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Settlements and motions to dismiss filed in St. Joseph’s pension fund challenges

Several defendants in a series of lawsuits filed against Prospect CharterCare LLC on behalf of participants in the insolvent St. Joseph Health Services of Rhode Island Retirement Plan asked the U.S. District Court in Providence on Tuesday to dismiss the case, arguing it is "a lawsuit that should never have been filed" because the insolvent plan should have gone to the Pension Benefits Guaranty Corp., among other reasons.

Other Prospect CharterCare defendants have agreed to a proposed settlement awaiting court approval. A second proposed settlement in a related state court case is awaiting a judge's approval.

On Oct. 30, Rhode Island Superior Court Judge Brian P. Stern provided conditional approval to the settlement agreement proposed by Stephen Del Sesto, the receiver for the pension fund, which had assets of $84.6 million as of Feb. 28. That proposed settlement, which also needs approval in U.S. District Court, calls for an immediate lump-sum payment of at least $11.15 million and admission by the settling defendants that the plaintiffs' damages are at least $125 million. It would also reassign a 15% interest in Prospect CharterCare to the receiver, whose website is tracking the cases.

The most recent settlement agreement calls for $4.5 million from the non-profit CharterCare Foundation be transferred to the St. Joseph's pension fund. The proceeds come from the sale of two non-profit hospitals sold to Prospect CharterCare.

"It's another welcome step in what promises to be a long journey," Max Wistow, partner at Wistow, Sheehan & Loveley and special counsel to the receiver, said in an interview.

The original 21-count lawsuit, which has since been amended, claimed 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 past 10 years, SJHSRI stopped making necessary contributions with the result that the plan was grossly underfunded." The lawsuit also claims the defendants collectively conspired to conceal the underfunding from participants.

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

The defendants moving to dismiss the legal actions include several Prospect CharterCare subsidiaries, pension fund administrator Angell Pension Group and the Roman Catholic Diocese of Providence. In its motion to dismiss, the diocese said it expresses "sincere sympathy for the retirees of St. Joseph Health Services of Rhode Island. That sympathy, however, cannot cloud the conclusion that this lawsuit is a baseless attempt to undo difficult decisions made in 2014 to save (the hospital system), nor does it change the inescapable conclusion that the allegations lodged against the diocesan defendants are patently false, implausible, conclusory and lack sufficient factual or legal basis to state a valid claim for relief."