Nearly a year after 40 Denver Health retirees or their surviving spouses were told they’d need to collectively pay back millions, 16 of them are going to court.
The pensioners last week filed a lawsuit against the Denver Employees Retirement Plan, which manages the retirement plan for Denver Health and thousands of city of Denver employees.
The lawsuit, filed in Denver County District Court, states that DERP planned to begin clawing back funds from the plaintiffs as of March 1. It seeks an injunction from the court to prevent that.
“This case is a shocking example of a pension administration riddled with incompetence, half- truths and untruths and gross negligence which woefully failed in its fiduciary obligations to the plaintiffs, and others,” the lawsuit states.
A representative for DERP declined to comment on the lawsuit, although in court filings the entity’s attorneys have argued the case should be dismissed because the plaintiffs have failed to exhaust “administrative remedies.”
CBS4 broke the news last May that DERP had determined that it had overpaid $11 million in pension benefits to 40 retirees or their surviving spouses.
Not all of those individuals are involved in the latest case, but the 16 plaintiffs include numerous prominent doctors or executives, including former Denver Health CEO Dr. Patricia Gabow, who retired in 2012. DERP said in court filings that those individuals need to pay back a total of $6.1 million.
The plaintiffs claim DERP discovered its internal violation of IRC 401(a)(17), a provision of IRS tax code that limits annual compensation on qualified plans, long before it moved to recoup the funds. The earliest such discovery claimed by the suit was in 2004. The suit claims DERP previously told the retirees these overpayments would be “covered,” and thus not an issue.
The overpayments were “not caused by a change in the IRC or regulations interpreting the IRC, but rather as a direct and proximate result of DERP’s repeated sheer incompetence and gross negligence,” the lawsuit states.
The 16 plaintiffs are:
- • Dr. Richard Albert, longtime director of the department of medicine at Denver Health
- • Dr. Stephen Cantrill, former associate director of emergency medicine and medical director of the emergency department
- • Dr. Edmund Casper, former director of psychiatry, drug treatment services and alcohol treatment services
- • Dr. Patricia Gabow, former chief of medicine and later chief medical officer, then CEO until her retirement in 2012
- • Dr. Richard Harper, former chief of nuclear medicine
- • Dr. John Lockrem, former director of anesthesiology
- • Patricia McFee, widow of Dr. John McFee, the former chief of obstetrics, who died in 2016
- • Dr. Vincent Markovchick, former director of emergency medical services
- • Dr. Philip Mehler, former chief of general internal medicine, later chief medical officer and director of Denver Health’s ACUTE Center
- • Dr. Michael Mestek, former director of radiology
- • Tod Sedbrook, widower of Dr. Lynn Sander, the former director of medical services at Denver Health’s forensic facility, who died in 2013
- • Stephanie Thomas, former chief operating officer
- • Dr. Neil Toribara, former chief of gastroenterology and hepatology
- • Margot Zallen, widow of Dr. Richard Zallen, former director of dental services and director of maxillofacial surgery, who died in 2016
- • Dr. Franklyn Judson
- • Dr. Frank Manart
The lawsuit describes the plight of each plaintiff.
Markovchick, for example, is described as having taken a 60 percent pay cut to leave a former employer to join Denver Health in 1977, then staying with the company for decades despite more lucrative offers, in part, the lawsuit states, because of the pension benefits.
He’s since made “numerous financial decisions based upon DERP’s representations about his benefits, including converting a Traditional IRA to a Roth IRA in 2010 and purchasing a new home in 2015.” Markovchick, like most of the plaintiffs, is in his 70s.
Attorneys Todd J. McNamara and Mathew S. Shechter of McNamara & Shechter are representing the plaintiffs.
Caleb Durling of Fox Rothschild is representing DERP, which is led by Executive Director Heather Darlington.