X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Arthur Andersen LLP went on trial Monday for its part in the largest nonprofit bankruptcy in U.S. history — a collapse that left 13,000 investors out of $570 million two years before the bankruptcy of Enron Corp. Arizona’s attorney general believes that in the Enron case and in that of the Baptist Foundation of Arizona, the accounting firm concealed huge losses on financial statements that would have alerted investors — many of them elderly — to trouble. Jury selection in the Baptist Foundation case began in Phoenix Monday and opening arguments were expected today. It’s the first of several Arizona cases against Andersen. Andersen had reached a $217 million settlement on March 1 with investors of the failed religious foundation, but it fell through March 29 when Andersen said its insurance carrier, Professional Services Insurance Co., couldn’t pay. The settlement was to resolve a case brought by a bankruptcy trust for foundation investors suing Andersen in Maricopa County, Ariz., Superior Court for $150 million in compensatory damages and more in punitive damages. Now the action is back on schedule, said trust attorney Sean Coffey. The trial is expected to last two or three months, attorneys said. “It’s been brutally hard for all sides involved,” Coffey said. “We look forward to bringing justice to the innocent BFA investors who have certainly found themselves on a roller coaster ride these last few months.” An Andersen attorney said the firm is ready for its day in court. “We’re prepared and ready for trial and looking forward to the opportunity to finally put Andersen’s story before a jury trial,” said attorney Ed Novak. Forrest Bomar, a 73-year-old Baptist retiree from Palestine, Texas, and his wife, Thelma Lee, lost $236,000, nearly their entire life savings, when the foundation collapsed. “On the one hand we were rejoicing if (the settlement) was going to happen, but of course it didn’t,” said Bomar. “It started my depression and anger and feeling of betrayal all over again. … If I were not so far away, I would be in the courtroom every day.” The Baptist Foundation was created in 1948 as a nonprofit religious entity to raise money for Southern Baptist causes. So far, five ex-foundation officials have been indicted on charges of fraud, racketeering and theft. Three others have pleaded guilty to fraud charges. The bankruptcy trust’s lawsuit claims Andersen ignored warning signs of foundation fraud, including whistleblowers and a series of newspaper articles, as early as four years before the foundation filed for Chapter 11 bankruptcy in November 1999. In addition, the trust suit alleges Andersen falsified work papers and ignored advice that it investigate companies controlled by the foundation but not listed on balance sheets. Andersen also is under fire for its role in the Enron Corp. collapse. Andersen is scheduled to go on trial May 6 in Houston on a criminal obstruction charge stemming from the shredding of Enron documents. Since the grand jury indictment last month against Andersen, the company has been struggling for survival as it rapidly loses clients and affiliates. Meanwhile, Bomar said he and his wife aren’t optimistic they’ll ever recover their investment. “My wife and I received last year a total of almost 9 cents on the dollar,” he said. “And it took a year to get that. So that gives you an idea of what we’re expecting in the way of future payoffs — very little.” Copyright 2002 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.