Sherif Abdelhak, mastermind of the failed Allegheny Health, Education and Research Foundation, was paroled Dec. 9 after serving three months of his 111/2- to 23-month sentence, Modern Healthcare learned last week.
Abdelhak, 56, pleaded no contest to using charitable funds to finance operations of the 14-hospital Pennsylvania system before it declared bankruptcy in 1998, creating the most notorious insolvency in not-for-profit healthcare history. His indictment resulted from what was reportedly one of the longest grand jury investigations in Pennsylvania history.
Modern Healthcare broke the story of Abdelhak's early release in its electronic newsletter, the Daily Dose.
During his jail time, Abdelhak was twice furloughed to Tennessee for unspecified treatment of a heart condition, once for 19 days, according to court records. During that time, he maintained daily telephone contact with prison officials.
Allegheny County Judge Raymond Novak, who handed out the sentence, approved Abdelhak's petition for parole, saying that "in view of the defendant's current state of health, further incarceration will not serve the public's interest."
Novak, who is semiretired, was out of state until April and could not be reached for comment, according to his clerk.
Sean Connolly, a spokesman for Pennsylvania Attorney General Mike Fisher, said Novak overruled an objection to the parole by the prosecution and did not hold a hearing.
According to documents obtained from the Common Pleas Court in Pittsburgh, Abdelhak served his time at Penn Pavilion, an alternative facility in New Brighton, Pa., where he performed more than 400 hours of community service at a local Methodist church. Apparently he put his acquisition skills to good use as he assisted the church leadership in its efforts to purchase a building it is renting. He also aided the church in creating a business plan and long-range financial budgeting, according to the petition filed by J. Alan Johnson, Abdelhak's attorney.
"Mr. Abdelhak's skills as a facilitator have been invaluable in guiding us through this very important planning process," said Fred Smith, pastor of Fellowship United Methodist Church, Ambridge, Pa., in a letter filed with the court. "Sherif has a gentle and caring spirit, and we believe he has much to contribute to society."
Abdelhak's petition for parole was filed on Nov. 27, although legally he could have filed it as soon as the day after his Aug. 29 sentencing, when he pleaded no contest to a single misdemeanor charge that he authorized the raiding of hundreds of charitable endowments to shore up the collapsing system (Sept. 2, 2002, p. 6). But at sentencing Novak cautioned Abdelhak that he wouldn't entertain a petition for parole "until autumn has passed."
In monthly progress reports filed with the court, Abdelhak in September earned one above-average grade for attitude and nine average marks in the areas of behavior and participation in the facility's program. By November, he improved to four above-average grades out of a possible 10. In his petition, he said he planned to live with his wife, Anna, and his 9-year-old stepson in a Louisville, Ky., apartment and immediately seek employment.
Those affected by the AHERF collapse who were contacted by Modern Healthcare last week were not aware that Abdelhak had been released, and had no reaction. Officials at MBIA Insurance Corp., Armonk, N.Y., AHERF's largest creditor, declined to comment on the parole, said Michael Ballinger, an MBIA spokesman. Ballinger said the AHERF scandal resulted in a $170 million loss for the insurance company.
Meanwhile, the legal repercussions almost completely have wound down with the exception of two pending lawsuits: a creditors' action against the system's former auditor, PricewaterhouseCoopers, and a Securities and Exchange Commission lawsuit charging three of AHERF's outside auditors with securities fraud. The creditors' case is in discovery and a couple of years from trial, said Claudia Springer, a partner at Reed Smith, Philadelphia. The SEC suit is in the fact-finding phase but could come to trial by late summer or fall, said Merri Jo Gillete, district trial counsel in the SEC's Philadelphia office.