Rhode Island Employees' Retirement System, Providence, will no longer invest with private equity firm Leonard Green & Partners.
In a letter sent Aug. 4 to Jonathan Sokoloff, Leonard Green managing partner, state Treasurer Seth Magaziner expressed his disappointment in the firm's investment in Prospect Medical Holdings, in which it owns a controlling interest through one of its private equity funds, Green Equity Investors V.
"Green Equity has extracted value from Prospect Medical hospitals, including St. Joseph's Hospital and Our Lady of Fatima Hospital in Rhode Island, at the expense of patients and employees," Mr. Magaziner wrote. "These actions have left already-vulnerable communities with fewer healthcare resources."
The $8.5 billion state pension fund made an investment in Green Equity Investors V in 2007.
"Under my administration, the Rhode Island pension system has adopted new standards to avoid investment risks associated with socially destructive business practices," Mr. Magaziner added. "Given the experience of Green Equity's ownership of Prospect Medical Holdings, I write to inform you that the Rhode Island pension system will not consider any future investments with Leonard Green & Partners."
A Leonard Green spokeswoman said the company takes several issues with Mr. Magaziner’s letter and argued that he made multiple false statements within it. Not only does the private equity firm deny that care for vulnerable populations has declined, but it counters that the hospital system is now “accredited and thriving and ... offering many services” after Prospect acquired and invested substantially in the system.
“Prospect has invested hundreds of millions of dollars to acquire and improve the operations of hospitals, many of which had been on the verge of closure prior to being acquired by Prospect,” the spokeswoman said in an emailed statement. “Without these investments made by Prospect, many communities would not have hospital access or would be underserved in terms of services available.”