The 2010 purchase of Caritas Christi: Attorney General review, conditions and first board

analysisOn October 6, 2010 Massachusetts Attorney General Martha Coakley issued a statement under G.L. c. 180, § 8A(d) on the proposed transaction in which Caritas Christi and its affiliates would sell and transfer substantially all of their health care assets and operations to Steward Health Care System LLC (Steward) and its designated subsidiaries, an affiliate of Cerberus Capital Management, L.P. The system's six hospitals were Carney Hospital (Dorchester), Good Samaritan Medical Center (Brockton), Holy Family Hospital (Methuen), Norwood Hospital, St. Anne's Hospital (Fall River) and St. Elizabeth's Medical Center (Brighton). The Attorney General described Caritas as a Massachusetts non-profit, Catholic faith-based health care system affiliated with the Roman Catholic Archbishop of Boston (RCAB). Since governance reforms adopted on May 22, 2008, neither the Archbishop nor RCAB had a membership or ownership role in Caritas, but the Archbishop kept reserve powers over major transactions and approved the sale by letter dated August 27, 2010. ¹

analysisAccording to the Massachusetts Attorney General's October 6, 2010 statement, a letter of intent that Caritas Christi signed with Vanguard Health Systems on November 4, 2009 was terminated in December 2009. Caritas's adviser Cain Brothers then approached five private equity firms; three responded and two, including Cerberus, made presentations in January 2010, and Caritas selected Cerberus and signed a letter of intent dated January 23, 2010. Caritas had hired Ralph de la Torre as President and CEO by May 2008. The statement records that Cerberus contacted him in 2009 about potentially hiring him, without any financial relationship being established, and that he abstained from the board's March 19, 2010 vote approving the purchase agreement; the Attorney General found that Caritas board members and senior management had no existing financial interests or business relationships with Cerberus and that no senior manager would receive extra compensation for the transaction. An online encyclopedia article, citing a 2024 newspaper report, states that in 2009 de la Torre, seeking investors for Caritas, met Robert Nardelli, an executive at Cerberus Capital Management and former CEO of Chrysler and Home Depot, and that the conversation led to a formal proposition for Cerberus to buy Caritas and convert it to a for-profit system; the Attorney General's statement mentions only the 2009 contact about hiring him. ^{1 2}

analysisThe Caritas Christi Board of Governors approved the Asset Purchase Agreement with Steward Health Care System LLC (Steward) on March 19, 2010, and it was amended on October 5, 2010. Under the initial terms the purchase consideration of between $430 million and $450 million consisted of Steward's assumption of all pension obligations for about 13,000 current and former Caritas employees, payment of virtually all Caritas debt and assumption of certain liabilities; Steward also undertook to spend or commit at least $400 million in capital expenditures within four years of closing. At the Attorney General's urging the consideration was increased by $45 million to $495 million, to cover, among other increased liabilities, the growth in pension liability since the agreement was signed in March 2010. The Caritas board had relied on a fairness opinion from Navigant Capital given when the price was $430 million to $450 million; the Attorney General estimated the $495 million price at about six times Caritas's EBIDA (earnings before interest, depreciation and amortization) of $80–$85 million and found it fair and reasonable. ¹

analysisIn her statement on the Caritas Christi transaction the Massachusetts Attorney General found that Steward Health Care System LLC (Steward) itself had no direct financial capacity, because the transaction would be funded by Cerberus, which had no direct legal obligation to support Steward but would commit hundreds of millions of dollars; given the structure of the purchase consideration, she noted, Steward would operate the health system essentially debt-free at closing. She concluded that it was impracticable, if not impossible, for Caritas to continue as a public charity, since doing so would likely leave the pensions of some 13,000 current and former employees underfunded and require closing at least one hospital; that the board had exercised due care; that the price was fair; and that the transaction served the public interest. She stated her intent to assent to Caritas's complaint seeking the approval of the Supreme Judicial Court. ¹

analysisUnder the Caritas Christi purchase, Steward Health Care System LLC (Steward) agreed not to close, or limit the general purpose of, any Caritas hospital within three years of closing. At the Attorney General's urging it extended this conditionally for two more years, during which a hospital could be closed only after two consecutive years of negative operating margins, an eighteen-month review and a six-month closure notice, and it agreed not to close or reduce inpatient psychiatric and detoxification beds in the same five-year period. For three years after closing Steward also agreed not to engage in an initial public offering, a sale, the issuance of debt for the purpose of making dividends or distributions, or certain other fundamental transactions; at the Attorney General's urging this restriction was expanded to cover the sale or transfer of a majority ownership interest in, or substantially all assets of, any Caritas hospital. The Attorney General declined public requests to require a longer hold period. ¹

analysisAs part of the 2010 purchase, Steward also committed to keep Caritas Christi's charity care policies, estimated at about $37 million a year; to maintain community benefit spending of about $26 million a year plus $3 million for pastoral care; to offer continued employment on the same terms to about 12,000 Caritas employees and recognize existing union agreements; and to keep its headquarters in the greater Boston area. It agreed to fund, with a $1.5 million payment at closing, a five-year monitoring of the transaction's impact on health care costs and services: the draft Assessment and Monitoring Agreement (as of October 5, 2010) required it to deposit $1,000,000 with the Attorney General for her study and $500,000 with the Department of Public Health for its study. ¹

analysisThe Attorney General required an Enforcement Agreement (draft as of October 5, 2010) under which she became a third-party beneficiary entitled to enforce public-interest provisions of the Asset Purchase Agreement, including the capital expenditure, no-IPO/sale and no-closure covenants. It named Steward Health Care System LLC as purchaser and Steward Hospital Holdings LLC, Steward Operations Holdings LLC, six new Steward hospital companies and Steward St. Elizabeth's Realty Corp. as guarantors of its obligations. Her office's draft pension enforcement letter of October 2010, addressed to Steward care of Cerberus Capital Management, L.P. in New York to the attention of W. Brett Ingersoll, concerned the Pension Transfer Agreement among Steward, the trustees of the Caritas Christi Retirement Plan and the Roman Catholic Archdiocese of Boston, and made the Attorney General's office a third-party beneficiary with the right to enforce that agreement. ¹

analysisThe hospitals' Catholic identity was to be preserved through a Stewardship Agreement between Steward and RCAB dated April 30, 2010. Steward could terminate it if observing the Catholic directives became materially burdensome, and RCAB could terminate it for non-compliance; in either case Steward would owe a $25 million Termination Contribution to a Massachusetts public charity designated by RCAB. The Attorney General found the terms not inconsistent with the Archbishop's fiduciary obligations. According to a newspaper report of October 15, 2010, a Catholic lay advocacy group, the Catholic Action League of Massachusetts, criticized her October 6 recommendation for preserving a clause that allowed Steward or any later owner to end the hospitals' Catholic identity on payment of the $25 million, which the group said would likely lead to the secularization of the six hospitals. The Attorney General's statement had said that matters of Catholicity, except as they affect compliance with Massachusetts law, are outside her review; it found the termination provisions a reasonable way to address an impasse and understood the $25 million to have been set high enough to deter termination as a matter of convenience. ^{1 2}

analysisExhibit G to the filings on the transaction, titled 'Initial Board of Directors of Steward', lists Ralph de la Torre, MD, described as President and Chief Executive Officer of Caritas Christi Health Care, among the initial directors. Two community members of the Caritas board, Chair James J. Karam and Vice Chair Ruben Jose King-Shaw, Jr., agreed to join the board, with de la Torre serving ex officio if employed as Steward's President and CEO; Steward offered them the seats several weeks after the purchase agreement was signed and offered no compensation terms. Exhibit G describes Karam as President and founder of First Bristol Corporation and King-Shaw as Chairman and CEO of Mansa Equity Partners, Inc. It also lists four Cerberus-affiliated members: Arthur H. Halper, Senior Operations Executive at Cerberus Operations and Advisory Company, LLC (with Cerberus since 2006); W. Brett Ingersoll, Co-Head of Private Equity at Cerberus Capital Management; James T. Lenehan, Senior Operations advisor to Cerberus and former Vice Chairman and President of Johnson & Johnson; and John W. Snow, Chairman of Cerberus since 2006 and the 73rd Secretary of the Treasury (2003–2006). Ingersoll was described as a director of Steward when the sale closed in November 2010. ^{1 2 3}

analysisCerberus described the board differently in a statement of September 19, 2024: during its investment, Steward's board was led by de la Torre as Chairman and included two independent directors from the original Caritas board and five directors appointed by Cerberus, including James Lenehan, with John Boehner and H.R. McMaster added in later years. Exhibit G lists four Cerberus-affiliated initial directors, and the statement does not say when a fifth was appointed. ⁴

analysisThe sale closed in November 2010. Cerberus states that the transaction with Cerberus affiliates and de la Torre's management team closed on November 5, 2010; a newspaper report dated November 8, 2010 said Caritas Christi had announced completion of its sale to Steward Health Care System LLC, 'a newly formed affiliate' of Cerberus, after approval by the Supreme Judicial Court, the Attorney General, the Department of Public Health, the Archdiocese of Boston and the Vatican. According to the same report the sale covered St. Anne's Hospital, St. Elizabeth's Medical Center, Carney Hospital, Norwood Hospital, Good Samaritan Medical Center and Holy Family Hospital; Steward also acquired assets of other Caritas entities, including the Caritas Physician Network, Caritas Hospice and Home Care, Laboure College and Por Cristo, and the hospitals would lose their non-profit status and pay taxes. ^{1 2 3}

analysisNo filing in the record from the time of the acquisition states the initial ownership percentages. An October 2024 investigative report based on leaked company records stated that Cerberus created a new for-profit company as the acquisition vehicle and gained almost full ownership of the business, including hospital operations and real estate, while de la Torre was named CEO and given a nine percent stake. In a sworn declaration filed on June 27, 2025 in support of plan confirmation, Alan J. Carr, an independent manager of the debtor Steward Health Care Holdings LLC, described the November 2010 transaction as a $420 million leveraged buyout (an acquisition financed largely with borrowed money) of the non-profit Caritas Christi Health Care System by Cerberus, which ultimately formed Steward Health Care System LLC. That characterization differs from Cerberus's description of its initial equity investment as $246 million and from the Attorney General's 2010 expectation that Steward would operate the system essentially debt-free at closing. ^{4 5 1 6}

analysisLater accounts describe the founding in different terms. The debtors' first-day declaration of May 6, 2024 states that Steward was formed in 2010 by de la Torre following the acquisition of six Massachusetts hospitals from Caritas, and that Cerberus acquired them in partnership with him; Senators Elizabeth Warren and Edward J. Markey wrote on March 7, 2024 that as Caritas CEO he 'developed the business model for Steward', which Cerberus then invested in. His website describes him as one of the founders of Steward Health Care in 2010. The debtors' July 15, 2025 adversary complaint (a lawsuit brought within the bankruptcy case) against him and others, in which Cerberus is not a defendant, states that Cerberus Capital Management organized the company in 2010 to acquire Caritas, then run by de la Torre as CEO; that he became Steward's CEO and served until his resignation on or about October 1, 2024; and that in Steward's early years funds managed or advised by Cerberus owned a significant stake and exercised substantial control over company management. Cerberus said on September 19, 2024 that the Attorney General, the Massachusetts Department of Health, the Archdiocese of Boston and the Vatican had determined that Cerberus and the management team led by de la Torre presented the best solution for the hospital system, and that during its investment Cerberus operated as a shareholder while day-to-day management and operations were led by the CEO and management. The adversary proceeding, No. 4:25-ap-03593, had reached the discovery-scheduling stage by July 2026 without a ruling on the merits. ^{7 8 9 1 10 11}

analysisWhether Cerberus kept the 2010 commitments is disputed. In their March 7, 2024 letter to de la Torre, Senators Warren and Markey wrote, citing a 2010 press report, that Cerberus made a series of commitments to the Attorney General and state regulators when it purchased Caritas Christi 'only to quickly violate these terms'; the letter does not specify which terms. Cerberus replied in its September 19, 2024 statement that Steward's commitments to assume pension obligations of up to $495 million and to invest $400 million over four years in the six original hospitals 'were met, and exceeded'. Cerberus states that the transaction brought about $895 million of fresh capital and financial commitments to the Caritas system, a figure a November 2010 newspaper report also cited, and that its initial $246 million equity investment allowed the immediate retirement of about $250 million of Caritas net debt; the $246 million figure also appears in a February 15, 2024 lawmakers' letter citing press reports, but in no 2010 filing in the record. A timeline compiled by a research institute states that at the end of the five-year monitoring period, on December 30, 2015, the Attorney General's office published a final report finding that Steward had overall complied with the terms of the agreement that allowed its creation, while the central system had 'substantial losses'. An October 2024 investigative report said the same December 2015 report found that Cerberus had invested only $246 million of the promised $400 million in capital investments, that there was no evidence of outside investment into the pension program, and that Cerberus never invested the full $895 million promised. The 2015 report itself is not in the record. ^{1 2 3 4 5 6}

analysisSteward expanded beyond the six hospitals within two years. A timeline compiled by a research institute states that in 2011 Steward bought Merrimack Valley Hospital (Haverhill) and Nashoba Valley Medical Center (Ayer) for $21 million together, then Quincy Medical Center and Morton Hospital and Medical Center (Taunton), with Attorney General Coakley requiring upgrades and a five-year bar on selling either, and in September 2012 New England Sinai Hospital (Stoughton); Cerberus says the state asked Steward to acquire five more hospitals, which it did in 2011 and 2012, with a $142 million capital obligation. The 2011–2012 purchase agreements and conditions are not in the record. According to the same timeline, on December 26, 2014 Steward closed Quincy Medical Center, citing financial losses and declining patient numbers, despite a requirement when it took over the hospital that it stay open at least until 2017, and Attorney General Coakley did not object as long as Steward maintained an emergency room and other services nearby for at least two years. A July 2025 magazine column said Steward had pledged to keep the Taunton and Quincy hospitals open for at least 10 years. ^{3 2 7}