PHOENIX (BP)–Investors in the Baptist Foundation of Arizona could expect to receive about 40 cents on the dollar as early as June under a liquidation plan filed Feb. 18 in U.S. Bankruptcy Court. That announcement comes the same day foundation officials filed a $400 million lawsuit against their former executives, lawyers and the foundation’s longtime accounting firm, Arthur Anderson.
A spokesman for the BFA estimated the foundation’s assets will bring between $215 million and $220 million when sold. That falls short of the $590 million the foundation owes to about 11,000 investors, many of whom are senior citizens.
However, that amount could increase considerably, possibly by enough to repay the entire $590 million owed to investors, if the lawsuit against former BFA officials and their lawyers and accountants is successful.
“Obviously, our hope is that everybody will get everything back, but I can’t speculate on how the lawsuit will turn out,” said Jock Patton, chairman of the foundation’s restructuring committee.
The liquidation plan, filed in U.S. Bankruptcy Court in Phoenix, called for an “orderly disposition of assets” of the foundation, many of which are in real estate. The plan requires bankruptcy court approval and investors will vote on the matter, according to BFA spokesman Lew Phelps.
The plan calls for the “immediate sale” of three properties in Alabama, Hawaii and Phoenix. The sale is expected to generate a substantial payout to investors whose money has been frozen in BFA accounts since August.
Phelps declined to disclose the estimated worth of the three properties to be sold at auction which include Pleasant Point, a 7,000-acre master-planned community near Phoenix.
The new proposal has been praised by investors, who called the first redistribution plan a “scam.”
“This plan here appears to be far better,” Franklin D.R. Kestner Sr. told Tucson’s Arizona Daily Star. “This plan makes me feel optimistic we’ll get something done,” said Kestner, the lead plaintiff in an investors’ class-action lawsuit against the foundation.
The original plan called for a $40 million cap on cash payouts to investors.
“We have destitute investors, and my goal is to get some money to those people as soon as possible,” he said.
In August 1999, the BFA put a temporary freeze on the assets of its investors after state regulators ordered the foundation to cease “fraudulent security sales.”
In November 1999, BFA announced a restructuring plan that included Chapter 11 bankruptcy protection, with an option for investors to recover 20 cents on the dollar immediately or choose stock in a new company.
That plan was withdrawn in December 1999 after investors voted it down in a series of meetings held around the state. They agreed that selling off the foundation’s assets was the correct plan.
In a related matter, Joe W. Panter, acting head of the BFA since August 1999, said he will step down from his position as soon as a restructuring plan is approved in the U.S. Bankruptcy Court. Panter said he has become a “lightning rod” for criticism about the BFA.