[8] The trial of Grabinski and Crotts was the longest criminal jury trial in the history of the state of Arizona. The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. in that it represents the largest cash settlement for a nonprofit case and 2023 FOX News Network, LLC. Since August, the foundation has fired its top three officials, severed ties with the law and accounting firms with which it had worked, laid off 72 of its 127 employees, and closed its two branch offices. 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. "[6], Mechanisms whereby the early investors make a profit by receiving the contributions of later investors. a complex mesh of over 90 insider-controlled entities had been used to help If the audit team had obtained copies of ALOs detailed financial statements, The BFA became dependent upon future investors to pay older investors and loan interest. "[3] Instead the BFA decided to hide its debt and began a series of dubious activities. Two year earlier than Enron scandal, the Baptist foundation of Arizona also failed. from ALO and New Church Ventures (SFAS 5. The foundations statement also acknowledges past wrongdoing, saying that the organization concealed money-losing investments by transferring them to affiliated companies. 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). Oct. 7, 2009 -- It's a practice that appeals to some people but disturbs many others: freezing the deceased in the hope . Scandals and stock market crashes . June 2, 2010, 9:03 AM. 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. Transactions console.log('PUB-GDPR-CHECK Blocked Categories: ', blockedCategories); 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. of the accounting professions new antifraud initiatives, such as the One pastor who had recently entrusted $1 million in church funds to. of fraud and even more critical to engage in effective audit procedures to 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. the auditors would have discovered that ALO was insolvent. 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. In applying SAS 99, auditors should plan and execute every audit own, and both organizations paid BFA substantial management fees to provide 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 = mps._queue || {}; 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 var d = new Date(); console.log('PUB-GDPR-CHECK oneTrustCookie: ', oneTrustCookie); "true" : "false") + "; expires=" + d.toUTCString() + "; path=/"; In other words, it had become a classic In a March 29 statement, the day after receiving notice from Andersen, the trust said one of the first steps will be to ask the mediator who presided over the settlement negotiations, retired federal judge Layn Phillips, to rule that Andersen has breached the agreement and to order Andersen to pay the $217 million as promised.. "They had their faith shattered and faced the possible loss of all their retirement investments.". The following were among the major GAAP violations alleged by Romero was a former congregant of Anderson's church before going to start the Fort Worth church with his . Oct. 11, 1999 BFA announces it is close to finalizing the restructuring plan that will be communicated to investors later in the month. d.setTime(d.getTime() + 60 * 60 * 24 * 30 * 1000); National Union Fire Insurance Company of Pittsburgh, Pa. United States District Court for the District of Arizona, Religious Prey: Baptist Foundation Of Arizona / Medical Scams: Dr. Mikos, "Elderly couple pays dearly for Baptist fund's trouble", "In the Name of the Father and the Son and the Wholly Owned Subsidiary", "Baptist Foundation of Arizona's Financial Collapse", "Terry Goddard Applauds Verdicts in Baptist Foundation Trial", "Grabinski v. National Union Fire Insurance Company of Pittsburgh, CV 04-01751-PHX-MHM, D. Az", "Final 5 Ariz. Foundation Defendants Sentenced", "Victims of the Baptist Foundation of Arizona | SENTENCES IMPOSED", "BFA Liquidation Trust v. Arthur Andersen, LLP", "Arthur Andersen Reaches Deal (Again) with Baptist Foundation of Arizona Investors", "Religious Prey: Baptist Foundation Of Arizona / Medical Scams: Dr. Mikos", https://en.wikipedia.org/w/index.php?title=Baptist_Foundation_of_Arizona&oldid=1137812926, Christian organizations established in 1948, Baptist organizations in the United States, Baptist denominations established in the 20th century, Articles lacking reliable references from May 2022, Creative Commons Attribution-ShareAlike License 3.0, This page was last edited on 6 February 2023, at 16:04. script.setAttribute("async", true); some red flag warnings that fraud was occurring, led to the Andersen settlement. 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. of Accountancy alleged that because of the very material departures from GAAP is an increased emphasis on professional skepticism. You may then be asked to log in, create an account if you don't already have one, In BFA's early days, it focused its attention More specifically, the litigation was brought by Arizona's Corporation Commission (Securities Division), as well as the state's attorney general. Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation Contact (909) 738-4000 info@bfcal.org. 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. Baptist Group Ex-Leaders Guilty of Fraud. Two of the most significant entities set up to hide BFAs nonperforming Login Here. They were acquitted of 23 counts of theft. Yet, in 2002, years after the BFA . too heavily upon management assurances. the firm should have issued either a qualified or an adverse opinion on the Investors Lost Millions in Church Fraud Executives Sentenced. }; fetch('https://geo.cnbc.com/info/').then(res => res.json()).then(result => { '); 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. Copyright 2023, Good Faith Media | Site by, Two Words That Explain the Kyle Rittenhouse Acquittal, Challenging Racism in the Criminal Punishment System by. "[1] Since he was working for both companies, Grabinski was able to authorize questionable transactions. (function() { The most likely cause of this is a content blocker on your computer or network. First, Robert Tuttle of The Reason Files 2 is reporting the same thing I am hearing from multiple sources. Wednesday, June 10, 2009. The 1996 information, Andersen settled a class-action lawsuit with BFA investors for $217 million, without admitting any wrongdoing. 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. BFAs liabilities included approximately $585 million owed to investors. The March 1 settlement had prompted the cancellation of a March 4 trial against Andersen in Arizonas Maricopa County for its failure to warn investors about BFA financial irregularities described as a Ponzi scheme that led to its collapse. Arthur Andersen Faces Court Trial Over Baptist Investment Foundation. a sobering reminder to auditors that it is important to understand the causes . Instead, they referred the individual to former BFA Director, Jalma Hunsinger, who then purchased the property for US$1. [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. 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]+. recently issued SAS 99, Consideration of Fraud in a Financial Statement 'cag[configuration_franchise]' : 'American Greed' , One BFA subsidiary, Arizona Southern Baptist New Church Ventures, had a stated purpose of financing new Southern Baptist churches in Arizona. if (cStart !== -1) { var CNBC_MPS_FRANCHISE_TAG='american_greed'; How did such a massive fraud develop? 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. "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. fiduciary requirements governing nonbank passive trustees of IRAs. Improving and strengthening fraud detection is at the heart Auditors must broaden the range of information that Powered and implemented by FactSet Digital Solutions. Through it all, Andersen continued to give BFA clean audits, until the Arizona Corporation Commission forced the foundation to stop selling securities in August 1999. Managing editor at EthicsDaily.com from 2003-2009, Allen wrote more than 1,500 news stories during his tenure. Start Here; Testimonials; Contact Us; Start Here; Testimonials; Contact Us; Location. that ALO had a negative net worth of $116 million and had been losing more } "updatecorrelator" : true script.setAttribute("src", "//www.npttech.com/advertising.js"); . mps._queue.mpsloaded = mps._queue.mpsloaded || []; } )+[a-zA-Z]{2,}))/; A few days later, the Kimseys' money had all but vanished. Then, BFA sold property 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 'adunits' : 'Default' , The Baptist mps._queue.adview = mps._queue.adview || []; }); If you continue to experience issues, contact us at 202-466-1032 or help@chronicle.com. Sign up for free newsletters and get more CNBC delivered to your inbox. A jury on Monday found former foundation president William Crotts guilty of three counts of fraud and one count of illegally conducting an enterprise, according to the Arizona Attorney General's Office, which prosecuted the case. Under William Crotts's leadership, the foundation engaged in a major strategic shift in its operations. return '' It eventually grew into an independent nonprofit organization that sold individual retirement accounts and other investments. 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'id' : '100000099' , SOCIAL_MEDIA: 8 [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. MVPNs were marketed with the notion that they received a higher than average yield and that part of the investment's return was used for God's mission. var _qs = window.location.href; His lawyer has said there was no fraud but rather a disagreement on the value of property. 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. return false; The Baptist Foundation of Arizona -- a non-profit fundraiser dedicated to the church. The state also is continuing to press criminal charges against five former BFA executives, including William Pierre Crotts, the former chief executive officer. [1], The Baptist Foundation of Arizona declared bankruptcy in 1999, citing $530 million in liabilities against $70 million in assets. 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.. This material may not be published, broadcast, rewritten, or redistributed. const matches = oneTrustCookie.match(COOKIE_REGEX); All rights reserved. between the foundation and these corporations were designed to achieve the 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. April 1998 The Phoenix NewTimes, a tabloid, accuses the BFA of many financial irregularities that threatened the foundations stability. var mps = mps || {}; For example, Select Trading Group, a subsidiary of ALO, created its own subsidiary, Santa Fe Trails Ranch II. if (cEnd === -1) { 'cag[related_primary]' : '' , // execute By Jonathan Weil Staff Reporter of The Wall Street Journal. 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 Novak contended that Andersen and its insurance company are two separate entities, The Republic reported, while Napolitano depicted the two as one and the same and thus Andersen in actuality is reneging on the settlement. After a series of delays, a criminal trial for Crotts and Grabinski got underway in September 2005. var CNBC_Premium = CNBC_Premium || {}; Buckner also used Anderson and turned the information over to the firm. if (document.cookie.length > 0) { DIRECTOR OF OPERATIONS. The Enron scandal has entered the BFA picture, according to Andersen's Phoenix attorney, Ed Novak. 'is_content' : '1' , Ponzi scheme. Hunsinger subsequently used the property as collateral to obtain a US$6.8M loan from the BFA. PC Phone Home The company will be organized to hold the foundations existing assets, which are estimated to be between $160-million and $200-million. At the time BFA filed for bankruptcy in November 1999, it had total liabilities of approximately $650 million and listed assets of approximately $290 million. Mutual Fund and ETF data provided by Refinitiv Lipper. 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. mps._queue.mpsloaded.push(function(){ STORAGE: 6, all audit engagements. The audit team must put Sentencing was set for Sept. 29. It was eventually revealed that it had over $500 million in liabilities. View Jasmine's full profile See who you know in common Get introduced . Baptist Foundation of Arizona WorldCom Enron Sunbeam scandal Andersen knew of the bill-and-hold schemes Waste Management Scandal Avoided depreciation expenses, Andersen knew about it and received bribes for issuing clean audit opinions. 'content_id' : '100000099' , BFAs counsel is informed that the state investigation could result in proceedings against individuals at BFA as well as the organization itself. Convention required BFA to be a profitable, self-sustaining independent entity. Market data provided by Factset. Aug. 5, 1999 BFAs board returned all client checks received since July 22; suspended redemption of all investment products; retained Squire, Sanders, and Dempsey, LLP, an international law firm. Lessons 'cat' : 'CNBC TV|Primetime Shows 2|American Greed' , 'cag[project_management_team]' : 'CNBC US Team' , auditors overlook? Paul D. Nelson, president of the Evangelical Council for Financial Accountability, a watchdog group in Winchester, Va., says that the Arizona foundations bankruptcy, like New Eras high-profile collapse, reflects poorly on religious organizations as a whole. Once javascript and access to those URLs are allowed, please refresh this page. corporations, with individuals closely associated with BFA, such as Along with companies like Enron and Worldcom, it was audited by accounting firm Arthur Andersen, giving investors a false sense of security. [14] The court signing off on the settlement meant that the BFA Liquidation Trust had standing should Andersen which was at the time being charged for issues surrounding Enron be unable to make that payment. 'keywords' : '~' , console.log('PUB-GDPR-CHECK'); Sept. 25, 1999 BFA creates an Investors Committee to meet and negotiate with the BFA on behalf of their fellows.. })(); let cStart = document.cookie.indexOf(`${name}=`); on funding church start-ups and providing aid for children and the elderly. 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). [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. the Arizona Corporation Commission as required by state law. The Arizona Baptist Foundation. 'hline' : 'American Greed' , {"@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"]} 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. The BFA won a religious exemption from both Arizona statutes governing securities and banking laws. 207, or tstolle@bcmd.org. Perceiving a lack of response, most resigned. In 1989, Arizonas A new management committee of Joe Panter, Mark Roberts and Mark Dickerson is installed. 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). Investors who choose to roll their money into securities may be risking even bigger losses. }); succeeded in 1984 by his son, William P. Crotts. Feb. 19, 2002 4:00 pm ET. if (typeof(window._mpspixZ) != 'string') { 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. 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. manager on the BFA audit lost their CPA licenses to practice and a third CPA const COOKIE_REGEX = /groups=([^&]*)/; el.parentNode.insertBefore(s, el); We want to hear from you. By 1997, ALO had a negative net worth of $138.9 and owed BFA $70.3 million real estate in exchange for notes receivable valued in the millions of dollars. Sept. 22, 1999 Former BFA director James Cook files a lawsuit against BFA in Maricopa Superior Court. One of ALOs primary purposes was to buy and hold non-producing or overvalued investments in real estate so BFA could avoid writing them down as losses. 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. }; 2023 Southern Baptist Convention.