Attorney General James Sues to Protect St. Clare’s Hospital Retirees

Mismanagement and Neglect Caused 1,100 Former Hospital Workers to Lose Retirement Benefits

NEW YORK – New York Attorney General Letitia James today took action to protect Capital Region retirees by filing a lawsuit against the Roman Catholic Diocese of Albany, its leadership, and others, for their negligent and intentional actions that deprived more than 1,100 former employees of St. Clare’s Hospital of their pensions. Attorney General James alleges that the Diocese shirked its fiduciary and legal responsibilities to the former hospital workers when it failed to preserve and protect the hospital's pension. The decision of the Diocese to remove the pension plan from the protections available under federal law, its failures to adequately fund, monitor, or insure the pension, and its resulting failure to administer the pension violate New York Not-for-Profit Corporations Law and New York Estates, Powers & Trusts Law. In her suit, Attorney General James seeks to hold the Diocese liable for the misconduct and recover the pensions that the former hospital workers lost.

“These former hospital workers nobly served their community and cared for the sick, elderly, and vulnerable. But when they retired, they were left with nothing,” said Attorney General James. “No one should ever have to deal with the financial and emotional trauma of losing the resources they were counting on to survive. With this action, we're standing up for New Yorkers who deserve to retire with dignity, and I will do everything in my power to make sure they get the pension benefits they’re owed."

In her suit, filed in the New York State Supreme Court of Schenectady County, Attorney General James argues that the Diocese’s breaches in fiduciary duty led to its failure to properly administer the pension that was entrusted to their care. As a result of its actions, the Diocese was unable to fulfill its mission and honor its commitments to the former hospital employees. More than 1,100 former employees lost their retirement benefits, including 650 retirees who lost all their pension rights, and nearly 450 retirees who received a single payment equal to 70 percent of the value of their pension. These former employees served St. Clare’s Hospital as nurses, lab technicians, social workers, EMTs, orderlies, housekeepers, and other essential workers and ranged between 10 and 50 years of service.

St. Clare’s Hospital was co-founded by the Diocese in 1948 and was managed primarily by the St. Clare’s Corporation, a not-for-profit corporation created by the Diocese to oversee operations of the hospital. In 2019, Attorney General James launched an investigation into the Diocese after it terminated the pension that had been in place since 1959. That investigation found repeated and pervasive violations of the Diocese’s fiduciary duties of care, loyalty, obedience, and disclosure to St. Clare’s Corporation, which resulted in failure to pay the promised retirement benefits to its former employees and vested pensioners.

In 1992, the Diocese used its religious status to obtain a federal exemption in order to avoid the required federal protections for pensioners, such as pension insurance and minimum funding contributions. After obtaining the exemption, the Diocese violated their fiduciary duties under New York law by failing to make any annual contributions to the pension for all but two years from 2000 to 2019 — causing the pension to be underfunded by $43 million — and by hiding the collapse of the pension plan from the federal government and former hospital workers who were vested in the plan. Diocese leadership rejected all attempts to address the deficit, including applying for pension insurance to protect the pensioners’ benefits, efforts to combine the St. Clare’s pension plan with other Diocesan pension plans, and allowing the Diocese to provide direct financial assistance to the pension.

In 2007, the Diocese requested $28.5 million in Medicaid funds from the state of New York to eliminate the pension’s deficit, which the state provided. However, the Diocese knew the funds were not sufficient to fully fund the pension, despite representing that they were. Leadership for the St. Clare’s Corporation knew that the pension would continue to be underfunded even with the state grant, but they never sought additional funds to fully fund the pension.

The Diocese also failed to fulfill its fiduciary duties by:

  • Failing to monitor or safeguard the pension, its related investments, and pension administrator;
  • Failing to require yearly audits and accounting of the St. Clare’s Corporation's finances and pension, as required by the St. Clare’s Corporation’s bylaws;
  • Failing to attend regularly scheduled board meetings as leadership was required;
  • Permitting a non-director, Vicar General David LeFort, to assume the role of director and to vote as a director, although not permitted by St. Clare’s Corporation’s bylaws;
  • Appointing a diocesan employee, Joseph Pofit, to leadership roles despite Pofit’s own admission of his lack of expertise in pension matters; and
  • Failing to adequately review IRS Form 990s to ensure that they were accurate, thus filing IRS Form 990s that were inaccurate and misleading.

In 2018, the leadership of the St. Clare’s Corporation learned that their liability insurance coverage for directors and officers would not be extended, so to avoid exposing themselves to the risk of personal liability, they unanimously voted to terminate the pension and dissolve the Corporation. In the petition for dissolution, filed with the court in 2019, the Corporation admitted that it owed more than $50 million to the retirement plan and its members and had no means or intention to fully fund the pension. New York law requires the Office of the Attorney General (OAG) to approve voluntary dissolutions of New York not-for-profit corporations. Due to unresolved questions and concerns regarding the outstanding benefits owed to more than 1,100 New Yorkers, Attorney General James opposed the Corporation’s petition and immediately sought discovery to determine why the pension failed to provide the promised and earned benefits, what happened to the $28.5 million in Medicaid funds received by St. Clare’s from New York state, and to ensure the Corporation fulfilled its obligation to the pensioners.

“After years of pain and unfulfilled promises, today’s lawsuit cannot come soon enough for the hundreds of former St. Clare’s employees who have been so cruelly and unjustly denied their pensions,” said U.S. Representative Paul Tonko. “It is my sincere hope and belief that this lawsuit will put the needs of the pensioners and their families first, and that they will finally receive the benefits that they have earned after years and even decades of dedicated service. Moving forward, I will continue to work with Attorney General James and my partners in state government to seek a resolution to this issue that has plagued families for so long.”

“Over the past three and a half years, the 1,100 pensioners of the former St. Clare’s Hospital, who cared for some of the most vulnerable citizens, have been coping with economic uncertainty and desperation with no end in sight as their pensions evaporated with the snap of a finger through no fault of their own,” said State Senator Jim Tedisco, who represents many of the pensioners and has been advocating on their behalf through this process. “I want to thank Attorney General James and her office in their efforts to investigate and help get to the bottom of what happened to the pension fund the retirees worked so hard for so we can help find a way to make them whole. I also want to thank St. Clare’s Pension Recovery Alliance Chair Mary Hartshorne and all of the retirees for their advocacy and diligence as we continue to seek justice for them.”  

“Pensions are lifelines for people in their retirement, and nothing should come between the right of employees to receive their hard-earned compensation after years of dedicated service,” said State Senator Michelle Hinchey. “I’m pleased to see Attorney General James taking swift action to hold the Diocese accountable for their unacceptable failures that have led to more than 1,100 St. Clare Hospital retirees either losing their pension or receiving a significant reduction. St. Clare Hospital retirees not only deserve answers but the full benefits of the pensions they’re owed, and I’ll continue to advocate as such.”

“St. Clare’s Hospital employees expected to have their pensions paid out to them when they retired after years of hard work and dedicated service,” said Assemblymember Patricia Fahy. “A mismanaged pension fund meant that for most workers, the assurance of a retirement pension evaporated in 2018. I commend Attorney General Letitia James for her years of investigation and follow up on this case, as well as her leadership and action today seeking to resolve and restore what is owed to St. Clare’s pensioners.”

“The attorney general’s continued work is an important step forward for the more than one thousand retirees from the former St. Clare’s Hospital who had the rug pulled out from underneath them in 2018 when the hospital's pension plan collapsed,” said Assemblymember Angelo Santabarbara. “Those who work in health care are critical to our community. These dedicated employees gave years of their lives and deserve a stable retirement they can depend on to get them through their golden years. The loss of this investment is unthinkable. I want to thank Attorney General James for standing up for St. Clare’s pensioners and addressing this important community issue as we continue working to find solutions to help these individuals who have been forced to live with the impacts of this crisis through no fault of their own.”

“For almost four years, I have been advocating for a solution to address the pension issue for St. Clare's Hospital retirees,” said Assemblymember John T. McDonald III. “Through no fault of their own, they have not received the pensions that they were entitled to because of the alleged mismanagement of the pension fund by the Corporation's trustees and a lack of surety that should have been mandated by the state of New York when funding was previously designated for the pensions. This is a step in the right direction, and I hope to see a positive result for the retirees and thank Attorney General Letitia James for moving forward on this issue.”

“Over three and a half years ago more than 1,100 former employees of St. Clare’s Hospital of Schenectady were notified that their pension plan would be terminated. Since then, my colleagues and I who represent the Capital Region have held several meetings, rallies, press conferences, proposed solutions, and submitted thousands of signatures calling for action — today is the day we’ve been waiting for,” said Assemblymember Mary Beth Walsh. “At the end of 2019, we called on the attorney general to do a complete investigation into the crisis after unveiling previously withheld documentation which suggested that the state and Catholic Diocese may have known the fate of the St. Clare’s pension fund, and yet did nothing to mitigate the damages. To that end, I am pleased to stand with Attorney General James today to take the next steps to right this wrong and, ultimately, help to make these former employees and retirees whole.”

“We thank the attorney general for investigating the collapse of the St. Clare’s pension plan, which left over 1,100 retirees without the benefits they are entitled to and deserve,” said Schenectady County Legislature Chair Anthony Jasenski. “We are hopeful that this lawsuit will help restore retirement benefits to those who served our community with dignity and grace, caring for our loved ones when they needed it the most.”

“This has been an incredibly difficult issue in our community over the last few years for far too many individuals who have been denied their hard-earned benefits,” said Schenectady Mayor Gary McCarthy. “I am hopeful that with today’s announcement we can begin to right the wrongs faced by St. Clare’s retirees. I thank Attorney General James and her team for their dedicated work on this case seeking justice for these workers and their families.”

“This is very exciting news for all the pensioners,” said Jerry and Kathy Adach, St. Clare’s pensioners. “Hopefully, this will result in a very positive outcome for all of us. We are so appreciative and thrilled to have Attorney General James fighting for us!”

“On October 18, 2018, a letter was sent to over 1100 hardworking and devoted health care workers, abruptly ending or limiting their pension,” said Mary Hartshorne, a St. Clare’s pensioner. “There was no notice and no explanation. More importantly, no one consulted any of these hardworking and devoted hospital workers on this monumental decision. We have fought to regain our rightful pension for more than three years. We have endured a pandemic and skyrocketing inflation that limited our already depleted resources. We had almost given up on multiple occasions. Today, Attorney General Letitia James has proven that her word is true. She told us that she would do everything that she could to get our pension back for us. I am humbly grateful to our attorneys and to the attorney general for supporting us in this manner. It means the world to us to know that we have them all on our side. We finally have light at the end of the tunnel.”

“Justice requires that St. Clare’s Corporation and the Roman Catholic Diocese of Albany hold up their end of the bargain and restore the financial security earned by and promised to their employees. We applaud the attorney general for filing this lawsuit,” said William Alvarado Rivera, senior vice president of litigation, AARP Foundation, whose attorneys, along with several legal aid groups and pro bono attorneys, filed a case against the Diocese and others in 2019. “We look forward to continue fighting for the St. Clare’s pensioners with the Office of the Attorney General.”

“We are pleased that OAG has taken this step, which can only benefit our clients and the other hardworking pensioners who are simply seeking the money they were promised as a part of their employment,” said Victoria Esposito, advocacy director, Legal Aid Society of Northeastern New York (LASNNY). “We remain grateful for OAG’s ongoing work to enforce fundamental fairness on behalf of St. Clare’s pensioners.” 

The defendants named in today’s suit are the Roman Catholic Diocese of Albany, the St. Clare's Corporation, Bishop Emeritus Howard Hubbard, Bishop Edward Scharfenberger, Joseph Pofit, and Very Reverend David Lefort, Vicar General, and an officer of the Diocese. In her lawsuit, Attorney General James is seeking to hold the defendants accountable for all debts owed to pensioners.

This matter is being handled by Charities Bureau Chief James Sheehan and Assistant Attorney General Diane Hertz, with the assistance of Transactions Section Chief Donna Cole-Paul and Legal Assistants Belynda Zigrest, Kelley Casper, and Nina Sargent. The Charities Bureau is a part of the Division for Social Justice, which is led by Chief Deputy Attorney General Meghan Faux and First Deputy Attorney General Jennifer Levy.