Baptist Foundation of Arizona
The Baptist Foundation of Arizona (BFA) was a Southern Baptist charity whose fraudulent behavior led to the largest collapse of a religious financial institution in U.S. history. The BFA was associated with the Arizona Southern Baptist Convention, which was affiliated with the national organization. When the BFA filed for bankruptcy in 1999, it had $530 million in liabilities as compared to a reported $70 million in assets. History. The BFA was founded in 1948 and initially sought to provide a financial revenue for participants while supporting Baptist-motivated causes. In 1962, Pastor Glen Crotts  became the organization's first president. Under his leadership, the organization held strict moral values. Its officers were forbidden from gambling and drinking alcohol. Twenty years later, Glen Crotts' son, William Pierre Crotts, became the organization's second president. The collapse of the BFA did not occur in a vacuum. In 1992, records indicated that the company had lost $3.2 million due to questionable transactions. 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." Instead the BFA decided to hide its debt and began a series of dubious activities. Under Bill Crotts, the organization diverted over $140 million to two former and one active (as of 1998) director. The organization did this through the use of over 63 different public and private organizations all directly affiliated with the BFA. Each of these related companies had Bill Crotts and the BFA's chief attorney, Tom Grabinski, on their board. Grabinski signed documents as an officer for both BFA and a subsidiary. When asked if a conflict of interest existed, the BFA indicated  that both parties "had waived any conflicts of interest." Since he was working for both companies, Grabinski was able to authorize questionable transactions. For example, on one day Grabinski attested to the value of a piece of property twice. The first time he attested to the value, he indicated that the property was worth $3.3 million. The second time, on the same day, he declared the same piece of property was valued at $960,000. Judgments. The Arizona Attorney General’s Office and the Arizona Corporation Commission conducted the criminal investigation that resulted in the convictions of eight defendants . At the time, it was the largest affinity fraud that had ever occurred in the United States, with a total loss estimated at $550 million. According to the Arizona Attorney General’s Office, the indictments were handed down by the Arizona State Grand Jury against five defendants in May 2001. Three defendants had already pleaded guilty. Only two defendants did not plead guilty before the trial, Thomas Grabinski and William Crotts. Their trial was the longest criminal jury trial in the history of the state of Arizona. In early 2007, several former members of the BFA's executive management  team were sentenced for the fraudulent activities associated with the BFA. Donald Dale Deardorff, Senior Vice President and Controller, was sentenced to four years in prison and a fine of $150,000,000. Jalma Hunsinger, President and Director of Church Ventures (a company whose stated purpose was to build churches), paid $150,000. BFA president, Crotts, was sentenced to eight years in prison. BFA chief attorney, Grabinski, was sentenced to six years. Grabinski sued BFA's insurance carrier, National Union Fire Insurance Company of Pittsburgh, Pa., for coverage of his legal fees, and later for abuse of process, but the abuse  of process claim was denied in a motion to dismiss. Arthur Andersen, the Big Five accounting firm that audited Enron, paid former BFA investors $217 million for Andersen's failure to identify fraudulent activities at the BFA. When the settlement was originally released, in 2002, there were questions as to whether or not Arthur Andersen, which was at the time being charged for issues surrounding Enron, would be able to make that payment. "Christianity Today" reported that "the worst case scenario for Baptist Foundation investors would be if Andersen were convicted this month in the criminal case [over its  audits of Enron], then quickly filed for bankruptcy-court protection." 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. Related. The television series "American Greed" episode "Religious Prey: Baptist Foundation Of Arizona / Medical Scams: Dr. Mikos" covers the fraudulent behavior of the Baptist Foundation of Arizona.