Yet Norwood implies that procedures have changed, saying, "There is total disclosure on the board now in terms of deals, and that disclosure is constantly increasing."
A March 23 BFA letter responding to New Times' written queries denies that officers violated fiduciary duty laws or engaged in any self-dealing, saying instead that loans to directors and former directors--"related parties" in the parlance of high finance--were for BFA's benefit.
"There is no favoritism or excess profit made by related parties at the expense of BFA," the letter, signed by Norwood and Crotts, says.
"Since the board consists of outside directors, their independence prevents it. The accountability and procedures in place, and the many checks and balances of BFA would not allow such to occur. Not only is there no favoritism, the benefit is to BFA in all related party transactions."
And that is the $368 million question.
Who benefits?
If the insiders benefited at BFA's expense, then state conflict-of-interest laws may have been violated and fraud may have occurred, says Paul Nelson of the ECFA.
"I don't know what's in the heart of these people," Nelson says. "Whether they set out to do something right and have done it the wrong way, or whether this really is something they set out to do so they could perpetrate a fraud on the public.
"God alone knows their hearts."
Pecuniary profit is not the object of this corporation and it shall have no capital stock and it shall not pay any dividends or make any division of its earnings, income or property to its members and shall not be operated for the financial or pecuniary benefit of any individual. . . ."
--Articles of Incorporation, Baptist Foundation of Arizona
The Players
Bill Crotts quietly allowed insiders to write IOUs to BFA for tens of millions of dollars with little oversight from the BFA board of directors and virtually no scrutiny from the Arizona Southern Baptist Convention, a community of about 125,000 believers who attend 400 churches and missions.
Even though BFA is an official agency of the Arizona Southern Baptist Convention, no supervisory body within the convention oversees it--other than to nominate BFA board members. The Arizona convention, in turn, does not answer to the national Southern Baptist Convention in Nashville, Tennessee.
Southern Baptists abhor big government--even among themselves. With 16 million believers, the nation's largest Protestant denomination is staunchly independent--a trait rooted in a theological tenet called the "priesthood of the believer," which encourages each individual to build his or her own relationship with God and interpret the Bible individually.
This explains why in Arizona, Southern Baptists chose to entrust BFA solely to a board made up of 21 men and women. Fourteen board members are "sophisticated business men and women--business owners, attorneys, CPAs, and public company executives and board members--whose experience includes risk-reward issues common to investing resources to achieve conservative but consistent returns," according to BFA's letter.
The remaining seven board members are Southern Baptist pastors. And those pastors, most of whom are financially unsophisticated, are loyal to Bill Crotts.
Even the spouses of directors expressed fierce loyalty to BFA--an attitude shared by all but a few Arizona Southern Baptists interviewed for this story.
"I heard my husband take your call in the kitchen," one former director's wife told a New Times reporter recently.
"I don't think he'll want to talk to you again. My husband didn't find anything illegal going on [when on the board.] Bill Crotts is a man of God and our friend. Why would my husband want to stir up trouble?"
Before hanging up, she said: "People should know better than to make investments that aren't secured by anything. They're just greedy and want those high interest rates. My goodness, everyone wants the government to take care of things for them."
Such loyalties might have faded if investors had known that the BFA board knew little about where those dollars went.
Three former board members say that BFA directors who questioned unusual business deals were not invited to sit on the board again. The former directors, who agreed to interviews only if they were not identified, say they had no idea that BFA had so many subsidiaries.
Such conditions should serve as a red flag for a religious foundation, the ECFA's Paul Nelson says. Unnecessarily complicated transactions and corporate structures could mean someone is trying to hide something from the board, and outsiders.
"Board governance usually is the first thing to break down, which allows transactions to go undetected," Nelson says.
"If they have done something wrong with a good motive, that's one set of things. Or did they sit around a table and try to figure out how to perpetrate a con?
"That's when you deliberately try to make something complex so it will be difficult to trace."
Free from institutional oversight, answering only to a trusting board that gave him free rein, Bill Crotts for years built a web of Arizona for-profit real-estate corporations beneath the BFA umbrella. BFA's corporate tree resembles a circuit board (see chart on page 32) and links with corporations controlled by related parties. As of 1996, the last year for which corporate financial records are available, Crotts was president of each corporation. BFA's staff attorney, Tom Grabinski, was also an officer in the corporations.
