PHOENIX (BP)–The Arizona Southern Baptist Convention has relinquished its claim to more than $1.2 million invested in the Baptist Foundation of Arizona as part of a settlement agreement with the Baptist Foundation of Arizona Liquidating Trust and investors in a class-action suit.
The settlement also includes payment of $750,000 by the Arizona convention’s insurance carrier.
In return, the BFA Liquidating Trust and those involved in the class action (Jack Grant, et ux., et al v. Arthur Andersen, et al.) will release all claims they might have against the state convention related to the financial collapse of the foundation.
Terms of the settlement were approved by the Convention Council of the Arizona Southern Baptist Convention.
“We could have fought this in court — and our attorney believes we have a strong case,” said Steve Bass, Arizona Southern Baptist Convention executive director.
“As investors ourselves, we were as much a victim as anyone else. We trusted the professionals: the audit firm that issued clean opinions and the foundation president who made annual reports to our convention. None of these indicated a problem.”
However, the decision to settle was made so that investors could get as much money back as possible, Bass said. “Ultimately,” he said, “the overriding desire of the convention was to have the insurance money used to benefit investors rather than be used to pay for legal costs.”
While wanting to do the best possible for the investors, the ASBC Convention Council was concerned that people would perceive the settlement as an admission of guilt by the state convention. As a result, part of the settlement agreement states that the Arizona convention does not admit any responsibility for the foundation’s collapse or for the failure to properly disclose information about the foundation’s poor financial condition to investors.
Much of the $1.2 million relinquished by the state convention was given through the years by Arizona Southern Baptists to the Willis J. Ray State Mission Offering. The funds were designated to help new churches pay back loans on land and buildings, under the theory that new churches with their own property would be able to grow more quickly.
“The [ASBC] decision to give up the bankruptcy claims was well-measured,” Bass said. “The funds represented by those claims will impact how we start new churches in the future. It will take us a while to replace them so that we can get back to helping new works under the ‘accelerated’ model. However, we will replace the money and ask God for more.”
The state convention’s settlement is one of seven settlement agreements jointly filed with the court.
Other settlements with the BFA Liquidating Trust and terms are as follows:
— Harold and Stephanie Friend and some related entities: $1.15 million, transferring notes receivable of $1.25 million and $594,750, and release of claims against the bankruptcy estate for which the court required a reserve of $18 million.
— Dwain and Beva Hoover and some related entities, $3 million, with an additional $1.5 million to be paid if the criminal proceeding against Hoover is resolved prior to March 15, 2003, and release of claims against the bankruptcy estate.
— Jalma and Carole Hunsinger, $500,000, with an additional $1.7 million cash within six months, and the transferring of additional real estate interest with an estimated value of $4.279 million.
— Alan and Becky Kuhn, $25,000.
— the accounting firm of Nelson Lambson, $2 million.
— the accounting firm of Henry & Horne, $1.3 million.
Kuhn and Hunsinger have pled guilty and entered into plea agreements with the state for their roles in the foundation’s collapse. Friend and Hoover have been indicted and face trial for their involvement in the foundation’s downfall.
The settlement agreement will follow the same process of court approval taken in the settlement between the BFA Liquidating Trust, investors and Arthur Andersen.
The Bankruptcy Court and State Superior Court must approve the settlement, and investors will be notified of the settlement and given opportunity to raise objections. Following preliminary approval by the state court, issues such as settlement allocation and attorneys’ fees will be addressed in a subsequent hearing.
The state court will have opportunity to grant preliminary approval at a hearing Jan. 17. Investors should receive notification of the settlement about the middle of December.