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recently issued SAS 99, Consideration of Fraud in a Financial Statement Sept. 10, 1999 BFA lays off 72 employees and closes offices in Youngtown and Tucson. See Church Loan Guidelines for details or download a Church Loan Application. 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. [4], The BFA sold property to the elderly that was marketed as a retirement community with a nursing home. var pixelurl = ((document.location.protocol === 'https') ? } for Southern Baptist causes. el.parentNode.insertBefore(s, el); The Mirage But sometimes in the. 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. Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation The Enron scandal has entered the BFA picture, according to Andersens Phoenix attorney, Ed Novak. } let cEnd = document.cookie.indexOf(';', cStart); help restore investor confidence and supersedes the Auditing Standards Boards 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. from the Baptist Foundation Fraud. 'cag[configuration_franchise]' : 'American Greed' , mpsload.src = "//" + mpsopts.host + "/fetch/ext/load-" + mpscall.site + ".js?nowrite=2"; ', window.location); 'type' : 'mobile: episode' , The Phoenix-based. var CNBC_Premium = CNBC_Premium || {}; 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. in 1985, which highlights just how dramatically the foundations mission The previously announced cash out plan is shelved after talking to more than 4,000 investors. their life savings. } } Arthur Anderson had the same problems with the Baptist Foundation of Arizona several years earlier when 750 million in assets was more like 125 million in assets because most of the assets booked by the Baptist Foundation were found to be substantially overvalued. By SUSAN DONALDSON JAMES. var postLoadFunctions = {}; Then, learn how Dr. Mikos, a charming doctor with a lucrative practice, turns out to be a con artist defrauding Medicare. Aug. 11, 1999 The Arizona Republic reports the foundations funds have been frozen as a result of the investigation. real estate properties were ALO and New Church Ventures. But a jury found them innocent on 23 counts of theft, saying they didn't intend to steal from investors but got in over their heads and tried to cover it up. While the recently enacted Sarbanes-Oxley Act may only directly impact auditors You may then be asked to log in, create an account if you don't already have one, However, the State Board if (!mps._ext || !mps._ext.loaded) { regardless of past experience with the entity or prior beliefs about managements 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. The majority of New Church Ventures mps.__intcode = "v2"; "I just hope they realize they defied (God's) word by mishandling money that people entrusted to them," said Virginia Branch, 77, of Prescott, who lost $400,000 she said would have helped her grandchildren pay for college. 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]+. mps._ext = mps._ext || {}; accounting, marketing, and administrative services. 'cag[type_source]' : 'CNBC US Source' , When the BFA filed for bankruptcy in 1999, it had $530 million in liabilities as compared to a reported $70 million in assets. 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. const blockedCategories = decodeURIComponent(matches[1]) Once javascript and access to those URLs are allowed, please refresh this page. If you continue to experience issues, contact us at 202-466-1032 or help@chronicle.com. all audit engagements. 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. return true; than $20 million per year for several years. the firm should have issued either a qualified or an adverse opinion on the The Baptist Foundation of Arizona was established with the pretense of serving Southern Baptist causes. function isEEARegionCheck() { Several accountants and one attorney became concerned enough to approach senior management about ALOs deficit. Watch how the . 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.. some red flag warnings that fraud was occurring, led to the Andersen settlement. In 2002 Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron. The news release said the attorney general also will: seek the sequestering of insurance proceeds and other Andersen assets to insure money is available for BFA victims., seek an expedited trial in the BFA lawsuit and a declaration by the BFA of Andersens actions as having been in bad faith., send a letter to victims outlining the legal steps the state will take., seek the revocation of the licenses of the Certified Public Accountants involved in the BFA at Andersen.. 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. [7], A land flipping scheme is one where a person or company inflates the value of a piece of property to make more money. 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. MVPNs were "fraudulently represented as one which could be redeemed at any time, although with an interest penalty. 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. Over a period of several years, the management of the Baptist Foundation renewed efforts to prevent such accounting failings in the future. Two years earlier, the Baptist Foundation of Arizona also failed, wiping out savings of 11,000 investors that had $570 million in the fund. 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. SAS 99 is effective for audits of financial Under Bill Crotts, the organization diverted over $140 million to two former and one active (as of 1998) director. [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. April 1998 The Phoenix NewTimes, a tabloid, accuses the BFA of many financial irregularities that threatened the foundations stability. the villa pacific palisades, ca. (function() { CONTENT_SELECTION_AND_MEASUREMENT: 7, It is expected to last until at least March, with an estimated cost of $1.6 million to Arizona taxpayers. })(); fetch('https://geo.cnbc.com/info/').then(res => res.json()).then(result => { Nov. 7, 1999 BFA unveils a restructuring plan that would give investors the choice of a cash-out option worth 20 cents on the dollar or shares in a newly created for-profit company. 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. In 1962, Pastor Glen Crotts became the organization's first president. of the accounting professions new antifraud initiatives, such as the July 2, 1998 December 10, 1998 Arizona Corporation Commission begins an investigation of BFA based on the Phoenix NewTimes reports. During its history, it did indeed return about $1.3 million to Baptist causes. baptist foundation of arizona scandalshaun thompson elmhurst Consultation Request a Free Consultation Now. The real estate market did }; 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 . cEnd = document.cookie.length; Aug. 30, 1999 Pastor Richard A. Kimsey and his wife file a lawsuit charging the BFA with running an investment sales Ponzi scheme. Andersen and its representatives pretended to negotiate in good faith, but in fact never had any intention of making good on their part of the settlement. operations from collapsing was a constant influx of new investor money that 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. Payments were being made on the 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.. 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. The BFA had issued millions of dollars in money-losing loans. [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. by the Arizona State Board of Accountancy. same time, it accelerated its efforts to sell IRA-type retirement investment The largest bankruptcy of a non-profit in history, the BFA, like Enron, allegedly hid losses. receivables only because of funds being obtained from either New Church Ventures, ideas on how fraud could occur and adjust the audit program plan so that tests Feb. 19, 2002 4:00 pm ET. This caused a lot of people, more than 11,000 investors, to lose their life savings ($550 million). 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. We are unable to fully display the content of this page. 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. a sobering reminder to auditors that it is important to understand the causes The BFA was associated with the Arizona Southern Baptist Convention, which was affiliated with the national organization. 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. Please make sure your computer, VPN, or }; Prosecutors estimated 11,000 investors, most of them elderly, were defrauded in the 1980s and 1990s. STRICTLY_NECESSARY: 1, 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. One BFA subsidiary, Arizona Southern Baptist New Church Ventures, had a stated purpose of financing new Southern Baptist churches in Arizona. A grand jury in April 2001 returned indictments charging former BFA officials with 32 counts of fraud, theft and racketeering. (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). Global Business and Financial News, Stock Quotes, and Market Data and Analysis. 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. 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. What clues did the have a responsibility to expand their work to obtain independent corroborating Both ALO and New Church Ventures Legal Statement. owed BFA significant amounts of notes receivables. var d = new Date(); We want to hear from you. mps._queue.adview = mps._queue.adview || []; [1], The Baptist Foundation of Arizona declared bankruptcy in 1999, citing $530 million in liabilities against $70 million in assets. they use. When a complex mesh of over 90 insider-controlled entities had been used to help "[1] Since he was working for both companies, Grabinski was able to authorize questionable transactions. 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). var setAdblockerCookie = function(adblocker) { Prosecutors said investors were promised high returns and a safe investment for using their money to build churches and retirement homes, but their combined losses totaled more than a half-billion dollars. mps._urlContainsEmail = function() { 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). mps._adsheld = []; Arizona real estate prices were skyrocketing in the early 1980s. 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. Another important provision of SAS 99 is that auditors should talk to employees, 'cag[attribution_author]' : 'Stacy Keach' , All Rights Reserved. Ponzi scheme. if (mps._urlContainsEmail()) { Wednesday, June 10, 2009. const name = ONE_TRUST_COOKIE_NAME; 1991 to 1994 statements and an adverse opinion on the 1995 to 1997 financial 'is_sponsored' : '0' , (Phoenix, Ariz. - June 10, 2009) Attorney General Terry Goddard today announced that the Arizona Court of Appeals has upheld the convictions and sentences of former Baptist Foundation of Arizona executives William Crotts and Thomas Grabinski. 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. function isOneTrustAnyBlocked() { Founded in 1948, BFA was created as a nonprofit agency of the Arizona Southern Baptist Convention. console.log('PUB-GDPR-CHECK oneTrustCookie: ', oneTrustCookie); 'id' : '100000099' , Baptist Foundation of Arizona Scandal Andersen ignored a CPA's uncovering of fraud and gave clean audit opinions. To this day, it is considered one of the largest affinity frauds in U.S history. The suits against Andersen alleged that the foundation had become a Ponzi scheme, needing to raise tens of millions of dollars to pay the high returns it had promised to earlier investors., The Journal noted that, according to the lawsuits, a key reason why the scheme lasted as long as it did was that Andersen continued to certify the foundations financial statements and dismissed multiple warnings by individuals that the foundation was defrauding investors. 30. Instead, they referred the individual to former BFA Director, Jalma Hunsinger, who then purchased the property for US$1. 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. 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. 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. It filed for bankruptcy in 1999 after many of the foundation 's executive had been convicted of condemnable charges or indicted for fraud. available for public inspection from the Arizona Corporation Commission, showed Arthur Andersen provided unqualified clean audit opinions on 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. cStart = cStart + name.length + 1; DIRECTOR OF OPERATIONS. Your investment actually touches the lives of countless numbers while you earn a very attractive interest rate. Looking for your Investment Portal? "[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! console.log('PUB-GDPR-CHECK Blocked Categories: ', blockedCategories); if (!matches) { in that it represents the largest cash settlement for a nonprofit case and succeeded in 1984 by his son, William P. 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. PC Phone Home var s = document.createElement("script"), el = document.getElementsByTagName("script")[0]; This page contains information The Cult Education Institute has gathered. }); 'nid' : '100000099' Under William Crotts . The organization did this through the use of over 63 different public and private organizations all directly affiliated with the BFA. In the case, it claims that Arthur Anderson gave investors a false sense of security after giving out Anderson issued a clean audit in order to attract new investors. Its initial mission was to raise donations and support for Southern Baptist causes. By MICHAEL SCHROEDER Staff Reporter of THE WALL STREET JOURNAL. } A former BFA director console.log('PUB-GDPR-CHECK all blocked. The foundation says it will pay up to $5-million into a trust intended to pay legal fees to pursue claims against what a spokesman called any third parties that could be held liable for the foundations troubles. 'cag[type_cnbcteam]' : 'CNBC US Team' , 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. Nevertheless, 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 'is_content' : '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.