Attorneys in Albany diocese bankruptcy case seek records on Fidelis sale

Times Union [Albany NY]

July 27, 2023

By Brendan J. Lyons

Assets transferred to the Mother Cabrini Health Foundation have remained out of reach in N.Y. claims involving Catholic church sexual abuse victims.

Attorneys representing the interests of more than 1,100 former employees of the now-closed St. Clare’s Hospital in Schenectady have asked a federal bankruptcy judge for authority to subpoena documents and testimony regarding the Catholic church’s sale of a lucrative insurance business that had been controlled by New York’s bishops.

The 2018 sale of the Fidelis Care insurance company took place months before New York’s Child Victims Act passed, allowing alleged survivors of childhood sexual assault to sue their abusers or the institutions that may have harbored them. Attorneys for some of those plaintiffs have questioned the timing of the sale and whether it was done to shield billions of dollars in assets before New York’s eight dioceses faced an avalanche of litigation.

Six of New York’s eight Catholic dioceses, including Albany, have filed for bankruptcy. 

Most of the $3.75 billion from the sale was transferred to the Mother Cabrini Health Foundation, where the proceeds have remained out of reach in the lawsuits and settlements involving thousands of Catholic church sexual abuse victims. The assets also have not been available to help the former St. Clare’s employees, whose retirement portfolios were wiped out by the hospital’s depleted pension fund that was allegedly mismanaged by officials associated with the Roman Catholic Diocese of Albany.

The motion seeking details on the Mother Cabrini assets and its business dealings was filed by a committee of attorneys representing the former St. Clare’s workers in the diocese’s bankruptcy case that’s pending in U.S. District Court in Albany. A similar committee for hundreds of alleged sexual abuse victims has joined in support of the motion.

The court filing seeks to access records related to the sale of Fidelis Care and also the holdings of the Mother Cabrini Health Foundation. It also requests for the attorneys for the alleged victims and the pensioners — who are listed in the case as creditors — to depose Bishop Edward Scharfenberger, a Brooklyn native who was appointed as the 10th bishop of the Albany diocese in 2014 following the retirement of Bishop Emeritus Howard J. Hubbard.

Lawsuits filed by the pensioners and the state attorney general’s office have accused Hubbard — in league with other diocesan officials — of falsely telling the Internal Revenue Service that required annual contributions were being made to the pension plan. The fund was created in 1959, about a decade after the diocese co-founded the hospital.

St. Clare’s closed in 2008 and merged with Ellis Hospital. The pension plan was shut down in 2018 with a $50 million shortfall — despite having received $28.5 million in Medicaid benefits from the state to fully fund the plan. Of the 1,100 retirees eligible for a pension, about 650 were told they would get nothing. The remaining 450 or so were paid 70 percent of their retirement benefits. 

In separate litigation, Hubbard, who was Albany’s bishop from 1977 to 2014, has denied allegations that he sexually abused children but has acknowledged shielding similar misconduct by other priests. 

Paul A. Levine, an Albany attorney who filed the recent motion, said the committee for the pensioners “believes that extensive discovery is needed into the (Fidelis Care) transaction.” That request includes ascertaining the organizational structure of the New York State Catholic Health Plan, Inc., a not-for-profit corporation that sold the insurance company and had been controlled by New York’s eight diocesan bishops.

Levine claims in his filing that none of the dioceses received any of the billions in sale proceeds. The sale occurred when all of the bishops were aware of “a very significant chance of liability to the abuse survivors, and … the additional risk of liability to the pensioners.”

The pensioners did not file a lawsuit seeking recompensation of their retirement funds until 2019, a year after Fidelis Care was sold. But Levine’s motion notes that three years earlier they were informed the plan was underfunded and they would not receive the full amount of their pensions. 

“Indeed, the reality turned out to be much worse, but the (diocese) knew full well, years before the Cabrini transaction, that it was facing a significant liability to the pensioners,” Levine wrote.

By pursuing an investigation of the structuring of the Fidelis sale, the attorney committees for the alleged victims and the pensioners are hoping to ascertain whether billions of dollars were diverted away from the New York dioceses to shield those assets in the impending civil cases and eventual bankruptcy proceedings.

“This was done at a time when the bishops must have known full well that substantial liabilities could drive the dioceses into Chapter 11; as had already happened with dioceses around the nation,” Levine wrote.

The Times Union reported in January that an attorney for the Albany diocese inadvertently disclosed during a court conference that it had offered $20 million toward a global settlement involving the hundreds of alleged child sexual abuse victims who have filed claims accusing priests or other employees of sexually assaulting them.

That offer was not accepted because the “plaintiffs liaison committee,” a group of attorneys who were facilitating mediation talks on behalf of the alleged victims, had already disbanded — a decision that came after they had accused the diocese and its insurers of dragging out the settlement process and making offers that the committee at one point described as “insultingly low.”

A source familiar with the matter said the diocese’s first offer, made last summer, had been around $8 million.

It has been common for dioceses across the country to seek bankruptcy protection when they face financial peril from waves of abuse claims. That strategy also allows the church to often avoid public trials or witness depositions, and to handle claims in one court proceeding that potentially will preserve more of their financial assets. 

The assets of the Mother Cabrini Health Foundation are not considered the diocese’s because they are not the legal owner of the not-for-profit, even if there’s overlap among who controls the funds. The charitable organization is governed by a board of health care experts, business leaders and others, and is “dedicated to improving the health and well-being of New York’s poor, disadvantaged and underserved and eliminating health disparities,” according to its website.

Jeff Anderson, an attorney whose firm along with Albany attorney Cynthia S. LaFave represents 190 alleged abuse survivors with claims against the Albany diocese, told the Times Union two years ago that Catholic bishops and other church leaders across the U.S. had allegedly used tactics dating back years to shield assets from sexual abuse victims.

“These strategies and schemes are well known to those who have sought accountability from the Catholic bishops for harm done by clergy,” Anderson said. “But now there is a body of evidence that lays this chicanery bare — that Catholic bishops across the country are moving and hiding their financial assets the same way they have moved and hidden predator priests for decades.”

Jonathan Rosen, a public relations professional employed by Cabrini, told the Times Union two years ago that the foundation had given grants to charities around the state, including Catholic Charities, which is directly affiliated with the church, and sometimes directly back to the dioceses. The foundation had made $315 million in grants since its formation, including about $31.5 million to the dioceses and $37.4 million to Catholic Charities.

The money was used to build homeless shelters, bolster immigrant legal services, create supportive housing and other nondenominational charitable enterprises. 

“Neither the Archdiocese of New York, nor any of the other dioceses of New York, owned Fidelis or controlled its assets, and the decision to sell Fidelis to Centene Corporation was totally and completely unrelated to the (Child Victims Act) in any way,” Joseph Zwilling, a communications director for the Archdiocese of New York, told the Times Union at the time.

Brendan J. Lyons is a managing editor for the Times Union overseeing the Capitol Bureau and investigations. Lyons joined the Times Union in 1998 as a crime reporter before being assigned to the investigations team. He became editor of the investigations team in 2013 and began overseeing the Capitol Bureau in 2017. You can reach him at or 518-454-5547.