PHOENIX (BP)–The troubled Baptist Foundation of Arizona has created an Investors’ Committee to meet and negotiate with the BFA on behalf “of their fellows,” according to a BFA report Sept. 25.
In a letter sent to more than 13,000 investors, BFA officials gave an update on the progress made in the work being done to resolve BFA’s “difficult financial situation.”
The nine-member Investors’ Committee, picked by BFA board of directors, includes large- and small-scale investors who hold all types of securities, are Baptist and non-Baptists, individual investors and institutional clients. The committee met with the BFA Management Committee and its professional advisors Sept. 21.
The investors’ group has its own independent legal counsel: Milbank, Tweed, Hadley & McCloy, LLP, an international firm with a general corporate business and finance practice, including a large and sophisticated restructuring group, according to the letter.
Investors were told the committee role “is to meet and negotiate with BFA on your behalf, suggesting changes to our draft plan before it is communicated to all investors sometime [in October].” BFA’s letter said the creation of the committee “is a fair and equitable way to help maximize returns to all investors and to ensure that investors are appropriately represented in the plan.”
Committee members’ names will not be released until the restructuring plan is made public, allowing them confidentiality “for now to allow them to do their work in the peace of anonymity.”
More than 13,000 investors with more than $483 million in investment products are affected by an Aug. 10 Arizona Corporation Commission “cease and desist” order against the BFA. It ordered BFA to discontinue immediately the offering and selling of its investment products. According to the order, the foundation or its affiliates sold securities form Arizona through misrepresentations, omissions of fact and engaged in business practices in violation of state law.
Acknowledging a number of lawsuits which have been filed against BFA, the Arizona Southern Baptist Convention agency’s Executive Oversight Committee said in the Sept. 25 letter the suits seek to “force some sort of faster payout to investors. One suit is a class action, claiming to represent the interests of all investors. We believe, however, that we are on track to deliver a solution which best considers the needs of all investors, a solution which could be seriously undermined if such a suit was successful. We remain opposed to giving preferential treatment to those who have filed lawsuits. We urge patience by those who seek to litigate until they’ve had a chance to review our proposed plan. However, the plaintiff in the class action lawsuit has not taken the legal steps required to represent investors as a class and we expect no further action until late October.”
W. Berry Norwood, BFA trustee board chairman and chairman of the Executive Oversight Committee, signed the letter as did the other four members.
Saying the BFA has had a number of calls from clients saying they did not give permission for BFA to extend the maturity date of investments, Norwood said, “Please understand that we’re extending maturity dates automatically (a) in keeping with our decision to cease making most forms of distribution for the time being, and (b) so that we can allow amounts equivalent to interest to be distributed or to compound, depending on how each account was set up.”
Another suit filed by a Phoenix-area pastor and wife, Richard and Ann Kimsey, was amended recently to include Steve Bass, executive director-treasurer of the state convention’s executive board and William Agee, director of missions for the Central (Phoenix) Baptist Association. Both were alleged to have helped the foundation “solicit” the Kimseys to buy a BFA promissory note. Kimsey, pastor of Desert Valley Baptist Church, invested $100,000 with the BFA from the sale of a home in Georgia following their move to Phoenix in March.
Since the cease and desist order against the BFA, the agency’s three top executives have been fired, 72 employees have been laid off and some offices closed as the agency seeks to reduce its overhead and struggles to keep from declaring bankruptcy.
