baptist foundation of arizona scandal

An unambiguous lesson from the BFA case is that the audit team cannot rely 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. The entities had no employees of their The subsidiary then used that money to purchase the loans from the parent company. In 1992, records indicated that the company had lost $3.2 million due to questionable transactions. One of the key provisions of SAS 99 positive results. }).catch(() => {}); (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. between the foundation and these corporations were designed to achieve the Powered and implemented by FactSet Digital Solutions. the villa pacific palisades, ca. 'keywords' : '~' , [5], The BFA sold certificates of deposit that were non-refundable during the life of the CD. Three former BFA officials have pleaded guilty to felonies in the case while Crotts and four others face fraud and racketeering charges. The CPA Journal. Five other defendants pleaded guilty to fraud or other charges and agreed to pay fines, Goddard said. } s.src = "https://fm.cnbc.com/applications/cnbc.com/resources/files/2020/03/28/VisitorAPI.js"; 'is_sponsored' : '0' , Former Alcor employee makes harsh allegations against cyronics foundation. July 7, 2020 News Division banned, deleted, faithful word baptist church., Steven Anderson, youtube. The foundation, controlled by the Arizona Southern Baptist Convention, declared bankruptcy in 1999 after state regulators ordered it to stop selling securities. For example, on one day Grabinski attested to the value of a piece of property twice. leadership, the foundation engaged in a major strategic shift in its business. manager on the BFA audit lost their CPA licenses to practice and a third CPA In applying SAS 99, auditors should plan and execute every audit An increased focus on professional skepticism in gathering Investors take a leap of faith and believe their money will be secure. the substance of ALOs actions was to buy and hold BFAs overvalued 'path' : '/id/100000099' , In a Good bank-bad bank scheme, the two companies manipulate transactions to favor the public institution while using the "bad bank" to hide the deficiencies. } if (!_qs) { July 19, 1999 BFAs board votes to suspend its offer and sale of securities. was used to pay interest on old money. ideas on how fraud could occur and adjust the audit program plan so that tests evidence. It is expected to last until at least March, with an estimated cost of $1.6 million to Arizona taxpayers. When the BFA filed for bankruptcy in 1999, it had $530 million in liabilities as compared to a reported $70 million in assets. The BFA now owes investors $200 million more than it did in 1995. auditors overlook? In other words, it had become a classic plans to church members. window.location.href = `/opt-in-check?pub_referrer=${encodeURIComponent(url)}`; More specifically, the litigation was brought by Arizona's Corporation Commission (Securities Division), as well as the state's attorney general. 'cag[type_cnbcteam]' : 'CNBC US Team' , [2], The collapse of the BFA did not occur in a vacuum. Officials at the Arizona Southern Baptist Convention were unavailable for comment. Money & Investing. Arizona Officials Say Andersen Auditors Played Role in Fraud by a Baptist Group. Hunsinger subsequently used the property as collateral to obtain a US$6.8M loan from the BFA. [7], A land flipping scheme is one where a person or company inflates the value of a piece of property to make more money. The collapse of Bryant Financial Associates was a complete scandal that exposed the fraudulent activities of its executives. 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. 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. Contact (909) 738-4000 info@bfcal.org. 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). be taking place requires a higher degree of due diligence by auditors. Market data provided by Factset. return _regex.test(_qs); ALOs stated purpose was to develop real estate. 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. 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. 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. Presented a detailed analysis of The Baptist Foundation of Arizona scandal and won first place among five teams. In 1989, Arizonas BFA began to invest heavily in the Arizona real estate market, and at the mps._ext = mps._ext || {}; Solely for the purpose of determining whether a transfer or ac- Aug. 28, 1999 The BFA board of directors votes to terminate the employment of William Crotts, Thomas Grabinski, and Donald Deardorff. 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. } 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. MVPNs were "fraudulently represented as one which could be redeemed at any time, although with an interest penalty. These. accounting treatment desired by management. 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 . The Baptist for Southern Baptist causes. [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. return true; (function() { 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. 'template' : 'special_reports' , This caused a lot of people, more than 11,000 investors, to lose their life savings ($550 million). Management set up independent separate 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. The BFA was a church-affiliated charity, one that preyed on the members of its own congregation and operated for years before church fraud detection put a stop to it. the State Board of Accountancy: Arthur Andersen, without admitting or denying any fault, settled an investors 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 . 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 setAdblockerCookie = function(adblocker) { "[6], Mechanisms whereby the early investors make a profit by receiving the contributions of later investors. const OneTrustCategories = { The Arizona Southern Baptist Convention was founded in 1928. } Lessons assets were receivables from the insolvent ALO. STORAGE: 6, 1991 to 1994 statements and an adverse opinion on the 1995 to 1997 financial Some 13,000 investors lost $570 million, mainly elderly Baptists, some of whom lost their entire life's savings. mps._queue.mpsloaded.push(function(){ detect fraud. 'hline' : 'American Greed' , 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. Data is a real-time snapshot *Data is delayed at least 15 minutes. var foresee_enabled = 1 was placed on probation, requiring that his work be monitored for two years }; the auditors would have discovered that ALO was insolvent. console.log('PUB-GDPR-CHECK Blocked Categories: ', blockedCategories); Defense lawyers said they plan to ask Judge Kenneth Fields to dismiss the charges, and plan to appeal if he doesn't. 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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. June 7, 2022 . credible tips or complaints are received about management fraud, auditors script.setAttribute("onerror", "setAdblockerCookie(true);"); People of faith vulnerable to 'affinity frauds,' authorities say. typeof mps._gptfirst == "function" && mps._gptfirst(adunit, slotid); 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. Kimsey reportedly invested $100,000 with BFA. A few days later, the Kimseys' money had all but vanished. The organization did this through the use of over 63 different public and private organizations all directly affiliated with the BFA. What clues did the Aug. 30, 1999 Pastor Richard A. Kimsey and his wife file a lawsuit charging the BFA with running an investment sales Ponzi scheme. BFA management was highly motivated not to show any losses and to report only }; 'nid' : '100000099' For example, the Phoenix New Times reported a case wherein an individual wanted to sell a US$1.9M (million) piece of asbestos-contaminated property to the BFA for US$1 as a tax write off. The BFA Liquidation Trust, which is seeking to recover the investors funds, immediately took action. mps._queue.adclone = mps._queue.adclone || []; 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 . if (!matches) { 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. 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. 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. 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. 'adunits' : 'Default' , 2023 CNBC LLC. a complex mesh of over 90 insider-controlled entities had been used to help can are designed to be unpredictable and unexpected. 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 $6.9 million. var _regex = /([^=&/<>()[].,;:s@"]+(.[^=&/<>()[].,;:s@"]+)*)@(([[0-9]{1,3}.[0-9]{1,3}.[0-9]{1,3}.[0-9]{1,3}])|(([a-zA-Z-0-9]+. .split(',') The foundations plan -- which is still subject to approval by investors -- includes one other way people might get back some of their money: litigation. Napolitano and the Arizona Corporation Commission then filed a civil lawsuit against Andersen in January 2001, seeking civil remedies for violations of the Arizona Securities and Consumer Fraud Act. have a responsibility to expand their work to obtain independent corroborating Date.now() : (function() { return +new Date })(); The Arizona Baptist Foundation. Novak contended that Andersen and its insurance company are two separate entities, The Republic reported, while Napolitano depicted the two as one and the same and thus Andersen in actuality is reneging on the settlement. Quotes displayed in real-time or delayed by at least 15 minutes. let cStart = document.cookie.indexOf(`${name}=`); 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. console.log('PUB-GDPR-CHECK oneTrustCookie matches: ', matches); As a nonprofit company, ALO filed its financial statements each year with 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. ALO in turn sold the stock to New Church Ventures, in exchange for a $1.6 million reduction in ALOs credit line owed to New Church Ventures. document.getElementsByTagName("head")[0].appendChild(script); Romero was a former congregant of Anderson's church before going to start the Fort Worth church with his . 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. BFAs counsel is informed that the state investigation could result in proceedings against individuals at BFA as well as the organization itself. Profits from investments were supposed to be used to fund the churches' ministries and numerous charitable causes. 'cat' : 'CNBC TV|Primetime Shows 2|American Greed' , Arizona real estate prices were skyrocketing in the early 1980s. [11], In early 2007, several former members of the BFA's executive management team were sentenced for the fraudulent activities associated with the BFA. 'stitle' : 'Religious Prey | Dr. Mikos: American Greed 5' , "true" : "false") + "; expires=" + d.toUTCString() + "; path=/"; return false; 'cag[brand]' : 'none' , Surname 1 Student's Name Professor's Name Course Date Financial Fraud Question I The litigation Both ALO and New Church Ventures 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. } 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. 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. recently issued SAS 99, Consideration of Fraud in a Financial Statement 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. const COOKIE_REGEX = /groups=([^&]*)/; The company will be organized to hold the foundations existing assets, which are estimated to be between $160-million and $200-million. Bob Allen is managing editor of EthicsDaily.com. All rights reserved. A Division of NBCUniversal. Login Here. in 1985, which highlights just how dramatically the foundations mission {"@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"]} To this day, it is considered one of the largest affinity frauds in U.S history. if (result && result.geo && result.geo.country_code) { })(); 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. Got a confidential news tip? 'cag[attribution_source]' : 'CNBC US Source' , 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. 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. (function(){ const matches = oneTrustCookie.match(COOKIE_REGEX); You have to deal with the embarrassment of it, the cleanup of it, but it doesnt put you out of business., Debra E. Blum is a freelance writer and has been a contributor to, An Update for Readers on Our New Nonprofit Status. We want to hear from you. } Auditors must exchange 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. 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. The BFA carried out a number of illegal activities in perpetrating affinity fraud against Southern Baptist worshipers in Arizona. Watch how the . Sign up for free newsletters and get more CNBC delivered to your inbox. [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.

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