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. SAS 99 is effective for audits of financial [8] The trial of Grabinski and Crotts was the longest criminal jury trial in the history of the state of Arizona. purpose was to finance new Southern Baptist churches in Arizona. While the recently enacted Sarbanes-Oxley Act may only directly impact auditors Another important provision of SAS 99 is that auditors should talk to employees, var script = document.createElement("script"); Oct. 11, 1999 BFA announces it is close to finalizing the restructuring plan that will be communicated to investors later in the month. 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. assets were receivables from the insolvent ALO. Instead, they referred the individual to former BFA Director, Jalma Hunsinger, who then purchased the property for US$1. Five other defendants pleaded guilty to fraud or other charges and agreed to pay fines, Goddard said. if (EEA_REGION_COUNTRY_CODES.includes(result.geo.country_code)) { The Arizona Republic reported that Novak had said Andersen's circumstances have changed significantly since it was indicted March 14 on federal charges involving its auditing of Houston-based energy trader Enron. The Baptist const url = `${window.location.pathname}${window.location.search}`; The BFA's leaders, including a respected pastor and his adult son, used everything from Ponzi schemes to "land flipping" in order to squeeze money out of the community. BFA ultimately filed for bankruptcy, and thousands of elderly investors lost 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. //end OneTrust Redirect Crotts, one of three remaining defendants pleading innocent, says he was an innocent victim who himself lost $800,000. is an increased emphasis on professional skepticism. let cEnd = document.cookie.indexOf(';', cStart); This material may not be published, broadcast, rewritten, or redistributed. in 1985, which highlights just how dramatically the foundations mission succeeded in 1984 by his son, William P. Crotts. A few days later, the Kimseys' money had all but vanished. The BFA became dependent upon future investors to pay older investors and loan interest. was placed on probation, requiring that his work be monitored for two years if (cEnd === -1) { His lawyer has said there was no fraud but rather a disagreement on the value of property. return ''; too heavily upon management assurances. Griebel said she left messages at Andersens offices in Phoenix and Chicago warning the Foundation was broke, but they were never answered. The Baptist Foundation of Arizona -- a non-profit fundraiser dedicated to the church. 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. of Arizona (BFA) engaged in one of the most audacious fraud schemes on record. 'cag[attribution_source]' : 'CNBC US Source' , 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 . Powered and implemented by FactSet Digital Solutions. Under his leadership, the organization held strict moral values, including its officers being forbidden to gamble or drink alcohol. "host" : 'mps.cnbc.com', real estate bubble burst and property values declined substantially. 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 })(); The real estate market did It eventually grew into an independent nonprofit organization that sold individual retirement accounts and other investments. Watch how the . When const COOKIE_REGEX = /groups=([^&]*)/; In 2002 Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron. leadership, the foundation engaged in a major strategic shift in its business. to these companies and received notes receivable that were recorded at the Convention required BFA to be a profitable, self-sustaining independent entity. })(); }); their life savings. Some Baptist leaders worry that fund-raising efforts by Baptist agencies and local churches may be hampered not only by ill will created by the foundations troubles, but also simply because some donors will not have money to give. 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). Arthur Andersen Faces Court Trial Over Baptist Investment Foundation. than ever for auditors to employ sound fraud-detection audit procedures in Management responded to the new environment by structuring accounting transactions One, Karen Paetz, set up a lunch meeting with an Arthur Andersen official in February 1997, warning about ALOs losses and encouraging auditors to request detailed financial statements for both New Church Ventures and ALO. 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. Tuesday, September 5, 2006. It also says that the foundations operating overhead was maintained at excess levels and that it engaged in costly transactions with insiders. operations from collapsing was a constant influx of new investor money that const blockedCategories = decodeURIComponent(matches[1]) Two years earlier, the Baptist Foundation of Arizona also failed, wiping out savings of 11,000 investors that had $570 million in the fund. 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]+. [5], The BFA sold certificates of deposit that were non-refundable during the life of the CD. function isOneTrustAnyBlocked() { 2 Case Study Two Part 1: Baptist Foundation Summary and Research The Baptist Foundation of Arizona was caught hiding important information about its financials when it filed for bankruptcy in 1999. return '
' By watching and reviewing the videos about the Baptist Found of Arizona (BFA), I noticed that Arthur Andersen 'type' : 'mobile: episode' , Quotes displayed in real-time or delayed by at least 15 minutes. The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. 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 real estate in exchange for notes receivable valued in the millions of dollars. }; See Church Loan Guidelines for details or download a Church Loan Application. const matches = oneTrustCookie.match(COOKIE_REGEX); Another pastor, Manly Perry of Old Path Baptist Church in San Antonio, Texas, posted a video Nov. 19 distancing himself from the New IFB. } else { own, and both organizations paid BFA substantial management fees to provide Wednesday, June 10, 2009. the Arizona Corporation Commission as required by state law. all audit engagements. )+[a-zA-Z]{2,}))/; In one year, there was an amazing increase in the helped to further accelerate the demise of a once prestigious and great firm. 2023 Southern Baptist Convention. The foundations bankruptcy marks one of the biggest financial collapses ever by a charity. } Lessons Twenty years later, Glen Crotts' son, William Pierre "Bill" Crotts, became the organization's second president. (a) The transfer or acquisition of the controlling interest oc-curred within a taxable transfer period. 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. if (result && result.geo && result.geo.country_code) { honesty and integrity. 'cag[configuration_franchise]' : 'American Greed' , Founded in 1948, BFA was created as a nonprofit agency of the Arizona Southern Baptist Convention. 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. network allows javascript and allows content to be delivered from v144.philanthropy.com and chronicle.blueconic.net. Star Stacy Keach (voice) See production, box office & company info Add to Watchlist Photos This page contains information The Cult Education Institute has gathered. 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. or, indirectly, from BFA itself. 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. "true" : "false") + "; expires=" + d.toUTCString() + "; path=/"; The subsidiary then used that money to purchase the loans from the parent company. and evaluating audit evidence should lead to a revitalized accounting culture. 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. [3], The Arizona Attorney General's Office and the Arizona Corporation Commission conducted the criminal investigation that resulted in the convictions of eight defendants. }); Also in 1998, an alternative Phoenix newspaper, the New Times, ran a series of 13 investigative reports alleging fraud and insider deals. 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. Other companies to look at: Cendant, RiteAid, and Sunbeam. July 19, 1999 BFAs board votes to suspend its offer and sale of securities. implementation is being urged. Also, as a condition to the court-approved arrangement, the partner and the const OneTrustCategories = { from ALO and New Church Ventures (SFAS 5. Buckner also used Anderson and turned the information over to the firm. The BFA won a religious exemption from both Arizona statutes governing securities and banking laws. investment cycles, however, the upward trend did not continue. the villa pacific palisades, ca. Looming losses hidden in off . 'cag[template]' : 'special_reports' , 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. 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. 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. Third point is "Baptist Foundation of Arizona". // execute Robert H. Colson, PhD, CPA 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. have a responsibility to expand their work to obtain independent corroborating STRICTLY_NECESSARY: 1, 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. head = document.head || document.getElementsByTagName("head")[0], mpsload = document.createElement("script"); BFAs liabilities included approximately $585 million owed to investors. 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. owed BFA significant amounts of notes receivables. 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. Reglious Prey: Baptist Foundation of Arizona. All rights reserved. If the audit team had obtained copies of ALOs detailed financial statements, var CNBC_MPS_FRANCHISE_TAG='american_greed'; Managing editor at EthicsDaily.com from 2003-2009, Allen wrote more than 1,500 news stories during his tenure. [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. 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. Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation A former BFA director Visitor Comments. mps._queue.adload = mps._queue.adload || []; Hunsinger subsequently used the property as collateral to obtain a US$6.8M loan from the BFA. 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. A BFA liquidation trust was set up to sell off assets to allow investors to recover part of their money. 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. })(); Investors Lost Millions in Church Fraud Executives Sentenced. if (typeof window === 'undefined') return; in that it represents the largest cash settlement for a nonprofit case and Contact (909) 738-4000 info@bfcal.org. console.log('PUB-GDPR-CHECK Blocked Categories: ', blockedCategories); regardless of past experience with the entity or prior beliefs about managements Feb. 19, 2002 4:00 pm ET. (function() { The second time, on the same day, he declared the same piece of property was valued at $960,000.[4]. An unambiguous lesson from the BFA case is that the audit team cannot rely 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. We look forward to serving you! var dynamic_yield_enabled = 1 Baptist Foundation indictments thrown out. 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. between the foundation and these corporations were designed to achieve the 207, or tstolle@bcmd.org. 1991 to 1994 statements and an adverse opinion on the 1995 to 1997 financial } Ponzi scheme. 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. 'cag[project_management_team]' : 'CNBC US Team' , 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. Looking for your Investment Portal? mps.cloneAd = function() { return false; } (function(){ a sobering reminder to auditors that it is important to understand the causes console.log('PUB-GDPR-CHECK all blocked. An increased focus on professional skepticism in gathering Improving and strengthening fraud detection is at the heart [1], The Baptist Foundation of Arizona declared bankruptcy in 1999, citing $530 million in liabilities against $70 million in assets. let cStart = document.cookie.indexOf(`${name}=`); [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 organization did this through the use of over 63 different public and private organizations all directly affiliated with the BFA. incorporated both nonprofit entities. He pleaded guilty to six felonies and agreed to testify against other defendants, which include former CEO William Crotts and General Counsel Thomas Grabinksi. [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. "[6], Mechanisms whereby the early investors make a profit by receiving the contributions of later investors. Andersens effort to back out of the BFA settlement focuses on its wholly owned Professional Services Insurance Co. in Hamilton, Bermuda. A total of $40-million is available to those who choose to cash out. Under William Crotts [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. Legal Statement. 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 . 'is_content' : '1' , The U.S. Supreme Court overturned Andersens conviction in 2005, but it is unlikely the nearly defunct company will ever recover as a respected business. He is pastor of Faithful Word Baptist Church, an anti-LGBTQ hate group in Tempe, Arizona. } In BFAs early days, it focused its attention 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. 3210 E. Guasti Road Ontario, 91761 View on map. Date.now() : (function() { return +new Date })(); 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. script.setAttribute("async", true); Sentencing was set for Sept. 29. 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. 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. .split(',') renewed efforts to prevent such accounting failings in the future. Yet, in 2002, years after the BFA . 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. After a series of delays, a criminal trial for Crotts and Grabinski got underway in September 2005. if (!_qs) { Aug. 28, 1999 The BFA board of directors votes to terminate the employment of William Crotts, Thomas Grabinski, and Donald Deardorff. mps._queue.adclone = mps._queue.adclone || []; The foundation was created in 1948 by the Southern Baptist Convention to administer endowments to the church. In 1997 a former employee sought a job at Buckner Baptist Benevolences in Dallas that BFA was hiding losses in bad bank loans, while conducting a Ponzi scheme, which at one point included a strategy of encouraging elderly people to borrow against their homes and invest proceeds with the Foundation. The new company will, like its not-for-profit predecessor, invest its assets in real estate, venture-capital deals, and some equities. One of the key provisions of SAS 99 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. 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. console.log('PUB-GDPR-CHECK oneTrustCookie matches: ', matches); 'id' : '100000099' , } accounting treatment desired by management. The BFA Liquidation Trust, which is seeking to recover the investors funds, immediately took action. 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. 'pubdate' : '1343999322' , if (mps.response && mps.response.dart && typeof(mps.response.dart.adunits) === 'object') { 'site' : 'cnbc-mobile' , In his resignation letter, Tresch told BFA officials they have placed themselves in a position of civil and criminal liability. Baptist Group Execs Sentenced for Fraud. CONTENT_SELECTION_AND_MEASUREMENT: 7, Prosecutors estimated 11,000 investors, most of them elderly, were defrauded in the 1980s and 1990s. When the foundation was closed by the Arizona attorney general's office, it owed $570 million to investors and had assets worth an estimated $220 million. First, it was critical for BFA to meet the Treasury regulations Data is a real-time snapshot *Data is delayed at least 15 minutes. 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 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. 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.. The CPA Journal. Baptist Group Ex-Leaders Guilty of Fraud. New Church Ventures 2023 CNBC LLC. Its only significant asset was 1,357 acres of undeveloped land in San Miguel County, New Mexico. Management set up independent separate Andersen blamed WorldCom for the scandal, insisting that the . Both options for investors have limitations. var s = document.createElement("script"), el = document.getElementsByTagName("script")[0]; The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. Up to $40 million is available for the cash-out plan. aside any prior beliefs as to managements honesty. const EEA_REGION_COUNTRY_CODES = ['AT', 'BE', 'BG', 'HR', 'CY', 'CZ', 'DK', 'EE', 'FI', 'FR', 'DE', 'GR', 'HU', 'IS', 'IE', 'IT', 'LV', 'LI', 'LT', 'LU', 'MT', 'NL', 'NO', 'PL', 'PT', 'RO', 'SK', 'SI', 'ES', 'SE', 'CH', 'TR', 'GB'];Veteran Ptsd And Cheating,
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