New York AG sues Roman Catholic Diocese over hospital retirees' pensions

Photo: Dean Mitchell/Getty Images

The New York Attorney General has filed suit against the Roman Catholic Diocese of Albany, claiming the latter mishandled pensions for retirees of St. Clare's Hospital, thereby allegedly dodging its financial and legal responsibilities.

In the lawsuit, Attorney General Letitia James claimed the diocese did not administer the pension properly, resulting in the total loss of retirement benefits for about 650 retirees. An additional 450 retirees allegedly received just one payment, equal to 70% of the value of their pension.

While the hospital itself closed in 2008, a related corporation, St. Clare's Corp., remained intact and was tasked with managing and maintaining the pension fund. The corporation established the pension in 1959.

The decision of the diocese to remove the pension plan from the protections available under federal law – as well as its alleged failures to adequately fund, monitor or insure the pension – violated New York Not-for-Profit Corporations Law and New York Estates, Powers & Trusts Law, James said in a news release.

James seeks to hold the Diocese liable for the misconduct and recover the pensions that the former hospital workers lost.

"These former hospital workers nobly served their community and cared for the sick, elderly, and vulnerable. But when they retired, they were left with nothing," said James by statement. "No one should ever have to deal with the financial and emotional trauma of losing the resources they were counting on to survive. With this action, we're standing up for New Yorkers who deserve to retire with dignity, and I will do everything in my power to make sure they get the pension benefits they're owed."

St. Clare's Hospital was co-founded by the diocese in 1948.

WHAT'S THE IMPACT?

The allegation is that in 1992, the diocese used its religious status to obtain a federal exemption to avoid the required federal protections for pensioners, such as pension insurance and minimum funding contributions. 

After obtaining the exemption, according to James, the Diocese violated its fiduciary duties under New York law by failing to make any annual contributions to the pension for all but two years from 2000 to 2019 – causing the pension to be underfunded by $43 million – and by hiding the collapse of the pension plan from the federal government and former hospital workers who were vested in the plan.

According to James, diocese leadership rejected all attempts to address the deficit, including applying for pension insurance to protect the pensioners' benefits, making no effort to combine the St. Clare's pension plan with other diocesan pension plans, and by not allowing the diocese to provide direct financial assistance to the pension.

In 2007, the Diocese requested $28.5 million in Medicaid funds from the state of New York to eliminate the pension's deficit, which the state provided. But according to the AG's probe, the diocese knew the funds were not sufficient to fully finance the pension, despite saying they were. Leadership for the St. Clare's Corp. knew that the pension would continue to be underfunded, even with the state grant, but they never sought additional funds to fully finance the pension, said James.

In 2018, the leadership of the St. Clare's Corp. learned that their liability insurance coverage for directors and officers would not be extended, so to avoid exposing themselves to the risk of personal liability, they unanimously voted to terminate the pension and dissolve the corporation, according to the suit. 

In the petition for dissolution, filed with the court in 2019, the corporation admitted that it owed more than $50 million to the retirement plan and its members and had no means or intention to fully fund the pension. New York law requires the Office of the Attorney General to approve voluntary dissolutions of New York not-for-profit corporations.

THE LARGER TREND: REACTION

The Roman Catholic Diocese of Albany responded to the lawsuit, saying that while it was sympathetic to St. Clare's pensioners, it disagreed with the Attorney General's decision to file the lawsuit.

"We have been in litigation (for) more than two years with the attorney general and the other parties," the diocese wrote in a statement. There are two lawsuits pending involving St. Clare's before the court and there have been multiple depositions with substantial, exhaustive discovery regarding what has been alleged.

"This lawsuit seeks to replicate the same claims and the same allegations that are in the lawsuits currently pending before the court. Today's announcement does not raise any new issues. It will only lead to more protracted proceedings, which will further delay resolution of the case."
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com