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 BULL
STREET
– The art of the Con
In one of the truly great religious frauds of all
time, the “Baptist Foundation of Arizona fleeced the faithful in that state
of almost $600 million in the name of god almighty. The Foundation put together
all of the necessary documentation that the Baptist Church totally endorsed
the project which consisted of investors putting up funds at high interest rates
in exchange for the Foundation building new churches. In true Ponzi fashion,
the Foundation took the money from later investors to pay back the earlier ones
giving the scheme some credibility. Before the Baptist Foundation was finished,
they had fleeced over 13,000 people of more than $590 million dollars. The
Foundation’s salespeople were to taught to prey on the fact that the people
were Baptists and that they shared the same set of values with one another.
Part of the package that these people put together was a phony
letter of authorization purportedly by the Baptist Church authorizing the foundation
to solicit funds on their behalf for this worthy cause. Moreover, they also
ensnared a very cooperative Arthur Andersen and company to endorse the Foundations
fictitious financial statements. The State of Arizona considered Anderson’s
work on the Foundation’s accounting, at best shoddy and at worse criminal and
has filed a lawsuit against the big accounting firm charging them with everything
including the kitchen sink. It may be that the Baptists that invested in this
scam would not have been so quick with their checkbooks if the Enron and Global
Crossings’ problems surfaced a tad earlier but this was not the case. Clinching
the deal however, was when the salesperson indicated that without their help,
the Church would suffer extraordinary financial difficulties and as a conclusion
and binder to the agreement he would lead his unsuspecting co-religionist in
a prayer while on his knees asking God to help the Church survive this financial
tragedy.
In the meantime, for the most part there is only one element
that must be carefully covered in a fraudulent scheme such as this one. Credibility!
This was created in three separate ways by these criminals. In the first instance,
by paying interest or returning money promptly to the original investors people
started spreading the word that these were solid people. Secondarily, by forging
a host of document purportedly signed by Church Officials authenticating the
project they were created both credibility and emotionality. This investor's
greed factor told them that they could do well for their church, get a handsome
return and sleep soundly knowing that their investment was safe. The last straw
in the house of cards was getting Arthur Andersen, at that time a very prestigious
major accounting firm to represent that not only was the foundation a going
concern but that their books were in good order.
The fact that Arthur Andersen had a substantial insurance policy
protecting them against error of judgment was also something in favor of the
investment. If the deal went south and yet had been certified by Andersen as
solid, the investors could look first to Andersen and then to the liability
insurance policy for redress. Thus, to some degree, Andersen’s authentication
of the books and records of the deal represented almost a surety to the investors
that even if everything else failed, they would still be secure.
This indeed was nothing but a gigantic Ponzi scheme and a reasonable
amount of checking would have shown it for what it was. At the press conference
that was held when it was announced that it was a massive fraud, it turns out
that Smith Barney had even warned one of the major investors against the deal.
Isn’t interesting that something smelled rotten to Smith Barney and the auditors
who could have had access all of the company’s books had been buffaloed and
continued to issue unqualified opinions endorsing BFA’s financial statements.
The Arizona Corporation Commission announced with some pride at the press conference
that was held the matter that they have already received guilty pleas from three
of the top executives of the Foundation and have indicted five others. However,
having these folks incarcerated will not get one nickel back from any number
of people that became totally impoverished when the scheme collapsed. Naturally
the Foundation wasted little time in declaring bankruptcy and no one really
is aware of where the money ultimately went.
One of the chief investigators was particularly upset with
what he called a fraud in the name of God as being particularly vile: “I can’t
think of any worse sin than using God’s name to fleece the faithful.” Because
human nature being what it is, religion is one of the best accessories for crime.
By that we mean, religion to a large sense is disorganized and any number of
a church’s representatives can be authorized to commit for this or that. Suppose
Pastor Robert Smith writes a letter on purported church stationary saying that
he thinks that this or that investment will be helpful in the church’s carrying
on God’s work. At the same time, there are 25,000 Pastor’s in the church with
81 having the name the name of Robert Smith. Ninety-thousand investors have
been taken for billions of dollars in 27-states in the last three years.
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