Investigation: Diocese Claims False - Board Directed Only $14M in Payment to St. Joseph Pension Fund
Tuesday, October 10, 2017
At that meeting in 2014, the board at the time directed just $14 million of $45 million from Prospect towards the pension fund - at a point when the hospitals’ actuarial firm had warned the board that the pension fund was woefully underfunded.
At the fateful meeting on February 27, 2014 held in the cafeteria conference room at Our Lady of Fatima, eleven of the thirteen board members were in attendance and carved up the $45 million cash portion Prospect’s offer and voted to provide just $14 million of the underfunded pension program.
Latest in Investigation
That fiscal year’s report prepared by Angell Pension Group of East Providence would show that to fully fund the pension fund $29,573,536 would be needed.
Questions now arise whether Angell’s numbers were too low.
Many of the board members had been appointed with Bishop Thomas Tobin’s blessing in the 2010 merger between St. Joseph and Our Lady of Fatima with Roger Williams Medical Center — the entire entity was rebranded as CharterCARE in 2010.
One constant on the Board of Directors has been Tobin’s man, Reverend Timothy Reilly. He served on the CharterCARE board prior to the sale to Prospect and then as one of three members of the orphaned pension fund that filed for receivership in August of this year.
Reilly said in a September article published in the Rhode Island Catholic that the Diocese “is not currently, and has not been, responsible for the ownership, management or oversight of the pension funds in question, and St. Joseph Health Services is not a Diocese entity.”
During the past few weeks, the Diocese of Providence has closed ranks. The often talkative Bishop Thomas Tobin has refused to answer questions and has been unavailable to meet with GoLocal despite repeated requests.
As documents are unveiled, it is clear that Tobin chaired the Board of St. Joseph prior to the merger, had a significant number of appointments to the merged entities’ board — the combined CharterCARE, and prior to the merger failed to make proper contributions to the pension fund.
The Diocese has been offering statements through the Rhode Island Catholic. The most recent opinion piece was published under Diocese lobbyist Father Bernie Healey’s name.
According to Healey, "It is untrue and unfair to suggest that Bishop Tobin is not living up to his ‘moral obligation’ in this situation. The impetus for the CharterCARE transaction was to save a failing community hospital that was losing millions of dollars per year. The Bishop’s intent and great hope was that the hospital would stay fiscally viable and continue to fulfill its vital mission to the community.”
But what Healey’s narrative and other Diocese-sanctioned articles and opinion pieces fail to acknowledge is that the Diocese had appointed multiple board members as part of the 2009 merger and that prior to the 2009 merger the Diocese failed to make much-needed contributions to the pension fund.
While Tobin has repeatedly refused comment, he did state in the Rhode Island Catholic in September that he was praying.
“We certainly hope and are praying that this comes to a very positive solution for them as will be possible,” said Tobin. The “them” Tobin refers to is the nearly 3,000 members of the Catholic Church’s former hospital employees whose pensions are now in peril.
As GoLocal reported last week:
From 2007 to 2015, contributions were made only in two years. Despite the fund needing tens and tens of millions of dollars annually, contributions were made only in the years in which St. Joseph was being sold.
In 2010, when the Diocese merged St. Joseph into Roger Williams Medical Center — that year a $1.5 million contribution was recorded. The other contribution was the $14 million in 2014.
In response to GoLocal's questions, CharterCARE issued the following statement, “We understand how difficult this situation is for those employees and retirees who are impacted by the pension fund’s decision to file for receivership.
It is important to note that the pension fund (the “Pension”) is not connected to either Prospect CharterCARE, LLC or Prospect. The pension fund was organized by St. Joseph Health Services of Rhode Island, Inc., a separate organization that retained control of certain assets and liabilities that were not transferred to the purchaser when the transaction with Prospect was completed three years ago.
Neither Prospect Chartercare, LLC nor Prospect have any oversight or control of the Pension.
As part of the overall transaction for the system, Prospect provided over $40,000,000 dollars in cash to the seller of the system. The allocation of the funds was a decision made by seller.
Similarly, neither Prospect nor Prospect Chartercare had involvement with decisions about contributions to the plan in years prior to 2014."
Related Slideshow: 10 Things to Know About One of Biggest Pension Failures in RI - St. Joseph Bankruptcy
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.”
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.
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.
- Investigation: Diocese Claims False - Board Directed Only $14M in Payment to St. Joseph Pension Fund
- Will Kilmartin Be Sued for Role in St. Joseph’s Pension Fund Bankruptcy?
- 1,000 St. Joseph Retirees Hear Horrors of Impact of Pension Fund Collapse
- RI Treasurer Magaziner Talks ‘Back to Basics’, College Costs, and St. Joseph’s Pension Fund
- St. Joseph’s Pension Fund Bankruptcy Could Be Just One of Many in RI
- Kilmartin Lawyer Who Approved St. Joseph’s Sale to CharterCARE Leaves AG After 23 Years
- Emergency Status Hearing Friday on St. Joseph Pension Fund Bankruptcy
- Diocese, RWMC and CharterCARE All Failed to Make Millions in Pension Payments to St. Joseph
- 38 Studios’ Wistow Named Special Counsel to Investigate St. Joseph Bankruptcy
- Bishop Tobin ‘Prays for Swift and Positive Resolution’ for St. Joseph’s Retirees, Despite Role
- Mattiello Blasts Kilmartin on St. Joseph Pension Fund Bankruptcy
- After Week of Silence, Kilmartin Issues Statement on St. Joseph Pension Bankruptcy
- St. Joseph Bankruptcy: Diocese Failed to Make Contributions to Employees Pension Fund for Years
- EXCLUSIVE: St. Joseph Pension Fund Shortfall is More Than $160 Million
- Riley: St. Joseph Pension Collapse Was Negligence or Malfeasance by Kilmartin
- 10 Things to Know About One of Biggest Pension Failures in RI - St. Joseph Bankruptcy
- St. Joseph Receiver Del Sesto to Meet with Raimondo, Ruggerio Proposes Bill
- READ: St. Joseph Pension Fund Bankruptcy Documents
- United Nurses and Allied Professionals Statement on Bankruptcy of St. Joseph’s Retirement Fund
- VIDEO: Violet Hosts Meeting for Hundreds of St. Joseph Pension Fund Retirees
- Moore: State Should Rescue St. Joseph’s Pensioners
- VIDEO: Governor Raimondo Calls for Investigation into St. Joseph Pension Fund Bankruptcy
- Who Was Responsible for Protecting the St. Joseph Pension Fund?
- Receiver: St. Joseph Pension Bankruptcy Will Impact As Many as 2,800, 40% Cuts to Benefits
- Siedle: St. Joseph’s Pension Fund Bankruptcy Shows RI Needs AG Who Knows Pensions