We commend the Boston Globe for their article today, “Nuns take O’Malley to court over pensions.” as well as the Associated Press for also picking-up the story, now running in the Boston Herald and no doubt across the country. BCI urges everyone to read the articles, and we invite the lawyers involved to keep reading below to find some additional insights that perhaps might help you.
In a highly unusual case pending before the Supreme Judicial Court, an order of nuns is suing Cardinal Sean P. O’Malley, the Roman Catholic archbishop of Boston, after years of trying in vain to withdraw from a church-run pension fund.
Nuns fighting a cardinal in court is almost unheard of, and their lawyers say they are doing so only as a last resort.
“The Daughters of St. Paul are just as unhappy as they can be about having to do this,’’ said Michael C. McLaughlin, an attorney for the nuns.
The nuns have asked the Massachusetts Supreme Judicial Court to order the pension plan trustees, who include O’Malley and several of his top aides, to provide them with a full accounting of the nuns’ portion of the fund, or to rule that the nuns were technically never part of the church-run plan and to order the archdiocese to reimburse the nuns’ contributions, plus returns. The nuns are also seeking attorney’s fees.
Their lawsuit alleges that representatives of the church-run plan were unable to supply data concerning the Daughters’ contributions and earnings required to effectuate the spinoff. The trustees, the lawsuit alleges, never kept separate records for each contributing employer — even though, it alleges, they were required to do so by the document establishing the trust.
BCI has not spoken to the Daughters or had any interaction whatsoever with them concerning this matter. Everything we report to you comes from other sources familiar with what is going on, and everyone we have communicated with feels the Daughters are in the right, and the archdiocese is in the wrong. Here are several points to note which are not covered in the Globe article:
1) Pension Money Missing
As we reported in “Is Boston Archdiocese Committing Fraud?, $5 million is owed to the pension fund for employee pensions by closed parishes. That has not yet been repaid, yet $2.5 was diverted from closed parish reconfiguration funds to pay costs of Finance Council member, Jack Connors’ pet Catholic Schools project in Brockton. Another $40 million is owed to the pension fund by open parishes. One might reasonably ask, is the amount the archdiocese is offering the Daughters for their contributions being reduced to adjust for other employer participants who the Archdiocese is not collecting from? (Sidenote: as we know from our post yesterday, Diocese Defaults on Debt, the current administration is not one necessarily prone towards upholding all of their their financial commitments, but we digress..).
2) Accounting for All Benefit Funds
If it is not happening already, BCI thinks the lawyers for the Daughters should insist on a full accounting of all employee pension plan-related payments made over the past 5 years. We know that $1.4 million was taken from insurance funds in 2010 to say that the 2010 Central Ministries budget was balanced (see “Easy Come, Easy Go” or graphic below.
And we already knew from the 2009 Annual Report (p. 75) that $2.6M was taken from the self-insurance program to cover the expenses associated with administering abuse prevention efforts and outreach to promote healing and reconciliation with survivors and others harmed by sexual abuse.
In what ways might the Benefits Trust funds intended for pensions have been used to pay other expenses (e.g. finance, accounting, HR, IT, etc) over the years that were not pension-related? Has anyone talked to or deposed Joe M. over in Risk Management to ask him in what ways Risk Management/Insurance reserve funds were used by the Chancellor to help balance the budget by cross-billing them to other departments?
How much from the Benefits Trust has been paid towards Carol Gustavson’s compensation, that started at $125K/year and supposedly increased to around $149,999–vastly higher than HR people in other dioceses are paid? Who else is paid by Benefits Trust funds and how much? How do the benefits administrative expenses compare today vs the cost in 2005 before Jim and Carol arrived? If they are higher, why?
As we asked in “20 Questions About Pensions,” what has become of the many millions of dollars the RCAB has retained over the past 20 years as fee income from the investment returns for some other purpose or Corporation Sole expense? Since RCAB charged these fees without license, why should the RCAB not have to make up all losses?
Carol Gustavson said the archdiocese requested information “demonstrating that the Daughters were equipped to oversee their employers’ own pensions.” Why exactly is that required of the Daughters of St. Paul, when the archdiocese is saying Corporation Sole is neither equipped nor feeling morally bound to oversee and fund their own employee pension plan?
4) Is Carol Competent to Hold this Role?
At one of the recent meetings with former employees, Carol Gustavson, an attorney and labor negotiator by previous occupation, said she was unable to answer an important question about the plan, explaining she was not as good with numbers as the former employee, gone 5 years, who asked the question.
Sources familiar with Carol’s tenure in the archdiocese tell BCI that Carol had to ask employees or consultants basic questions about the attributes of a “Defined Benefit” vs “Defined Contribution” plan. She was unaware of the need to file certain healthcare forms, required by law, and disputed knowledgeable employees and consultants who knew the requirements. We are told that her emails had to be checked for errors, and sources indicate on one occasion, she was unable to do simple math regarding costs of a life insurance program that employees would pay for.
5) Nature of the Negotiation
In the Globe article, Marcia S. Wagner, a pension law specialist whom the nuns hired in 2007, said she has never encountered such difficulty acquiring basic information to complete what she said should have been a straightforward matter.
“What struck me as most atypical is the incredible lack of responsiveness, the lack of any hard data or information, non-answers to very specific questions, and just endless, fruitless negotiations,’’ she said.
She added: “When you want to accomplish something that is par for the course and ordinary, and it becomes mired in arcane complexity, nonresponsiveness and non-answers, that will usually mean that something is amiss.’’
We have confirmed the validity of her comments. Negotiations were characterized to BCI as “adversarial” and occasions where “vitriol was spewed.” One person told BCI, “The Archdiocese stonewalled them because they thought if the RCAB allowed the Daughters to exit the plan, then we’ll lose other organizations in the same manner.”
Then there is Carol G’s style. BCI has it on good word that Jim McDonough paid a substantial amount of money not long ago to an organizational consultant he knew from his days at Abington Bank to try and help him resolve the dysfunction on his team. (John Straub is the latest attempt at resolving the dysfunction). Of Carol, she was apparently found by the consultant to have low teambuilding and collaborative skill and to have created significant animosity amongst her colleagues within the department and across the Pastoral Center, which in turn created problems for the Chancellor. She was perceived as a labor negotiator, not as an empathetic, fair, trustworthy head of HR. That is not a personal attack, it is simply factual information. (Moving her out of high-level responsibility for HR and having her coordinate just benefits, the Pastoral Center floorplan and the phone system was an attempt to address those problems, but BCI thinks it would be better for her to be told she is simply not a fit for this organization). Some amount of your donations to the Catholic Appeal probably paid for the organizational consultant.
If Carol is not good with math, does not understand pensions and benefits, and does not get along well with other people, one might reasonably ask why she is still employed at the Catholic Archdiocese of Boston making a nice six-figure salary in a job that requires the aforementioned skills? Answer: because she is seen by the Chancellor as loyal to him and his agenda.
Perhaps the Daughters’ attorney should also request a different archdiocesan representative to negotiate with.
6) Other Lawsuits?
This one lawsuit is just about getting pension funds back. Though BCI knows of no other lawsuits, we hear that the Chancellor has nicely positioned the archdiocese for other potential lawsuits on age discrimination, especially by women. For example, there is the manner in which the Chancellor pushed out his former administrative assistant after about 30 years of service. People familiar with the situation report he said many times he was looking to hire a young blond secretary. (He ended up hiring a student, Peter, straight out of BC with no experience, and in short order he was making the same or more than the previous admin with 30 years experience). Was it age discrimination, or simply that he did not want people around in the Chancellors and Cardinals’ offices who knew their jobs well, had institutional memory and connections to past leaders, and who would not let him break past promises? How many other long-time knowledgeable, dedicated people over the age of 55 were pushed out with offers of early retirement on the basis that if they did not take the money at that time, there would be less in the future?
A BCI commenter wrote that when the Chancellor was hiring the new head of HR, he was overheard by a manager saying his goal was to hire someone who could “get rid of all these menopausal women” without triggering a lawsuit. Nice Christian attitude, Jim.
So, there you have it. Yet more reasons for a changing of the guard. Does the Cardinal have the courage and backbone to make the tough decision to replace the Chancellor and other members of the cabal? We are asking this question not for BCI, but in order that the Cardinal can rebuild trust, take care of dedicated former employees living on limited retirement incomes, and ensure the future good works of the Catholic Church in Boston