38 Studios’ Wistow Named Special Counsel to Investigate St. Joseph Bankruptcy
Saturday, September 09, 2017
In the hearing Stern also granted the receivers requests to continue the full funding of monthly pension payments to retirees through February 1, 2018. And, additionally, provided Del Sesto and thus, Wistow with full subpoena powers.
More than sixty retirees, lawyers for interested parties attended the hearing which was moved to a larger courtroom. Stern also asked to Del Sesto to create a committee which would include retirees to be included in the receivership and recovery of asset process. Stern also urged to, sooner rather than later, organize a "town hall" to present information to the nearly 3,000 impacted retirees who are now threatened with a 40 percent cut to their benefits.
Wistow had helped Rhode Island recover more than $60 million of the state's $75 million investment in 38 Studios. He was appointed by then-Governor Lincoln Chafee.
Wistow tells GoLocal of the appointment, “Literally, thousands of people have been adversely impacted by this bankruptcy. This is a complex case and I am very interested to look into this.”
Senate President Dominick Ruggerio, issued a statement in support of the appointment of Wistow. “I am very pleased that Max Wistow has been named special counsel in the St. Joseph Health Services pension fund case. Mr. Wistow has a tremendous reputation as one of the finest legal minds in the state. His ability to delve into complex financial issues, and his impressive legal acumen, led to the recovery of millions of taxpayer dollars in the 38 Studios case," said Ruggerio.
"I am very concerned for the thousands of pensioners impacted by the failure of this fund. The appointment of Mr. Wistow means that the beneficiaries can be assured that every aspect of the sudden deterioration of the pension fund will be thoroughly examined, and every avenue for remedy under the law will be brought to bear,” he added
On August 17, the board of the St. Joseph pension fund filed for bankruptcy. The fund was orphaned when CharterCARE purchased the related hospital, but under the agreement, the pension fund was left as a separate company and was not assumed by CharterCARE. In the sale, CharterCARE made a $14 million contribution to the fund and RI Attorney General Peter Kilmartin approved the deal under the RI Hospital Conversion Act.
"The case is about basic morality. Loyal employees worked for years and were promised and dependent on their employers for their retirement. Employers should be held accountable," added Wistow.
While it is unknown how the case will progress, GoLocal found significant discrepancies in two areas of focus. One was the failure of the Diocese of Providence to make pension payments to the fund when it controlled the hospital. Second, areas of concern is if the Attorney General fulfilled his responsibilities in reviewing the sale of St. Joseph to CharterCARE under the Hospital Conversion Act.
As previously reported, there appears to be plenty of blame to go around. “This is a matter of a tremendous breach of duty on every level to those folks who worked for so long at the hospital and had an expectation as retirees that they would receive their retirement funds,” said former Rhode Island Attorney General Arlene Violet, in an interview with GoLocalProv.com.
"This fund presently has the resources to last maybe ten years, but it needs to support retirees for 40 to 45 years," said Del Sesto.
Violet raised further questions about the role of Peter Kilmartin, Rhode Island's current Attorney General. Under the Hospital Conversion Act, the Attorney General is required to review the financial viability and impact of the transaction.
"The retirees had no idea there were any issues with the viability of the fund until it filed for bankruptcy," said Del Sesto. "There were a number of entities that had a responsibility, including the Attorney General."
The Hospital Conversion law is very specific to the responsibilities of Kilmartin and his office, stating, “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.”
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.”
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As GoLocal reported on December 13:
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