Arizona Attorney General Terry Goddard

Victims of the Baptist Foundation of Arizona

May 4, 2001

FIVE INDIVIDUALS INDICTED, THREE OTHERS PLEAD GUILTY IN BAPTIST FOUNDATION OF ARIZONA SECURITIES CASE, ONE OF THE LARGEST AFFINITY FRAUD CASES IN U.S.

(Phoenix, AZ) - Attorney General Janet Napolitano today announced five key players associated with the Baptist Foundation case have been indicted by the State Grand Jury in a 32-count indictment alleging $550 (m) million was obtained through fraud, theft and illegally conducting an enterprise. The defendants indicted are: William Pierre Crotts, Thomas Dale Grabinski, Lawrence Dwain Hoover, Harold Dewayne Friend and Richard Lee Rolfes. Additionally, three other defendants have pled guilty to felony charges in the BFA case: Donald Dale Deardoff, two counts of fraud schemes, Edgar Alan Kuhn, three counts of facilitation of fraud schemes and Jalma W. Hunsinger, three counts of facilitation of illegally conducting an enterprise. Most of the Foundation's upper management were paid six-figure salaries and received generous benefits on the job.

The indictment alleges that beginning in the early 1990's, Crotts, Grabinski, Hoover and Friend and Rolfes (beginning in 1996) had key roles in defrauding thousands of investors into putting money into BFA investments. BFA sold different types of investments and savings accounts, most of which were supposedly backed by collateral. Investors were told the accounts paid interest greater than most banks. Investors were told some of the profit would benefit Baptist causes. In fact, however, BFA stayed afloat by getting new investors to help meet its financial obligations. BFA officials allegedly put 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 Attorney General's Office and the Corporation Commission issued an order in the summer of 1999 requiring the Baptist Foundation to stop selling investments in violation of the Arizona Securities Act. BFA went bankrupt later that year, making it the largest nonprofit bankruptcy in U. S. history.

A civil lawsuit was filed against Arthur Andersen accounting firm last year, over allegations 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 (m) million in restitution for BFA victims, alleging that the company's failure to reveal the true nature of BFA's financial status contributed to the Foundation's collapse.

The BFA case is one of the largest affinity fraud cases in U. S. history. The majority of BFA's victims are Arizonans, however, BFA investors are also from California, Texas and other States. Arizona received investigative assistance from the National White Collar Crime Center in this case. The investigation into BFA's dealings continues.

An indictment is a criminal charge only. All defendants are presumed innocent unless and until proven guilty.

FACT SHEET ON BAPTIST FOUNDATION OF ARIZONA CRIMINAL CASE

Individuals charged by indictment:

William Pierre Crotts, Phoenix , (DOB 6/2/45), President and CEO

Legal counsel: Michael Piccaretta

3 counts Fraud Schemes/Artifices (Class 2 Felony), Maximum penalty: 12.5 years/prison

27 counts Theft (Class 2 Felony) Maximum penalty: 12.5 years/prison