Former Arizona foundation executives convicted of fraud, await sentencing

PHOENIX (ABP) -- In what has been described as the largest case of fraud targeting a religious group, the former top executive and legal counsel for the Baptist Foundation of Arizona were convicted on multiple fraud-related counts July 24.

A Maricopa County, Ariz., Superior Court jury convicted former foundation President William Crotts and Thomas Grabinski, the group's former top lawyer, each on three counts of defrauding investors and one count of knowingly operating an illegal operation. The jury also acquitted two of 23 counts of theft. Jurors reportedly determined that Crotts and Grabinski did not personally gain financially from the scheme.

Because the convictions require mandatory jail time, according to the Arizona Republic, the two were immediately handcuffed and taken into custody. They will be sentenced in September.

The convictions are the result of a 10-month trial that came nearly seven years after the foundation collapsed and the fraud allegations first came to light, shocking the non-profit world.

The foundation, controlled by the Arizona Southern Baptist Convention, declared bankruptcy in 1999 after state regulators ordered it to stop selling securities. About 11,000 investors -- many of them elderly members of Baptist churches in Arizona and elsewhere -- lost more than $550 million.

Prosecutors said Crotts, Grabinski and other foundation employees marketed the charitable fund to individuals interested in investing in a fund that would support Baptist and other Christian ministries. Bible-quoting foundation representatives claimed the investments would deliver above-average returns while helping "to do the Lord's work," the Republic reported.

However, the prosecutors said, the foundation's investments were actually losing money. The executives created "off-the-books" corporations to hide the losses while touting strong returns to sell the foundation to new investors to cover those losses -- essentially creating a non-profit pyramid scheme.

Defense attorneys countered that the foundation would eventually have been able to pay off investors if it had been able to wait out a bad real-estate market, but state officials shut the foundation down too soon. The jurors rejected that argument.

"They got caught up in something they couldn't get out of," the Republic quoted juror Nathan Redmond as saying.

Five other foundation officials have already cooperated with prosecutors in the case, pleading guilty and testifying against Crotts and Grabinski. A sixth is reportedly too sick to stand trial.

The accounting firm Arthur Andersen -- which also was connected to the massive Enron fraud scandal -- in 2002 paid a record $217 million to Arizona to settle a lawsuit involving the Baptist case. Andersen served as the foundation's accounting firm.

Steve Bass, the chief executive officer of the Arizona Southern Baptist Convention, expressed optimism in reaction to the verdicts in a July 24 entry on his weblog.

"Many in our Arizona Southern Baptist family are ready to close this chapter of our life together and move on," he wrote. "As I visit our churches and hear our people, the BFA issue is no longer the 'hot topic.' It appears that our people have moved on to our greatest passion: sharing the good news of Jesus Christ with our world."

As a caveat, though, he added: "Arizona is now watching us. Will we remain humble? Will we seek to forgive and to reconcile? Will we invest the kind of evangelism energy in what God has taught us through this experience as Kingdom Children? We must. For whatever we think of Bill and Tom, their trial is now over and ours is just beginning."

By Robert Marus
ABPnews.com
Published July 25, 2006