Court Delays Award of $11M to St. Joseph Pensioners After AG and Foundation Lawyers Object
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Court Delays Award of $11M to St. Joseph Pensioners After AG and Foundation Lawyers Object
Leading the fight to block the transfer more than $11 million from the CharterCARE Foundation to the receivership was lawyers for the Attorneys for Attorney General Peter Kilmartin and CharterCARE Foundation.
The St. Joseph pension fund has a more than 2,700 members and a $118 million shortfall.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTSean Lyness of the Attorney General's office argued that the funds were intended for charitable purposes.
Special investigator Max Wistow ridiculed the opposition for blocking the payment by pointing out that the funds should not be used for other uses as the retirees had the first claim on the funds.
“These objections are the height of hypocrisy,” said Wistow.
Retirees' Needs -- and "Charitable Giving"
Wistow charged that the beyond the obligation to the retirees, that the fund was spending more on administration as it was on grant giving.
According to IRS documents for the year 2015 the most recent year available, CharterCare provided grants of $135,097 and scholarships of $58,250.
During that year, the organization has administrative fees tied to staffing of $191,876 for that year, according to the organization’s IRS 990 submission.
“I am not impressed with the charitable standing of the foundation,” said Wistow in the hearing late Friday afternoon before Superior Court Judge Brian Stern.
Russell Conn of the Boston-based law firm Conn Kavanaugh Rosenthal Peisch & Ford, LLP representing CharterCARE Foundation sought to block the transfer of the Foundation’s assets and called the move an “illegal transfer.”
Wistow responded that “it is easy to be charitable with someone else’s money.”
Stern on Friday delayed the transfer of the more than $11 million until at least mid-October.
As one retiree asked receiver Stephen Del Sesto while walking out of the court, “Will we see any money before I die?’
According to documents received by the court earlier in the week secured by GoLocal, the receiver and de facto, the old charitable function of St. Joseph Hospital — the CharterCARE Community Board, had reached a settlement for the transfer of the $11 million plus.
The pension plan was thrust into receivership in August 2017 and has an estimated shortfall of more than $118 million. It is the largest pension failure in Rhode Island's history and affects more than 2,700 plan members.
“Petitions this Court to approve the proposed settlement (“Proposed Settlement”) of claims the Receiver has asserted against CharterCARE Community Board (“CCCB”), St. Joseph Health Services of Rhode Island (“SJHSRI”), and the corporation Roger Williams Hospital (“RWH”) (collectively the “Settling Defendants”), in a lawsuit filed in the United States District Court for the District of Rhode Island,” reads the settlement.
Specifically, settlement documents submitted to the court state, “Immediate payment of the Initial Lump Sum of a minimum of $11,150,000, which is 95% of the Settling Defendants’ combined liquid operating assets of $11,525,000, up to a maximum of approximately $11,900,000 if the Rhode Island Department of Labor and Training releases the entire DLT Escrow in the amount of approximately $750,000 prior to the due date for payment of the Initial Lump Sum…”
The package of documents submitted to the court totals 476 pages. Stern's decision on Friday delays the petition for the settlement.
This settlement is highly complicated and the monetary value could increase as the settling party -- CharterCARE Community Board -- has additional assets, and one asset has tremendous value.
“In connection with the 2014 Asset Sale, Settling Defendant CCCB received a 15% membership interest in Prospect CharterCare, LLC, which indirectly owns and operates Roger Williams Hospital and Our Lady of Fatima Hospital. The current value of those interests is unknown to Plaintiffs,” states the settlement.
In June, two related massive lawsuits were filed simultaneously in state and federal court by the receiver in the collapsed St. Joseph pension fund - the largest pension failure in Rhode Island history.
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.
