New York AG sues over hospital retirees' pensions

New York Attorney General Letitia James has filed a lawsuit alleging the Roman Catholic Diocese of Albany evaded its fiduciary and legal responsibilities to former hospital employees by mishandling the hospital's pension.

The lawsuit, filed May 24 in the New York State Supreme Court of Schenectady County, centers around retirement benefits of former employees of St. Clare's Hospital.

In her lawsuit, Ms. James argues the diocese did not properly administer the pension, resulting in more than 1,100 former employees losing their retirement benefits, including 650 retirees who lost all their pension rights and nearly 450 retirees who received one payment equal to 70 percent of the value of their pension.

The diocese co-founded St. Clare's Hospital in Schenectady, N.Y., in 1948, and created the St. Clare's Corp., a nonprofit to oversee hospital operations. The hospital closed in 2008, but the corporation remained operational, primarily to manage the pension fund, according to the lawsuit.

Ms. James said in a news release that her office launched an investigation in 2019 into the diocese after it terminated the pension the corporation established in 1959.

The probe found "repeated and pervasive violations of the diocese's fiduciary duties of care, loyalty, obedience and disclosure to St. Clare's Corp., which resulted in failure to pay the promised retirement benefits to its former employees and vested pensioners," she said.

Ms. James alleges the corporation failed to require yearly audits and accounting of the corporation's finances and pension; named an employee of the diocese to leadership roles despite that employee's admitted lack of expertise in pension matters; and failed to adequately review IRS documents to ensure accuracy.

The corporation in 2019 said in its petition for dissolution it owed $50 million to the pension plan and its members and had no means or intention of fulfilling that obligation, the attorney general said.

In a statement about the lawsuit, the diocese said: "We are sympathetic to the plight of the St. Clare's pensioners and want to see these hardships resolved as soon as possible. We respectfully disagree with the attorney general's decision to file this lawsuit." 

The diocese also said the diocese has been in litigation more than two years with the attorney general and the other parties, and there are two lawsuits pending involving St. Clare's before the court.

"This lawsuit seeks to replicate the same claims and the same allegations that are in the lawsuits currently pending before the court," the statement said. The recent lawsuit "announcement [by the attorney general] does not raise any new issues. It will only lead to more protracted proceedings, which will further delay resolution of the case."

Ms. James alleges the diocese violated New York Not-for-Profit Corporations Law and New York Estates, Powers & Trusts Law. She seeks to recover the former hospital employees' pensions.

To read the lawsuit, click here

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