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Kilmartin Tries to Block Release of Records in St. Joseph Pension Fund Collapse

Monday, November 20, 2017

 

According to court documents secured by GoLocal, Rhode Island Attorney General Peter Kilmartin is trying to limit the scope of a subpoena regarding the St. Joseph pension fund collapse.

The subpoena was issued by special investigator Max Wistow, requesting all documents tied to Kilmartin's office approval of the merger of CharterCare and Prospect of California.  Just three years later the pension fund of St. Joseph employees was bust.

The 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.”

Now, 2,800 retirees face millions in cuts to their pension — the fund is underfunded by tens of millions of dollars.

In a motion filed in Superior Court last Thursday, Kilmartin claimed the subpoena requested too many documents and that many of the documents requested were “privileged.”

Specifically, in the Attorney General’s motion, he claims that “documents such as attorney notes, communication between staff and drafts,” are privileged. Included, he claims are communications with experts used in the review are also privileged other than final reports.

Wistow Fires Back at Kilmartin

Wistow fired back in a motion to the court on Friday.

Both Wistow and Kilmartin made headlines in the 38 Studios case. Wistow was successful in recovering $61 million for the State of Rhode Island from some of America's largest financial institutions. He received accolades for his success.

In contrast, Kilmartin failed to bring criminal charges against anyone after three years of investigation. Kilmartin has been blistered by everyone from Governor Gina Raimondo to legislators in both parties for his failures in the 38 Studios investigation.

Max Wistow, Special Investigator on the St. Joseph pension fund collapse

In the St. Joseph pension fund collapse, an array of state leaders have called for Kilmartin to step aside due to his role in the approval of the Hospital Conversion Act (HCA).

“Undoubtedly the Attorney General knew the subpoena was coming for months, based on his own statement to the press beginning in August, defining his handling of the pension liabilities and his statement that was carefully ‘monitoring’ this receivership,” wrote Wistow.

Just one week after the pension fund was thrust into receivership, Kilmartin said in a statement to GoLocal, "[We] will be closely monitoring the legal process, and assessing where we have legal standing to intervene…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 also wrote in response to Kilmartin’s claims, “It is totally improper for the Attorney General to evade his responsibility to produce the documents by attempting to place the burden on the Receiver to obtain a waiver of confidentiality.”

Kilmartin “Commended” Staff's Work in 2014

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.” 

A GoLocal review has found that Kilmartin, who is statutorily responsible for a key element of the Hospital Conversion Act, failed to protect the pension assets in the transaction.

The 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.”

Hundreds of retirees attended a meeting earlier this fall with the receiver

Key Staffer Quits AG’s Office Just Weeks After Pension Fund Collapses

A key member of Kilmartin's staff -- closely involved in the St. Joseph dealings -- recently departed the office. 

As GoLocal reported in September: 

“For nearly 23 years, Genevieve Martin served in the Attorney General’s office and most recently as an Assistant Attorney General and Chief of the Insurance Advocacy Unit, but just two weeks after St. Joseph Health Services pension fund went into bankruptcy, Martin is out at the Attorney General’s office and she is not talking about her departure.

She signed off on the transfer of assets of St. Joseph and Roger Williams Medical Center in the sale to CharterCare in 2014.

The sale left the employees' retirement fund an "orphan" and within just three years of the sale, the fund was bankrupt.

 

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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