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Ex-AHERF chief pleads no contest

Abdelhak faces two years in jail

Friday, August 30, 2002

By Jim McKinnon, Post-Gazette Staff Writer

The former chief executive of the bankrupt Allegheny Health, Education and Research Foundation, who at one time faced more than 1,500 criminal charges, yesterday pleaded no contest to a single misdemeanor count of misusing charitable funds.

Sherif Abdelhak leaves the Allegheny County Courthouse yesterday. (Annie O'Neill, Post-Gazette)

Common Pleas Senior Judge Raymond A. Novak sentenced the defendant, Sherif S. Abdelhak, to 11 1/2 to 23 months in the Allegheny County Jail with a provision that his time can be served in alternate housing. That way, Abdelhak can be available for a work-release program.

"I believe this resolution of this enormous case is not only just, but it makes good public policy," Novak said.

Abdelhak is to begin serving his sentence Tuesday. He will be eligible for parole relatively quickly but not too soon, Novak said.

"I'll not even read a petition for parole until at least one season has passed," the judge said. By winter, such a request may be considered, he added.

"This man is not a thief," defense attorney J. Alan Johnson said. "This man did what he had to do under very, very difficult circumstances. The only thing he did wrong is he didn't succeed."

Abdelhak, a driven and demanding executive, oversaw the astonishing and rapid expansion of the Allegheny Health empire and remained at the helm during its even faster and stunning demise.

In the decade leading up to its July 1998 bankruptcy, the nation's largest ever of a nonprofit institution, Allegheny Health's tentacles stretched across two states, with 14 hospitals, two Philadelphia medical schools that merged into one, hundreds of physicians' offices and nearly 30,000 employees.

Within two years, its nine Philadelphia hospitals were sold and its foundering North Side flagship, Allegheny General Hospital, and its two suburban affiliates were merged into the West Penn-Allegheny Health System.

"My entire intent was to keep the hospitals in operation for the patients and over 20,000 persons employed," Abdelhak said before he was sentenced. "I regret that I was not around to prevent the bankruptcy that followed my departure."

In February 2000, state Attorney General Mike Fisher's office, Tenet HealthSystem Philadelphia and two nonprofit institutions filed a complaint seeking return of $78.5 million in charitable assets they claimed were misappropriated by Abdelhak. About $8.5 million of the claims were related to endowments at Allegheny General.

Foundation executives, allegedly under Abdelhak's direction, had wrongly used the charitable funds to cover operating expenses in the months leading up to Allegheny Health's 1998 bankruptcy, Fisher charged.

Recovery of funds for charitable endowments was announced in January as part of a settlement of lawsuits related to the foundation's bankruptcy. The settlement also directed more than $55 million to foundation creditors, $9.5 million to cover the civil court defense costs of the directors and officers, and $1.25 million to pay for the criminal defense costs of three Allegheny Health executives.

The criminal case charged that Abdelhak misappropriated more than $30 million.

More than $26 million of that has been recovered.

Johnson said another $8 million will be available to give back to Allegheny General.

Because of Abdelhak's plea, the $1.25 million that was to be set aside for his defense now is not needed. Novak issued an order asking that U.S. District Court allow it to be given to creditors.

After a preliminary hearing before the late Senior Judge Robert E. Dauer, Abdelhak was ordered to stand trial on about 600 of the 1,500 charges he had faced.

The case was assigned to Novak after Dauer's death, and last week, a defense motion was granted to dismiss 299 of the counts, all felonies.

In the plea agreement yesterday, Pennsylvania Deputy Attorney General Anthony J. Krastek agreed to withdraw nearly 300 more counts and promised to withdraw the final felony count, a charge of theft.

That last felony charge resulted when Abdelhak used $50,000 of the funds to make a grant to the Quaker Valley School District in Sewickley where his son was a student.

Post-Gazette staff writers Jim McKay and Christopher Snowbeck contributed to this report.

Jim McKinnon can be reached at jmckinnon@post-gazette.com or 412-263-1939.

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