BFA Liquidation Trust's Trial Against Arthur Andersen LLP Ends With Revived, Fortified $217 Million Dollar Settlement, Announces Bernstein Litowitz Berger & Grossmann LLP.

Business Editors & Legal Writers

NEW YORK--(BUSINESS WIRE)--May 6, 2002

Midway through the sixth day of trial in a Phoenix courtroom, the BFA Liquidation Trust ("Trust") today announced that Arthur Andersen LLP ("Andersen") has agreed to revive the previously announced $217 million settlement that had collapsed in March 2002.

The renewed settlement contains several significant additional terms intended to maximize the prospect that the embattled Big Five accounting firm will pay the full $217 million settlement amount. In return for the settlement terms described below, the Trust has agreed to stop the trial that began last Monday, April 29, 2002.

Pursuant to the settlement agreement finalized this morning, Andersen will today provide a certified check for $11.32 million, which is non-refundable, and will be deposited into an account controlled by the Arizona Attorney General's Office, with whom the Trust and lawyers for the investors have been working closely throughout this litigation. Andersen has also agreed that the Trust, the State, and the investor class (together, the "Plaintiffs") shall have the right to enter a stipulated, non-appealable judgment in the amount of $217 million on June 5, 2002, if Andersen has not paid the balance of $205.68 million by June 4, 2002.

The parties anticipate that the primary source of funds for the balance of the settlement amount will be Andersen's Bermuda-based insurance company, Professional Services Insurance Company Ltd. ("PSICL"), if that entity is able to return to solvency over the coming weeks. At Plaintiffs' insistence and as a prerequisite to stopping the ongoing Trust trial, the PSICL Board of Directors voted to approve two separate resolutions at a board meeting in Hamilton, Bermuda this morning. The first approved payment of the balance of the settlement amount within five days of PSICL becoming solvent. The second, effective immediately, approves an assignment of Andersen's interest in the proceeds of the PSICL policy that will be used primarily to fund the settlement. While there cannot be assurance of payment in the event of a PSICL liquidation, these resolutions provide important safeguards that will protect the interests of investors in the event of a liquidation or an Andersen bankruptcy filing.

Should PSICL not be able to pay the settlement by June 4, 2002, the settlement provides entry of the non-appealable judgment referred to above, and for a schedule of payments to Plaintiffs by Andersen itself, pursuant to the payment schedule set forth below at rates of interest escalating up to ten percent:

                  June 14, 2002             $10 million
                  July 15, 2002             $10 million
                  August 15, 2002           $10 million
                  September 13, 2002        $10 million
                  October 15, 2002          $10 million
                  October 25, 2002          $155.68 million

The settlement amount is the second largest ever agreed to by a "Big Five" accounting firm to settle litigation not associated with the savings & loan crisis, and approximately twice the largest settlement that Andersen had ever paid. It also settles several other related suits against Andersen that arose out of the 1999 collapse of the Baptist Foundation of Arizona ("BFA"), the largest non-profit bankruptcy in American history.

Founded in 1948 to raise money for Southern Baptist causes, BFA and its subsidiaries and affiliates had marketed securities throughout the United States as retirement vehicles for investors, and served as a custodian for tax-deferred Individual Retirement Accounts ("IRAs"). At the time BFA filed for bankruptcy in November 1999, it had total liabilities of approximately $650 million and listed assets of approximately $290 million. BFA's liabilities included approximately $570 million owed to over 11,000 investors. Pursuant to a reorganization plan approved by the Bankruptcy Court, the Liquidation Trust was established to wind up the affairs of BFA and Clifton Jessup was appointed as the BFA Liquidation Trustee. The reorganization plan provides that any net recovery from litigation pursued on behalf of the Trust will flow to the investors who purchased securities from BFA.

The malpractice case against Andersen, filed in August 2000, is pending before the Honorable Edward O. Burke of the Superior Court of Arizona in Maricopa County. The trial, which began last Monday and was scheduled to last several months, focused on the Trust's allegations that Andersen had been negligent and breached its fiduciary duties in failing to disclose serious financial improprieties by former BFA senior managers, even after a series of whistleblowers alerted Andersen to the ongoing fraud. The Trust sought compensatory damages of $155 million for loss of BFA's assets and significant punitive damages. The settlement announced today resolves not only the Trust case but also a putative class action against Andersen by former BFA investors, a civil action brought by the Arizona Corporation Commission, and disciplinary proceedings brought against Andersen and three of its employees by the Arizona Board of Accountancy.

After attorneys fees, the net recovery to investors from the Andersen settlement alone - approximately $175 million - will constitute repayment of over 50% of the net losses suffered by investors after liquidation of BFA's assets. A prospective settlement for $21 million that is about to be finalized with BFA's former outside law firm is expected to result in a distribution of another $18.3 million to investors. As of December 31, 2001, the Trust had already distributed $49 million to investors from sales of real estate and other assets of BFA. Those sales continue, and are expected to generate additional distributions over the next three years. The Trust is also pursuing litigation claims against other parties that may recover additional money to be distributed to investors.

"We are extremely pleased to achieve this outstanding result for the investors," said Liquidation Trustee Clifton Jessup. "We will seek the necessary court approvals expeditiously, so that we can distribute the proceeds of the Andersen settlement and the prospective settlement with Jennings Strouss as quickly as possible," said Mr. Jessup. According to the Trust's lead trial lawyer, John P. ("Sean") Coffey, a partner of Bernstein Litowitz Berger & Grossmann LLP and former federal prosecutor, "Getting the settlement back on track, with significant added protections for the investors, is a far better result than we could have achieved at trial. Although we were delighted with how well our evidence has been going in at trial, the fact is that even in the `best case' scenario a judgment would be months away. This settlement represents as firm and positive an outcome as we could hope for given Andersen's situation, one that is better than we could achieve if we were to prevail at trial, and we have that result now." Mr. Coffey added, "I want to thank my fellow trial counsel, Rich Himelrick of Tiffany & Bosco and my partner Bob Gans, for putting together such a strong case at trial. I also want to thank the Liquidation Trust Board for their guidance and support, as well as the fine people at the Arizona Attorney General's Office and our colleagues at Bonnett Fairborn Friedman & Balint, who, with Rich Himelrick, represented the investor class, for the outstanding cooperation as we worked together to achieve our mutually shared goal of obtaining this result for the investors." Mr. Jessup and Mr. Coffey each note that litigation against other parties who played a role in the demise of BFA will continue apace.

Andersen did not admit any wrongdoing in the settlement.

All inquiries regarding this press release should be directed to BFA's outside counsel Sean Coffey, partner at Bernstein Litowitz Berger & Grossmann LLP, [phone], email address [e-mail].