Andersen Reneges on Baptist Church Settlement

Big Five firm Andersen has told Arizona state officials and others involved in the firm's settlement relating to the bankruptcy of the Baptist Foundation of Arizona that it will not be able to meet its obligation to pay $217 million for its role in the demise of the religious organization.

Andersen's lawyers said that the firm's insurance carrier, Professional Services, is "unable to approve or pay claims at this time due to its financial position." Sources familiar with the issue indicate that the financial position of the carrier was compromised because of Andersen's failure to pay a $100 million premium. That missed premium has made the insurance carrier insolvent, and raises questions on the ability of Andersen to pay ANY legal claims - regardless of whether they are Baptist Foundation related or Enron related.

As part of the out-of-court agreement, Andersen was not required to take blame for the failure of the foundation which was discovered to be operating a Ponzi scheme in which established investors were paid from the proceeds of new investors.

The Baptist Foundation's bankruptcy was the largest non-profit bankruptcy in U.S. history.

Arizona Attorney Janet Napolitano was quoted in the Arizona Republic as saying the development is an "outrage" and that she will request that the state Board of Accountancy revoke Andersen's registration in Arizona. "Arthur Andersen lied," she said.

In a lawsuit filed by the Baptist Foundation of Arizona against Andersen, the organization claimed that Andersen's negligence while auditing the foundation led to the bankruptcy that was filed in late 1999.

Besides being sued by the Baptist Foundation, Andersen was sued by the Arizona Corporation Commission and the Arizona Accountancy Board in relation to the controversial audit. In addition to the monetary settlement that Andersen agreed to, Andersen had also agreed that two Andersen accountants who had worked on the audit would relinquish their licenses. To date, neither accountant has done so.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Upcoming CPE Webinars

Apr 17
In this exciting presentation Excel expert David H. Ringstrom, CPA shares tricks that you can use with pivot tables every day. Remember, either you work Excel, or it works you!
Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.