PHOENIX (ABP) — Two former executives of the Baptist Foundation of Arizona were sentenced to jail and told to pay millions in restitution Sept. 29 in what may be the nation's largest case of faith-based financial fraud.
Maricopa County, Ariz., Superior Court Judge Kenneth Fields sentenced former foundation President William Crotts and Thomas Grabinski, the group's former top lawyer, to prison time and fines. Fields gave Crotts, 61, eight years in prison and Grabinski, 46, six years. Each was ordered to pay $159 million in restitution to the victims of a fraudulent scheme that came to light seven years ago.
In July, a jury convicted each man on three counts of defrauding investors and one count of knowingly operating an illegal operation. However, the jury also acquitted two of 23 counts of theft. Jurors reportedly determined that Crotts and Grabinski did not personally gain financially from the scheme.
The sentencing marks the end of a 10-month trial that came nearly seven years after the foundation collapsed and the fraud allegations first came to light, shocking the non-profit world.
The foundation, controlled by the Arizona Southern Baptist Convention, declared bankruptcy in 1999 after state regulators ordered it to stop selling securities. About 11,000 investors — many of them elderly members of Baptist churches in Arizona and elsewhere — lost more than $550 million.
Prosecutors said Crotts, Grabinski and other foundation employees marketed the charitable fund to individuals interested in investing in a fund to support Baptist and other Christian ministries. Foundation representatives claimed the investments would deliver above-average returns while helping support the Lord's work.
However, the prosecutors said, the foundation's investments were actually losing money. The executives created “off-the-books” corporations to hide the losses while touting strong returns to sell the foundation to new investors to cover those losses — essentially creating a non-profit pyramid scheme in a ploy to keep the foundation afloat.
During the sentencing phase, according to news reports, dozens of victims of the scheme, as well as friends and family members of the pair, appeared before Fields to ask, alternately, for heavy sentences or for leniency. Some victims and family members asked Fields to have mercy on the pair because the money belonged to God anyway.
But Fields said the argument was moot, according to the Arizona Republic. “This is not a church, it's a court of law,” he said.
Six other foundation officials have already pleaded guilty in the case and are awaiting sentencing.
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