UPDATED: Court Decision Sets Stage for Up to $30 Plus Million to St. Joseph Retirees
Tuesday, October 30, 2018
Over the past 14 months, the members of the St. Joseph pension fund have faced nearly an endless string of bad news — ranging from the potential of a 40 percent cut to their pensions to endless court hearings and delays.
On Monday, Rhode Island Superior Court Judge Brian Stern issued a ruling that may pave the way for the recovery of a minimum of $12 million, but what could be upwards of $30 to $40 million or more. As a result of Stern’s ruling the now-defunct pension plan could own 15 percent of Prospect CharterCARE in Rhode Island.
The decision by Stern now needs to be approved by his judicial counterpart in federal court, Judge Will Smith.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe dual jurisdiction is set up as such as the receivership of the pension fund and one major fraud lawsuit are in state court, and a related federally-filed fraud suit is now pending in federal court.
“We are pleased with the decision by [Judge Stern] we received today in state court and now need to get approval in federal court,” said attorney Max Wistow on Monday.
Prospect is a statement to GoLocal on Tuesday said, "Although the decision issued yesterday approves the settlement, it does so in a manner that prevents and restricts the Receiver from moving forward with the agreement until these matters are addressed in federal court. We are pleased the decision struck a balance that permits the Receiver to take the next step to the federal court while preserving the rights of Prospect and other third parties."
Receiver for St. Joseph pension fund Stephen Del Sesto told GoLocal that Stern’s decision has a number of conditions and still needs federal approval, but is a major step in the effort to recover tens of millions of dollars for the collapsed pension fund. It is estimated that the fund faces a shortfall of $118 million.
The Economic Impact Depends on CharterCare’s Value
Stern’s decision states, “On balance, the proposed settlement agreement [PSA] provides the Plan with much-needed relief via an influx of capital, and, for the reasons explained above, the PSA is in the best interest of the Plan’s estate.”
The decision by Stern, if approved by Smith in the federal court will transfer 15 percent of the owner of Prospect CharterCare’s ownership to the receivership for the pension fund. The value of the CharterCARE in Rhode Island in unknown. Documents from the hospital conversion show that Prospect poured $90 million into the deal.
In 2014, when Rhode Island Attorney General Peter Kilmartin and RI Department of Health approved the hospital conversion and transferred the control of CharterCare to Prospect the remaining institution which was set up as a non-profit for purposes of charitable interest retained 15 percent of the California company’s ownership.
“[Prospect] will acquire certain assets of CCHP for $45 million and thereby acquire an 85% interest in the existing hospitals. CharterCARE Health Partners will retain a 15% interest in the existing hospitals. The $45 million will be used to retire the long-term debt of the existing hospitals ($31 million) and to increase the long-term the SJHSRI pension plan to greater than 90% ($14 million). PMH and CharterCARE Health Partners will own Prospect CharterCARE, LLC and will each hold 50% of the seats on the governing board,” said the 2014 approval decision issued by the State of Rhode Island.
Wistow said he did not know the exact value of the 15 percent ownership, "it is critical to determine the value of the hospitals and, if approved by the court, the value to the retirees' pension fund."
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