Two related massive lawsuits (one Federal and the other State) have been filed simultaneously in state and federal court by the receiver in the collapsed St. Joseph Hospital of the State of Rhode Island (SJHSRI) Pension Fund - the largest pension failure in Rhode Island history.
The suit alleges massive fraud in the case which has created a hole in pension assets estimated to be in excess of $115 million.
The Federal Court complaint is 136 pages and includes a 21 count complaint filed against 14 Defendants. Similarly, the State Court complaint is 101 pages and includes 16 count complaint against same defendants.
The defendants include the Diocese of Providence, CharterCare, CharterCare’s parent company Prospect, Angela Pension Group, and a range of other related healthcare and Diocesan entities tied to the sale of the St; Joseph Hospital first in 2009 by the Diocese to Roger Williams Medical Center which created CharterCare and then the sale of CharterCare to Prospect of California in 2014.
Noteworthy is the fact that both sales were approved by the Rhode Island Department of Health and, more importantly, the State Attorney General’s office.
The lawsuits assert that when the hospital was sold both in 2009 and in 2014, it affirmed the Pension Fund status as being a “church plan.” However, the pension fund should have then been thrust into a regulated ERISA plan -- a Federally regulated plan that then would required oversite, regulation, reporting, and mandated contributions.
Instead, the Pension Fund was jettisoned into a future that lead to its collapse just three years later. The fund when into receivership in August of 2017.
The suits further allege that the Diocese and the other healthcare organizations conspired to withhold information from the retirees, regulators and even the Vatican.
According to court documents, it is alleged that Bishop Thomas Tobin did not disclose (in his letter to the Vatican) that the proposed asset sale increased the probability of the Pension Fund failing. Instead, Bishop Tobin omitted that information and, in effect, said the opposite, that approval of the asset sale was actually necessary to secure the Pension Fund.”
The suit further alleges that, "On September 27, 2013, Bishop Tobin signed his letter as altered by counsel and sent it to the Vatican” in order to secure the necessary canonical approval for the sale.
Both the Federal and the State suits contend that the parties knew the implications: “These misrepresentations and omission concerning the Pension Fund in the Bishop’s letter to the Vatican…all understood that Vatican approval was required for the transaction to proceed..”
As a result, over 2,700 participants in the Pension Fund, consisting of nurses and other hospital workers, who, after many years of dedicated service to their patients and Saint Joseph Hospital, learned in August of 2017 that the Plan had not been adequately funded.
This was disclosed when the Plan was placed into receivership, with the request that the Rhode Island Superior Court approve a virtually immediate 40% across-the-board reduction in benefits.
The lawsuits claim that the harm to the Pension Fund participants is the product of (at least) four separate but related factual scenarios and schemes which attest to willful and fraudulent actions on the part of the defendants.
First, for nearly 50 years SJHSRI used the Pension Fund as a marketing tool to hire and retain employees, and promised employees and prospective employees it made of the necessary contributions, assuring them that they had no investment risk.
Second, for the past decade, SJHSRI stopped making necessary contributions with the result that the Pension Fund was grossly underfunded. Moreover, SJHSRI and other defendants conspired to conceal that from participants through fraudulent misrepresentations and material omissions.
Third, for many years SJHSRI and other defendants secretly sought a means to terminate the plan without exposing SJHSRI’s substantial operating assets and charitable funds to lawsuits by participants for benefits.
Records reveal that, in December of 2012, SJHSRI considered unilaterally terminating the Plan and paying benefits only to employees who were already retired. This would have deprived over 1,800 other Plan participants of any pension whatsoever. The scheme was reconsidered because SJHSRI feared the excluded plan participants would bring a successful class action that would end up costing SJHSRI more than it would save by terminating the Pension Fund.
Finally, in 2011, SJHSRI and other Defendants put into operation a scheme to transfer SJHSRI’s operating assets, cash and most of its expected future charitable income to entities controlled by SJHSRI’s parent company, intending that such assets thereby would be out of reach of a suit by Pension Fund participants and then terminate the Fund completely.
If the allegations are proven and the lawsuits successful, SJHSRI, the Prospect Entities, and other Defendants violated Federal and State pension mandates, committed fraud, breached their contractual obligations, violated their duty of good faith and fair dealing, and otherwise acted illegally. As a result, they will be required to compensate losses to the Plan and remedy such violations.
But defendants could also run afoul of Rhode Island laws prohibiting fraud.
Participants would be entitled to a judgment awarding them these all the assets of SJHSRI and its parent company, including but not to limited to New Fatima Hospital and New Roger Williams Hospital, or ordering that these properties and other assets be sold and awarding the Pension Fund participants the proceeds from the sale up to the amount necessary to fully compensate the Pension Fund on a termination basis and to ensure the pensions of all participants.
This is a shocking allegation of fraud and mismanagement in which the Diocese of Rhode Island, through the participation of Bishop Tobin and his associates, participated.
Thus far, these are only allegations which need to be subjected to the due process of law and trial.
However, if proven true, the scandal to the Church in Rhode Island would be enormous.
Certainly, this is something with which the Holy See must be concerned and be prepared to hold those responsible accountable for their misdeeds, if proven.
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