Baptist Foundation collapse similar to Enron, Arizona official says
January 18 2002 by Mark Wingfield , Texas Baptist Standard

Baptist Foundation collapse similar to Enron, Arizona official says | Friday, Jan. 18, 2002

Friday, Jan. 18, 2002

Baptist Foundation collapse similar to Enron, Arizona official says

By Mark Wingfield Texas Baptist Standard PHOENIX - The alleged swindling of $600 million from investors in the Arizona Baptist Foundation could provide clues to how the Texas energy giant Enron collapsed, according to the Arizona attorney general. The two bankruptcy cases are related by the fact Arthur Andersen was the auditor for both Enron and the Arizona Baptist Foundation.

"I am very troubled by the similarities between the allegations against Andersen by Enron's investors and the facts our office has discovered in our various investigations of Andersen," Arizona Attorney General Janet Napolitano wrote in a Jan. 2 letter to three Senate leaders. "I am seriously concerned that Andersen has engaged in a pattern of deceptive auditing practices that have had the effect of defrauding the investing public, including the state of Arizona and the Arizona State Retirement System, out of hundreds of millions of dollars.

"The Baptist Foundation of Arizona matter alone cost investors approximately $590 million, and we believe that the Enron matter has cost investors billions of dollars, including losses in excess of $700 million just to the various states' retirement systems."

Napolitano urged the Senate Commerce, Transportation and Science Committee "to closely examine Andersen's role in auditing Enron's financial statements." "The investing community, including the state of Arizona, needs to know whether Andersen has undertaken a systematic campaign or practice of fraudulent financial auditing," she said.

Congress and federal law enforcement officials are investigating what role the accounting giant might have played in hiding Enron's financial instability from investors. Arthur Andersen currently is defending itself against allegations that its auditors were complicit in hiding the shaky financial condition of the Arizona Baptist Foundation.

Pati Urias, public information officer for the Arizona attorney general, said Napolitano's offer was made to Sens. Tom Daschle, John McCain and Ernest Hollings.

Arthur Andersen has denied any wrongdoing in the foundation collapse. Its response to the Enron bankruptcy is still unfolding, with internal investigations under way, one key employee fired and others suspended.

Andersen media representatives did not return a phone call seeking additional comment on the cases.

In both the Enron and Baptist foundation cases, the auditing firm had given its clients clean bills of financial health, despite the fact that huge losses were hidden from investors in a maze of subsidiaries.

Enron's collapse is the largest bankruptcy of a publicly traded company in United States history. The Baptist Foundation of Arizona's collapse is the largest bankruptcy of a non-profit charity in U.S. history.

Arthur Andersen is tangled in a series of legal actions and accusations related to the collapse of the Arizona Baptist Foundation.

Criminal charges have been filed against eight people formerly associated with the foundation. Three of the former foundation officials have entered guilty pleas to the criminal charges, while five others have been indicted but entered not guilty pleas.

A class-action lawsuit and other civil litigation have been filed against Arthur Andersen. The Arizona State Board of Public Accountancy also has filed an administrative complaint against Arthur Andersen, seeking $600 million in restitution to victims of the foundation bankruptcy.

Andersen is battling in court now to prevent the class-action suit from proceeding. The accounting firm contends foundation investors should be required to bring individual lawsuits rather than a class action.

Depositions on Andersen's claims should be completed by Jan. 25, and a hearing date is set for Feb. 25.

Meanwhile, the BFA Liquidation Trust has distributed $56 million to creditors of the foundation to date. The trust is charged with liquidating assets of the foundation, such as real estate, and distributing the proceeds among those who lost money in the bankruptcy.

Foundation investors, many of whom are elderly Baptists who wanted their money to be invested in ministry causes, have their eyes on the Enron debacle now, according to individuals involved in litigating the class-action suit.

"We're obviously very alert to what's going on with Enron," said one of the Arizona attorneys related to the case who spoke on condition of anonymity.

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1/18/2002 12:00:00 AM by Mark Wingfield , Texas Baptist Standard | with 0 comments
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