Two years ago, the Baptist Foundation of Arizona collapsed, victim of an elaborate
insider scheme that has led to criminal charges and the loss of hundreds of
millions of dollars for investors.
Two years ago, the Baptist Foundation of Arizona collapsed, victim of an elaborate
insider scheme that has led to criminal charges and the loss of hundreds of
millions of dollars for investors.
Two years later, Louisiana Baptist Foundation Executive Director
Wayne Taylor also continues to preach a simple message – what happened
there cannot happen here.
Despite his efforts, questions remain for some – and in
this case, what some people do not know definitely can hurt, especially the
Louisiana Baptist Foundation.
That is why Taylor wants Louisiana Baptists to know the truth
about the operation of his state agency. “The Baptist Foundation of Arizona
was a bad apple doing its own thing,” he noted. “To understand the
difference (between them and us) takes some understanding of how the Baptist
Foundation of Arizona operated versus how the Louisiana Baptist Foundation and
the other Baptist state foundations operate.”
There are three key areas of difference that prevent an Arizona
repeat in Louisiana, Taylor explained.
The first relates to sticking to the business of stewardship,
he noted.
“Because the Baptist Foundation of Arizona did not receive
money from the Arizona Baptist Convention, it had to raise money to support
itself,” Taylor noted. “Over time, the Baptist Foundation of Arizona
began to do a lot of things outside the scope of what other Baptist foundations
do.”
At its peak, the Arizona foundation had more than 150 employees
and 80-plus subsidiaries. They were heavily involved in real estate, including
nursing homes, a travel agency and a golf course.
State investigators have charged that foundation officials
used the subsidiaries to set up an extensive “Ponzi” scheme.
A Ponzi scheme occurs when a person or agency is unable to
pay promised returns on investments. In order to make the payments, the person
or agency sells more investments and uses the money to pay existing debts. Then,
they must sell even more investments to pay on the newer ones.
To attract new money, higher and higher rates of return usually
are promised, which creates even more debt and leads to crisis.
In addition, investigators have charged that Baptist Foundation
of Arizona officials also used subsidiaries to hide their shortfalls from investors
and auditors.
In the process, the foundation lost its focus on managing funds
for Baptist causes, Taylor said. Indeed, the gifts it was managing for such
causes were minuscule, he said.
In turn, he said the mission statement of the Louisiana Baptist
Foundation makes the purpose of that agency clear – “to biblically
encourage, graciously receive, prudently manage and accurately administer gifts
for Baptist causes from individuals and entities; and to provide short-term
cash management and long-term endowment services to churches, agencies, and
institutions of the Louisiana Baptist Convention.”
The agency is committed to that purpose, Taylor said. It does
not offer individual investments, handling only individual gift annuities and
charitable remainder trusts.
“The Louisiana Baptist Foundation has six employees and
sticks to its purpose of encouraging Baptists to give to Baptist ministries,”
Taylor explained. “Then, it prudently manages and administers those gifts.
“It gets half of its budget from the Cooperative Program
of the Louisiana Baptist Convention. The other half of the budget comes from
a small fee it receives from the money it invests. The Louisiana Baptist Foundation
does not borrow money and only promises what it can deliver to the churches,
agencies and institutions it serves.”
The second important difference between the Arizona and Louisiana
agencies relates to policies and procedures, Taylor added.
Events seem to indicate the Arizona foundation “either
had no investment or operating policies or changed the policies to fit whatever
they wanted to do,” Taylor said.
“When the Baptist Foundation of Arizona had 80-plus subsidiaries
with the same three officers, it should have been pretty obvious something was
awry.”
In turn, the Louisiana Baptist Foundation has definite policies
and procedures that govern its work and the type of investments it can offer,
Taylor said. “Those policies and procedures are in place to accomplish
the foundations goal of preserving principal and generating income and
growth … for intended beneficiaries,” he noted.
A final area of difference relates to accountability and board
oversight.
“The Baptist Foundation of Arizona board of directors
apparently did not fulfill its role of holding the foundation director accountable,”
Taylor suggested. “When concerns were brought to trustees, the director
gave simple and cursory answers to the concerns. Then, the board members apparently
accepted the directors explanations without further questioning.”
That is not the case in Louisiana, Taylor said. “At this
foundation, policies – and adherence to them – are looked at by a
board that understands they are the only source of oversight and accountability.”
The Louisiana Baptist Foundation trustees understand they personally
are financially liable for the decisions they make regarding the agency –
and take their responsibilities seriously, Taylor said.
As a result, Taylors answer to whether what happened in Arizona can occur
in Louisiana is short and simple – “no.”