Rhode Island's Largest Pension Fund Collapse Gets a Federal Bailout

Rhode Island's Largest Pension Fund Collapse Gets a Federal Bailout

In August of 2017, GoLocal broke the story of the St. Joseph pension fund being thrust into receivership.

Now, seven-plus years later, the pension fund is being “rescued” by a little-known federal finance agency called Pension Benefit Guaranty Corporation (PBGC). Taxpayers are picking up the tab.

Each year, the agency takes over multiple failed pension funds — those that were underfunded and/or ravaged by mismanagement or corruption.

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The move to federal control of the fund ensures that nearly all members of the pension fund will receive full payments.

The St. Joseph pension fund, which was placed into receivership, was underfunded by an estimated $120 million at the time of the collapse and had a balance of $80 million.

Today, prior to the PBGC takeover, the St. Joseph pension fund balance was depleted to $45.6 million.

“As of the date of August 2017, the Plan had approximately 2,729 vested participants, of which approximately 1,229 were then receiving monthly benefits payments,” according to the court-appointed receiver Stephen Del Sesto. “Based on the benefits payments issued by Bank of America as of November 1, 2024, 1,558 participants received monthly benefits payments.  The total amount of benefits paid in November 2024 equals $937,848.31.”

Del Sesto says that he and fellow attorney Max Wistow were able to recover significant funds.

“Max’s charge as special counsel was to investigate and, if appropriate, sue those responsible for the failure of the plan. He did that and recovered over $50 million for the plan,” said Del Sesto in an email to GoLocal.

“My charge as receiver was to take any and all actions to save the plan so that the benefits that the pensioners worked their lives for were paid. My charge and ultimate goal was successfully achieved as a result of the notice from the PBGC,” said Del Sesto.

Combined, Del Sesto and Wistow received millions in compensation.

Each year, the agency takes over failed pension funds — those that were underfunded and/or ravaged by mismanagement or corruption.

 

Failure to Fund and Failure to Regulate

The St. Joseph pension fund was underfunded and had been “orphaned” in the deal in which CharterCARE was sold to Prospect of California in 2014. 

State regulators — especially former Rhode Island Attorney General Peter Kilmartin — failed to protect the members of the pension fund and had approved the hospitals' sales.

The damage to the fund began years earlier when the Diocese of Providence failed to fund the pension properly and then sold off St. Joseph, including its pension obligation to CharterCARE.

Bishop Thomas Tobin chaired the Board of Trustees in 2008, during the period in which the hospital merged with Roger Williams Medical Center in the CharterCARE deal.

For years earlier and under the direct auspices of the Tobin-led Diocese, contributions to the pension fund were either only a fraction of what was needed or not made at all. 

In Rhode Island, the Attorney General has the sole responsibility under Rhode Island's Hospital Conversion Act to protect the employees of a healthcare facility financially during a transaction.

At the time of the agreement to sell St. Joseph 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.” 

But just three years later, the St. Joseph pension fund was placed into receivership.

“At the very least, the Attorney General failed to ‘mind the store’ when it came to the rights of Plan participants in 2014, and continues to oppose their assertion of their lawful rights. Apparently, it will take the zealous advocacy of the Receiver on behalf of the Plan participants to obtain for them what was rightfully theirs over four years ago,” wrote Del Sesto and Wistow in the documents filed in 2018 in the court proceeding.

While all of the others targeted in the lawsuit settled for $47 million from the other litigants, CharterCare paid the lion's share — $27 million of the $47 million.

Former Sister of Mercy nun and America’s first female Attorney General Arlene Violet unleashed in an interview with GoLocalProv in October of 2018 on the legal tactics of the Diocese of Providence and specifically Bishop Thomas Tobin.

“It is unjust what the Roman Catholic Church is doing to delay the court action to try and help the retirees,” said Violet. "Tobin and the church, not only are they not putting any monies in, but they are actively objecting to every effort to recover money even when they are not economically involved.”

In a February 2022 article published by GoLocal, Del Sesto complained that the Diocese was “dragging its feet.”

The Diocese's lawyers used legal motions to delay the resolution of the case, said Del Sesto at the time.

“I guess I will say the crafty lawyering that can be done on the side of the Diocese that this could go on for three-four maybe even five years in litigation and you know that's not because [federal court Judge William Smith] is not moving things along or we're not,” said Del Sesto in a Zoom call to the retirees on January 10 of 2022.