Baptist Charity Under Scrutiny in Arizona for Deals It Offered to Thousands of Investors

The Baptist Foundation of Arizona, the fund-raising and endowment arm of the state’s Southern Baptist Convention, is under investigation for allegedly misrepresenting its financial condition in the sale of up to $500-million in investment products to more than 13,000 investors.

State authorities said that the organization and its affiliates, Arizona Southern Baptist New Church Ventures and Christian Financial Partners, covered up financial losses that could jeopardize investors’ money. Officials said they have not yet determined how much in assets the charity might hold or how much money investors stand to lose.

In Arizona, charities are exempted from having to file documents with the state that detail their plans to sell investments. That exemption, officials say, may have contributed to the scope of the organization’s alleged misdeeds.

“If the Baptist Foundation were not a charitable organization, there would have been a different level of scrutiny and a higher level of protection for investors,” said W. Mark Sendrow, director of the securities division of the Arizona Corporation Commission, which, along with the Arizona Attorney General’s office, is investigating the Baptist investments.

Mr. Sendrow said that most of the people who purchased the organization’s investments are Southern Baptists, and four out of five live in Arizona.

The charity’s business dealings could take regulators months to untangle. An organizational chart provided by the corporation commission shows dozens of interlocking subsidiaries, including ones labeled “Micronesian Leasehold Corp. (Guam),” “Foundation Insurance Co. Ltd. (Cayman),” and “Foundation Surprise Center Inc.”

Many investors apparently were lured by the charity’s promises of lucrative financial returns. A foundation subsidiary recently advertised an interest rate of 9 per cent on five-year deposits as low as $1,000 — a rate that was much higher than the prevailing rate on typical bank certificates of deposit.

In a series of letters to its clients, Baptist Foundation officials have said they are seeking ways to deal with investors’ concerns. They have fired the foundation’s three top executives and, according to one letter, are “determining how cash flow can be matched with our need and desire to pay investors.”

The charity says it raises money for Southern Baptist causes through its estate-planning and financial-services activities. A Baptist Foundation spokeswoman said that donors have made $500-million in bequests — money that she said is separate from the investments that are under investigation. Since its formation, the Baptist Foundation has contributed a total of $1.3-million to charity, according to a letter that foundation officials wrote last year to the Phoenix New Times, which published stories that led to the state investigation.