New York AG Sues Albany Diocese Over Pension ‘Mismanagement’

New York Attorney General Letitia James has filed a lawsuit against the Roman Catholic Diocese of Albany and its leadership for what she alleges is their “negligent and intentional actions that deprived more than 1,100 former employees of St. Clare’s Hospital of their pensions.”

The lawsuit also names as defendants Bishop Edward Scharfenberger and Bishop Howard Hubbard of the Roman Catholic Diocese of Albany, the Very Reverend David LeFort, also of the Albany Diocese, and Joseph Profit as charitable fiduciaries of the St. Clare’s Corporation, which was created by the diocese to oversee the hospital’s operations.

According to the complaint, which was filed in the New York State Supreme Court of Schenectady County, Hubbard and other board members obtained a so-called “church plan exemption” in 1992, which meant it was no longer governed by the rules of the Employee Retirement Income Security Act of 1974. As a result, it was not required to make minimum funding contributions or carry pension insurance coverage to protect pension beneficiaries. The lawsuit alleges that the diocese did not make annual contributions to the pension during all but two years between 2000 and 2019, which caused it to be underfunded by $43 million.

In 2017, St. Clare’s Corporation’s board voted unanimously to rejoin ERISA and purchase PBGC coverage for the pension plan. However, according to the complaint, Bishop Scharfenberger later directed the board to reverse its vote and not apply to the PBGC for pension coverage. The board unanimously followed Bishop Scharfenberger’s directive, and as a result the plan remained uninsured and unfunded. At the same time, the corporation’s officers and directors learned that their current directors’ and officers’ liability insurance coverage would not be extended.

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“As a result of this loss of insurance for each of them individually, the board unanimously voted to terminate the pension plan and dissolve the corporation,” says the complaint. “This decision was made by Bishop Scharfenberger, Rev. Lefort and Profit based on their own personal interests, concern for individual liability, and loyalty to the Diocese and the Bishop, and not pursuant to the fiduciary obligations that they owed to the Corporation.”

The lawsuit claims that the decision to remove the pension plan from federal protection from the PBGC and its failures to adequately fund, monitor or insure the pension violated New York’s Not-for-Profit Corporations Law and Estates, Powers and Trusts Law. James is looking to hold the diocese liable for the misconduct and recover the pensions that the former hospital workers lost.

“No one should ever have to deal with the financial and emotional trauma of losing the resources they were counting on to survive,” James said in a statement. “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.”

According to James, of the more than 1,100 former employees who lost their retirement benefits, 650 lost all of their pension rights, and nearly 450 received a single payment equal to 70% of the value of their pension.

“We are sympathetic to the plight of the St. Clare’s pensioners and want to see these hardships resolved as soon as possible,” the Roman Catholic Diocese of Albany said in a statement in response to the lawsuit. However, it added that “we respectfully disagree with the attorney general’s decision to file this lawsuit.”

The diocese said that it has been tied up in litigation for more than two years with the attorney general and other parties, and that there are two pending lawsuits that involve St. Clare’s.

“This lawsuit seeks to replicate the same claims and the same allegations that are in the lawsuits currently pending before the court,” the diocese said. The “announcement does not raise any new issues. It will only lead to more protracted proceedings which will further delay resolution of the case.”

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Tags: Lawsuits, Letitia James, New York Attorney General, Pension, Roman Catholic Diocese of Albany, St. Clare’s Hospital

Stocks are still in a bad way this year, with the S&P 500 down 12.8%, and the potential for a bear market looms. So does the possibility of a recession. Investor lore holds that bear runs presage recessions—but this two-step progression doesn’t always occur.

Three U.S. bear markets (in 1961, 1966 and 1987) happened that didn’t lead to recession, according to a report by Sam Stovall, CFRA’s chief investment strategist. Plus, three recessions took place that were not preceded by bear markets (in 1953, 1960 and 1980).

“There have been 12 bear markets since 1948, and an equal number of recessions,” Stovall writes. “While most bear markets were typically triggered by impending recessions, not all bear markets were paired with recessions.”

In 1987, stocks lost almost a quarter of their value in one day, known as Black Monday. At the heart of the crash was then-new computerized trading, which over-reacted to disturbing news about an unexpectedly large U.S. trade deficit and military tensions between Iran and Kuwait that raised the prospect of shutting down Middle Eastern oil shipments. The new trading systems were programmed to sell if the market was sliding, and so they did, all at once.

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The Federal Reserve intervened by promising to ensure liquidity in the economy. As the economic picture was bright at the time, no recession developed. Later, the trading systems were revamped with “circuit breakers,” where sudden losses trigger market shutdowns to stem panics.

In 1980, Paul Volcker was new on the job as chair of the Federal Reserve and had started to raise short-term rates to combat double-digit inflation. But after a brief oil-supply scare in 1979, touched off by the Iranian revolution, many investors took heart. Oil prices started to come down. No one seemed to mind Volcker’s tightening policy, at least at the beginning. The S&P 500 rose 26% for the year. A mild recession lasted for the first half of 1980. (A much harsher one erupted in 1981, and then the market suffered.)

How 2022 will turn out, both for stocks and the economy, is a matter of conjecture, with strategists all over the place delivering predictions both fair and foul. The market got a reprieve last week, with the S&P 500 gaining for a change and breaking a seven-week losing streak. Still, on May 19, the index flirted with breaching the 20% loss level—the standard threshold of a bear market—but only intra-day, so it didn’t count. Whether that’s a dead-cat bounce, with more market losses ahead, or the beginning of an upturn is anyone’s guess.

Where there have been bear-market-recession sequences, the bears historically anticipated the economic slumps by an average of seven months, Stovall writes. While recessions last an average 10 months, bear markets bottom four months before recessions end.