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Lawsuits allege fraud, conspiracy in insolvency of St. Joseph Health Services of Rhode Island plan

Class-action lawsuits on behalf of participants in the insolvent St. Joseph Health Services of Rhode Island Retirement Plan were filed in state and federal courts in Rhode Island.

The 2,700 participants in the plan learned in August 2017 when it was placed into receivership that the plan had been inadequately funded for years, according to the lawsuit filed on behalf of Stephen Del Sesto, the receiver for the pension fund.

At the time, plan administrators asked the Rhode Island Supreme Court to approve immediate 40% across-the-board benefit cuts. The cuts have not yet been approved.

Defendants in the lawsuits include Prospect CharterCare LLC, Roger Williams Hospital, the Roman Catholic Diocese of Providence and St. Joseph Health Services of Rhode Island, which sold Our Lady of Fatima Hospital and Roger Williams Hospital to CharterCare in 2014. The pension plan was founded by diocese.

The plan was declared insolvent three years after the hospitals were sold to Prospect CharterCare, with a $43 million pension shortfall, according to the lawsuits. The sale included a $14 million payment to the plan, but not ongoing contributions.

The 21-count lawsuits filed Monday claim that while St. Joseph's Health Services was responsible for the plan, it promised participants that it was making all contributions. "For most of the at least the past 10 years, SJHSRI stopped making necessary contributions with the result that the plan was grossly underfunded." The lawsuit also claims that the defendants collectively conspired to conceal the underfunding to participants.

Other charges alleged in the lawsuits are that the defendants falsely claimed that it was a church plan exempt from ERISA, and that the sale of the hospitals was approved by state regulators under fraudulent circumstances.

The lawsuit is seeking to have the two hospitals sold, with the proceeds going to the pension plan participants.

Superior Court Judge Brian Stern appointed Max Wistow of Wistow, Sheehan & Loveley as special counsel to the receiver, and Mr. Wistow filed the class-action lawsuits.

Calls to Prospect CharterCare and the Roman Catholic Diocese of Providence were not returned at press time.