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Fraud History: The $500 Million Pyramid — How William Crotts Bankrupted the Baptist Foundation of Arizona

By   /   April 18, 2014  /   No Comments

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 Arizona Southern Baptists

The Arizona auxiliary of the Southern Baptist Convention was formed in 1928. The association was called at the time: “Baptist General Convention of Arizona.”

The Arizona Southern Baptists, like the Georgia Southern Baptists of the mid-19th century, had a break with the Northern Baptists, whom they viewed as too liberal on a number of issues.

The early group of Arizona Southern Baptists were led by a rugged transplant from Asheville, North Carolina: Pastor C.M. Rock. In Arizona, Rock left the Calvary Baptist Church with a congregation of followers to form the First Southern Baptist Church.

In May 1929, the Baptist General Convention of Arizona was formally associated with the Southern Baptist Convention. The Arizona religious organization, which represented a growing number of Southern Baptists churches in the state, retained the name Baptist General Convention of Arizona until 1961.

With a dateline of September 10th, 1961, the Baptist Press, the national newsletter for the Southern Baptist Convention, reported that the Baptist General Convention of Arizona was changing its name.

From the Baptist Press:

Arizona Seeks To Add ‘Southern’ To Title (9-10-61)

PHOENIX, Ariz. (BP)–The executive board of Baptist General Convention of Arizona voted here to recommend a change in the name of that convention to include the word,”Southern.”

The new name, to be voted on probably at the annual convention session this fall would be “Arizona Southern Baptist Convention.”

Editor James R. Staples of the Baptist Beacon, convention weekly paper published here, indicated Arizona Southern Baptists are happy with the designation, “Southern.”
The Arizona executive board also voted to merge the directors of its foundation with the executive board. Foundation members would comprise a foundation committee of the board.

Glen E. Crotts, president of the convention and pastor of First Southern Baptist Church, Tucson, was asked to accept the post of foundation secretary.”

The timing was interesting. The major social and political issue in the United States in 1961 was civil rights, particularly the de jure “Jim Crow” racial segregation of the southern United States. By designating themselves as “Southern” Baptists, the Arizonans were signaling where their organization’s sympathies lay.
Baptist Foundation of Arizona: A Family Business
The Baptist Foundation of Arizona (BFA) was initially created in 1948 by the Baptist General Convention of Arizona to administer endowments to the church.

For about its first decade and a half, the BFA was run by a board of directors of 21 members of various Arizona Southern Baptist churches. The board was comprised of pastors, lawyers, CPAs, and businessmen. As the years went by, and the church grew with the rest of Arizona, some of the BFA funds were used to build new churches, as well as fund several charities and missions.

In 1962, a year after the Baptist General Convention of Arizona changed its name to the Arizona Southern Baptist Convention, the BFA board of directors hired its first paid President and Executive Director: Pastor Glenn E. Crotts.

It was Crotts, as President of the Baptist General Convention of Arizona in 1961, who communicated to the national Southern Baptist Convention the Arizona group’s desire to adopt the word “Southern” into their convention’s title.

Although created as an agency of the Arizona Southern Baptist Convention, the BFA was an independent nonprofit organization. The Arizona Southern Baptist Convention had no supervisory role in the BFA’s operations. The Arizona Southern Baptist Convention only appointed the BFA board.
That was the extent of its involvement in BFA.

Glen Crotts controlled the whole operation after that. Crotts ran the organization on a day-to-day basis.

At its formation, the BFA’s articles of incorporation included the stipulation that directors uphold strict Southern Baptist morals, like abstaining from alcohol and gambling.

In Arizona, state law exempted religious financial non-profit organizations like BFA from regulatory scrutiny, unless a specific charge of fraud was made. Foundations like BFA were only answerable to their boards of directors.

Glen Crotts retired as President of the BFA in 1982, and he was replaced by his son, Bill.

The second President and Executive Director of the Baptist Foundation of Arizona was William Pierre “Bill” Crotts, a 36 year-old Phoenix-based attorney. Crotts the younger was an Arizona State University law school graduate, class of 1971.

Pudgy and bespectacled, of average height, with a fair complexion, Bill Crotts was a physically unprepossessing man. But evidently he had sufficient brain power and charisma, and the bona fides that only a predecessor father-king can confer, to command the respect and obeisance of the entire foundation.

By the time Bill Crotts took over from his father, the BFA was operating out of a gleaming $6.5 million headquarters at 1313 East Osborn Road, in a tony Phoenix commercial district.

Below is the BFA’s mission statement at the time Bill Crotts took over the BFA.

In response to the love God expressed in Jesus Christ, the Baptist Foundation of Arizona is a ministry which is committed to providing asset management services to Christians who desire to benefit worthy ministries while earning a market return on their investments.

We are further committed to protecting our investors through a growing fund balance which will enable us to provide resource and expertise for Arizona Southern Baptist ministries.
BFA’s staff members offer professional services through an `up close and personal’ client strategy.

The ministry of the Baptist Foundation of Arizona is born out of calling, commitment and sacrifice. Through excellence and commitment in their professional and spiritual lives, our board of directors and staff strive to be effective witnesses for Jesus Christ.
The real estate market in Arizona in the 1970s and early 1980s was hot, very hot.

Unlike most religious foundations, including other Southern Baptist foundations, which tend to invest its members’ money in stocks and bonds, the BFA under Bill Crotts poured investors’ funds into the exploding Arizona real estate market.

Things were going well for BFA investments until Arizona property values fell drastically in the mid-1980s.

This is the point where Bill Crotts’ massive fraud began.

Instead of admitting BFA losses and writing down the bad loans made by BFA, Crotts, along with a few key BFA insiders, made up artificial transactions between BFA and dozens of shell companies that made it look as if the BFA was still very profitable.

Additionally, there were other high expenses confronting the BFA under Bill Crotts. Operating overhead for the foundation averaged more than $18 million per year. The BFA supported a workforce in excess of 150 employees.

The bulk of BFA’s assets were in real-estate – land; real-estate-related notes and bonds; and a few properties that generated cash, such as retirement communities and golf resorts.

These were illiquid assets; they could not be sold quickly, and their value had plummeted with the real estate crash, even if they could be unloaded.

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