May 14, 2001

Five Arizona Foundation leaders
indicted; three others plea bargain
___By Bob Allen
___Associated Baptist Press
___PHOENIX (ABP)--Five former Baptist Foundation of Arizona officials could face prison if convicted of crimes alleged in a 32-count indictment unsealed May 4.
___Three other former officials with the now-bankrupt foundation pleaded guilty to reduced charges in exchange for turning state's evidence at an initial criminal hearing in Phoenix.
___Five defendants pleaded not guilty at the May 4 hearing in Maricopa County Superior Court. They are William Pierre Crotts, the foundation's former chief executive officer; Thomas Dale Grabinski, ex-general counsel and vice president; Lawrence Dwain Hoover and Harold DeWayne Friend, former members of the Foundation's board of directors; and Richard Lee Rolfes, an accounting consultant.
___Charges stemming from a two-year investigation by Arizona's attorney general include theft, fraud and racketeering. It is one of the largest fraud cases involving an affinity group--in this case a religious denomination--in U.S. history.
___Sentences for the various crimes carry prison terms of between eight and 12 years. If convicted, the former officials also could be forced to pay up to $550 million in restitution to 13,000 defrauded investors. If convicted of racketeering, the court could go after their personal assets.
___Three others targeted in the probe--former treasurer Donald Dale Deardoff; Edgar Allen Kuhn, an officer of foundation subsidiaries; and former board member Jalma Hunsinger--accepted a plea bargain in exchange for cooperating with prosecutors.
___Deardoff pleaded guilty to two counts of fraudulent schemes, which carries a penalty up to 12-and-a-half years plus fines and restitution. Kuhn confessed to three counts of facilitating fraudulent schemes and Hunsinger to three counts of illegally conducting an enterprise, less-serious felonies carrying sentences of six months to 18 months. Sentencing for the three was delayed until after the case ends.
___The indictments, handed down by a grand jury April 24, allege that the eight defendants worked together to defraud thousands of investors into putting money into bogus foundation investments between 1994 and 1999.
___They accuse the officials of hiding losses while promising investors a high rate of return and promising that part of their investments would be used to further Southern Baptist work.
___Meanwhile, they allegedly used funds from new investors to pay dividends on old accounts, an illegal practice commonly known as a Ponzi scheme.
___As a result, it is alleged, investors lost millions--some their life's savings.
___Attorneys for two of the defendants, meanwhile, told the Arizona Republic newspaper in Phoenix that the charges are unwarranted and their clients are innocent.
___Foundation directors fired Crotts, Grabinski and Deardoff in August 1999, a month after the Arizona Corporation Commission said the foundation violated securities laws by failing to reveal its true financial condition to investors.
___The agency, following a yearlong probe, ordered the foundation and two subsidiaries to stop selling investment products immediately on Aug. 10, 1999.
___The foundation filed for bankruptcy protection that November, marking the largest non-profit bankruptcy in U.S. history.
___At that time, it reported assets of $240 million and $640 million in debts. Foundation-owned properties currently are being sold off to return investors a portion of their money. Investors so far have recovered five-and-one-half cents on the dollar of their total claim under a court-ordered restructuring. They expect to receive no more than 31 percent to 44 percent of their investment over the next five years. Criminal proceedings will have no bearing on the bankruptcy case.
___Other civil lawsuits also are pending, however, including a 13,000-member class-action suit against the foundation. A recent case filed by the state on investors' behalf also seeks up to $600 million from Andersen, formerly known as Arthur Andersen. It alleges that the accounting giant aided and abetted the scam by continuing to issue clean audits despite warnings from whistle-blowers and other red flags.
___Andersen denies any wrongdoing. An attorney for the firm told an Arizona newspaper it is hard to catch a client bent on deceiving an auditor. Andersen recently agreed to pay shareholders of appliance-maker Sunbeam Corp. $110 million in a similar case, however, also without admitting guilt.

Get printer-friendly version of this story


Send this story to a friend

News of religion, faith, missions, Bible study and Christian ministry among Texas Baptist churches, in the BGCT, the Southern Baptist Convention ( SBC ) and around the world.

---

Contents/ Masthead / Why We're Here / Links / Archive / E-mail us/ SUBSCRIBE!