A Matter of Lost Souls and Savings

Thousands of Baptists lose money, in church

Newsweek, December 6, 1999
By Andrew Murr

When Tucson businessman Paul Moses needed a place to park his retirement money, the issue was what you'd expect it to be--trust. And who better to put your faith in than your own church? So Moses invested $40,000 in an "Easy Access" account with the Baptist Foundation of Arizona, which is connected to the Southern Baptist Convention, the largest Protestant denomination in the United States. "It was Baptist and it was part of the church," he reasoned. Two years later he transferred his $200,000 IRA account to BFA, and later, proceeds from a land sale. By the time he and his wife were through, they'd entrusted $1.1 million.

Well, they don't have "easy access" anymore. And neither do the other 13,000 investors, since the BFA declared bankruptcy in November, four months after state regulators forced the nonprofit to freeze its assets. The fund is $590 million in debt, far outstripping the $158 million Jim and Tammy Bakker bankruptcy scandal--and regulators believe it is among the nation's largest cases of "affinity fraud," preying on a group of people with a common background. Civil and criminal investigations are underway. Says investor Ed Rogers, 45, "The last people I thought would rip me off was my own religion."

Until the late 1980s, the BFA had been managing church building funds and retirement funds for a few thousand Baptist laymen. Profits came from land investments in the red-hot Arizona market. But when property values tanked, the BFA investments did, too. Instead of admitting losses and writing down loans, BFA officials in several cases allegedly cooked up transactions between BFA and shell companies that made it look as if the BFA was still profitable. "It was a big paper charade," charges Assistant State Attorney General Robert Zumoff.

But the real damage started only later. To counter the unreported losses, fund president William Crotts and the BFA stepped up marketing, allegedly trying to bring in enough new money to cover old losses. Through the '90s, brochures extolled BFA's "Biblically based" investment plans, and urged faithful Baptists to "do good by doing good," becoming "bolder stewards of their God-given resources." Helpful salesmen made house calls. "[Our pastor] said if you've got any money, take it up to the Baptist Foundation," recalls investor Opal Bostwick, 72. The marketing worked. The BFA now owes investors $200 million more than it did in 1995.

At the center of the scandal is Crotts, a charismatic 53-year-old lawyer, who took over the BFA from his father in 1982. Crotts denies any wrongdoing, as he has since the story broke in the Phoenix New Times. "Bill Crotts is a good, decent human being, and at no time did he do anything intentionally to harm the investors," says his attorney, Michael Piccarreta, calling Crotts, who resigned under pressure, a "scapegoat."

Is anything left? The restructuring committee recently proposed a plan that would offer $40 million to investors willing to take 20 cents on the dollar and set up a for-profit corporation that would sell off assets over the next few years, perhaps gaining 40 cents on the dollar. Burned once, though, many doubtful investors are pushing for immediate liquidation. Meanwhile, the human toll is more immediate. Esther Swanson, 85, and her husband, Lester, of Kissimmee, Fla., have $81,000 tied up in a BFA account they opened in 1992 after selling their home. (About 25 percent of investors live outside Arizona.) Now Lester has Alzheimer's and lives in a nursing home they were paying for with BFA income. Esther Swanson is frightened, and she's scrambling to make ends meet. "I have no savings left. Those were my savings," she says. She and other investors will just have to pray they eventually recoup enough to get by.