BFA ultimately filed for bankruptcy, and thousands of elderly investors lost The Baptist foundation began selling investment products to church members in 1983. At the time of its failure in 1999, it was the largest affinity fraud that had ever occurred in the United States, with a total loss estimated at US$550 million (equivalent to $895 million in 2021). Presented a detailed analysis of The Baptist Foundation of Arizona scandal and won first place among five teams. if (!oneTrustCookie) return true; The Arizona Baptist Foundation. The foundation, controlled by the Arizona Southern Baptist Convention, declared bankruptcy in 1999 after state regulators ordered it to stop selling securities. By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL. By watching and reviewing the videos about the Baptist Found of Arizona (BFA), I noticed that Arthur Andersen Unfortunately, the issuing of unqualified opinions, even after receiving Yet, in 2002, years after the BFA . Also, as a condition to the court-approved arrangement, the partner and the Its initial mission was to raise donations and support Defense lawyers said they plan to ask Judge Kenneth Fields to dismiss the charges, and plan to appeal if he doesn't. Sept. 20, 1999 Pastor Richard A. Kimsey amends his lawsuit against BFA to include the Arizona Southern Baptist Convention and Steve Bass, executive director treasurer of the conventions Executive Board. var s = document.createElement("script"), el = document.getElementsByTagName("script")[0]; mps._debug('[MPS]: email address detected in url, bypass gpt. Two year earlier than Enron scandal, the Baptist foundation of Arizona also failed. auditors overlook? 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 board members, controlling these new companies. "[6] Elder law attorney Leas wondered why BFA would sell the elderly, "an investment that would tie up more than two-thirds of their non-residential assets in an investment that would be unavailable for five years! By SUSAN DONALDSON JAMES. script.setAttribute("src", "//www.npttech.com/advertising.js"); "true" : "false") + "; expires=" + d.toUTCString() + "; path=/"; 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. or subscribe. 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. Kimsey reportedly invested $100,000 with BFA. ALOs stated purpose was to develop real estate. Oct. 11, 1999 BFA announces it is close to finalizing the restructuring plan that will be communicated to investors later in the month. mps.insertAd("#" + slotid, adunit) Hoover was a member of the Baptist Foundation Board in the late 1970s and served on the board until 1999 when the organization filed for . Southern Baptist Media Day Added to SBC Calendar, Appalachian Church Boosted by Zions Cause Baptist Church in Western Kentucky, Southern Baptist Editors Challenged to Press On, Relationships, conversations key to sharing the hope of Christ, former missionary says, SBC DIGEST: Stolle to lead BCM/D; IMB pipeline tops 1,200, Spurgeon College basketball coach Billy Livezey wins Coach of the Year Award, FIRST-PERSON: Georgia Baptist bicentennial: Lamenting a heritage of racism and slavery, As Church Staffs Grow, Ministry Leaders Look to the Bible for Titles, Churches Declare Their Stance on Pastorship Through Ordination, Jesus Revolution heads into second weekend after 3rd-place box office opening, Second Daytona 500 win in three years shows moments matter in racing and life, Walgreens action on abortion pill falls short, ERLC says, ARITF releases video interview with Samantha Kilpatrick of Guideposts Faith-Based Solutions, SBC DIGEST: Unify Project prayer guide; Barber gives CP lesson at SBTC conference. const ONE_TRUST_COOKIE_NAME = 'OptanonConsent'; The BFA had issued millions of dollars in money-losing loans. manager on the BFA audit lost their CPA licenses to practice and a third CPA the substance of ALOs actions was to buy and hold BFAs overvalued The foundation's bankruptcy marks one of the biggest financial collapses ever by a charity. . mps.__timer = Date.now ? window.location.href = `/opt-in-check?pub_referrer=${encodeURIComponent(url)}`; }, mpsopts = { var d = new Date(); to these companies and received notes receivable that were recorded at the 'cag[type_source]' : 'CNBC US Source' , Also on March 29, the trust gained a judges order to reschedule a key trial for April 29 the earliest date permitted by law, the trusts statement noted. STRICTLY_NECESSARY: 1, Money & Investing. mps._queue.refreshads = mps._queue.refreshads || []; that audit public companies, in todays environment it is more important In 1989, Arizonas the villa pacific palisades, ca. positive results. Aug. 30, 1999 Pastor Richard A. Kimsey and his wife file a lawsuit charging the BFA with running an investment sales Ponzi scheme. accounting treatment desired by management. With what are they going to make donations?. 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. 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. The BFA consistently sold the concept that its main objective was to help its investors serve the work of the Arizona Southern Baptist Convention, while also providing them with favorable returns, as stated in a BFA investor brochure: We are a ministry dedicated to serving the Lord and furthering Southern Baptist and other Christian causes. 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. Art Toalston is a writer based in Nashville and a former editor of Baptist Press. This material may not be published, broadcast, rewritten, or redistributed. earlier fraud standard, SAS 82. head.insertBefore(mpsload, head.firstChild) 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 . Site by Mere. (Phoenix, Ariz. - September 5, 2006) Lawrence Dwain Hoover today pleaded guilty to one count of fraud in the criminal case involving the Baptist Foundation of Arizona (BFA). A lawyer for Crotts, Michael Piccarreta, said all the foundation's investors would have been paid back if the state hadn't shut it down in 1999 for what the Arizona Corporation Commission said were faulty financial statements. A former BFA director BFA invested heavily in real estate, a more speculative investment strategy than other Baptist foundations in the state traditionally used. The BFA became dependent upon future investors to pay older investors and loan interest. The auditors were Arthur Andersen, the same firm that audited Enron. the auditors would have discovered that ALO was insolvent. mpsload.src = "//" + mpsopts.host + "/fetch/ext/load-" + mpscall.site + ".js?nowrite=2"; if (typeof(window._mpspixZ) != 'string') { It says that a new charity will be established that will be involved in traditional Baptist charitable activities, including, for example, ministries, education, and providing routine trust and estate planning. The new charity, the statement says, will be prohibited from selling debt securities. 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. Hunsinger subsequently used the property as collateral to obtain a US$6.8M loan from the BFA. In his resignation letter, Tresch told BFA officials they have placed themselves in a position of civil and criminal liability. 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. Prosecutors estimated 11,000 investors, most of them elderly, were defrauded in the 1980s and 1990s. 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. 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. [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]. Crotts, one of three remaining defendants pleading innocent, says he was an innocent victim who himself lost $800,000. "[3] Instead the BFA decided to hide its debt and began a series of dubious activities. than ever for auditors to employ sound fraud-detection audit procedures in Griebel said she left messages at Andersens offices in Phoenix and Chicago warning the Foundation was broke, but they were never answered. var slotid = "mps-getad-" + adunit.replace(/\W/g, ""); First, Robert Tuttle of The Reason Files 2 is reporting the same thing I am hearing from multiple sources. }); [4], The BFA sold property to the elderly that was marketed as a retirement community with a nursing home. var script = document.createElement("script"); }); The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. // execute Profits from investments were supposed to be used to fund the churches' ministries and numerous charitable causes. Baptist Convention. than $20 million per year for several years. Reflection and resources at the intersection of faith and culture through an inclusive Christian lens. from the Baptist Foundation Fraud. Baptist Foundation of Arizona's auditor Arthur Anderson Illegal practices of Baptist Foundation of Arizona Holding company with losses of $585 million Told everyone they were building churches Global Crossing's auditor Arthur Anderson Global Crossing illegal practices Borrowing money and changing the origin recently issued SAS 99, Consideration of Fraud in a Financial Statement if (result && result.geo && result.geo.country_code) { The audit team requested the financial statements 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. Under his leadership, the organization held strict moral values, including its officers being forbidden to gamble or drink alcohol. The foundation was created in 1948 by the Southern Baptist Convention to administer endowments to the church. SAS 99 2023 Southern Baptist Convention. You may then be asked to log in, create an account if you don't already have one, "updatecorrelator" : true in that it represents the largest cash settlement for a nonprofit case and Powered and implemented by FactSet Digital Solutions. if (isOneTrustAnyBlocked()) { Quotes displayed in real-time or delayed by at least 15 minutes. var mps = mps || {}; 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. return _regex.test(_qs); of Arizona (BFA) engaged in one of the most audacious fraud schemes on record. 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. However, A grand jury in April 2001 returned indictments charging former BFA officials with 32 counts of fraud, theft and racketeering. 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. Powered and implemented by FactSet Digital Solutions. The BFA filed for Chapter 11 bankruptcy that November, listing assets of $220 million and liabilities of $640 million. PHOENIX Two former executives with the Baptist Foundation of Arizona were sentenced to prison Friday and ordered to repay millions for defrauding thousands of investors in a botched. Date.now() : (function() { return +new Date })(); BFA informed Arizona Southern Baptist pastors of the financial crisis at a retreat held last weekend at the Wigwam Resort. 'cag[device]' : 'mobile-touch' , 'adunits' : 'Default' , In 1992, records indicated that the company had lost $3.2 million due to questionable transactions. 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. Start Here; About Us. plans to church members. return false; 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. BAPTIST FOUNDATION OF ARIZONA The Baptist Foundation of Arizona (BFA), which Andersen served as auditor, lost $570 million of donor funds. var _qs = window.location.href; Arizona real estate prices were skyrocketing in the early 1980s. Copyright 2023, Good Faith Media | Site by, Two Words That Explain the Kyle Rittenhouse Acquittal, Challenging Racism in the Criminal Punishment System by. 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. Andersen opposed that request in court, the trust said; the Arthur Andersen Internet site, meanwhile, makes no mention of its latest BFA actions. network allows javascript and allows content to be delivered from v144.philanthropy.com and chronicle.blueconic.net. return Object.values(OneTrustCategories).filter((c) => blockedCategories.includes(c)).length > 0; Aug. 28, 1999 The BFA board of directors votes to terminate the employment of William Crotts, Thomas Grabinski, and Donald Deardorff. All rights reserved. Crotts denies any wrongdoing, as he has since the story broke in the Phoenix New Times. 'cag[brand]' : 'none' , But it also "loaned" nearly $140 million to companies owned by three of the Foundation's directors. 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.. help restore investor confidence and supersedes the Auditing Standards Boards if (window.mps) { } {"@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"]} relationships, transactions, and balances (SFAS 57. The Baptist Foundation of Arizona was founded in 1948 to raise money to back up Baptist causes and to pay a return for investors. He is pastor of Faithful Word Baptist Church, an anti-LGBTQ hate group in Tempe, Arizona. [3], The Arizona Attorney General's Office and the Arizona Corporation Commission conducted the criminal investigation that resulted in the convictions of eight defendants. })(); 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. 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. 2023 Southern Baptist Convention. The foundations statement also acknowledges past wrongdoing, saying that the organization concealed money-losing investments by transferring them to affiliated companies. 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. [11] National Union appealed that ruling, leading to Grabinski suing them in July 2004 for damages due to abuse of process; the abuse of process claim was denied by the United States District Court for the District of Arizona in a September 2005 ruling on National Union's motion to dismiss. Like many 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]+. 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. The collapse of Bryant Financial Associates was a complete scandal that exposed the fraudulent activities of its executives. a complex mesh of over 90 insider-controlled entities had been used to help Got a confidential news tip? The Arizona Republic reported that Novak had said Andersens circumstances have changed significantly since it was indicted March 14 on federal charges involving its auditing of Houston-based energy trader Enron. We look forward to serving you! Then, BFA sold property In August 2006, a jury found Crotts, the foundation's ex-president, and . //end OneTrust Redirect 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. The Baptist Foundation does have a plan to help investors recoup at least a portion of their money. [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. const name = ONE_TRUST_COOKIE_NAME; Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation By 1997, ALO had a negative net worth of $138.9 and owed BFA $70.3 million
