Creditors of defunct AHERF to receive undisclosed settlement from accounting firm
Lawyers would not say Tuesday how much money an accounting firm will pay to settle a 13-year-old lawsuit claiming it helped destroy one of the state's largest health care systems.
“It will result in a very significant recovery,” James Jones, one of the lawyers representing the unsecured creditor of the Allegheny Health Education and Research Foundation, said during a settlement hearing in Pittsburgh federal court.
The creditors in 2000 sued Coopers & Lybrand LLP, the predecessor of PricewaterhouseCoopers LLP, claiming that if auditors in 1996 and 1997 had informed AHERF's board about the foundation's true financial condition, it would have acted to avoid a bankruptcy that resulted in huge losses. The foundation's assets included the Allegheny General Hospital system.
AHERF, which once ran 14 hospitals and two medical schools and employed 31,000 people, filed for Chapter 11 bankruptcy protection in 1998, listing $1.3 billion in debt, in the largest U.S. nonprofit collapse. The foundation's assets included the Allegheny General Hospital system.
Over the course of bankruptcy proceedings, creditors filed more than 20,000 claims seeking more than $5.9 billion, records show. The bankruptcy court allowed collection on 11,703 claims that totaled about $806 million. As of 2011, its estate paid creditors about $250 million.
AHERF's flagship Allegheny General Hospital in the North Side was bought by West Penn Hospital in Bloomfield, forming West Penn Allegheny Health System. However, the AHERF insolvency contributed to rival UPMC's dominance in Western Pennsylvania health care.
U.S. District Judge David Cercone, in a joint session with U.S. Bankruptcy Judge Judith Fitzgerald, approved the settlement with PricewaterhouseCoopers.
The company disputes the method the committee used to calculate losses and denies liability in the settlement.
Joseph McDonough, a lawyer for PricewaterhouseCoopers, agreed the settlement amount is significant. He and Jones declined comment.
Jones said during the hearing that a trial could have lasted 40 days. Preparation for the case generated more than 200 depositions, 19 expert opinions and more than a million documents, he said.
The committee sent more than 3,500 notices to creditors about the proposed settlement, and none objected, he said.
Both sides agreed to keep the amount secret, and they discussed with Fitzgerald how to avoid releasing the amount in filings for related bankruptcy action.
The AHERF crash led to criminal charges by the state Attorney General's Office against former CEO Sherif Abdelhak, former chief financial officer David McConnell and former general counsel Nancy Wynstra, though the charges against Wynstra were dismissed.
Abdelhak, who drew 1,500 criminal charges, pleaded no contest to a single misdemeanor count of misusing endowment funds and served three months of an 11- to 23-month jail sentence.
McConnell entered an accelerated rehabilitative disposition program for nonviolent first-time offenders to avoid a trial set on one charge. The Securities and Exchange Commission fined McConnell $25,000 to settle fraud charges.
Brian Bowling is a staff writer for Trib Total Media. He can be reached at 412-325-4301 or email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Gunfire wounds man near Riverview Park
- County police officer on leave after assault charges filed
- Teen caught after stolen car crashes in Homewood
- One person taken to hospital after fire in Scott
- Allegheny County Airport gets FAA grant to trim trees under flight path
- Man convicted in North Side stabbing
- Overnight closures, lane restrictions announced for Fort Pitt Tunnel, Parkway West
- Old Pennsylvania Turnpike plan gets new restart effort
- Judge approves reduced attorneys fees in Jordan Miles case
- Port Authority of Allegheny County eyes $2M in detour costs
- Civil War vet gets 21-gun salute