Despite $120M Gap, Diocese to Pay $2.5M in St. Joseph Pension Fund Settlement With Retirees

Despite $120M Gap, Diocese to Pay $2.5M in St. Joseph Pension Fund Settlement With Retirees

In a statement announced on Wednesday afternoon, parties tied to the failure of the St. Joseph pension fund announced that the Diocese of Providence will settle the case for just $2.5 million.

The settlement is a fraction of the amount that many thought the Diocese was liable for.

The St. Joseph pension fund collapse is the largest failure in Rhode Island history and impacted 2,700 plan members. The shortfall was estimated to be in excess of $120 million.

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

The receiver, Stephen Del Sesto, told GoLocal that the settlement, if approved by a critical federal agency, would ensure that pensioners receive their full benefits.

"As the receiver, [I am] to save the pension regardless of how that happens -- so then I have done my job," said Del Sesto in a phone interview with GoLocal on Wednesday.

But, the federal approval is an "if."

In previous years, Del Sesto and special investigator Max Wistow alleged in a federal and state lawsuit that the Diocese was guilty of perpetrating a complex fraud that caused the failure.

Wistow did not respond to a request for comment on Wednesday. 

For decades, St. Joseph Health was owned by the Diocese of Providence and then it turned over the hospital to CharterCARE in 2010, but still held certain rights. During those years, it is clear that the Diocese failed to make proper pension contributions.

In 2014, Prospect of California purchased CharterCARE and that deal was blessed by then-Attorney General Peter Kilmartin.

At the time of the agreement in 2014, Kilmartin said, “The transacting parties have worked diligently to provide regulators with the necessary documentation and information throughout this review process to make this decision, a decision I believe is in the best interest of Rhode Island’s healthcare marketplace, the community, the employees, and most importantly, the patients.”

Kilmartin said in his statement, “Conducting a hospital conversion review requires the commitment of a substantial amount of resources for the Office of Attorney General. I commend my staff for the time and careful consideration put into this review process.” 

 

Tobin Misleads the Vatican

The lawsuit filed in 2018 alleged 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."

 

The Diocese Ran the Clock

In a February 2022 article published by GoLocal, Del Sesto complained that the Diocese was “dragging its feet.”

The Diocese's lawyers have been using legal motions to delay the results of the case, said Del Sesto in 2022.

“I guess I will say the crafty lawyering that can be done on the side of the Diocese that this could go on for three-four maybe even five years in litigation and you know that's not because [federal court Judge William Smith] is not moving things along or we're not,” said Del Sesto in a Zoom call to the retirees on January 10.

“It's just the process by which things happen and with all of the complex issues that are going on that's just about how long it will take,” said Del Sesto.

“[As the] Diocese typically does in their litigation, they do not usually fold up their tent and walk away early--  they usually fight it until the end,” said Del Sesto.

Financial records going back decades show that the Diocese was aware of the financial shortfalls

In 2021, GoLocal first reported, St. Joseph’s failed pension fund reached an agreement with a number of litigants, including the hospital's former owner CharterCARE.

The agreement does not include the Diocese of Providence who refused to participate in negotiations.

The settlement is for $30 million, not including legal fees, and bolsters the total amount recovered for the past 3-plus years to $47 million.

The agreement announced Wednesday allows for the “Plan for submission to Pension Benefit Guaranty Corporation ("PBGC"), the federal agency which protects pension benefits in private-sector defined benefit pension plans“ to review and approve the agreement. 

If the court and PBGC don't approve the agreement -- back to the courts for more delays.