Kilmartin Knew of St. Joseph's Pension Collapse 10 Days Before Failure
GoLocalProv News Team
Kilmartin Knew of St. Joseph's Pension Collapse 10 Days Before Failure
Wistow says that Kilmartin is one of the biggest obstacles to his efforts to determine the cause of the biggest pension collapse in Rhode Island history. The pension fund is facing upwards of a $125 million deficit.
Wistow's frustration is beginning to boil over. He says Kilmartin is blocking tens of thousands of documents and that the one document that has been released that is not publicly available shows Kilmartin had advanced knowledge of the collapse.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe one document provided unveils that Kilmartin knew at least ten days before the pension fund was thrust into receivership. Thus, Kilmartin could have helped the investigative process for the past four-plus months.
On August 25, Kilmartin issued a statement that said in part:
The men and women who dedicated their careers working at St. Joe's expected that their pension would be there for them when they retired, and rightfully so. Many, if not most, live on fixed incomes and depend on that monthly pension check to survive. Just as state employee pensioners know all too well, it can be devastating to see your monthly income decrease precipitously because of broken promises.
These retirees deserve to know how this happened and what is being done to protect their investment. I urge the receiver of the pension fund and the Court to establish and maintain complete transparency throughout this process, and to consider every available option to regain financial viability of the pension fund.
Wistow told GoLocal in a phone interview on Friday night that, “the Attorney General, who should be assisting the investigation, but he is, in fact, one of the biggest obstacles.”
“We are being taken away from our effort to get to the bottom of this massive pension failure because we constantly need to go to court to fight with the attorney general,” said Wistow.
About the one document provided by Kilmartin that was not already public, “The document is an email demonstrating that the Attorney General knew of the insolvency of the pension funds at least 10 days before this receivership proceeding was even commenced on August 19, 2017,” writes Wistow’s office in the motion filed on Friday.
“Despite the inside and advance knowledge from over four months ago, the Attorney General protests it does not have time to identify and produce the requested documents.”
Wistow is asking Judge Stern on Monday at an emergency hearing to sanction Kilmartin and to force him to reimburse the receivership estate the cost of Wistow and his team of attorney that have had to spend the past six weeks trying to force the Attorney General to comply with a November 3 subpoena.
In an unusual situation, Wistow is charging the RI Attorney General is operating in bad faith.
Clock Ticks Towards Cuts
On Monday, Stern will hear Wistow and Kilmartin’s dueling motions. And, as Wistow continues to press both the Attorney General and the Diocese to comply with subpoenas, the clock ticks closer and closer to February 1, 2018. On that date, it is anticipated that court-appointed receiver Stephen Del Sesto will implement significant cuts to existing pension payments.
Of the more than 2,700 eligible plan participants, 1,229 presently receive payments. The average monthly pension payment paid is $694.
10 Things to Know About One of Biggest Pension Failures in RI - St. Joseph Receivership
Biggest Pension Failure Ever in Rhode Island?
There is not a record book, but according to a number of top bankruptcy attorneys, the failure of the St. Joseph Health Services Pension Fund impacts the most individuals and the adverse financial impact will be the highest percentage impact to the retirees' monthly payments in Rhode Island history.
In Central Falls, by 2014 then-Governor Lincoln Chafee signed legislation that upped police and fire beneficiaries to 75 percent of their benefits. The cost of the legislation — post-Central Falls bankruptcy — was $4.8 million.
Kilmartin’s Role in the Hospital Conversion Act
Attorney General Peter Kilmartin won’t answer questions about his role in the approval of the Hospital Conversion of St. Joseph Health Services to CharterCare. GoLocal has repeatedly reached out to Kilmartin to answer questions, without response.
As part of the review of the deal, Kilmartin, as Attorney General, had the responsibility to review and approve the financial viability of the transaction. The Hospital Conversion law is very specific to the responsibilities of Kilmartin and his office.
"The department of attorney general [is] to preserve and protect public and charitable assets in reviewing both hospital conversions which involve for-profit corporations and hospital conversions which include only not-for-profit corporations.”
Number Impacted
The bankruptcy of St. Joseph Health Services pension fund will impact between 3,600 and 3,800 existing or future pensioners — and the loss of pension payments may be 40 percent, according to court-appointed receiver Steven Del Sesto, a partner at Donoghue Barrett & Singal.
However, Del Sesto said the plan for winding down the pension fund is only in the preliminary phase.
How Many Are Presently Receiving Benefits
According to the receiver, attorney Stephen Del Sesto, there are 1382 active/vested who have reached retirement date; 639 active/vested who reached early retirement, for a total of 2,021.
On average, retirees are receiving just $425 between the two classes. The retirees are facing a 40 percent reduction — thus, the average retiree would receive just $255 per month.
Kilmartin Called the Plan "Best Interest of...Employees"
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.” Kilmartin's office has refused to respond to questions from GoLocal regarding the collapse of the fund.
How Much Will the Receiver be Paid?
Stephen Del Sesto, the receiver for the St. Joseph Health Services Pension Fund, said he will be paid $375.00 per hour -- which is more than the average retiree will receive per month after the 40 percent cut in benefits.
“My fees will not be paid from the plan assets,” said Del Sesto in an email to GoLocal.
Role of the Diocese of Providence
According to to the document filed with the court seeking bankruptcy protection, the fund or petitioner “has been affiliated with the Catholic Church — “as an affiliate of the Catholic Church, the Plan Qualified as a 'church plan,' which is exempt from the provisions of the Employment Retirement Income Securities Act of 1974 (ERISA) governing defined benefit pension plans.”
And, as a “church plan” the fund and the Diocese were not required to make a minimum contribution to the Plan, or “make pension insurance payments to the Pension Benefit Guaranty Corp."
Will the Receiver Seek a New Actuarial and an Independent Audit?
Stephen Del Sesto, the receiver, said he does not know yet if he will seek an independent actuarial and call for a forensic audit.
He is less than a week in his role and told GoLocal that he would need the court's approval to move forward with both steps.
Big Date
The big date for this case is October 11 -- at that time the receiver Stephen Del Sesto will present the full plan of action.
Payment levels and payment dates will continue at present level, "nothing will change until October 11," said Del Sesto.
Big Question
The biggest question swirling over the sale of St. Joseph's to CharterCARE and the bankruptcy is how could Attorney General Peter Kilmartin approve the sale with the only condition relating to the pension fund was a one-time $14 million payment in 2014 as part of the approval process -- and then just three years later -- the fund collapses.
The present fund has a balance of approximately $85 million. According to court documents filled as part of the bankruptcy petition, the actuarial claims the fund has a shortfall of $43 million.
