The Baptist Foundation of Arizona (BFA) was a Southern Baptist-affiliated charitable organization founded in 1948 with the dual purpose of generating investment income for participants and funding Christian causes. Closely tied to the Arizona Southern Baptist Convention and the national Southern Baptist Convention, the BFA presented itself as a faith-based investment ministry. Through investor brochures and promotional materials, it promised that earnings would support efforts such as Christian education, elder and childcare, global missions, and the creation of new churches, all while offering investors attractive interest rates.
Glen Crotts, who became BFA’s first president in 1962, ran the organization according to strict moral guidelines, even prohibiting staff from engaging in activities like drinking alcohol or gambling. In 1982, leadership passed to his son Bill Crotts. Under his leadership, however, the organization began to stray from its ethical foundations.
By the early 1990s, BFA’s financial health was already deteriorating. Internal documents from 1992 revealed a $3.2 million loss due to dubious transactions. Minister Ed Shaw recommended transparency and repentance, urging the BFA to disclose the loss to investors and ask for forgiveness. Instead, the leadership opted for secrecy, setting in motion a sprawling web of deceit that would eventually unravel one of the largest religious financial collapses in U.S. history.
Over time, BFA executives, under Bill Crotts’ direction, allegedly diverted more than $140 million to three directors — two former and one active — through a network of over 63 interconnected public and private entities. These organizations were all either owned or tightly controlled by the BFA, effectively masking the movement of funds. One central figure in this elaborate operation was Tom Grabinski, BFA’s chief legal counsel, who also served on the boards of the foundation and its subsidiaries. This gave him unchecked authority to greenlight transactions between the entities, despite clear conflicts of interest that the BFA later claimed had been “waived.”
Grabinski’s dual roles enabled highly questionable transactions. On one occasion, he signed off on two different valuations for the same property, once for $3.3 million and then again, just hours later, for $960,000. These deceptive practices contributed to what experts would later define as affinity fraud, exploiting the trust of fellow Southern Baptists across Arizona.
To keep the fraud hidden, the BFA used multiple schemes. One involved a “good bank-bad bank” setup. The foundation funneled unprofitable loans to a secretly controlled subsidiary that then “bought” the bad loans from BFA’s balance sheet, falsely improving its financial appearance. Another strategy included selling certificates of deposit that were non-redeemable during their term, along with Ministry Venture Participation Notes (MVPNs) that were misleadingly promoted as redeemable at any time, albeit with penalties. In reality, these notes locked investors, many of them elderly, into illiquid commitments for years.
BFA’s finances became increasingly dependent on a Ponzi scheme model. Returns to early investors were paid out using the capital of new investors. To make matters worse, the foundation engaged in land-flipping schemes that artificially inflated property values to extract fraudulent profits. In one instance, a property contaminated with asbestos was offered to BFA for $1. The foundation declined the purchase but directed the seller to former BFA director Jalma Hunsinger, who bought the land for $1 and then used it as collateral for a $6.8 million loan from the BFA.
The BFA also sold the illusion of real estate ownership. The BFA “sold” plots marketed as retirement homes to seniors, but in reality, these transactions only conveyed the “right to occupy,” leaving purchasers with no legal ownership or ability to resell the property.
In 1999, the BFA filed for bankruptcy, reporting $530 million in liabilities and just $70 million in assets. It became the largest religious financial failure and affinity fraud in U.S. history, with investor losses reaching $550 million. The Arizona Attorney General and the Corporation Commission launched criminal investigations, culminating in indictments by 2001.
In July 2006, after Arizona’s longest criminal jury trial, Bill Crotts and Grabinski were convicted on multiple counts of fraud. Crotts was sentenced to eight years and Grabinski to six, with each ordered to pay $159 million in restitution. Additional sentences followed in 2007: Controller Donald Deardorff received four years in prison and a $150 million fine, while Hunsinger paid $150,000.
Civil litigation brought further developments. Grabinski won a $2.5 million judgment in a 2004 lawsuit against the BFA’s insurer for legal fee coverage, a verdict upheld on appeal. Most notably, Arthur Andersen, BFA’s auditor, agreed in 2002 to a $217 million settlement with the BFA Liquidation Trust, the second-largest accounting settlement unrelated to the Savings and Loan crisis.
Key Sources:
Fischer, Alan D. (1999, September 26). Elderly couple pays dearly for Baptist fund’s trouble. Arizona Daily Star.
Murr, A. (1999, December 6). A matter of lost souls and savings. Newsweek.
Olsen, T. (2002, May 1). Arthur Andersen reaches deal (Again) with Baptist Foundation of Arizona Investors. Christianity Today.
Sterling, T. G. (1997, May 22). In the Name of the Father and the Son and the Wholly Owned Subsidiary. Phoenix New Times.
Sterling, T. G. (1998, April 16). The moneychangers. Phoenix New Times.