Andersen reneges on foundation settlement
___By Bob Allen
___Associated Baptist Press
___PHOENIX (ABP)--Nearly 13,000 investors in the failed Baptist Foundation of Arizona had their hopes dashed March 28 when Arthur Andersen announce it would renege on a $217 million out-of-court settlement reached March 1.
___In a stunning setback for investors, Andersen said its wholly owned insurance company is "unable to approve or pay claims at this time due to its financial position."
___Investor Tom Kennedy called Andersen's decision "treachery in the highest order."
___"I am just crushed by the Arthur Andersen announcement that they will not stand by the agreement their representatives negotiated," said Kennedy, a member of Mountain View Baptist Church in Phoenix. "The breakdown in the settlement translates into further suffering by investors who need their funds returned so life can be sustained and we can put this unpleasant experience behind us."
___Attorneys for the foundation's liquidation trust quickly asked a retired federal judge who presided over the settlement negotiations to enforce the agreement.
___Meanwhile, Judge Edward Burke of Maricopa County Superior Court rescheduled a jury trial for April 29. The trial, originally scheduled for March 4, was averted when Andersen, accused of negligence in its audits of foundation accounts, agreed to pay investors the equivalent of about 32 cents on the dollar of their original investments.
___In light of Andersen's decision to renege on that deal, Arizona Attorney General Janet Napolitano called on the state's board of accountancy to impose "the administrative equivalent of a death penalty" by revoking the accounting firm's registration.
___"This is an absolute outrage," Napolitano said in a statement. "This shows that 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."
___But according to a report in the Arizona Republic, Andersen's Phoenix attorney, Ed Novak, said Napolitano is wrong. He said the insurer, Professional Services Insurance Company Limited, is a separate entity that had to approve the claim.
___Meanwhile, the Wall Street Journal reported April 1 that the insurer had been rendered technically insolvent because Andersen failed to make a $100 million premium payment.
___Novak told the Arizona newspaper Andersen's situation changed dramatically when the firm was indicted by the federal government March 14 for its auditing of Enron.
___Officials with the Baptist foundation trust hope Andersen still can be forced to honor the agreement. That could give investors an important edge in the event Andersen files bankruptcy.
___But Kennedy said investors, many of whom lost 65 percent to 70 percent of their life's savings, believe any recovery from Andersen is now remote. He termed the decision "just another act of betrayal."
___In another development, the Arizona Republic on April 2 quoted Clifton Jessup, the trustee overseeing liquidation of Baptist Foundation assets, as saying his group's lawyers would take a more aggressive approach in seeking restitution from the Arizona Southern Baptist Convention.
___The state convention, which started the foundation in 1948 to raise funds for Baptist causes, has expressed sympathy and raised funds for victims but contends it is not legally responsible for actions of foundation officers, who are accused of defrauding investors out of $550 million.
___The practices of the Arizona Baptist Foundation differed significantly from the practices of other state Baptist foundations, including the Baptist Foundation of Texas. The Texas foundation and other state foundations do not offer the type of high-yield personal investment products the Arizona foundation sold.
___
The Baptist Standard
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!/ Signup for FirstLook