State takes up pensioners’ fight Complaint alleges Albany diocese mismanaged fund
The state attorney general’s office filed a lawsuit against the Roman Catholic Diocese of Albany and some of its top officials over the alleged mismanagement of a depleted pension fund that wiped out retirement plans for more than 1,100 former employees of the now-closed St. Clare’s Hospital in Schenectady.
The lawsuit alleges that top officials with the Albany diocese, including former Bishop Howard J. Hubbard, had mismanaged the fund and falsely told the Internal Revenue Service that required annual contributions were being made to the pension plan. The complaint by the attorney general’s office will seek restitution for pensioners, whose fund was created in 1959, about a decade after the diocese co-founded the hospital.
Having this happen, is definitely like an angel that has come in touch with us because we didn’t think this was going to happen.”
Mary Hartshorne
State Attorney General Letitia James announced the litigation Tuesday afternoon at a news conference outside the Ellis Medicine Mcclellan Street Health Center, which is the former St. Clare’s hospital site. Ellis Hospital took over the real estate in 2008 after the state’s Berger Commission on hospital consolidation forced the closure of St. Clare’s and eight other hospitals across the state.
St. Clare’s retirees who have been working for years to try and recover their pensions, or at least get an accounting of what happened, said Tuesday they were both shocked and elated at the turn of events. They said having the attorney general’s office — with all of its resources behind it — gives them a fighting chance.
“Having this happen, is definitely like an angel that has come in touch with us because we didn’t think this was going to happen,” St. Clare’s retiree Mary Hartshorne said.
The Diocese of Albany issued a statement following the attorney general’s news conference saying that while it is “sympathetic to the plight of the St. Clare’s pensioners and want to see these hardships resolved as soon as possible,” it feared that the attorney general’s new lawsuit is only replicating the “same claims and the same allegations” in similar lawsuits that have already been filed in the case.
“Today’s announcement does not raise any new issues,” the statement reads. “It will only lead to more protracted proceedings which will further delay resolution of the case.”
The attorney general’s office launched an investigation of the matter about two years ago under pressure from multiple state lawmakers; the office of state Comptroller Thomas Dinapoli determined it had no authority to investigate the pension fund’s collapse.
The former hospital workers learned four years ago that their pensions would be sharply reduced or eliminated because the fund was wiped out by a $50 million shortfall that was attributed to the 2008 recession and the Catholic church’s decision to stop funding it. The beneficiaries included laboratory technicians, nurses, orderlies, emergency medical technicians, and other staff members — some with decades of work history at the hospital. It’s alleged that the diocese failed to make required annual contributions from 1999 to 2017, resulting in a $43 million shortfall.
Gina Martinelli-painter, another former St. Clare’s employee who now works at Ellis, said the pension’s collapse impacted many families in the region.
“This doesn’t just affect me, it affects our spouses too,” she said. “My husband and I were planning (our finances) with false information. It kind of has a ripple effect because it does affect whole families. We’ll never make it up.”
Part of the attorney general’s investigation had examined whether board members of a corporation overseeing the pension plan — many of them officials with the diocese including bishops, or with ties to Catholic Charities — had authorized submitting IRS forms falsely attesting that contributions had been made to the fund.
The defendants in the lawsuit in addition to the diocese are Hubbard, who had served as chairman of the St. Clare’s Corp. that managed the pension fund; Albany Bishop Edward Scharfenberger, who succeeded Hubbard and has been a member the board since 2014; David R. Lefort, vicar general of the diocese; and Joseph Pofit, director of Catholic Charities and a St. Clare’s Corp. board member since 2008.
The pension’s board voted in 2018 to close the fund, a decision that resulted in nearly 700 of the younger pensioners in the plan having their benefits wiped out entirely, according to a lawsuit filed in 2019 in state Supreme Court in Schenectady by a group of nonprofit attorneys representing the pensioners. Another 440 of the older pensioners were told they would get just 70 percent of their benefits.
The attorney general’s office filed the new lawsuit in the same court.
State Sen. James Tedisco, R-glenville, who is one of several Capital Region legislators who has pressed for the state to take action, said Tuesday that St. Clare’s was always the hospital of “last resort” for people in the community who could not pay for care, and now the workers who provided that essential care have been abandoned.
“They stood in the pocket as long as they could, and they were tremendous professionals,” Tedisco said, making a reference to when a football quarterback is facing pressure from an opposing team.
Tedisco also noted that when the COVID-19 pandemic hit in early 2020, Ellis enlisted St. Clare’s retirees who returned to work and helped the hospital battle the worst international health crisis in generations.
“Many of them came out and sacrificed and served, even though they knew they weren’t getting their pension,” Tedisco said.
A year ago, Tedisco also explored whether the former workers could receive benefits from a pandemic relief fund, but he said they were not eligible because they were nonunion workers.
A focus of the investigation has been a decision made in the 1990s by the St. Clare’s governing board to invoke the religious exemption from the federal government that allowed it to drop out of the federal pension insurance program run by the Pension Benefit Guaranty Corp. That cost-savings decision also exposed the pension plan if it became insolvent.
In 2017, the Albany diocese sought to distance itself from the situation, noting that the St. Clare’s Corp., the not-for-profit that retained control of the former hospital’s obligations, had no corporate connection to the diocese.
But the diocese’s ties to St. Clare’s, which ceased operations and was merged with Ellis Hospital 14 years ago, have been significant.
The diocese purchased the land where St. Clare’s was built and the St. Clare’s Hospital Corporation listed its mailing address as 40 North Main Ave. in Albany, the headquarters of the diocese. When the hospital was incorporated in 1945, Albany Bishop Edmund F. Gibbons was named president of the board.
Subsequently, the president of the St. Clare’s Corp. was Bishop Edwin B. Broderick, who headed the diocese from 1969 to 1976. In 1980, Pofit, who was the head of Catholic Charities, was named the president of St. Clare’s Corp. Hubbard, who was bishop in Albany from 1977 to 2014, had served as chairman of the St. Clare’s Hospital board of trustees and numerous diocesan officials had also served on the board through the years.
Records indicate that in 2014, Scharfenberger succeeded Hubbard, who had retired, on the St. Clare’s board.
The hospital’s board of trustees or its finance committee voted on decisions made for the hospital, including ceasing to make regular payments to the pension. Despite the oversight of the hospital by diocesan officials, the Roman Catholic Diocese of Albany said in 2017 that it “was never involved in the governance and operation of St. Clare’s Hospital or St. Clare’s Corporation, including their assets, liabilities and pension plan. “We understand the former employees of St. Clare’s are searching for answers and are, rightfully, anxious about the situation,” the statement continued. “However, the answers they are seeking must come from the St. Clare’s Corporation responsible for overseeing its obligations, including the pension plan.”
In December, a mid-level appellate court in Albany issued a unanimous decision allowing a lawsuit filed against the diocese by former employees of St. Clare’s Hospital to go forward. The ruling by the Appellate Division of state Supreme Court’s Third Department upheld a 2020 decision by acting Supreme Court Justice Vincent Versaci that rejected a motion by attorneys for the diocese to dismiss the case.
The judges in the case involving the employees’ lawsuit had concluded that St. Clare’s Corp. inadequately contributed to the pension plan, leaving it in a poor financial situation as it was closed to new members and limits were placed on the ability of employees to accumulate additional years of service.
The former employees of St. Clare’s sued the diocese and the St. Clare’s Corp., alleging the entities breached longstanding agreements to fulfill the pension and failed their fiduciary duty to the workers. An attorney for the diocese, Michael L. Costello, and Brian Whitely, an attorney for the St. Clare’s Corp., had argued the former workers were timebarred from suing and that the hospital had “unfettered discretion to alter the plan in a manner that reduced or terminated benefits.”
The Diocese of Albany issued a statement following the attorney general’s news conference saying that while it is “sympathetic to the plight of the St. Clare’s pensioners and want to see these hardships resolved as soon as possible,” it feared that the attorney general’s new lawsuit is only replicating the “same claims and the same allegations” in similar lawsuits that have already been filed in the case.