Part 1

BAPTIST FOUNDATION OF ARIZONAARIZONA’S ENRON

• CALLED ONE OF LARGEST AFFINITY FRAUDS AND THE LARGEST NON-PROFIT BANKRUPTCY IN UNITED STATES HISTORY

• NEARLY 100 SEPARATE LEGAL ENTITES FILED FOR BANKRUPTCY AS PART OF ITS COLLAPSE

• AT TIME OF BANKRUPTCY THERE WERE IN EXCESS OF 11,000 INVESTORS LOCATED IN EVERY STATE THAT WERE OWED NEARLY $600,000,000 WITH LESS THAN $250,000,000 IN IDENTIFIED ASSETS

• WHEN LAST DEFENDANTS WERE FINALLY SENTENCED IN FEBRUARY OF THIS YEAR IT BROUGHT TO A CONCLUSION ONE OF THE LONGEST CRIMINAL TRIALS IN ARIZONA’S HISTORY

BAPTIST FOUNDATION OF ARIZONAARIZONA’S ENRON

• ACC INVESTIGATION BEGAN LATE 1998• ARIZONA CORPORATION COMMISSION ISSUED

CEASE AND DESIST ORDER IN AUGUST 1999• BFA AND RELATED ENTITIES DECLARED

BANKRUPTCY IN NOVEMBER 1999• ARIZONA CORPORATION COMMISSION AND

ATTORNEY GENERAL’S OFFICE SUED ARTHUR ANDERSEN (“AA”) FOR AIDING AND ABETTING FRAUD IN JANUARY 2001

• MARCH 1, 2002 SETTLEMENT REACHED WITH AA TO PAY $217,000,000 –65-70¢ ON THE DOLLAR RETURNED TO INVESTORS

• MARCH 14, 2002 AA INDICTMENT RELATED TO ENRON WAS UNSEALED—LED TO DEMISE OF AA

BAPTIST FOUNDATION OF ARIZONACRIMINAL CASE

• CRIMINAL CASE INVOLVING INDICTMENTS OF FIVE DEFENDANTS AND THREE PRE-INDICTMENT PLEAS IN APRIL 2001

• REMANDED TO GRAND JURY SEPTEMBER 2002• NEW INDICTMENTS OCTOBER 2002• SIX OF EIGHT DEFENDANTS PLED BEFORE TRIAL• TWO PRINCIPALS WILLIAM CROTTS AND

THOMAS GRABINSKI WENT TO TRIAL• CRIMINAL TRIAL STARTED SEPTEMBER 2005• CROTTS AND GRABINSKI CONVICTED JULY 2006• CROTTS SENTENCED TO EIGHT YEARS,

GRABINSKI SIX YEARS AND DEARDOFF FOUR YEARS

BAPTIST FOUNDATION OF ARIZONA

• BETWEEN ALL CASES--MILLIONS OF PAGES OF DOCUMENTS WERE INVOLVED AND DISCLOSED

• MILLIONS OF DOLLARS WAS SPENT ON DEFENSE OF AA CASE AND BY CRIMINAL DEFENDANTS

BAPTIST FOUNDATION OF ARIZONAOVERVIEW OF PLAYERS AND ALLEGED SCHEME


BAPTIST FOUNDATION OF

ARIZONA

and its Subsidiaries



ARIZONA


ARIZONA SOUTHERN

BAPTIST NEW CHURCH

VENTURES, INC. and its Subsidiaries



ARIZONA


ARIZONA SOUTHERN

BAPTIST NEW CHURCH


A.L.O., INC. and its

Subsidiaries



ARIZONA


ARIZONA SOUTHERN

BAPTIST NEW CHURCH


A.L.O., INC. and its

Subsidiaries

E.V.I.G., INC. and its

Subsidiaries



ARIZONA SOUTHERN BAPTIST CONVENTION


BAPTIST FOUNDATION OF ARIZONA--

ARIZONA NOT FOR PROFIT CORPORATION INCORPORATED 1948 TO PROVIDE FINANCIAL

SUPPORT FOR SOUTHERN BAPTIST CAUSES







WILLIAM P. CROTTS,

PRESIDENT

1982






WILLIAM P. CROTTS,

PRESIDENTTHOMAS

GRABINSKI, GENERAL COUNSEL

1982






WILLIAM P. CROTTS,

PRESIDENTDONALD DEARDOFF,

CHIEF FINANCIAL OFFICER

THOMAS GRABINSKI,

GENERAL COUNSEL

1982



A.L.O., INC., an Arizona Corporation fka ARIZONA DISTRESSED REAL ESTATE,

INC.--Incorporated December 1988




ALO has multiple direct subsidiaries (at least 15)

many of which have subsidiaries of their own




JALMA HUNSINGER AND E.A. KUHN--Listed as officers and directors of all ALO direct subsidiaries.







SELECT TRADING GROUP, INC. (STG)--Arizona corporation incorporated in September

1992--Subsidiary of ALO











STG has multiple direct subsidiaries (at least 15)








HAROLD FRIEND AND JALMA HUNSINGER--

Listed as officers and directors of all STG

subsidiaries.



STG has multiple direct subsidiaries (at least 15)




ARIZONA SOUTHERN BAPTIST NEW CHURCH VENTURES, INC., An Arizona

Corporation



Corporation

NEW CHURCH VENTURES CREDIT CORPORATION

(NCVCC)



Corporation


(NCVCC)

NEW CHURCH VENTURES FINANCE

CORPORATION



Corporation


(NCVCC)


CORPORATION

NEW CHURCH VENTURES MANAGEMENT CORPORATION



Corporation


(NCVCC)


CORPORATION

NEW CHURCH VENTURES MANAGEMENT CORPORATION

JALMA HUNSINGER, E.A. KUHN have been officers and directors since 1992 or earlier



E.V.I.G., INC., an Arizona Corporation--Incorporated in

May 1996



May 1996

E.V.I.G. has at least three

subsidiaries



May 1996

E.A. KUHN listed as shareholder, officer and

director.

E.V.I.G. has at least three

subsidiaries



BFA

NCV ALO

EVIG


BFA

NCV ALO

EVIG

AUDITED BY AA


BFA

NCV ALO

EVIG

AUDITED BY AA


BFA

NCV ALO

EVIG

AUDITED BY AA

NOT AUDITED


BFA

NCV ALO

EVIG

AUDITED BY AA

NOT AUDITED


BFA

NCV ALO

EVIG

ALL ENTITIES UNDER PRACTICAL CONTROL OF CROTTS, GRABINSKI and

DEARDOFF

AUDITED BY AA

NOT AUDITED

BAPTIST FOUNDATION OF ARIZONATHE STORY

• BAPTIST CONVENTION WANTS ORGANIZATIONS UNDER ITS UMBRELLA TO BE SELF-SUSTAINING--NOT TO HAVE LOSSES

• MID 1980’s REAL ESTATE DOWNTURN

• BFA HAD REAL PROPERTY THAT SHOULD BE WRITTEN DOWN

• SOLUTION--MOVE ASSETS OFF BOOKS OF FOUNDATION ONTO OTHER ENTITIES’ BOOKS THAT ARE NOT SUBJECT TO AUDIT

• NCV USED AS FIRST “BAD BANK”

• 1988 ALO CREATED AS NEW “BAD BANK”

• 1996 EVIG CREATED AS LAST “BAD BANK”

BAPTIST FOUNDATION OF ARIZONAEXAMPLE OF HOW SCHEME WOULD WORK

BFA HAS ASSET VALUED AT $1,000,000 ON BOOKS NOW

WORTH $500,000



WORTH $500,000

BFA SHOULD WRITE DOWN

ASSET AND RECOGNIZE $500,000 LOSS



WORTH $500,000



WORTH $500,000

ASSET TRANSFERRED TO

ALO AT BOOK VALUE--25% DOWN,

75% NOTE“SELL ASSET”



WORTH $500,000



75% NOTE

$250,000 CASH and $750,000

NOTE

“SELL ASSET”



WORTH $500,000



75% NOTE

NCVCC HAS INVESTORS’ FUNDS

FROM IRA INVESTMENTS

$250,000 CASH and $750,000

NOTE

“SELL ASSET”

$250,000 LOAN TO ALO



WORTH $500,000



75% NOTE



$250,000 CASH and $750,000

NOTE

“SELL ASSET”


NOTE TO NCVCC



WORTH $500,000



75% NOTE



$250,000 CASH and $750,000

NOTE

“SELL ASSET”


NOTE TO NCVCC

ALO NOW HAS DEBT SERVICE ON

$1,000,000 AND ASSET WORTH $500,000--THIS

SHOULD LEAD TO EVER INCREASING LOSSES ON ALO’S

BOOKS

BAPTIST FOUNDATION OF ARIZONAALO LOSSES SINCE 1993

• 1988-1993 ACCUMULATED DEFICIT $46,242,000

• 1993 LOSS 9,889,000

• 1994 LOSS 14,040,000

• 1995 LOSS 23,321,000

• 1996 LOSS 21,533,000

• 1997 LOSS 22,200,000

• ACCUMULATED DEFICIT 12/31/97 $137,225,000

BAPTIST FOUNDATION OF ARIZONA INVESTOR FUNDS AT RISK-BFA/NCV--1992-1998

• 1992--Investment Agreements and Mortgage Notes $101,950,000







BAPTIST FOUNDATION OF ARIZONAAMOUNTS OWED BY RELATED PARTIES

AT DECEMBER 31, 1998

BFA

ALO

HUNSINGER

NCV



BFA

ALO

HUNSINGER

NCV

$65,093,000



BFA

ALO

HUNSINGER

NCV

$65,093,000

$58,761,000



BFA

ALO

HUNSINGER

NCV

$65,093,000

$58,761,000

BFA TOTAL NOTES RECEIVABLE $188,546,000 66% DUE FROM ALO/NCV



BFA

ALO

HUNSINGER

NCV

$65,093,000

$58,761,000

$168,000,000

BFA TOTAL NOTE RECEIVABLE $188,546,000 66% DUE FROM ALO/NCV

BAPTIST FOUNDATION OF ARIZONATHE STORY

• BAPTIST CONVENTION WANTS ORGANIZATIONS UNDER ITS UMBRELLA TO BE SELF-SUSTAINING--NOT TO HAVE LOSSES

• MID 1980’s REAL ESTATE DOWN TURN

• BFA HAD REAL PROPERTY THAT SHOULD BE WRITTEN DOWN

• SOLUTION--MOVE ASSETS OFF BOOKS OF FOUNDATION ONTO OTHER ENTITIES BOOKS THAT ARE NOT SUBJECT TO AUDIT

• NCV FIRST “BAD BANK”

• 1988 ALO CREATED AS NEW “BAD BANK”

• 1996 EVIG CREATED AS CURRENT “BAD BANK”

Baptist Foundation of Arizona Gahan Trust Transaction

Baptist Foundation of Arizona (“BFA”)

William J. Gahan

Arizona Southern Baptist New Church

Ventures, Inc. (“NCV”)

ALO, Inc.



William J. Gahan



ALO, Inc.

12/31/91-- Gahan makes $3.5 Million

Pledge to BFA--BFA recognizes

$3.5 Million income



William J. Gahan



ALO, Inc.



$3.5 Million income3/24/92

$3,500,000 Cash



William J. Gahan



ALO, Inc.




$3,500,000 Note

$3,500,000 Cash



William J. Gahan



ALO, Inc.




$3,500,000 Note

$3,500,000 Cash

3/24/92

$3,500,000 Cash



William J. Gahan



ALO, Inc.




$3,500,000 Note

$3,500,000 Cash

3/24/92

$3,500,000 Cash

$3,500,000 Note



William J. Gahan



ALO, Inc.




$3,500,000 Note

$3,500,000 Cash

3/24/92

$3,500,000 Cash

$3,500,000 Note

3/24/92$3,500,000 Cash



William J. Gahan



ALO, Inc.




$3,500,000 Note

$3,500,000 Cash

3/24/92

$3,500,000 Cash

$3,500,000 Note

3/24/92$3,500,000 Cash

$3,500,000 Gahan Note Receivable



William J. Gahan



ALO, Inc.




End Result--BFA recognized $3,500,000 income in December 1991

and ALO had receivable due from Gahan on books (never collected or

written off)

$3,500,000 Note

$3,500,000 Cash

3/24/92

$3,500,000 Cash

$3,500,000 Note

3/24/92$3,500,000 Cash

$3,500,000 Gahan Note Receivable

BAPTIST FOUNDATION OF ARIZONASANDIA BUILDING AND GARAGE TRANSACTION

BFA (FI, FDC)

ALO (NMPC, NMEC, ATI,

& AGI)

NCV (NCVCC) BARCLAY

October 1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY

Gift of Sandia Building Option ($1 exercise price) $1,910,000

Gift Income for BFA

October 1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY


Gift Income for BFA$6,144,000 cashOctober

1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY


Gift Income for BFA$6,144,000 cash

Draw on C

redit L

ine

October 1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY



Draw on C

redit L

ine

$6,120,000 cash

October 1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY



Draw on C

redit L

ine

Draw on Credit Line

$6,120,000 cash

October 1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY



Draw on C

redit L

ine

Draw on Credit Line

$6,120,000 cash

1. $6,120,000 cash 2. $1,910,000 note

October 1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY



Draw on C

redit L

ine

Draw on Credit Line

$6,120,000 cash

1. $6,120,000 cash 2. $1,910,000 note1. Exchange Properties

2. Sandia Bldg. option

October 1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY



Draw on C

redit L

ine

Draw on Credit Line

$6,120,000 cash1. E

xchange Properties

2. $1 (Optio

n)



October 1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY



Draw on C

redit L

ine

Draw on Credit Line

$6,120,000 cash1. E

xchange Properties

2. $1 (Optio

n)

1. Sandia Garage

2. Sandia Building



October 1992


BFA (FI, FDC)


& AGI)

NCV (NCVCC) BARCLAY



Draw on C

redit L

ine

Draw on Credit Line

$6,120,000 cash1. E

xchange Properties

2. $1 (Optio

n)

1. Sandia Garage

2. Sandia Building



END RESULT—BFA AVOIDED A $4,843,000 LOSS ON EXCHANGE

PROPERTIES AND RECOGNIZED GIFT

INCOME OF $1,910,000

October 1992



& AGI)

PAPALOTE PARTNERS

1. Sandia Garage 2. Sandia Building

Paradise Heights Lots ALO

recognized a $2,421,000 loss on

exchange

5/23/95

End Result—ALO recognizes a further loss

of $2,421,000 related to the Sandia Building and

Garage

Documents

Part 1