Baptist Group’s Leaders Convicted

Investors Lost $585 Million

PHOENIX, July 24 — Two former executives of a failed Southern Baptist foundation were convicted here Monday in what prosecutors said was the nation’s largest fraud ever targeting members of a religious group.

William Pierre Crotts, who was president of the Baptist Foundation of Arizona, and Thomas Dale Grabinski, the group’s former chief legal counsel, were each convicted of three counts of fraud and one count of conducting an illegal enterprise in a scheme that lasted decades and cheated 11,000 investors across the country of about $585 million.

In a trial that lasted 10 months, prosecutors claimed that the executives were driven by shame to hide the foundation’s mounting investment losses, bilking investors who were recruited in Southern Baptist churches and by Bible-quoting salesmen who visited their homes. Investors were told their money would help Southern Baptist causes, such as building new churches, and were promised above-market returns.

Instead, prosecutors said Crotts and Grabinski had designed a Ponzi scheme in which new investors were needed to pay off the secret mounting debt. Donald Conrad, an Arizona assistant attorney general, characterized Crotts and Grabinski during closing arguments as business failures who defrauded investors in part to “feed their financial fantasies” that they were savvy businessmen.

The pair were handcuffed and led from Maricopa County Superior Court after the verdict.

Prosecutors failed to show that Crotts and Grabinski profited personally from the fraud, which involved hiding millions of dollars of losses in shell companies they created to conceal the losses. The two men were acquitted of 23 theft counts.

Defense attorneys had argued that the foundation could have been able to pay off investors if state regulators had not forced it to stop selling securities in 1999. Grabinski’s attorney, Daryl Williams, said Arizona officials simply did not understand the foundation’s complicated finances.

The two former executives will be sentenced Sept. 29. Each faces a maximum sentence of more than 46 years, according to the attorney general’s office. James D. Porter, a foundation investor and Crotts family friend, said he believes that Crotts is innocent despite the verdict.

“The truth is not determined by what this court said,” Porter said. “Righteous people have spent time in jail before.”

Since the foundation’s 1999 bankruptcy, five other employees or associates have pleaded guilty in connection with the fraud.

The foundation was an official agency of the Arizona Southern Baptist Convention, which is affiliated with the national Southern Baptist Convention. The foundation’s accounting firm was Arthur Andersen LLP, which collapsed after allegations that it had helped Enron Corp. conceal its mounting business problems. In 2002, Arthur Andersen agreed to pay the state of Arizona $217 million to settle a lawsuit over its work for the Baptist foundation.

Foundation investor Bob Shaw, 59, a car salesman, said he recovered about 68 percent of the $250,000 he invested with the foundation. But he said Monday’s verdicts were more satisfying than getting his money back.

“When they walked out of there in handcuffs,” Shaw said, “that was justice for me.”

Special correspondent Steve Elliot contributed to this report.

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