Subpoena Issued to RI Foundation on $8.2M Questionable Gift Tied to St. Joseph Pension Fund Collapse
Thursday, February 22, 2018
The Rhode Island Foundation has been hit with a subpoena in the ongoing investigation into Rhode Island’s largest pension fund collapse — St. Joseph pension fund.
In 2014, Rhode Island officials approved the sale of CharterCARE to Prospect of California — as part of that deal the pension fund of St. Joseph Health Services was orphaned and left with more than a hundred million in unfunded pension liability and no source of further contributions. Despite the shortfall Attorney General Peter Kilmartin sought and received court approval of the transfer of $8.2 million in charitable assets to be transferred to the RI Foundation.
The subpoena was served by the Special Investigator Max Wistow’s firm. The subpoena was issued on February 9, 2018, has been met with resistance from lawyers for the RI Foundation and receiver Stephen Del Sesto is voicing frustration by the lack of urgency and the legal machinations of the Foundation’s lawyers.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe Rhode Island Foundation refused to answer a series of questions from GoLocalProv on Wednesday asked to the organization about the status of the funds and the lack of response to the subpoena.
The Rhode Island Foundation did forward the following statement:
“As the state’s community foundation we take our role as a fiduciary and steward of charitable dollars very seriously. We recently received a subpoena requesting documents about affiliated charitable assets that the Foundation holds in an organizational endowment. We are in the process of gathering certain financial records in response. Currently, we hold over 250 organizational endowments for charities across the state. Each endowment provides a grant back to those organizations on a yearly basis.”
Del Sesto said the document request to the RI Foundation is not extensive and to date, the Foundation has not turned over any of the requested documents. RI Foundation has refused to disclose the balance of the funds and has also withheld information if the Foundation made any distribution of funds since receiving the dollars in 2014.
Receiver Voices Frustration
“There are important issues to be examined. We are looking to see if the dollars that were transferred to the RI Foundation were restricted or non-restricted, and, whether the dollars should have need transferred at all if there was a massive shortfall in the pension system,” said Del Sesto.
The funds were transferred under the legal doctrine cy pres.
“If it becomes unlawful, impossible or impracticable to carry out the purpose of the designated charitable trust or becomes wasteful to apply all the property to the designated purpose, the trust will not fail but instead the court will direct the application of the property (or a portion of the property) to a charitable purpose that reasonably approximates the designated purpose. The cy pres doctrine means "as near as possible,” writes Cornell School of Law. The charitable donations could not be transferred to Prospect as other assets were in the sale as the California-based company is a for-profit concern.
“While the funds may have been donated with a specific charitable intent, the funds should go to address the creditors of the hospital before the funds were transferred to a third party,” said Del Sesto.
“It is frustrating that the RI Foundation is asking for additional time in order to respond to the subpoena. They should have responded immediately,” added Del Sesto.
“We are not going to leave any stone unturned trying to recover funds for the retirees,” said Del Sesto.
Presently, more than 2,700 members of the plan face a fund that is estimated to be underfunded by $118 million.
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