ALBANY (NY)
Times Union [Albany NY]
December 29, 2023
By Brendan J. Lyons
2023 TOP STORIES: Hundreds of lawsuits filed under New York’s Child Victims Act are hanging in the balance as the parties seek a path to resolve them and pay abuse survivors
Cynthia LaFave, an Albany attorney whose firm is working with Anderson’s firm on the cases, said it’s “a very good thing that it’s moving forward.”
“Everybody needs closure. Everybody needs this to move forward,” LaFave said of the mediation.
It’s unclear whether the mediation will immediately include any claims from the roughly 1,100 former employees of the now-closed St. Clare’s Hospital in Schenectady, whose pension plan was shut down in 2018 with a $50 million shortfall. St. Clare’s closed in 2008 and merged with Ellis Hospital. The former employees’ retirement portfolios were wiped out by the hospital’s depleted pension fund, which they allege was mismanaged by top officials associated with the Roman Catholic Diocese of Albany.
The pension plan was shut down 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. The fund was created in 1959, about a decade after the diocese co-founded the hospital.
The alleged sexual abuse victims of priests and others associated with the Albany diocese are expected to be compensated using the diocese’s assets and also its insurance policies. But the diocese is contesting it has any responsibility in the St. Clare’s pension collapse. That legal battle is pending in state Supreme Court, where lawsuits filed by the pensioners and the state attorney general’s office have accused deceased former Albany Bishop Howard J. 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.
As those cases are pending, attorneys for the sexual abuse victims and the former St. Clare’s employees are engaged in a court-authorized examination of where the proceeds went from the sale of a lucrative insurance business that had once been controlled by New York’s bishops — and whether those funds should be used to help resolve the litigation.
The 2018 sale of the Fidelis Care insurance company took place months before New York’s Child Victims Act passed — a law change that allowed alleged survivors of childhood sexual assault to sue their abusers or the institutions that may have harbored them. Attorneys for the 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.
The $3.75 billion in proceeds from the Fidelis sale were transferred to the Mother Cabrini Health Foundation, where the assets 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.
The plaintiffs’ attorneys received permission from Littlefield to subpoena documents and testimony from the organizations and the church officials that were involved in the Fidelis sale.
The diocese had opposed the motions filed by the creditors’ committees, but noted in a court filing that it had “continued to express its compassion for the St. Clare’s pensioners and has offered support and assistance within the purview of its mission and ministry.”
Bishop Edward Scharfenberger, a Brooklyn native who was appointed as the 10th bishop of the Albany diocese in 2014 following the retirement of Hubbard, is scheduled to testify at a hearing next month on the diocese’s assets. The hearing is part of the bankruptcy case and the creditors are seeking to ascertain what are the true assets of the diocese.
Paul A. Levine, an Albany attorney who filed the first motion seeking access to the records on the Mother Cabrini assets, previously told the Times Union 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 claimed in his filing that none of New York’s eight dioceses — six of which have filed for bankruptcy due to the Child Victims Act — had 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.”
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 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.
Cynthia LaFave, an Albany attorney whose firm is working with Anderson’s firm on the cases, said it’s “a very good thing that it’s moving forward.”
“Everybody needs closure. Everybody needs this to move forward,” LaFave said of the mediation.
It’s unclear whether the mediation will immediately include any claims from the roughly 1,100 former employees of the now-closed St. Clare’s Hospital in Schenectady, whose pension plan was shut down in 2018 with a $50 million shortfall. St. Clare’s closed in 2008 and merged with Ellis Hospital. The former employees’ retirement portfolios were wiped out by the hospital’s depleted pension fund, which they allege was mismanaged by top officials associated with the Roman Catholic Diocese of Albany.
The pension plan was shut down 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. The fund was created in 1959, about a decade after the diocese co-founded the hospital.
The alleged sexual abuse victims of priests and others associated with the Albany diocese are expected to be compensated using the diocese’s assets and also its insurance policies. But the diocese is contesting it has any responsibility in the St. Clare’s pension collapse. That legal battle is pending in state Supreme Court, where lawsuits filed by the pensioners and the state attorney general’s office have accused deceased former Albany Bishop Howard J. 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.
As those cases are pending, attorneys for the sexual abuse victims and the former St. Clare’s employees are engaged in a court-authorized examination of where the proceeds went from the sale of a lucrative insurance business that had once been controlled by New York’s bishops — and whether those funds should be used to help resolve the litigation.
The 2018 sale of the Fidelis Care insurance company took place months before New York’s Child Victims Act passed — a law change that allowed alleged survivors of childhood sexual assault to sue their abusers or the institutions that may have harbored them. Attorneys for the 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.
The $3.75 billion in proceeds from the Fidelis sale were transferred to the Mother Cabrini Health Foundation, where the assets 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.
The plaintiffs’ attorneys received permission from Littlefield to subpoena documents and testimony from the organizations and the church officials that were involved in the Fidelis sale.
The diocese had opposed the motions filed by the creditors’ committees, but noted in a court filing that it had “continued to express its compassion for the St. Clare’s pensioners and has offered support and assistance within the purview of its mission and ministry.”
Bishop Edward Scharfenberger, a Brooklyn native who was appointed as the 10th bishop of the Albany diocese in 2014 following the retirement of Hubbard, is scheduled to testify at a hearing next month on the diocese’s assets. The hearing is part of the bankruptcy case and the creditors are seeking to ascertain what are the true assets of the diocese.
Paul A. Levine, an Albany attorney who filed the first motion seeking access to the records on the Mother Cabrini assets, previously told the Times Union 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 claimed in his filing that none of New York’s eight dioceses — six of which have filed for bankruptcy due to the Child Victims Act — had 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.”
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 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.
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 dioceses’ because they are not the legal owners 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.
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 for other nondenominational charitable enterprises.