The U.S. Government Accountability Office, an investigative arm of Congress, is probing the alleged mismanagement of a depleted pension fund that wiped out retirement plans for more than 1,100 former employees of the now-closed St. Clare’s Hospital in Schenectady.

State Assemblyman Angelo Santabarbara disclosed the federal investigation on Wednesday and said he learned of it this week during a meeting with staff members with the House Committee on Education and Workforce. They had met “to discuss potential federal solutions regarding the ongoing St. Clare’s pension crisis,” according to Santabarbara’s office.

Santabarbara, a Rotterdam Democrat, noted that the St. Clare’s pension fund, which had been managed by top officials in the Roman Catholic Diocese of Albany including Bishop Emeritus Howard J. Hubbard, did not have guarantee insurance — coverage that would have protected the fund — due to a religious exemption in federal law.

“At the state level, there are limitations on what New York can do protect these pension plans going forward, because federal law pre-empts most potential state regulations regarding pensions,” Santabarbara said. “We will continue the dialogue with our federal partners to ensure accountability and justice are delivered for the St. Clare’s pensioners going forward. … Committee staff assured my office that the St. Clare’s pension crisis is ‘on their radar,’ and they will keep us informed of findings from the Government Accountability Office.”

Separately, the Albany diocese and the St. Clare’s Corporation are the subject of civil complaints filed by the state attorney general’s office and on behalf of former employees at the hospital who lost their pensions. That litigation has been paused as a result of the diocese filing for Chapter 11 bankruptcy protection last week — a proceeding that could take several years to adjudicate and also involves claims filed by hundreds of sexual abuse victims.

The lawsuit pending in state Supreme Court alleges that top officials with the Albany diocese, including Hubbard, had mismanaged the fund and falsely told the Internal Revenue Service that required annual contributions were being made to the pension plan. The civil complaint by the attorney general’s office seeks restitution for the pensioners, whose fund was created in 1959, about a decade after the diocese co-founded the hospital.

St. Clare’s had been located at what is now the Ellis Medicine McClellan Street Health Center in Schenectady. Ellis Hospital took over the real estate in 2008 after the state’s Berger Commission on hospital consolidation forced the closure of St. Clare’s and eight other hospitals across the state.

St. Clare’s retirees have been working for years to recover their pensions or at least get an accounting of what happened.

The Diocese of Albany issued a statement last year saying the attorney general’s lawsuit replicated the “same claims and the same allegations” of earlier lawsuits filed on behalf of the pensioners and that it would “further delay resolution of the case.”

The former hospital workers learned five years ago that their pensions would be sharply reduced or eliminated because the fund had been wiped out by a $50 million shortfall attributed to the 2008 recession and the Catholic church’s decision to stop funding it. The beneficiaries included laboratory technicians, nurses, orderlies, emergency medical technicians and other staff members — some with decades of work history at the hospital.

It’s alleged that the diocese failed to make required annual contributions from 1999 to 2017, resulting in a $43 million shortfall.

The attorney general’s office has examined whether board members of the corporation overseeing the pension plan — many of them officials with the diocese, including bishops, or with ties to Catholic Charities — had authorized submitting IRS forms falsely attesting that contributions had been made to the fund.

The defendants in the lawsuit in addition to the diocese are Hubbard, who had served as chairman of the St. Clare’s Corp. that managed the pension fund; Albany Bishop Edward Scharfenberger, who succeeded Hubbard and has been a member of the board since 2014; David R. Lefort, vicar general of the diocese; and Joseph Pofit, director of Catholic Charities and a St. Clare’s Corp. board member since 2008.

The pension’s board voted in 2018 to close the fund, a decision that resulted in nearly 700 of the younger pensioners in the plan having their benefits wiped out entirely, according to a lawsuit filed in 2019 in state Supreme Court in Schenectady by a group of nonprofit attorneys representing the pensioners. Another 440 of the older pensioners were told they would get just 70 percent of their benefits.

A focus of the investigation has been a decision made in the 1990s by the St. Clare’s governing board to invoke the religious exemption from the federal government that allowed it to drop out of the federal pension insurance program run by the Pension Benefit Guaranty Corp. That cost-savings decision also exposed the pension plan if it became insolvent.

In 2017, the Albany diocese sought to distance itself from the situation, noting that the St. Clare’s Corp., the not-for-profit that retained control of the former hospital’s obligations, had no corporate connection to the diocese.

But the diocese’s ties to St. Clare’s, which ceased operations and was merged with Ellis Hospital 14 years ago, have been significant.

The diocese purchased the land where St. Clare’s was built, and the St. Clare’s Hospital Corp. listed its mailing address as 40 North Main Ave. in Albany, the headquarters of the diocese. When the hospital was incorporated in 1945, Albany Bishop Edmund F. Gibbons was named president of the board.

Subsequently, the president of St. Clare’s Corp. was Bishop Edwin B. Broderick, who headed the diocese from 1969 to 1976. In 1980, Pofit, who was the head of Catholic Charities, was named the president of St. Clare’s Corp. Hubbard, who was bishop in Albany from 1977 to 2014, had served as chairman of the St. Clare’s Hospital board of trustees and numerous diocesan officials had also served on the board through the years.

Records indicate that in 2014, Scharfenberger succeeded Hubbard, who had retired, on the St. Clare’s board.

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