LAWSUIT FILED AGAINST SRHS ALLEGES FRAUD BY TRUSTEES, FORMER EXECUTIVES
Five current and former Singing River Health System employees allege in a federal lawsuit filed Thursday they were subjected to more than 20 counts of corporate and financial fraud, breach of contract and bad faith when their pensions were yanked from under them without notice.
They are suing numerous Singing River entities, former CEO Chris Anderson, former CFO Mike Crews, retirement benefits committee member and attorney Stephanie Barnes Taylor, eight members of the Board of Trustees, auditing firm KPMG LLP and pension plan administrator Transamerica Retirement
The lawsuit says Singing River breached its contract with plan members because alternatives existed to "shore up" the pension plan. Pension plan members, it says, had a "legitimate expectation" their employer would contribute.
The lawsuit alleges fraud and deceit by Anderson, now CEO at Baptist Health Systems in Jackson; Crews, who has retired; and Barnes, who is no longer chief legal counsel at SRHS. The three executives reviewed and approved audits containing fraudulent material and misrepresented the pension plan's
condition, the lawsuit says.
Trustees are accused of fraud and deceit for failing to report the plan's true condition to members and for voting to discontinue it, among other allegations. The trustees named are president Michael Heidelberg, vice president Michael Tolleson, Tommy Leonard, Larry Cosper, Morris Strickland, Ira Polk, Stephen Nunenmacher and Hugo Quintana.
As plan fiduciaries, board members are in a position of trust that obligates them to represent the plan's best interests.
Among other things, the lawsuit seeks to make the pension plan whole, appoint an independent fiduciary and fine the parties named $110 a day for every day the plan has not been funded. The lawsuit also asks for punitive damages against the three executives and eight trustees because, it says, their actions were malicious and reckless.
"We have clients afraid they're going to have to file for bankruptcy," one of the attorneys who filed the lawsuit, Jim Reeves of Biloxi, said in a news release. "We have retirees afraid they're going to be forced back into the work place. Others might have to sell their homes. This is devastating on a large scale to a lot of people."
Law firms Reeves and Mestayer and Cunningham Bounds of Mobile are seeking class-action status for the lawsuit. Class-action status would allow them to represent those of the more than 2,400 employees and 600 retirees who qualify. The case has been assigned to U.S. District Judge Keith Starrett, Starrett must decide whether a class of litigants can be certified based on factors such as whether the alleged wrongs committed and potential damages owed would uniformly apply.
Employees contributed a mandatory 3 percent to retirement from their payroll checks. The plan offered them 50 to 70 percent of pay for life when they retired. The lawsuit details signs the plan was failing. Since 2009, the health system has not funded its share of the plan. In 2011, it was closed to new employees.
Employees received annual statements in 2010 and 2011 that led them to believe Singing River was still funding their retirement. Annual audits of SRHS finances by KPMG "expressed the opinion the plan was adequately funded when it was not," the lawsuit says. "KPMG's misstatement of the true financial situation relating to the plan was the result of an ongoing conspiracy between the defendants to suppress the true financial picture of the plan and the hospital."
A new firm, Horne LLP, conducted the hospital system's audit in 2013, revealing financial problems. Earlier this year, the hospital was forced to write off $88 million in bad debt that had been listed as operating income. Nov. 20, the Board of Trustees voted to terminate the pension plan.