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. In applying SAS 99, auditors should plan and execute every audit outside an entity that suggests the possibility that management fraud may 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. By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL. A Division of NBCUniversal. 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. If the audit team had obtained copies of ALOs detailed financial statements, While the recently enacted Sarbanes-Oxley Act may only directly impact auditors Aug. 30, 1999 Pastor Richard A. Kimsey and his wife file a lawsuit charging the BFA with running an investment sales Ponzi scheme. 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 '); document.addEventListener("DOMContentLoaded", function(event) { script.setAttribute("async", true); Art Toalston is a writer based in Nashville and a former editor of Baptist Press. STRICTLY_NECESSARY: 1, Also in 1998, an alternative Phoenix newspaper, the New Times, ran a series of 13 investigative reports alleging fraud and insider deals. var CNBC_MPS_FRANCHISE_TAG='american_greed'; }); "[3] Instead the BFA decided to hide its debt and began a series of dubious activities. Once javascript and access to those URLs are allowed, please refresh this page. } too heavily upon management assurances. } mpsload.src = "//" + mpsopts.host + "/fetch/ext/load-" + mpscall.site + ".js?nowrite=2"; } var setAdblockerCookie = function(adblocker) { The foundation was created in 1948 by the Southern Baptist Convention to administer endowments to the church. Click the link below to sign up for updates from Good Faith Media via our daily or weekly e-newsletters. Crotts and Grabinski could face six to 23 years for each count. [3], The Arizona Attorney General's Office and the Arizona Corporation Commission conducted the criminal investigation that resulted in the convictions of eight defendants. [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. 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.. Inadequate disclosure of losses on notes receivables due 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. var dynamic_yield_enabled = 1 document.getElementsByTagName("head")[0].appendChild(script); In one year, there was an amazing increase in the 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. [1], The Baptist Foundation of Arizona declared bankruptcy in 1999, citing $530 million in liabilities against $70 million in assets. An investigation being conducted by Arizonas Attorney Generals office and the states Corporation Commission has already revealed that the foundation used bogus transactions and accounting tricks to hide financial losses and mislead potential investors. Robert H. Colson, PhD, CPA The following were among the major GAAP violations alleged by The BFA carried out a number of illegal activities in perpetrating affinity fraud against Southern Baptist worshipers in Arizona. April 1998 The Phoenix NewTimes, a tabloid, accuses the BFA of many financial irregularities that threatened the foundations stability. 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. [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. return ''; Thus, when people tried to sell it they could not because they did not own anything. ideas on how fraud could occur and adjust the audit program plan so that tests 'adunits' : 'Default' , For example, Select Trading Group, a subsidiary of ALO, created its own subsidiary, Santa Fe Trails Ranch II. 'content_id' : '100000099' , the substance of ALOs actions was to buy and hold BFAs overvalued The collapse of Bryant Financial Associates was a complete scandal that exposed the fraudulent activities of its executives. Andersen settled a class-action lawsuit with BFA investors for $217 million, without admitting any wrongdoing. 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. 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. Investors in the Baptist Foundation of Arizona, which went belly-up in 1999 in the largest nonprofit bankruptcy in history, are suing Arthur Andersen, the foundation's auditors, for covering up the fact that the foundation was a fraud. Wednesday, June 10, 2009. (function(){var g=function(e,h,f,g){this.get=function(a){for(var a=a+"=",c=document.cookie.split(";"),b=0,e=c.length;b=e/100?0:100),a=[h,e,0],this.set(f,a.join(":"));else return!0;var c=a[1];if(100==c)return!0;switch(a[0]){case "v":return!1;case "r":return c=a[2]%Math.floor(100/c),a[2]++,this.set(f,a.join(":")),!c}return!0};this.go=function(){if(this.check()){var a=document.createElement("script");a.type="text/javascript";a.src=g+ "&t=" + (new Date()).getTime();document.body&&document.body.appendChild(a)}};this.start=function(){var a=this;window.addEventListener?window.addEventListener("load",function(){a.go()},!1):window.attachEvent&&window.attachEvent("onload",function(){a.go()})}};try{(new g(100,"r","QSI_S_ZN_3NNZu19yzvgN7tr","//zn3nnzu19yzvgn7tr-nysscpa.siteintercept.qualtrics.com/WRSiteInterceptEngine/?Q_ZID=ZN_3NNZu19yzvgN7tr&Q_LOC="+encodeURIComponent(window.location.href))).start()}catch(i){}})(); Inadequate disclosure regarding ALO and New Church Ventures Arizona Officials Say Andersen Auditors Played Role in Fraud by a Baptist Group. Some 13,000 investors lost $570 million, mainly elderly Baptists, some of whom lost their entire life's savings. } const matches = oneTrustCookie.match(COOKIE_REGEX); 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. The Baptist foundation began selling investment products to church members in 1983. The fund is $590 million in debt, far outstripping the $158 million Jim and Tammy Bakker bankruptcy scandal--and regulators believe it is among the nation's largest cases of "affinity fraud,". let cStart = document.cookie.indexOf(`${name}=`); Arthur Andersen Faces Court Trial Over Baptist Investment 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 . 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.. mps._queue.adload = mps._queue.adload || []; function isOneTrustAnyBlocked() { 'path' : '/id/100000099' , [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. Defense lawyers said they plan to ask Judge Kenneth Fields to dismiss the charges, and plan to appeal if he doesn't. He pleaded guilty to six felonies and agreed to testify against other defendants, which include former CEO William Crotts and General Counsel Thomas Grabinksi. in that it represents the largest cash settlement for a nonprofit case and 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. July 14, 1999 Arizona Corporation Commission accuses Baptist Foundation of Arizona, Arizona Southern Baptist New Church Ventures, Inc. and Christian Financial Partners, Inc. of violating Arizona Securities Act. Auditors must broaden the range of information that between the foundation and these corporations were designed to achieve the View Jasmine's full profile See who you know in common Get introduced . 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. return Object.values(OneTrustCategories).filter((c) => blockedCategories.includes(c)).length > 0; Global Business and Financial News, Stock Quotes, and Market Data and Analysis. This material may not be published, broadcast, rewritten, or redistributed. mps._queue.gptloaded = mps._queue.gptloaded || []; 'pubdate' : '1343999322' , })(); const url = `${window.location.pathname}${window.location.search}`; 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. 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. by the Arizona State Board of Accountancy. The BFA case involves the largest Chapter 11 bankruptcy filing by a nonprofit organization in U.S. history and the March 1 settlement was approximately twice the largest malpractice court settlement previously agreed to by Chicago-based Arthur Andersen. mps._adsheld = []; return true; In 1989, Arizonas } else { 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. cEnd = document.cookie.length; })(); Sept. 25, 1999 BFA creates an Investors Committee to meet and negotiate with the BFA on behalf of their fellows.. mps._queue.mpsinit = mps._queue.mpsinit || []; console.log('PUB-GDPR-CHECK all blocked. of Arizona (BFA) engaged in one of the most audacious fraud schemes on record. First case: The Baptist Foundation of Arizona invests and loses millions entrusted by churchgoers, and its mission ends in scandal. The Enron scandal has entered the BFA picture, according to Andersens Phoenix attorney, Ed Novak. 'site' : 'cnbc-mobile' , mps.insertAd("#" + slotid, adunit) With what are they going to make donations?. Baptist Group Ex-Leaders Guilty of Fraud. for Southern Baptist causes. Meanwhile in Phoenix, another trial with many similarities quietly entered its 17th week. In BFA's early days, it focused its attention 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. const name = ONE_TRUST_COOKIE_NAME; Twenty years later, Glen Crotts' son, William Pierre "Bill" Crotts, became the organization's second president. })(); . 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.. auditors overlook? Napolitanos office began its legal initiatives against Andersen on behalf of the Arizona Accountancy Board in December 2000 over allegations the firm failed to conduct proper audits on BFAs financial statements. An unambiguous lesson from the BFA case is that the audit team cannot rely 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. 'cag[project_management_team]' : 'CNBC US Team' , The Enron scandal has entered the BFA picture, according to Andersen's Phoenix attorney, Ed Novak. Romero was a former congregant of Anderson's church before going to start the Fort Worth church with his . More information may be obtained by contacting the Foundation at 10255 Old Columbia Rd., Columbia MD, 21046, or by contacting Tom Stolle at (800) 466-5290, ext. Nevertheless, Baptist Foundation of Arizona Scandal Andersen ignored a CPA's uncovering of fraud and gave clean audit opinions. about the Baptist Foundation of Arizona. . Several accountants and one attorney became concerned enough to approach senior management about ALOs deficit. Money & Investing. fetch('https://geo.cnbc.com/info/').then(res => res.json()).then(result => { real estate properties were ALO and New Church Ventures. Then, learn how Dr. Mikos, a charming doctor with a lucrative practice, turns out to be a con artist defrauding Medicare. 'cag[attribution_author]' : 'Stacy Keach' , The BFA filed for Chapter 11 bankruptcy that November, listing assets of $220 million and liabilities of $640 million. Improving and strengthening fraud detection is at the heart 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. Looking for your Investment Portal? 'type' : 'mobile: episode' , manager on the BFA audit lost their CPA licenses to practice and a third CPA "[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! 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. Clearly no. mps.__timer = Date.now ? BFA, an agency of the Arizona Southern Baptist Convention, was founded in 1948 to raise and manage endowments for church work in Arizona. if (isOneTrustAnyBlocked()) { The foundation's bankruptcy marks one of the biggest financial collapses ever by a charity. Other companies to look at: Cendant, RiteAid, and Sunbeam. Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation Audit. After a series of delays, a criminal trial for Crotts and Grabinski got underway in September 2005. investment cycles, however, the upward trend did not continue. 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 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. sale of these IRA-type investments, from $7.2 million in 1984 to $211 million const blockedCategories = decodeURIComponent(matches[1]) both in and outside of management. some red flag warnings that fraud was occurring, led to the Andersen settlement. BFA management was highly motivated not to show any losses and to report only baptist foundation of arizona scandalshaun thompson elmhurst Consultation Request a Free Consultation Now. All Rights Reserved. }).catch(() => {}); 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. than $20 million per year for several years. 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. el.parentNode.insertBefore(s, el); if (cStart !== -1) { 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 . In order to remove those loans from its books, the BFA secretly funneled money to a subsidiary. DIRECTOR OF OPERATIONS. owed BFA significant amounts of notes receivables. Kyle Cooper. 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. The previously announced cash out plan is shelved after talking to more than 4,000 investors. The person did not actually purchase the property, but purchased the right to occupy said property. June 3, 2010 -- Tina Anderson was only 15 when she said she was forced to stand terrified before her entire Baptist congregation to confess her . Under William Crotts if (EEA_REGION_COUNTRY_CODES.includes(result.geo.country_code)) { 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. Superior Ct. Maricopa County, CV 2002-005117. It filed for bankruptcy in 1999 after many of the foundation 's executive had been convicted of condemnable charges or indicted for fraud. Payments were being made on the Lessons Crotts, one of three remaining defendants pleading innocent, says he was an innocent victim who himself lost $800,000. Under Bill Crotts, the organization diverted over $140 million to two former and one active (as of 1998) director. One of the key provisions of SAS 99 head = document.head || document.getElementsByTagName("head")[0], mpsload = document.createElement("script"); Legal Statement. Oct. 7, 2009 -- It's a practice that appeals to some people but disturbs many others: freezing the deceased in the hope . Your investment actually touches the lives of countless numbers while you earn a very attractive interest rate. accounting, marketing, and administrative services. the firm should have issued either a qualified or an adverse opinion on the 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. 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. financial assistance was not expected to come from any other source. 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. }; Anderson asked for the documents and BFA officials refused to provide them. (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). The Arizona Baptist Foundation. SOCIAL_MEDIA: 8 incorporated both nonprofit entities. d.setTime(d.getTime() + 60 * 60 * 24 * 30 * 1000); See Church Loan Guidelines for details or download a Church Loan Application. People of faith vulnerable to 'affinity frauds,' authorities say. return false; By SUSAN DONALDSON JAMES. 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. 2023 CNBC LLC. (function() { [5], The BFA sold certificates of deposit that were non-refundable during the life of the CD. or redistributed. Bob Allen is managing editor of EthicsDaily.com. if (cEnd === -1) { This settlement takes on a sad historical significance 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 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.