 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 . A total of $40-million is available to those who choose to cash out. statements for periods beginning on or after December 15, 2002, and earlier 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. 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. console.log('PUB-GDPR-CHECK oneTrustCookie matches: ', matches); . Former Alcor employee makes harsh allegations against cyronics foundation. "updatecorrelator" : true Nevertheless, . It expects that its preferred stock will start paying annual dividends of 6 per cent by 2002. if (typeof mps.getAd != "function") mps.getAd = function(adunit) { var d = new Date(); Church corruption, questionable gifts live on, long after Bakker scandal Inside Higher Ed's News Also, as a condition to the court-approved arrangement, the partner and the Donald Dale Deardorff, Senior Vice President and Controller, was sentenced to four years in prison and a fine of $150 million (equivalent to $196 million in 2021). "true" : "false") + "; expires=" + d.toUTCString() + "; path=/"; BFA informed Arizona Southern Baptist pastors of the financial crisis at a retreat held last weekend at the Wigwam Resort. July 22, 1999 BFAs board accepts the offers of President Bill Crotts, General Counsel Tom Grabinski and Controller Don Deardorff to relinquish their BFA responsibilities although remain as BFA employees. Baptist Foundation of Arizona was the largest non-profit in U.S. history. The Baptist Foundation does have a plan to help investors recoup at least a portion of their money. The BFA filed for Chapter 11 bankruptcy that November, listing assets of $220 million and liabilities of $640 million. Art Toalston is a writer based in Nashville and a former editor of Baptist Press. Quotes displayed in real-time or delayed by at least 15 minutes. [1] Grabinski signed documents as an officer for both BFA and a subsidiary. 2023 FOX News Network, LLC. 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,". //begin OneTrust Redirect 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. 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.

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