Shakedown in Show Low

Allegations of fraud swirl around a White Mountain RV resort, and the Baptist Foundation of Arizona is right in the middle of it

On a summer day in 1988, Tucson retirees Nita and Chuck Pratt visited an RV resort near Show Low.

Juniper Ridge RV Resort sat atop an isolated ridge studded by fragrant juniper trees, a setting that seemed idyllic to the Pratts. They were also impressed by the resort's country-club-style amenities--a large swimming pool, hot tubs, exercise rooms, saunas, a nine-hole golf course and pro shop, shuffleboard courts, a log-cabin-style lodge with an immense dance floor and a stage for shows, arts-and-crafts rooms, pool hall, game room, library.

At the time, the Pratts were both 67 years old and in good health. They purchased a small lot in the park for $25,750 and outfitted it with a "Park Model" mobile home. The couple ended up spending about $70,000 of their retirement savings on their Show Low getaway. They figured if they ever got too sick or too poor to spend summers at Juniper Ridge, they'd sell out and make a profit on their investment.

They figured wrong.
Now 77, Chuck Pratt recently suffered a near fatal bout of congestive heart failure. Hospital bills are due. To add to the stress, Chuck Pratt can't exert himself at the Show Low altitude anymore. He can't golf. He can't play pool. He can't swim.

So he sits on the front porch.
At a time of sickness and financial need, Chuck Pratt worries that he stands to lose tens of thousands of dollars if he sells his Juniper Ridge property.

At a stage of their lives that they had long planned and saved for so that it would be secure and worry-free, the Pratts and many other elderly owners of the 173 developed lots in the now shabby--and bankrupt--Juniper Ridge RV Resort see themselves as victims of legal disputes they neither condone nor understand.

Their future at Juniper Ridge depends on resolution of a bitter fight over ownership of the park.

Embroiled in the legal melee are the Baptist Foundation of Arizona (BFA) and two of its former board members, who are accused in a Superior Court lawsuit of participating in a 1997 scheme to defraud three Phoenix developers of their right to purchase Juniper Ridge. The alleged scam included a questionable loan of BFA dollars to East Valley Investment Group (EVIG), a company controlled by a former BFA director and managed by BFA's staff attorney.

A memo written by an accountant who worked for BFA in 1996 raises questions about BFA's plan to lend EVIG money to purchase Juniper Ridge. The accountant claimed BFA was using the virtually valueless company in a shell game to hide some nonperforming debts from board members and auditors.

BFA later lent EVIG $1.7 million to buy Juniper Ridge.

The fight over ownership of Juniper Ridge is being waged in Maricopa County Superior Court and in federal bankruptcy court in Phoenix.

The litigation is intense because, despite its current state of disrepair, Juniper Ridge holds hidden treasure.

With more than 800 lots in the resort yet to be developed and sold, one developer estimated the resort would "conservatively" reap a $15 million profit, according to court records.

On one side of the litigation are Phoenix developers John Holmes, Hamilton McRae III and Jay Stuckey. They say their companies, Republic Holding Company and Holmes Development Group, had formed a partnership in 1996 with Phoenix RV park developer Steven Northroup to develop and market Juniper Ridge.

On the other side are Harold Friend, a former director of the non-profit Baptist Foundation of Arizona, Friend's attorneys, former BFA board member Edgar Kuhn and Northroup, a former RV park operator and a former partner of McRae, Stuckey and Holmes. The plaintiffs have filed a motion asking that BFA and its staff attorney, Thomas Grabinski, be added as defendants.

New Times reported in April that BFA has funneled nearly $140 million of the $265 million it has borrowed from Christian investors and the general public into real estate companies controlled by insiders, including Harold Friend. (See related story.)

New Times' investigation, based on public records gathered in several states, revealed how BFA's managers appeared to have gone to great lengths to disguise the insider transactions, creating a labyrinth of corporations that raises questions about whether insiders broke the law by "self-dealing"--conducting transactions to their benefit at BFA's expense. Self-dealing violates state and common law regarding fiduciary duty and can render corporate directors vulnerable to civil--and in some cases criminal--liabilities.

Although BFA has lent tens of millions of dollars to companies controlled by insiders, BFA itself has given only about $1.3 million to the Southern Baptist community in the past 50 years, according to a letter BFA wrote the newspaper in March.

BFA officials denied in March that any self-dealing has occurred.
One of the insiders named in the New Times investigation was former BFA director Friend, who is a prominent player in the current litigation. Another insider, former BFA director Jalma Hunsinger, who engages in real estate transactions with Friend and BFA (and whose companies in March owed BFA more than $120 million), is not mentioned in the current litigation. However, former BFA director Edgar Kuhn, the sole co-director of many of Hunsinger's companies, is a key figure in the Juniper Ridge litigation. Kuhn co-directs ALO, a Hunsinger company whose subsidiaries have engaged in real estate transactions with Friend. (Friend, however, claims in a recent deposition that he's never met Kuhn.)

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