DIOCESE-ST. CLARE'S TRIAL

Long awaited-trial underway

The first week of the St. Clare’s trial was emotional and information-heavy. 

The long-awaited trial, which is set out to determine if the Roman Catholic Diocese of Albany shared responsibility for the collapse of the St. Clare’s Hospital pension fund, began Nov. 6 and is expected to run through December. 

Anne Hotaling, 69, a nurse for St. Clare’s Hospital for over 30 years, was the first witness to be called in the case and testified last week about her time working at the now-closed hospital. 

Her memories and time as a nurse were happy ones; the hospital felt like a second family to her. Hotaling, who is also Catholic, enjoyed that St. Clare’s was a Catholic hospital. The hospital itself was founded in 1949 by the Franciscan Sisters of the Poor but cosponsored by the Diocese.

Hotaling recalled visits from the late Bishop Howard J. Hubbard to St. Clare’s. The bishop of the Diocese served as an honorary chairman of the hospital’s board of directors and had voting power to carry out the hospital’s canonical duties and responsibilities. 

Michael Costello, attorney for the Albany Diocese, argued that the bishop of the Diocese was being “conflated” with the Diocese itself, and that the individual bishop is separate from the entity of the Diocese. 

Costello, who has long represented the Albany Diocese, does not represent Bishop Edward B. Scharfenberger or the estate of the late Father David LeFort, who both served on the St. Clare’s board, and are being sued separately for their alleged mishandling of the pension plan.

Supreme Court Judge Vincent Versaci, who is overseeing the case, explained to the jury in the opening week that the St. Clare’s case is slightly different, and from that, more confusing, than a typical case. There are two plaintiffs in the trial — AARP, which first sued the Albany Diocese in 2019, and represents the over 1,000 pensioners, including Hotaling, who received either a fraction of or none of their promised pension plan, and the New York State Attorney General’s Office, which joined in suing the Diocese in 2022. 

During Hotaling’s testimony, plaintiffs displayed letters regarding St. Clare’s pension plan sent by the hospital over the years, both leading up to and following the hospital’s closing. 

In 2009, a letter was sent out regarding the impact the 2008 stock-market crash had on the pension plan, saying St. Clare’s was “not immune to the financial impacts” but promised the pension would still be “paid in full.”

Despite the letter’s assurances, the plaintiff’s attorneys contend that the hospital leadership and board of directors knew the pension plan was underfunded and did not make the recommended contributions necessary to keep the plan afloat.

During his cross-examination of Hotaling, Costello asked if any of the letters regarding the pension plan directly mentioned the Diocese of Albany. Hotaling said they did not.

On Friday, Nov. 7, attorneys for the pensioners called an expert witness to the stand. Matthew Estersohn is a certified public accountant for CBIZ, an organization that works with nonprofit clients in New York, and was paid by the state attorney general’s office to conduct an analysis of the St. Clare’s governing structure and how the management of the hospital’s finances impacted the management of the pension plan. 

During his testimony, Estersohn discussed the hospital’s decision to seek “church plan” status from the Internal Revenue Service, which exempted the St. Clare’s plan from federal pension rules and from the Employee Retirement Income Security Act of 1974 (ERISA), a federal law that sets minimum standards for private-sector employee benefit plans. 

From his analysis, Estersohn concluded three main takeaways: That there was a long failure of control and lack of oversight by management at St. Clare’s; there were violations of internal policy; and that, under the Generally Accepted Accounting Principles (GAAP), St. Clare’s was controlled by the Diocese. 

Costello went on to question Estersohn on how he came to this conclusion, and if he was outside his scope of understanding as a CPA, making claims on the governing structure of a nonprofit.

Costello repeatedly asked him, in the course of making his report, why he did not consider looking at the Diocese’s financial records and statements if the Diocese was allegedly in control of St. Clare’s hospital. Estersohn stated he would not have found it relevant to his report.

Much like with his question of Hotaling, Costello repeated that assertion that the Diocese did not legally control St. Clare’s Hospital or the pension plan.

On Monday, Karen Griffin, a former nurse for St. Clare’s for over 30 years, took the stand. Griffin reiterated Hotaling’s sentiments of St. Clare’s being a Catholic hospital, and liked that it did not allow treatments that didn’t align with Catholic values (i.e. no abortions were performed). 

OPENING STATEMENTS

The much-anticipated trial between the Diocese of Albany and the St. Clare’s pensioners began Nov. 6 with opening statements. 

While the plaintiffs and the defendants will argue over the next several weeks (the trial is anticipated to run through December), both parties agree on one thing: what happened to the pension plan was wrong, and the impacts on the dedicated employees of St. Clare’s were devastating.

“The uncertainty over the last six years of these lawsuits has caused pensioners immense suffering, and I want you to know I feel terrible about what happened with this pension issue,” said Costello during his opening statement. “It is not the intention of the parties in this lawsuit or their desire to prolong that suffering and hardship.”

“(The pensioners) losses are real; that’s not in dispute,” said Brian E. Whiteley, attorney for defendants, Robert Perry, Joseph F. Pofit, St. Clare's Corporation and St. Clare's Retirement Income Plan.

The case has wound its way through the court system since 2019. Lawyers representing the St. Clare’s pensioners — including the AARP and the Office of the Attorney General, which came aboard in 2022 — contend that the Diocese was to blame for the collapse of the St. Clare’s pension fund. 

Opening statements were also given by Diane Hertz, representing the Office of the Attorney General, Victoria Williamson, representing AARP, and Anthony Cardona, attorney for defendants Bishop Scharfenberger and the estate of the late Father LeFort.

Costello continued that the trial “to address and resolve these long-standing claims” and employed the jury to “keep an open mind until all of the evidence and exhibits are in.”

Hertz and Williamson provided an overview of the case and explained how they believe the Diocese of Albany was connected to St. Clare’s Hospital in an impactful way, making the Diocese also liable for the mishandling of the pension plan.

“I specifically submit to you that it is one chapter or one side of a multi-sided story,” Costello told the jury. “As instructed by the judge, and consistent with the commitments you gave during the jury selection process, let's keep an open mind until the end.”

St. Clare’s pension fund, which was created in 1959, received $28.5 million in state Medicaid money to solidify the fund and to continue to pay the pensioners when St. Clare’s Hospital closed in 2008. But by 2018, the pension fund shortfall had grown to $55 million. Approximately 450 pensioners have received 70 percent of their estimated benefits while nearly 1,100 have received nothing. They are suing the Diocese for $73.7 million in damages which includes interest.

Diocesan lawyers — representing the estate of the late Bishop Howard J. Hubbard, Bishop Edward B. Scharfenberger, the estate of the late Father LeFort, Profit and Robert Perry, both of the St. Clare’s Corporation — contend that the Diocese of Albany essentially had a purely canonical role in making sure that St. Clare’s Hospital followed Catholic principles, and was not involved in the running of the hospital or the mismanagement led to the collapse of the pension fund. 

DIOCESAN STATEMENTS

The lead-up to the trial highlighted what the Diocese of Albany called “misinformation” about the past history of the case in the media.

“The Roman Catholic Diocese of Albany would like to clear up misinformation that continues in media reports throughout our diocese regarding the St. Clare’s pension. It has been widely reported that the Diocese is responsible for the failure of the pension, that the Diocese managed the pension,” read a recent diocesan statement. “That is not true. The Roman Catholic Diocese of Albany was never party to and never exercised any control over St. Clare’s Hospital operations or its pension. The Diocesan Administrative and Finance offices have never had any responsibility or involvement regarding St. Clare’s Hospital or its pension.

“All decisions regarding pension eligibility and benefits were made by the St. Clare’s Hospital’s board of directors and its pension trustees, not by the Roman Catholic Diocese of Albany. The Roman Catholic Diocese of Albany was never a member, trustee, or director of St. Clare’s Hospital or its pension plan.

“The claim that the Diocese of Albany was deeply involved in the hospital’s day-to-day activities is inaccurate. The bishop’s canonical oversight was focused on the Ethical and Religious Directives for Catholic Health Care Services. The hospital was Catholic because of its mission to serve all in accord with Catholic moral standards, and that’s why it was canonically co-sponsored with the Franciscan Sisters of the Poor. 

“You might also want to look at the Final Report of the Commission on Health Care Facilities in the 21st Century, the Berger Commission Report, and the New York State Department of Health Report on Implementation of the Berger Commission Report. Neither mentions nor references the Roman Catholic Diocese of Albany. The pension claims began with the Berger Commission which determined the level of funding for the pension at St. Clare’s Hospital and its closure. That report was delivered in late 2006.

“Bishop Edward Scharfenberger, who arrived in the Diocese in 2014, has actively sought ways to help the pensioners. He hosted a listening session with pensioners at Siena College to identify issues and consider ways to help those in need. He also reached out to the Mother Cabrini Foundation to try and secure funding for the pensioners, but that effort was unable to move forward once the pensioners filed the lawsuit. 

“The Diocese is eager to see the case move forward and promptly resolved. Our prayers continue for all who are struggling in any way, and as we stated previously, our offer to connect those in need with services that can help, stands. No one should walk alone.”