Judge Slams Kilmartin for Delaying Release of Documents in St. Joseph Pension Fund Collapse

Thursday, November 30, 2017


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Max Wistow, Superior Court hearing on Wednesday

An effort by Rhode Island Attorney General Peter Kilmartin to block the release of critical documents tied to the Attorney General’s review of the merger between CharterCARE and Prospect was slapped down by Judge Brian Stern on Wednesday at a hearing in Providence Superior Court. Special investigator Max Wistow blistered Kilmartin for the delay in providing key documents. And, Wistow laid out that he believed Kilmartin lacked the understanding of the key issues relating to the 2014 merger. 

Kilmartin tried to quash many elements of a subpoena issued by Wistow looking into the failure of St. Joseph Health Services pension fund. The subpoena was issued to Kilmartin on November 3, and to date lawyers in the Attorney General’s office admitted before Judge Brian Stern that they have yet to provide one single document.

Latest Hearing

Stern pointed out during the hearing that Kilmartin often penalizes cities and towns for not complying with the state’s access to public records act (APRA) which dictates public documents are turned over in ten or 30 days, but that the Attorney General’s office had not complied with a court-sanctioned subpoena after nearly a month.

St. Joseph is the largest pension fund collapse in Rhode Island history, as approximately 2,800 are facing a cut to their pensions of as much as 40 percent.

In court Wednesday, Wistow pounded the Attorney General for saying one thing and then doing another. Wistow repeatedly read from a statement issued by Kilmartin and published in GoLocal just days after the pension fund was forced into receivership.

“I am very concerned and have many questions as to how the pension fund could be insolvent just three years after being funded at 90 percent. While the Attorney General's Office is not directly or indirectly involved with the management of the pension fund, we have engaged with counsel for the Petitioner and the Court-appointed receiver, and will be closely monitoring the legal process, and assessing where we have legal standing to intervene,” said Kilmartin in his statement in August.

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Assistant Attorney General Kathryn Enright

Wistow read another portion of Kilmartin’s statement, “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.”

He then bristled at the delaying tactics and multiple motions Kilmartin has filled — which are delaying the process and the ability to recover funds for the retirees. The Attorney General's office represented by Assistant Attorney General Kathryn Enright and Special Assistant Jessica Rider. The two had filed the motions pressing to limit Wistow's request for documents.

“No Understanding of the Transaction”

Wistow said that Kilmartin has no fundamental understanding of the key transaction between both CharterCARE in 2014 when it was acquired by Prospect.

“It is frightening it is how little...the AG understands the transaction,” said Wistow.

Wistow charged that Kilmartin “misled or concealed” when rendering his approval of the decision to allow the companies to merge under the Hospital Conversion Act.

But the harshest words at the hearing came from Chris Callaci, the lawyer for the United Nurses and Allied Professionals (UNAP).  He spoke in favor of Wistow's motion to compel the Attorney General to release documents.

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Judge Brian Stern

In a statement before Judge Stern, Callaci said he was “troubled by the non-cooperation” by Kilmartin. He claimed Kilmartin was “impairing” the investigation and was deeply disturbed that the most basic public documents had not been turned over for the investigation.

Stern Set Timeline

In a decision issued from the bench, Stern instructed the Attorney General and Wistow to immediately meet with their technology experts to identify a process for transferring records. Stern also instructed the Attorney General to have all documents to Wistow by January 15.


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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