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By Ray Stern
By New Times Staff
By Stephen Lemons
By Chris Parker
By Monica Alonzo
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By Robrt L. Pela
Ever since it sprouted up from a west-side cotton field about 50 years ago, Grand Canyon University has been a Southern Baptist school. Located at 3300 West Camelback, the institution now has 3,100 students and is best known for its nursing school.
GCU has always touted its affiliation with its parent, the Arizona Southern Baptist Convention. The convention, the umbrella organization that connects all Southern Baptist institutions in Arizona, was so intimately involved with the school that it appointed the university's board of trustees.
But on January 13, GCU's board of trustees voted to sever the university's legal ties with the convention, fueling speculation among local Southern Baptists that the trustees had tired of the convention's ongoing legal and public relations problems stemming from the recent bankruptcy of another offshoot, the Baptist Foundation of Arizona.
The same day GCU trustees voted to split from the convention, the Tribune newspaper reported that the IRS had a $175 million claim against BFA. The article said the IRS claim had been raised by investors at two public meetings. However, New Times was unable to substantiate that such a claim had been filed by the IRS in Arizona or elsewhere. IRS officials won't comment, and key bankruptcy attorneys for both creditors and BFA itself say they know nothing of such a claim.
University officials say the decision to break from the convention had nothing to do with the Tribunestory or with any link the convention might have to the ongoing BFA scandal.
But the convention has plenty of public relations problems these days. It has been sued in Maricopa County Superior Court by angry BFA investors. In the ongoing court cases, investors charge the convention with aiding and abetting an illegal Ponzi scheme by promoting BFA's fraudulent investments to Southern Baptist churches and ministers.
These days, many of BFA's 13,000 mostly elderly Christian investors, citing the convention's link to BFA, are publicly clamoring for the state convention to reimburse them for their lost life savings.
BFA filed Chapter 11 bankruptcy in November, claiming $640 million in liabilities and from $160 million to $200 million in assets. The foundation's crash is thought to be the largest collapse of a religious financial institution in the nation's history. State criminal investigations of BFA officers and BFA's auditor, Arthur Andersen LLP, are ongoing.
Grand Canyon University itself lost its endowment, more than $2 million, in the BFA debacle. It also lost about $175,000 in cash that had been "invested" with BFA.
In a February 1998 interview with New Times, then-GCU president Bill Williams said the university's endowment was "secure."
"I'm very trusting," Williams said when asked in 1998 about BFA's finances. "I figure the foundation [BFA] . . . is fulfilling its fiduciary responsibility in the highest way. . . . BFA could not have been more forthright or more helpful in terms of how they handle our endowment fund. I personally have a great deal of respect for how they do it [invest] and how they treated us."
Williams characterized former GCU board member Jalma Hunsinger as a "friend" and "business adviser" to the university. In 1998, companies controlled by Hunsinger owed BFA at least $120 million. A key player in numerous BFA real estate transactions, Hunsinger is currently being investigated by the Arizona Attorney General's Office for his role in BFA's collapse.
Williams stepped down from the GCU presidency in December, and current president Gil Stafford says Williams' decision to "retire" was not linked to the BFA scandal. Stafford says Williams, a mathematician, still offices at GCU. Among other things, Williams is attempting to solve a mathematical problem that has eluded mathematicians for hundreds of years, says Stafford.
As for GCU's break from the convention, Stafford says it was simply a move recommended by GCU's accountants, KPMG Peat Marwick. According to Stafford, the accountants advised the board that because the convention had selected GCU's board of trustees, GCU must technically file a joint financial statement with the convention. Stafford says such joint filing would make it difficult for GCU students to get federal loans.
When asked if filing a joint financial statement would also make GCU liable for investor lawsuits filed against the convention, Stafford answered: "That would be speculation. In today's world, it is probably not wise to make speculative statements."
A January 14 statement by GCU's board of trustees is equally cautious. The release says the board, "after much prayer and deliberation voted to re-organize the University's corporate ownership and control so as to redefine its relationship with the Arizona Southern Baptist Convention."
The release went on to say that GCU will "continue its close, cooperative relationship with the Arizona Southern Baptist Convention."
"We pray for our family and friends and ask for your prayers during this time of reorganization," the release says.
News of GCU's vote to break from the convention shocked many in the state's Southern Baptist community.
Steve Bass, executive director of the convention, says the GCU board "voted unilaterally, which means on their own," to "basically sever their formal -- and that's an important word, formal -- ties with the Arizona Southern Baptist Convention."
But does the convention itself consider its legal ties with GCU severed?
"We have to respond to that," Bass says. ". . . It's going to take a while."
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