By Jonathan Weil Staff Reporter of The Wall Street Journal. Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation 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. 'cag[project_management_team]' : 'CNBC US Team' , mps._queue.mpsloaded.push(function(){ available for public inspection from the Arizona Corporation Commission, showed Aug. 10, 1999 The Arizona Corporation Commission and Attorney General Janet Napolitano order the BFA and two related corporations to cease and desist from violating the Arizona Securities Act. The collapse of Bryant Financial Associates was a complete scandal that exposed the fraudulent activities of its executives. 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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. . [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 was founded in 1948 to raise money to back up Baptist causes and to pay a return for investors. Superior Ct. Maricopa County, CV 2002-005117. Then, learn how Dr. Mikos, a charming doctor with a lucrative practice, turns out to be a con artist defrauding Medicare. "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. mps._queue.gptloaded = mps._queue.gptloaded || []; Also, as a condition to the court-approved arrangement, the partner and the cStart = cStart + name.length + 1; Clearly no. if (cEnd === -1) { Founded in 1948 to raise money for Southern Baptist causes, BFA and its subsidiaries and affiliates had marketed securities throughout the United States as retirement vehicles for investors and served as a custodian for tax-deferred Individual Retirement Accounts. The BFA was not interested in making this purchase. return Object.values(OneTrustCategories).filter((c) => blockedCategories.includes(c)).length > 0; 'title' : 'American Greed: Religious Prey: Baptist Foundation of Arizona | Medical Scams' , the Arizona Corporation Commission as required by state law. receivables only because of funds being obtained from either New Church Ventures, 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. } Looming losses hidden in off . mpsload.id = "mps-load"; mps.response.dart.adunits[i].data = ''; 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. 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. //begin OneTrust Redirect credible tips or complaints are received about management fraud, auditors real estate properties were ALO and New Church Ventures. .map(categoryPreference => parseInt(categoryPreference.split(':')[0], 10)); The foundation's bankruptcy marks one of the biggest financial collapses ever by a charity. mps._queue = mps._queue || {}; [14] Christianity Today reported that the timing of this court approved settlement avoided "the worst case scenario for Baptist Foundation investors" of Andersen being convicted in its then ongoing criminal case regarding its audits of Enron, then quickly filing "for bankruptcy-court protection" from any civil lawsuits not yet settled in a court. fetch('https://geo.cnbc.com/info/').then(res => res.json()).then(result => { in 1985, which highlights just how dramatically the foundations mission In 1989, Arizonas 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. (a) The transfer or acquisition of the controlling interest oc-curred within a taxable transfer period. 'is_sponsored' : '0' , Reglious Prey: Baptist Foundation of Arizona. In a typical year-end flurry of transactions to help BFA show a profit, Santa Fe Trails Ranch II was transferred from Select Trading Group to ALO on Dec. 26, 1995. [8] Indictments were handed down in April 2001; by July 2006, when BFA's president and CEO William Crotts and BFA's Chief Legal Counsel Thomas Grabinski were found guilty at trial on multiple counts of fraud, five other defendants had already pleaded guilty. In BFA's early days, it focused its attention mps.__intcode = "v2"; For example, Select Trading Group, a subsidiary of ALO, created its own subsidiary, Santa Fe Trails Ranch II. 2023 Southern Baptist Convention. Profits from investments were supposed to be used to fund the churches' ministries and numerous charitable causes. Arizona real estate prices were skyrocketing in the early 1980s. 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 . "[1] Since he was working for both companies, Grabinski was able to authorize questionable transactions. The entities had no employees of their was used to pay interest on old money. 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. return true; The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. This material may not be published, broadcast, rewritten, Oct. 7, 2009 -- It's a practice that appeals to some people but disturbs many others: freezing the deceased in the hope . 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. return _regex.test(_qs); Sept. 22, 1999 Former BFA director James Cook files a lawsuit against BFA in Maricopa Superior Court. By watching and reviewing the videos about the Baptist Found of Arizona (BFA), I noticed that Arthur Andersen All Rights Reserved. by the Arizona State Board of Accountancy. 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. If the audit team had obtained copies of ALOs detailed financial statements, 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. mps._queue.mpsinit = mps._queue.mpsinit || []; the State Board of Accountancy: Arthur Andersen, without admitting or denying any fault, settled an investors A new management committee of Joe Panter, Mark Roberts and Mark Dickerson is installed. 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. The Baptist Foundation of Arizona filed for bankruptcy in federal court last week, owing nearly $600-million to 13,000 people who had bought securities from the organization. const url = `${window.location.pathname}${window.location.search}`; } 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. const name = ONE_TRUST_COOKIE_NAME; The Baptist foundation began selling investment products to church members in 1983. s.src = "https://fm.cnbc.com/applications/cnbc.com/resources/files/2020/03/28/VisitorAPI.js"; console.log('PUB-GDPR-CHECK oneTrustCookie: ', oneTrustCookie); .filter(categoryPreference => !categoryPreference.includes('0_') && categoryPreference.includes(':0')) 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. . }; 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. Managing editor at EthicsDaily.com from 2003-2009, Allen wrote more than 1,500 news stories during his tenure. Site by Mere. Romero was a former congregant of Anderson's church before going to start the Fort Worth church with his . or, indirectly, from BFA itself. if (typeof mps.getAd != "function") mps.getAd = function(adunit) { 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. By 1997, ALO had a negative net worth of $138.9 and owed BFA $70.3 million In 1948, the Baptist Foundation of Arizona was founded in 1948 and initially sought to provide a financial revenue for participants while supporting Baptist-motivated causes. mps._ext = mps._ext || {}; Market data provided by Factset. When the BFA filed for bankruptcy in 1999, it had $530 million in liabilities as compared to a reported $70 million in assets. 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. It is expected to last until at least March, with an estimated cost of $1.6 million to Arizona taxpayers. About 11,000 investorsmany of them elderly members of Baptist churches in Arizona and elsewherelost more than $550 million. 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. 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. Baptist Group Ex-Leaders Guilty of Fraud. Thus, when people tried to sell it they could not because they did not own anything. One pastor who had recently entrusted $1 million in church funds to. Under his leadership, the organization held strict moral values, including its officers being forbidden to gamble or drink alcohol. At the center of the scandal is Crotts, a charismatic 53-year-old lawyer, who took over the BFA from his father in 1982. Over a period of several years, the management of the Baptist Foundation }).catch(() => {}); const OneTrustCategories = { Transactions real estate in exchange for notes receivable valued in the millions of dollars. }); It was eventually revealed that it had over $500 million in liabilities. 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. By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL. PC Phone Home if (typeof adunit != "string") return false; Under Bill Crotts, the organization diverted over $140 million to two former and one active (as of 1998) director. 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. Along with companies like Enron and Worldcom, it was audited by accounting firm Arthur Andersen, giving investors a false sense of security. 'keywords' : '~' , console.log('PUB-GDPR-CHECK'); of the accounting professions new antifraud initiatives, such as the 3210 E. Guasti Road Ontario, 91761 View on map. 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. His lawyer has said there was no fraud but rather a disagreement on the value of property. The new company will, like its not-for-profit predecessor, invest its assets in real estate, venture-capital deals, and some equities. On this Wikipedia the language links are at the top of the page across from the article title. A grand jury in April 2001 returned indictments charging former BFA officials with 32 counts of fraud, theft and racketeering. Money & Investing. (function() { can are designed to be unpredictable and unexpected. some red flag warnings that fraud was occurring, led to the Andersen settlement. Management responded to the new environment by structuring accounting transactions 2023 CNBC LLC. aside any prior beliefs as to managements honesty. }; Improving and strengthening fraud detection is at the heart The real estate market did The only thing I can confidently tell investors is this: The commission will pursue every possible avenue to ensure that Arthur Andersen pays for their egregious errors., The size of the settlement, The Wall Street Journal had reported March 4, was remarkably large compared with the losses suffered by investors.. Quotes displayed in real-time or delayed by at least 15 minutes. New Church Ventures sold the stock to another BFA subsidiary, also in exchange for a $1.6 million reduction in a credit line, which turned around and sold for $3.2 million to Harold Dewayne Friend, who in September accepted a plea bargain and agreed to cooperate with the prosecutors. former board members, controlling these new companies. View Notes - Baptist Foundation of Arizona from ACCT 2101 at Kennesaw State University. Former general counsel Thomas Grabinski was convicted of three counts of fraud and one count of illegally conducting an enterprise. )+[a-zA-Z]{2,}))/; 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 . disguise BFAs tenuous financial condition. var setAdblockerCookie = function(adblocker) { that audit public companies, in todays environment it is more important [12][13], In 2002, a judge in the civil court case of the BFA Liquidation Trust versus Arthur Andersen, the Big Five accounting firm that also failed to properly audit Enron, officially approved a settlement that would pay former BFA investors $217 million (equivalent to $327 million in 2021) for Andersen's failure to identify fraudulent activities at the BFA. 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. 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. about the Baptist Foundation of Arizona. })(); 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. The foundation was created in 1948 by the Southern Baptist Convention to administer endowments to the church. 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. We want to hear from you. These. The company will be organized to hold the foundations existing assets, which are estimated to be between $160-million and $200-million. 'cag[configuration_franchise]' : 'American Greed' , While the recently enacted Sarbanes-Oxley Act may only directly impact auditors }); earlier fraud standard, SAS 82. Login Here. For example, on one day Grabinski attested to the value of a piece of property twice. Convention required BFA to be a profitable, self-sustaining independent entity. typeof mps._gptfirst == "function" && mps._gptfirst(adunit, slotid); was placed on probation, requiring that his work be monitored for two years mpsload.src = "//" + mpsopts.host + "/fetch/ext/load-" + mpscall.site + ".js?nowrite=2"; } mps._queue.adload = mps._queue.adload || []; regardless of past experience with the entity or prior beliefs about managements owed BFA significant amounts of notes receivables. Baptist Foundation indictments thrown out. Second, BFA management was highly motivated not to show any losses and to report only 'id' : '100000099' , The most likely cause of this is a content blocker on your computer or network. fiduciary requirements governing nonbank passive trustees of IRAs. Market data provided by Factset. BFA ultimately filed for bankruptcy, and thousands of elderly investors lost Sept. 10, 1999 BFA lays off 72 employees and closes offices in Youngtown and Tucson. 'cag[attribution_source]' : 'CNBC US Source' , const blockedCategories = decodeURIComponent(matches[1]) CNBC_Comscore = 'CNBC_TV'; 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. BFA invested heavily in real estate, a more speculative investment strategy than other Baptist foundations in the state traditionally used. 'cag[brand]' : 'none' , Other companies to look at: Cendant, RiteAid, and Sunbeam. The foundations bankruptcy marks one of the biggest financial collapses ever by a charity. STRICTLY_NECESSARY: 1, The BFA Liquidation Trust, which is seeking to recover the investors funds, immediately took action. .split(',') All eyes are on Houston this week, as jury selection gets underway for the long-awaited criminal trials of former Enron leaders Kenneth Lay and Jeffrey Skilling on charges of corporate fraud. Baptist Group Execs Sentenced for Fraud. Twenty years later, Glen Crotts' son, William Pierre "Bill" Crotts, became the organization's second president. See Church Loan Guidelines for details or download a Church Loan Application. With what are they going to make donations?. Meanwhile in Phoenix, another trial with many similarities quietly entered its 17th week. Kyle Cooper. 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. Synopsis The Baptist Foundation of Arizona (BFA) was organized as an Arizona nonprofit organization primarily to help provide financial support for various Southern Baptist causes. But it also "loaned" nearly $140 million to companies owned by three of the Foundation's directors. both in and outside of management. Text. 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). function isOneTrustAnyBlocked() { var d = new Date(); Arthur Andersen Faces Court Trial Over Baptist Investment Foundation. script.setAttribute("src", "//www.npttech.com/advertising.js"); The Mirage But sometimes in the. 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. Instead, they referred the individual to former BFA Director, Jalma Hunsinger, who then purchased the property for US$1. if (typeof(window._mpspixZ) != 'string') { By SUSAN DONALDSON JAMES. return true; The Arizona Baptist Foundation. [4], The BFA sold property to the elderly that was marketed as a retirement community with a nursing home. 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.