Red Flags Abound At Bankrupt RI St. Joseph Health Services Church Pension: Guest MINDSETTER™ Siedle
Guest MINDSETTER™ Edward Siedle
Red Flags Abound At Bankrupt RI St. Joseph Health Services Church Pension: Guest MINDSETTER™ Siedle
I don’t see dead people.
But I do see dead pensions. And I see things about dead pensions that other people do not see.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAnd what I see is scary.
I see untimely deaths that should never have happened and anguished survivors grieving their losses.
Gross mismanagement, conflicts of interest, hidden and excessive fees, scamming, looting—all are commonplace—if you know where to look.
In 2017, the St. Joseph Health Services of Rhode Island pension fund filed for bankruptcy, devastating the retirement plans of nearly 3,800 former and existing workers whose benefits will likely be dramatically cut.
The hospital operating company, which throughout its history had been affiliated with the Catholic Church, wrote in its 2017 receivership request that the pension fund is "unsustainable" and absent any judicial intervention, "will be terminated and its funds distributed in a manner that will result in current plan beneficiaries receiving about 60% of their accrued benefits and all others receiving nothing."
With an average monthly payout of $425, a cut of 40% of benefits will be brutal. Participants will be left with barely enough to go out to dinner a few times a month. So much for the retirement security they were promised.
As an affiliate of the Catholic Church, the Plan qualified as a “church plan” exempt from the provisions of the Employment Retirement Income Security Act of 1974 (“ERISA”). The receiver for the Plan is seeking to have the church plan reclassified and administered as if it had been covered by ERISA and to have the Pension Benefit Guaranty Corp. assume responsibility for it.
The receiver admitted in an interview with Pensions&Investments earlier this year, "However, there can be no assurance that PBGC will provide any coverage for pension fund shortfalls as a result of underfunding prior to (the receivership) or at all."
"I have no idea whether this is going to help the plan," he said. "At the very least, I thought it was not only appropriate because it should have never been a church plan, but it certainly doesn't hurt to try to make the (ERISA) election."
Based upon over a decade of experience with PBGC, I can assure you that having PBGC assume responsibility for your pension is hardly a panacea, or even likely to provide much relief.
On the other hand (and without giving too much away), carefully reviewing the management of your pension over the decades could be enlightening and productive. I see lots of “red flags.”
As I said last week with respect to the coal miners’ imperiled pension fund, every pension death deserves an autopsy. Workers and retirees deserve answers about what caused their loss and once the PBGC takes over the plan, it will be too late. The PBGC has consistently demonstrated it has no interest in knowing what causes pensions—your pension—to fail.
After decades of trusting promises made would be promises kept, St. Joe participants should demand a full review of the causes of their pension’s collapse. Any parties responsible for contributing to the pension’s demise should be held accountable.
Doing nothing—sitting back, is not an option. And neither is simply walking away without answers.
This column was first published in Forbes.
10 Shocking Elements of the St. Joseph Pension Fund Lawsuit Against the Diocese and Others
Another Hospital Group Identified that the Pension Fund Needed $72M for Plan
In 2012, prior to CharterCare, then the owner of St. Joseph being sold to Prospect of California, another hospital group wanted to purchase Roger Williams, St. Joseph and Fatima. That group, LHP Hospital Group, identified that the pension fund needed a $72 million infusion, but their offer was rejected.
The $72 million was $58 million more than the amount put into the pension fund by Prospect, the eventual purchaser, in 2014.
All the Parties Knew the Pension Plan Was No Longer a Church Plan
Post sale of St. Joseph to CharterCare in 2009 and then CharterCare’s sale to Prospect, and despite knowing that for the pension fund to continued to be considered a “church plan,” the Diocese and hospital officials continued to list the hospital under the U.S. Conference of Bishops’ Catholic directory as “operated, supervised, or controlled by or in conjunction with the Roman Catholic Church.”
The lawsuit states that all the defendants in the suit knew this claim was false.
Tobin Misleads the Vatican
The lawsuit lays out that “Bishop Thomas Tobin did not disclose in his letter to the Vatican that the proposed asset sale increased the probability of the Plan failing. Instead, Bishop Tobin omitted that information and, in effect, said the opposite, that approval of the asset sale was actually necessary to secure the Plan.”
The suit goes on to assert, "On September 27, 2013, Tobin signed his letter as altered by [legal] counsel for [St. Joseph Health Services, CharterCare and Roger Williams Hospital] and sent it to the Vatican.”
The parties knew the implications, “These misrepresentations and omission concerning the Plan in the Bishop’s letter to the Vatican…all understood that Vatican approval was required for the transaction to proceed..”
Suit Alleges Fraud
The lawsuit is blunt as it alleges that, "Saint Joseph Health Services of RI, the Prospect Entities, and other Defendants violated ERISA, committed fraud, breached their contractual obligations, violated their duty of good faith and fair dealing, and otherwise acted wrongfully. As a result, they must be required to compensate losses to the Plan and remedy such violations, including returning all assets improperly diverted to the Plan, and to otherwise fully fund the plan."
Severe Remedy
Wistow and his team claim the remedy of violating the "fraudulent conveyance" laws in Rhode Island are severe and that the Plan -- thus the retirees -- should receive the assets, aka, CharterCare.
"They also ran afoul of Rhode Island laws prohibiting fraudulent conveyances. The remedies for those violations include that the Prospect Entities must turn over to the Plan and its participants the entirety of the assets they acquired in the 2014 Asset Sale, with no credit of offset for what they paid for those assets, or for the improvements that they may have made on the facilities. In other words, the Plaintiffs are entitled to a judgment awarding them these assets, including but to limited to New Fatima Hospital and New Roger Williams Hospital, or ordering that these properties and other assets be sold and awarding Plaintiffs the process from the sale up to the amount necessary to fully fund the Plan on a termination basis and to ensure the pensions of all Plan participants."
Quid Pro Quo
On August 14, 2013, key hospital officials meet with the leadership of the Diocese of Providence’s office to get sign off on the sale to Prospect.
According to documents, a meeting was convened which was attended by Bishop Tobin, Rev. Timothy Reilly and Msgr. Paul Theroux at that meeting the top Diocese officials signed off on the deal which cast the pension off as an orphaned plan. The deal also asserted certain promises critical to the leadership of the Diocese specifically that Roger Williams Medical Center would not engage in prohibited activities of the Diocese and specifically listed:
Abortion
Euthanasia
Physician-assisted suicide
The suit asserts that there was a “quid pro quo for freeing New Fatima Hospital from the unfunded liabilities of the plan, and granting these extensive and perpetual ‘Catholic identity covenants’ for New Fatima Hospital and New Roger Williams Hospital.”
Violated Federal Law and Federal Oversight
As the hospitals left the control of the Diocese and were sold off in 2009 and then, the ultimate sale to Prospect, officials knew that the pension plan was no longer a "Church Plan" and thus needed to then fall under federal regulatory review under ERISA.
According to the lawsuit, the "deceit" create a federal violation of the law and de facto an "unlawful violation of tax law and ERISA."
Misleading the Vatican, Continued
Bishop Tobin did not disclose in his letter to the Vatican that the proposed asset sale increased the probability of the plan failing. Instead, Bishop Tobin omitted that information (removed from the letter was “spiraling and gaping liability’ which was in the draft) and, in effect, said the opposite, that the approval of the asset sale [to CharterCare] was actually necessary to secure the plan."
The lawsuit goes on to assert, ”These misrepresentations and omissions concerning the Plan in the Bishop’s letter to the Vatican were included by the defendants…and the Diocesan defendant, all understood that the Vatican approval was required for the transaction to proceed, and knew or were told that the Vatican must approve specifically the ‘pension structuring.’”
Most Damning - Email After the Sale
In order to continue the status of the pension fund as a "Church Plan" and thus hide the financial condition of the fund from members and keep from federal regulation, after the sale legal counsel for St. Joseph Health Services of RI sent an email to the Diocese and copied CharterCare and the actuary Angell, reminding everyone of the consequences of the Diocesan defendants not listing St. Joseph in the Catholic Directory.
"Saint Joseph Health Services of RI believes that if it is not included in the 2015 issue of the directory that the pension fund will no longer qualify as a church plan and that the loss of the status will require that they immediately notify the applicable governmental authorities that the plan is currently underfunded."
The Diocese officials than contacted the editors of the directory and made sure that the St. Joseph remained listed, according to the suit.
Funds Diverted to Priest's Pension Fund
One of the biggest affronts to members of the now failed St. Joseph pension fund was that when the sale of CharterCare was completed the Diocese received a $640,000 repayment of a loan from the Inter-Parish Loan Fund.
The Diocese received those funds and instead of applying them to the pension fund, according to the lawsuit church records show that the loan was partially repaid, but that $100,000 was diverted to the priest's retirement fund -- a fund that is reportedly fully funded.
