As St. Joseph Pension Fund Legal Cases Drag On, 58 Retirees Have Died and Fund is Depleting
GoLocalProv News Team
As St. Joseph Pension Fund Legal Cases Drag On, 58 Retirees Have Died and Fund is Depleting
The underfunded pension fund has been depleted by 13 percent from $85 million at the time of the collapse in August of 2017 -- with over 2700 pension fund members -- to a March 2019 balance of $73,941,637 all during a record performance of the stock market.
The litigation to recover funds for the pensioners has been slow. The process is being fought both in federal and state court and lawyers for players like the Diocese of Providence and Prospect of California — the owners of CharterCare, who own St. Joseph — have fought and worked to delay the proceedings at every turn.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAt some status meetings with Federal District Court Judge Will Smith and Rhode Island Superior Court Judge Brian Stern there are more than 25 attorneys representing a range of litigants, with some attorneys in from the west coast for Prospect.
Litigation Morass
The fund is underfunded by an estimated $120 million according to the pension funds receiver Stephen Del Sesto.
Del Sesto and special investigator Max Wistow filed massive lawsuits in both federal and state courts last June.
The Federal Court complaint is 136 pages and includes a 21 count complaint filed against 14 Defendants. Similarly, the state court complaint is 101 pages and includes 16 count complaint against the same defendants.
The litigation has led to settlements totaling about $15 million, but the process has been slow and nearly every step has been litigators dream.
"Mauled the Rights"
“The Diocese and Prospect have mauled the rights of the pensioners,” said former Rhode Island Attorney General Arlene Violet in reference to the constant effort to delay the legal proceedings.
Violet represents a group of the older pensioners — primarily woman in their 70s, 80s, 90s and even centenarians.
Violet said that the action by Prospect to try and move the case to Delaware is most objectionable and is an affront to the pensioners. “It is insulting to try and move the case to Delaware that they are trying to harm the people that they have already harmed,” said Violet.
During the 20 month process, hundreds of retirees have attended the dozens of court hearings in both federal and state court. Some of the retirees use walkers and have attended hearings fighting harsh weather.
The juxtaposition of the retirees and the plethora of corporate attorneys is stark.
The retirees anxiously trying to protect their promised retirement funds — many wearing purple t-shirts with white lettering, “ Save our Pensions,” sit in the gallery.
Dozens of attorneys representing the Diocese, Prospect, the actuarial firm Angell Pension Group — some earning more per hour than the average retiree receives per month — a little more than $700 per month -- have the front row seats.
The litigation is scheduled to be considered by a mediator. It has taken months to select a mediator and the process is not expected to begin until June.
There is another court hearing scheduled for this Friday. Retirees in their purple shirts and lawyers will all be their en masse — they both have money in the game.
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.
