Legal storm clouds billowed over Allegheny Health, Education and Research Foundation last week as a federal grand jury in Pittsburgh subpoenaed the embattled system's corporate and financial records.
The subpoenas signal that a federal criminal probe is under way.
Spokesman Thomas Chakurda said that the subpoenas covered four subsidiaries in addition to AHERF: Allegheny University Medical Practices; Allegheny University Hospitals West, which includes Allegheny General Hospital; Allegheny Health Services Providers Insurance Co., an offshore malpractice insurer; and Jellico, which was formed to buy a house and lease it to ousted AHERF Chief Executive Officer Sherif Abdelhak.
The precise subject of the grand jury inquiry wasn't revealed. "We don't know the scope, targets or timing of the investigation," Chakurda said. "We're simply responding to their document requests."
No individuals have been subpoenaed to testify before the grand jury, Chakurda said. Late last week AHERF and its subsidiaries were working to fulfill the requests for documents, Chakurda said. He could not estimate when that job would be completed.
Grand juries weigh evidence of potential crimes to determine whether to press criminal charges; they don't consider civil matters. While a grand jury review of evidence does not necessarily mean that charges will be brought, its activities are an ominous sign.
"The mere fact that there is a grand jury there . . . and that they've authorized subpoenas is pretty serious stuff," said Michael Flanagan, a healthcare attorney with Gardner, Carton & Douglas, Washington.
Grand juries, he said, often start with subpoenas for general corporate and financial records. From those records, a grand jury and prosecutors can develop a more detailed inquiry.
If the evidence appears to support criminal charges, federal prosecutors probably would not restrict indictments to the foundation and its subsidiaries, he said.
"The criminal guys want heads," Flanagan said. "They want to prosecute people."
Separately, U.S. Bankruptcy Court Judge Bruce McCullough postponed to Nov. 5 from Oct. 21 a hearing to approve the sale of AHERF's bankrupt Philadelphia assets. The delay is to allow Tenet Healthcare Corp. to find a manager for Allegheny University of the Health Sciences.
Tenet has steadfastly maintained it would walk away from the deal for AHERF's Philadelphia operations without an academic partner to run AUHS, which includes the MCP-Hahnemann School of Medicine.
Late last week a source familiar with the negotiations said Drexel University was reconsidering its decision against running AUHS.
To allay Drexel's concerns, AHERF creditors have pledged to add as much as $50 million to the school's endowment.