SCHENECTADY – A Schenectady County jury has awarded $54.2 million in damages to more than 1,100 former employees of now-closed St. Clair Hospital in Schenectady, which left a $50 million shortfall in its pension plan when it was shut down in 2018.
After a full day of deliberations, a jury reached its verdict Friday night, finding two former bishops of the bankrupt Roman Catholic Diocese of Albany and the former leadership of St. Clair Hospital responsible for failing to properly manage the hospital’s pension plan.
The jury also concluded that former Albany Bishops Howard Hubbard and Edward Scharffenberg, former diocesan employee and St. Clair Hospital President Joseph Pofitt, and former St. Clair Hospital President Robert Perry all breached their fiduciary duties to the hospital and pensioners. Hubbard died in 2023.
The next step in the case is to schedule a trial to determine punitive damages. The ruling will also be subject to review in the diocese’s bankruptcy case, which is ongoing in U.S. District Court in Albany. Any damages awarded to the pensioners will need to be approved by a bankruptcy judge, who will also approve settlements with hundreds of alleged child sex abuse victims who have filed claims against the diocese and are also listed as unsecured creditors.
State Attorney General Letitia James, who filed the lawsuit on behalf of the pensioners along with attorneys from the AARP Foundation, said, “This verdict is a significant victory for every St. Clair Hospital employee who works tirelessly to care for patients and has been unfairly denied their pension and the opportunity to retire with dignity.”
“No one should be deprived of their promised pension, and my office will not hesitate to seek justice against any person or organization that violates our laws or the trust of New Yorkers,” James added.
St. Clair Hospital closed in 2008 and turned over its operating license and all assets to Ellis Hospital. Former employees have had their retirement portfolios wiped out by the hospital’s depleted pension fund, which they claim was mismanaged by top officials tied to the Roman Catholic Diocese of Albany.
The pension plan was shut down despite receiving $28.5 million in Medicaid benefits from the state to fully fund the program. About 650 of the 1,124 retirees eligible for pensions were told they would receive nothing. The remaining 450 or so people receive 70% of their pensions. The fund was established in 1959, about a decade after the diocese co-founded the hospital.
The diocese claimed it had no responsibility for the St. Clair pension collapse; but pensioners and the state attorney general’s office accused Hubbard of colluding with other diocesan officials to falsely tell the IRS required annual contributions to the pension plan.
Attorneys in the case made closing arguments Thursday in Schenectady County Court.
Jurors began deliberating Friday morning after Acting State Supreme Court Justice Vincent Versaci instructed jurors on the law they could consider in reaching a verdict.
Lawyers for the diocese, Scharffenberger and other defendants told jurors Thursday that while the church is the religious sponsor of St. Clair Hospital, it does not directly control the hospital and therefore is not liable for the pension’s termination. Instead, they say the fund was a victim of the U.S. Department of Health’s order to close the hospital in 2008 and the global financial crisis that same year.
“It was the Department of Health, not the bishop, not the diocese,” Anthony Cardona, an attorney representing Scharfenberg, told the jury. “The Ministry of Health makes all the decisions.”
Attorneys for the pensioners argue that all defendants are liable because they violated their fiduciary duties to the former St. Clair workers by repeatedly waiving federal pension insurance and concealing the true financial condition of the pension funds from beneficiaries.
“This was wanton and reckless conduct,” Assistant Attorney General Monica Connell told the jury.
The AARP Foundation, which filed the original lawsuit against the diocese and others, said in a statement that it hoped the jury would rule in favor of the pensioners.
“We ask that the jury hold all defendants accountable for breaches of fiduciary duty and contract and award damages and punitive measures to deter future misconduct,” said William Alvarado Rivera, senior vice president for litigation at the AARP Foundation.
After the verdict, the diocese issued a statement saying: “While we are grateful to the jury for its wise decision, we remain acutely aware of the harm done to St. Clare’s pensioners throughout St. Clare’s Hospital’s long history of caring for the sick and poor. This does not mean that we turn our backs on pensioners because, as Bishop (Mark) O’Connell noted, they are part of our flock; they still need healing.”
O’Connell was appointed bishop of the Diocese of Albany earlier this month.
The case centers on a decision by the St. Clair County Board of Governors in the 1990s to invoke the federal government’s religious exemption to allow it to withdraw from the federal pension insurance program run by the Pension Benefit Guaranty Corp. The cost-saving decision also puts the pension scheme at risk in the event of insolvency.
In 2017, the Albany Diocese attempted to distance itself from the situation, pointing out that St. Clair Inc., the nonprofit that retains control of the former hospital’s obligations, had no corporate relationship with the diocese.
But the parish has very close ties with St. Clare’s Church.
The diocese purchased the land on which St. Clair Hospital was built, and St. Clair Hospital Corporation listed its mailing address as 40 North Main Street in Albany, the diocese’s headquarters. When the hospital opened in 1945, Edmund F. Gibbons, then Bishop of Albany, was named chairman of the board of directors.
Subsequently, St. Clare’s president was Bishop Edwin B. Broderick, who led the diocese from 1969 to 1976. In 1980, Joseph Pofit, director of Catholic Charities, a member of the St. Clare’s Board of Directors and head of Catholic Charities, was appointed president of St. Clare’s. Hubbard, who served as Bishop of Albany from 1977 to 2014, served as chairman of the St. Clair Hospital board of directors, and many diocesan officials also served on the board over the years.
Records show that Scharfenberg became a member of St. Clair’s board of directors in 2014, succeeding Hubbard, who retired.
The hospital’s board of directors or its finance committee votes on the hospital’s decisions, including stopping regular pension payments.
Although the hospital is overseen by diocesan officials, the Roman Catholic Diocese of Albany claimed in 2017 that it “has never been involved in the governance and operations of St. Clair Hospital or St. Clair Corporation, including its assets, liabilities and pension plans.”
“We understand that former St. Clair employees are looking for answers and are rightly anxious about the current situation,” the 2017 statement continued. “However, the answers they seek must come from St. Clair Corporation, which oversees its obligations, including its pension plan.”
This article was originally published on Jury awards St. Clair pensioner $54 million in damages.
