Diocese Admits Teachers’ Retirement Fund in Distress, Blames Individuals Who Unveiled Key Documents

Monday, July 02, 2018

 

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Bishop Thomas Tobin

The Diocese of Providence has sent a memo to members of the Diocesan Lay Employees' Retirement Fund after a GoLocal investigation unveiled that the fund was in severe economic distress -- and chastised individuals for going public with the information. 

The GoLocal report based on Diocese' financial information showed that members of the fund are facing significant cutbacks to their benefits and some members — and those with under ten years and yet to be vested in the fund would lose all the contributions made to the fund on their behalf.

In the Memorandum, authored by Monsignor Raymond Bastia and Michael Sabatino of the Diocese of Providence’s fiscal office, the Diocese for the first time was forced to admit that the fund is facing “financial stress.” Documents GoLocal previously unveiled quoted Diocese documents that stated, "Even with the revised more realistic assumptions, if we make these changes, it will still take 30-35 years to fully fund the Plan."

As the Diocese refuses to be interviewed, provide financial data or report on the status of the financial condition of the fund, retirees are concerned that the fund may collapse.

Document of the Diocese previously reported on by GoLocal, show that The impact on those non-vested staffers is that they will lose all of the pension contributions made into their accounts if the plan is approved. Other big impacts are the fund will be frozen and fund members wanting to exit the fund, who may be concerned that the fund will collapse, could be allowed to exit -- but will take a 40 percent cut to their lump sum payment.

For a nine-year teacher who has taught for nine years and had an annual average salary of $50,000 over those years, they would have accrued an estimated $54,000, but under the plan to be adopted by the Diocese -- that teacher will receive zero.

Diocese Blames Whistleblowers

The memo to retirees affirms what GoLocal has learned, that Bishop Thomas Tobin is furious that news of the cuts to retirees was leaked by officials. The memo cites, “It is unfortunate that someone entrusted with participation in the process chose not to respect professional confidentiality and interrupted the process by leaking discussion materials to the media.”

However, the reality is that the documents released by GoLocal were not discussion documents — they were the final proposed plan to be implemented. The meeting last Thursday at the Diocese’s Chancellory was to receive a final vote — the only remaining step was final approval to the benefits by Tobin.

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1 of more than 2,700 St. Joseph pension fund retirees

Second Pension Failure

The concerns continue to grow about the Catholic school's pension fund, as the litigation continues to grow regarding the collapse of the St. Joseph pension fund.

Earlier in June, lawsuits were filed that allege massive fraud in the case which has created a hole in pension assets estimated to be in excess of $115 million. The suit was filed by the receiver Stephen Del Sesto and was prepared by the special investigator Max Wistow and his law associates Stephen Sheehan and Benjamin Ledsham.

The Federal Court complaint is 136 pages and includes a 21 count complaint filed against 14 Defendants. Similarly, the state court complaint is 101 pages and includes 16 count complaint against same defendants.

According to court documents, the parties knew that the post-2014 transaction which orphaned the pension fund would have “catastrophic implications” of that failure.

Further, the suit 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..”

The Diocese documents layout some significant cutbacks to members of the Lay Employee’s Retirement Fund:

As stated in the documents:

In conjunction with the Plan actuaries, the revised assumptions are as follows:

* 6.75% long-term investment return expectations

* Most recently published mortality tables by Society of Actuaries

* 2% annual decline in participant population for 10 years followed by 1% declines 

* 2% annual pay increases 

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Tobin presiding

Under these revised assumptions, it is understood, that unless we increase contributions by nearly 15% - and there is no appetite for that - the Plan is likely to become insolvent before 2047. Therefore, the 2017 Subcommittee also is recommending:

* A full freeze of the Plan (no new participants are accruals)

* No change to benefits of folks that have retired

* No change to accrued benefits through the date of the freeze

* No change to payroll contributions  (remains at 12% of the full-time payroll)

* Amed the withdrawal liability provisions of the Plan to require approval for any employer to withdraw after the freeze

* Offer a voluntary discounted lump-sum buyout to certain participants

* Fund a partial replacement defined contribution benefit

Even with the revised more realistic assumptions, if we make these changes, it will still take 30-35 years to fully fund the Plan. 

 

Related Slideshow: 10 Shocking Elements of the St. Joseph Pension Fund Lawsuit Against the Diocese and Others

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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.

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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.

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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..”

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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."

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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."

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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.”

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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."

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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.’”

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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.

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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.

 
 

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