Lawrence Dwain Hoover, 71, who served two decades on the foundation's board, faces up to 12 1/2 years in prison when he's sentenced in late November and has agreed to pay $500,000 in restitution, according to the Arizona Attorney General's Office. He pleaded guilty Tuesday to a single count of fraud.
The foundation, which was created in 1948 as a nonprofit religious entity to raise money for Southern Baptist causes, collapsed in 1999 in what was then the largest nonprofit bankruptcy filing in U.S. history. About 11,000 mostly elderly investors lost almost $600 million as a result.
Prosecutors said Hoover participated in various BFA financial transactions that allowed the foundation to falsely portray its financial position to investors.
In July, a Maricopa County jury found former foundation president William Crotts and ex-BFA general counsel Thomas Grabinski guilty of three counts of fraud and one count of illegally conducting an enterprise.
Prosecutors said Crotts, 61, and Grabinski, 46, could face anywhere from six to 23 years for each count when they are sentenced later this month
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Three Baptist Foundation Execs. Guilty of Fraud by Sharon Bhagwandin Three former Baptist Foundation of Arizona (BFA) officials who pleaded guilty to participating in a plan to swindle investors of more than half a billion dollars have agreed to assist an investigation into the foundation. The officials, including former treasurer Donald Dale Deardoff, may testify against five other former executives who have pleaded not guilty to stealing approximately $550 million from 13,000 investors, mostly made up of church-goers, the elderly, retired and disabled. The five who pleaded not guilty and were indicted May 4 are: William Pierre Crotts, Thomas Dale Grabinski, Lawrence Dwain Hoover, Harold Dewayne Friend and Richard Lee Rolfes. Deardoff, Edgar Alan Kuhn and Jalma W. Hunsinger have plead guilty to felony charges. Deardoff plead guilty to two counts of fraud schemes; Kuhn plead guilty to three counts of facilitation of fraud schemes; and Hunsinger plead guilty to three counts of facilitation of illegally conducting an enterprise. The indictment alleges in the early 1990s, Crotts, Grabinski, Hoover, Friend and Rolfes played key roles in defrauding thousands of investors who put money into BFA investments. BFA was founded in 1948 by the Arizona Southern Baptist Convention (ASBC) as a not-for-profit corporation to benefit Southern Baptist causes. The organization raised funds through a variety of investment vehicles that it marketed to Southern Baptist churches, pastors and church members. BFA sold different types of investments and marketed Individual Retirement Accounts, most of which were supposedly back by collateral. Investors were told the accounts paid interest greater than most banks, said an Arizona Attorney General spokeswoman. Investors were also told some of the profit would benefit Baptist causes. By 1999, more than 13,000 individuals had invested approximately $585 million with the not-for-profit. However, according to records, it has contributed only about $1.3 million to such groups over its half-century of operation. By contrast, in 1996 BFA spent $16 million on staff salaries and $329,000 on staff automobiles. Most of the Foundation’s upper management were paid six-figure salaries and received generous benefits. It has also been reported that BFA had invested in a long series of shaky loans and skeptical real estate deals, primarily with companies controlled by members of its board. The deals left the organization facing huge losses. However, BFA stayed afloat by getting new investors to help meet its financial obligations, according to police reports. BFA officials allegedly transferred nonperforming assets and bad investments into "bad banks," hiding losses from investors. Investigators with the Arizona Corporation Commission and the Attorney General’s Office began looking into BFA’s dealings in 1998, when allegations surfaced that BFA was misrepresenting its true financial condition to potential investors. The Commission issued an order Aug. 10, 1999 requiring BFA to stop selling investments in violation of the Arizona Securities Act. Three days earlier, BFA had written to its investors that it faced possible bankruptcy and was placing "a temporary freeze" on the redemption of investments. The foundation did say it would continue to make some payments to certain IRA investors. On August 26, 1999 the foundation terminated its longtime president, "Bill" Crotts, along with Grabinski, general counsel, and controller Deardoff. On November 9, 1999, BFA filed a petition for reorganization under Chapter 11 of the Bankruptcy Code, following the discovery of accounting improprieties, making it the largest nonprofit bankruptcy in US history. In January 2001, the Arizona Corporation Commission filed a civil lawsuit against Arthur Andersen Accounting Firm alleging that the company misrepresented BFA’s financial condition by giving the Foundation a clean bill of health. The Arizona State Board of Accountancy filed an administrative complaint against Arthur Andersen in December 2000 seeking $600 million in restitution for BFA’s victims, alleging that the company’s failure to reveal the true nature of BFA’s financial status cost investors millions of dollars. "The BFA case is one of the largest affinity fraud cases in US history," said state Attorney General Janet Napolitano. "The majority of BFA’s victims reside in Arizona, however, there are investors from 50 states and approximately 10 foreign countries. Arizona received investigative assistance from the National White Collar Crime Center in this case. The investigation into BFA continues." Civil suits are pending. |
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