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Judge wants AHERF payouts returned

Wednesday, January 27, 1999

By Pamela Gaynor, Post-Gazette Staff Writer

The judge overseeing Allegheny Health, Education and Research Foundation's Chapter 11 bankruptcy reorganization yesterday asked attorneys in the case why AHERF officials who received a combined $6.8 million in deferred compensation hadn't yet returned the money.

Judge M. Bruce McCullough also asked attorneys to bring him information on trips that AHERF executives took to Iceland, Paris, Holland, Geneva and other foreign locales, ostensibly to comply with regulations that governed the foundation's Cayman Islands insurance subsidiary.

Taking aim at the head of AHERF's Western Pennsylvania hospitals, McCullough asked, "Why hasn't Mr. [Anthony] Sanzo paid his [deferred compensation] back? He's still being paid pretty heavily. If he were under the jurisdiction of this court he'd be paying it back pretty promptly."

Sanzo, who had served as president of the foundation when it filed for bankruptcy, has since resigned that post and become head of AUH West, the organization that oversees Allegheny General Hospital and three other AHERF hospitals that were not part of the $1.5 billion bankruptcy.

But Sanzo has, in fact, paid back the $408,009.80 that he owed, AHERF attorney Lee Powar said following the hearing. He said Donald Kaye, former head of AHERF's Philadelphia operations, and Dwight Kasperbauer, now head of human resources for AUH-West, had also fully repaid the foundation.

Powar told McCullough that AHERF's creditors, either alone, or in cooperation with the trustee appointed to head AHERF, plan to pursue the repayments.

When it disclosed in August that it had improperly made the payments, AHERF said that it expected the repayments to be made voluntarily.

But not all executives have complied, Powar said.

As a result, litigation is expected to be initiated either by the creditors or the trustee.

Powar said AHERF has received no communication in the matter from Sherif Abdelhak, AHERF's ousted president, or from its former chief financial officer, David McConnell. He said that former general counsel, Nancy Wynstra, had repaid $71,477.10 of an original balance of $528,691.12.

Powar said Abdelhak owes the foundation about $1.5 million and that McConnell owes $449,437. Reached by phone, Abdelhak declined comment and McConnell could not be reached.

But Wynstra said she doesn't owe any money. Asked if she had made a partial payment as Powar said, Wynstra said only, "I don't know where he gets his figures."

The deferred compensation payouts to top executives have been a lightning rod for criticism, not just in court but by some 152 other employees whose deferred compensation automatically became part of AHERF's bankruptcy and turned them into creditors standing to collect fractions of what they were owed.

McCullough, who said he had read published reports that AHERF executives took trips to Iceland and other foreign locations, also told attorneys that he wanted to know who went and how much money was spent.

Powar said AHERF would respond to the judge's request, but that he didn't as yet know when or in what form the response would be made.

McCullough has not as yet turned the request into a written court order.

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