Jackson County

Judge weighing SRHS pension settlement, will do his best with 'bad situation'

TIM ISBELL/SUN HERALD 
 Maury Thompson awaits the ruling of Judge Neil Harris in SRHS case, Tuesday, Dec. 23, 2014, in Pascagoula.
TIM ISBELL/SUN HERALD Maury Thompson awaits the ruling of Judge Neil Harris in SRHS case, Tuesday, Dec. 23, 2014, in Pascagoula. SUN HERALD

GULFPORT -- When Maury Thompson learned in October 2014 that Singing River Health System had not contributed to its employee retirement plan since 2009, he immediately thought about the annual statements the health system mailed that claimed otherwise.

The retiree's 2010 statement, for example, said SRHS contributed $4.1 million, Thompson testified Tuesday before U.S. District Court Judge Louis Guirola Jr.

"This is mail fraud," Thompson told the judge, "blatant mail fraud." Thompson said he should know because he pleaded guilty to the same crime years ago, before he worked for SRHS,

Guirola must decide if a settlement proposed by SRHS and attorneys for 17 pension-plan members should be approved as fair and reasonable for all 3,173 current and former employees qualified to participate.

SRHS has pledged to pay $150 million into the pension fund over 35 years. The amount represents the $55 million SRHS failed to pay from 2009-2014, plus interest amortized over the payment period. The plan was frozen in late 2014, ending contributions from SRHS and the mandatory 3 percent employees were required to put in from their paychecks.

Nobody has been able to say what monthly payments retirees can expect, or for how long. The plan's health going forward will hinge on SRHS's required payments, income from investments and interest. The plan, with current assets at $128 million, has so far continued to pay retirees full benefits.

The settlement releases SRHS and its owner, Jackson County, from liability over the failed pension. If Guirola approves it, SRHS can present the federal settlement in state court and ask for dismissal of more than 150 lawsuits pending against it. Jackson County also is expected to ask that state court lawsuits against it be dismissed if Guirola approves the settlement.

The county has agreed to put up more than $13 million for indigent care at SRHS, freeing up health system funds for pension payments.

Attorney Steven Nicholas of Mobile, who represents pro-settlement plan members, said SRHS did its employees wrong, but protracted litigation is no guarantee they will recover retirement benefits. Testimony showed that the health system has a negative net worth, he said, so it might be unable to pay a court judgment.

Nicholas also acknowledged the settlement does not guarantee retirees the same monthly payments SRHS promised them for life, but he believes it is in the best interest of plan members.

Carly Duvall, an attorney for SRHS from Missouri, said Guirola also must consider the health system's importance to Jackson County, where it operates two hospitals and medical clinics. She said SRHS wants to end all the litigation and return its focus to providing quality health care.

Attorneys Earl Denham and Harvey Barton, who represent 204 members opposed to the settlement, told Guirola the county should guarantee settlement payments in case SRHS is unable to make them.

Retirees who packed the federal courtroom, most of them clients of Denham and Barton, want to know why the pension failed and who is responsible,

Barton told Guirola that SRHS has breached its promise.

"They have done everything they can, through fraud and collusion, to make this (settlement) happen so they can escape liability," Barton said.

Without the benefits they were promised, several Denham and Barton clients testified, they could lose their homes.

Guirola reminded those in attendance Tuesday that the case is not about criminal wrongdoing. The judge said anyone with evidence of a wrongdoing needed to deliver it next door to the U.S. Attorney's Office, which prosecutes federal crimes.

At the two-day hearing's conclusion, Guirola said he plans to study all the evidence before issuing a written opinion. He said he must consider whether the settlement is fair to plan members, and the effect it will have on the hospital and community. Residents need their community hospital, the judge said.

Guirola concluded: "We're going to do the best that we can with a bad situation."

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