baptist foundation of arizona scandal

Aug. 11, 1999 The Arizona Republic reports the foundations funds have been frozen as a result of the investigation. Several accountants and one attorney became concerned enough to approach senior management about ALOs deficit. 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 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. 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 largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. function getOneTrustCookie() { . The clause was depicted as a housekeeping measure, Arizona Attorney General Janet Napolitano said, according to the paper, which quoted her as declaring, Arthur Andersen lied., Napolitano, according to a news release from her office, will be seeking severe penalties against Andersen LLP (formerly Arthur Andersen) and others., This is an absolute outrage, Napolitano said. mps._queue.adload = mps._queue.adload || []; const name = ONE_TRUST_COOKIE_NAME; evidence. that ALO had a negative net worth of $116 million and had been losing more [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. var script = document.createElement("script"); }; return false; })(); 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 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. (function(){ if (typeof window === 'undefined') return; Inadequate disclosure of losses on notes receivables due It expects that its preferred stock will start paying annual dividends of 6 per cent by 2002. Star Stacy Keach (voice) See production, box office & company info Add to Watchlist Photos 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. [1], Each of these related companies had Bill Crotts and the BFA's chief attorney, Tom Grabinski, on their board. PC Phone Home 3210 E. Guasti Road Ontario, 91761 View on map. By SUSAN DONALDSON JAMES. purpose was to finance new Southern Baptist churches in Arizona. about the Baptist Foundation of Arizona. mps._queue.mpsinit = mps._queue.mpsinit || []; })(); 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). the villa pacific palisades, ca. Site by Mere. return true; 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. 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 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. Baptist Foundation of Arizona was the largest non-profit in U.S. history. } Profits from investments were supposed to be used to fund the churches' ministries and numerous charitable causes. "[1] Since he was working for both companies, Grabinski was able to authorize questionable transactions. 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? on funding church start-ups and providing aid for children and the elderly. all audit engagements. Bob Allen is managing editor of EthicsDaily.com. mpsload.src = "//" + mpsopts.host + "/fetch/ext/load-" + mpscall.site + ".js?nowrite=2"; var dynamic_yield_enabled = 1 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. Auditors must broaden the range of information that if (mps.response && mps.response.dart && typeof(mps.response.dart.adunits) === 'object') { 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. 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. with a questioning mind, recognizing the possibility that fraud may be present, Improving and strengthening fraud detection is at the heart 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. if (result && result.geo && result.geo.country_code) { 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). While the recently enacted Sarbanes-Oxley Act may only directly impact auditors Convention required BFA to be a profitable, self-sustaining independent entity. 'cag[attribution_author]' : 'Stacy Keach' , 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. This page contains information The Cult Education Institute has gathered. 'title' : 'American Greed: Religious Prey: Baptist Foundation of Arizona | Medical Scams' , renewed efforts to prevent such accounting failings in the future. 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. 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). View Notes - Baptist Foundation of Arizona from ACCT 2101 at Kennesaw State University. "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 $400,000 she said would have helped her grandchildren pay for college. console.log('PUB-GDPR-CHECK oneTrustCookie: ', oneTrustCookie); than ever for auditors to employ sound fraud-detection audit procedures in fiduciary requirements governing nonbank passive trustees of IRAs. In the decade since Vasquez's appeal for help, more than 250 people who worked or volunteered in Southern Baptist churches have been charged with sex crimes, an investigation by the Houston . The new company will, like its not-for-profit predecessor, invest its assets in real estate, venture-capital deals, and some equities. (Phoenix, Ariz. - June 10, 2009) Attorney General Terry Goddard today announced that the Arizona Court of Appeals has upheld the convictions and sentences of former Baptist Foundation of Arizona executives William Crotts and Thomas Grabinski. owed BFA significant amounts of notes receivables. for (var i in mps.response.dart.adunits) { Start Here; About Us. the firm should have issued either a qualified or an adverse opinion on the leadership, the foundation engaged in a major strategic shift in its business. To this day, it is considered one of the largest affinity frauds in U.S history. BFA informed Arizona Southern Baptist pastors of the financial crisis at a retreat held last weekend at the Wigwam Resort. Pope Francis I said in an interview with the Associated Press that "homosexuality is not a crime" and encouraged bishops to stop practicing forms of conversion therapy. Got a confidential news tip? let cStart = document.cookie.indexOf(`${name}=`); First case: The Baptist Foundation of Arizona invests and loses millions entrusted by churchgoers, and its mission ends in scandal. Ponzi scheme. The 1996 information, head = document.head || document.getElementsByTagName("head")[0], mpsload = document.createElement("script"); A total of $40-million is available to those who choose to cash out. recently issued SAS 99, Consideration of Fraud in a Financial Statement fetch('https://geo.cnbc.com/info/').then(res => res.json()).then(result => { mps._queue.adview = mps._queue.adview || []; Lessons // execute BFAs financial statements from 1984 to 1997. The Baptist Foundation does have a plan to help investors recoup at least a portion of their money. We re-invest your money and the profit we earn goes to further such ministries as Christian education, care for children and senior adults, missions and new church starts. 207, or tstolle@bcmd.org. Wednesday, June 10, 2009. The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. 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. July 2, 1998 December 10, 1998 Arizona Corporation Commission begins an investigation of BFA based on the Phoenix NewTimes reports. It filed for bankruptcy in 1999 after many of the foundation 's executive had been convicted of condemnable charges or indicted for fraud. A non-profit corporation chartered in 1948 to help Southern Baptist causes, the BFA returned about $1.3 million to Baptist causes in 50 years but loaned nearly $140 million to companies owned by three current and former BFA directors. [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). var mps = mps || {}; s.src = "https://fm.cnbc.com/applications/cnbc.com/resources/files/2020/03/28/VisitorAPI.js"; In 2002 Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron. 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. Investors Lost Millions in Church Fraud Executives Sentenced. Aug. 28, 1999 The BFA board of directors votes to terminate the employment of William Crotts, Thomas Grabinski, and Donald Deardorff. Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation The Arizona Baptist Foundation. 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 . Yet, in 2002, years after the BFA . 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. Money & Investing. In one year, there was an amazing increase in 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 . In 1962 Pastor Glen Crotts became the first full-time president and was subsequently 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 State Board of Accountancy: Arthur Andersen, without admitting or denying any fault, settled an investors If the audit team had obtained copies of ALOs detailed financial statements, The Arizona Southern Baptist Convention was founded in 1928. [14], In 2007, the first story on the episode "Religious Prey: Baptist Foundation Of Arizona / Medical Scams: Dr. Mikos", of the television series American Greed, covered the fraudulent behavior of the Baptist Foundation of Arizona.[16]. Data is a real-time snapshot *Data is delayed at least 15 minutes. some red flag warnings that fraud was occurring, led to the Andersen settlement. return unescape(document.cookie.substring(cStart, cEnd)); BAPTIST FOUNDATION OF ARIZONA The Baptist Foundation of Arizona (BFA), which Andersen served as auditor, lost $570 million of donor funds. } 2023 CNBC LLC. //begin OneTrust Redirect The BFA was not interested in making this purchase. Baptist Group Execs Sentenced for Fraud. Baptist Foundation of Arizona Scandal Andersen ignored a CPA's uncovering of fraud and gave clean audit opinions. mps._queue.mpsloaded.push(function(){ 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. mps.cloneAd = function() { return false; } 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. 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. In the case, it claims that Arthur Anderson gave investors a false sense of security after giving out Anderson issued a clean audit in order to attract new investors. The foundations bankruptcy marks one of the biggest financial collapses ever by a charity. if (isOneTrustAnyBlocked()) { SAS 99 After a series of delays, a criminal trial for Crotts and Grabinski got underway in September 2005. Then, learn how Dr. Mikos, a charming doctor with a lucrative practice, turns out to be a con artist defrauding Medicare. Get this delivered to your inbox, and more info about our products and services. The BFA won a religious exemption from both Arizona statutes governing securities and banking laws. Arthur Andersen Faces Court Trial Over Baptist Investment Foundation. In order to remove those loans from its books, the BFA secretly funneled money to a subsidiary. Foundation officials and others involved in the investment scandal that led to the collapse may eventually face both civil and criminal charges. mps._queue.gptloaded.push(function() { As a nonprofit company, ALO filed its financial statements each year with })(); "host" : 'mps.cnbc.com', was placed on probation, requiring that his work be monitored for two years The Mirage But sometimes in the. console.log('PUB-GDPR-CHECK'); Visitor Comments. Arizona real estate prices were skyrocketing in the early 1980s. Reglious Prey: Baptist Foundation of Arizona. earlier fraud standard, SAS 82. regardless of past experience with the entity or prior beliefs about managements "[6], Mechanisms whereby the early investors make a profit by receiving the contributions of later investors. The BFA became dependent upon future investors to pay older investors and loan interest. const matches = oneTrustCookie.match(COOKIE_REGEX); 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. var _qs = window.location.href; 'template' : 'special_reports' , or redistributed. 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. 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. By 1996, ALO was more than $100 million in debt. Under William Crotts's leadership, the foundation engaged in a major strategic shift in its operations. Twenty years later, Glen Crotts' son, William Pierre "Bill" Crotts, became the organization's second president. receivables only because of funds being obtained from either New Church Ventures, During its history, it did indeed return about $1.3 million to Baptist causes. 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. 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. Start Here; Testimonials; Contact Us; Start Here; Testimonials; Contact Us; Location. network allows javascript and allows content to be delivered from v144.philanthropy.com and chronicle.blueconic.net. (function() { Like many CNBC_Comscore = 'CNBC_TV'; He pleaded guilty to six felonies and agreed to testify against other defendants, which include former CEO William Crotts and General Counsel Thomas Grabinksi. 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. The BFA carried out a number of illegal activities in perpetrating affinity fraud against Southern Baptist worshipers in Arizona. than $20 million per year for several years. } } Crotts, one of three remaining defendants pleading innocent, says he was an innocent victim who himself lost $800,000. 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 convicted of fraud. Copyright 2023, Good Faith Media | Site by, Two Words That Explain the Kyle Rittenhouse Acquittal, Challenging Racism in the Criminal Punishment System by. It also says that the foundations operating overhead was maintained at excess levels and that it engaged in costly transactions with insiders. The company will be organized to hold the foundations existing assets, which are estimated to be between $160-million and $200-million. About 11,000 investorsmany of them elderly members of Baptist churches in Arizona and elsewherelost more than $550 million. The entities had no employees of their Market data provided by Factset. changed under new management. When the BFA filed for bankruptcy in 1999, it had $530 million in liabilities as compared to a reported $70 million in assets. in that it represents the largest cash settlement for a nonprofit case and An unambiguous lesson from the BFA case is that the audit team cannot rely 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. both in and outside of management. var slotid = "mps-getad-" + adunit.replace(/\W/g, ""); regarding the disclosure of related parties and the recognition of losses, 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.. var setAdblockerCookie = function(adblocker) { assets were receivables from the insolvent ALO. Its only significant asset was 1,357 acres of undeveloped land in San Miguel County, New Mexico. 'path' : '/id/100000099' , In his resignation letter, Tresch told BFA officials they have placed themselves in a position of civil and criminal liability. Powered and implemented by FactSet Digital Solutions. return true; 'cag[configuration_franchise]' : 'American Greed' , 'cat' : 'CNBC TV|Primetime Shows 2|American Greed' , 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. It is expected to last until at least March, with an estimated cost of $1.6 million to Arizona taxpayers. Market data provided by Factset. in 1985, which highlights just how dramatically the foundations mission 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. their life savings. Arizona Officials Say Andersen Auditors Played Role in Fraud by a Baptist Group. Two years earlier, the Baptist Foundation of Arizona also failed, wiping out savings of 11,000 investors that had $570 million in the fund. mps._ext = mps._ext || {}; The insurance company is refusing to honor the settlement, based on a clause added at the last minute allowing the insurance company to void the March 1 settlement, The Arizona Republic reported. The Baptist Foundation of California. if (document.cookie.length > 0) { const url = `${window.location.pathname}${window.location.search}`; The Baptist Foundation of Arizona (BFA) was a Southern Baptist charity, which executed an affinity fraud on unwitting worshippers in the Southern Baptist community in Arizona, leading to the largest collapse of a religious financial institution in U.S. history. }); window.location.href = `/opt-in-check?pub_referrer=${encodeURIComponent(url)}`; 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,". Superior Ct. Maricopa County, CV 2002-005117. BFA began to invest heavily in the Arizona real estate market, and at the console.log('PUB-GDPR-CHECK Blocked Categories: ', blockedCategories); the Arizona Corporation Commission as required by state law. if (typeof adunit != "string") return false; 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. Please make sure your computer, VPN, or corporations, with individuals closely associated with BFA, such as July 19, 1999 BFAs board votes to suspend its offer and sale of securities. Kimsey reportedly invested $100,000 with BFA. if (!oneTrustCookie) return true; manager on the BFA audit lost their CPA licenses to practice and a third CPA Baptist Foundation of Arizona (Southern Baptist charity) BFA: Books for Africa (St. Paul, MN) BFA: Body Fat Analysis (biology) BFA: British Fantasy Award (British Fantasy Society; UK) BFA: Baseball for All (various locations) BFA: Botswana Football Association (Botswana) BFA: Blank Firing Attachment: BFA: Benefit Fraud Assessment: BFA } }; Anderson asked for the documents and BFA officials refused to provide them. })(); The following were among the major GAAP violations alleged by Under William Crotts } 'cag[project_management_team]' : 'CNBC US Team' , script.setAttribute("src", "//www.npttech.com/advertising.js"); In BFAs early days, it focused its attention The real estate market did have a responsibility to expand their work to obtain independent corroborating mpsload.id = "mps-load"; 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. for Southern Baptist causes. const OneTrustCategories = { mps._adsheld.push(adunit) }; of Accountancy alleged that because of the very material departures from GAAP When 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. Your investment actually touches the lives of countless numbers while you earn a very attractive interest rate. The Enron scandal has entered the BFA picture, according to Andersens Phoenix attorney, Ed Novak. 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. Two year earlier than Enron scandal, the Baptist foundation of Arizona also failed. All rights reserved. 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. It eventually grew into an independent nonprofit organization that sold individual retirement accounts and other investments. same time, it accelerated its efforts to sell IRA-type retirement investment

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