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Mattiello Blasts Kilmartin on St. Joseph Pension Fund Bankruptcy

Friday, August 25, 2017

 

Speaker Nick Mattiello

Speaker of the House Nicholas Mattiello blasted Rhode Island Attorney General Peter Kilmartin for his failure to protect the pension fund of the retirees of St. Joseph Health Services. during an interview on GoLocal LIVE.

Since GoLocal was first to report the St. Joseph pension fund bankruptcy last week, the Attorney General has refused to answer any questions about his role in the approval of the sale of St. Joseph. In his first comments on the catastrophic bankruptcy, which may lead to a 40 percent cut to the benefits nearly 3,800 retirees, Kilmartin blamed, among many, the Rhode Island General Assembly.

"The Hospital Conversion Act is not all encompassing and the Legislature did not grant the Attorney General's Office the statutory authority to make sweeping demands that are outside the scope of the statute. Specifically, it neither gives the Attorney General nor the Department of Health the authority to oversee or manage private pension funds associated with the healthcare system," said Kilmartin in his first public statement, a week following the bankruptcy. 

Kilmartin's comments are inconsistent with the law, his own comments when he approved the deal and drew a strong response from an incredulous Mattiello.

Speaker on the Record

"Well, I am not sure I agree with that assessment (that the Attorney General didn’t have authority). He certainly had the authority. And, he should have been looking at it (pension funds)," said Mattiello.

"If he has specific concerns he should bring it to my attention. We will address it," added Mattiello. 

Mattiello pointed out that Kilmartin was a long-time member of the legislature and never made any effort to amend the HCA as relative to pension funds nor had Kilmartin brought any concerns to his attention.

"When pension funds are not funded approved folks get hurt and I've heard from constituents...I look forward to hearing what the Attorney General has to say," said Mattiello.

Peter Kilmartin, Attorney General

Kilmartin's claims are inconsistent with the statutory requirement for his office and for the comments Kilmartin made at the approval of the sale of St. Joseph.

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.” 

Other Issues Covered by the Speaker

Mattiello spoke to the status of the car tax elimination implementation, and what the General Assembly -- and House of Representatives -- would be taking up, when it reconvenes for a rare special session in September. 

Mattiello also spoke to the prospects for any action being taken on the PawSox, as well as recent Progressive wins, including Dawn Euer in Senate District 13 -- and what that means for the General Assembly. 

 

Related Slideshow: 10 Things to Know About One of Biggest Pension Failures in RI - St. Joseph Bankruptcy

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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.

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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.”

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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. 

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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.

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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.

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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.

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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."

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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.

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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.

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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.

 
 

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