August 23, 2001 | Read Time: 2 minutes
The Securities and Exchange Commission is charging that three employees of a major accounting firm helped a now-bankrupt Pennsylvania health foundation conceal its poor financial shape.
In a suit filed in federal court in Philadelphia, the S.E.C. alleges that employees of PricewaterhouseCoopers, a national accounting firm, conspired with officials of the former Allegheny Health, Education, and Research Foundation to move $37-million from one of the foundation’s solvent entities to one struggling with debt.
In doing so, the auditors and the foundation, which filed for bankruptcy in 1998, “misled the investing public as to Allegheny’s financial health,” says Ronald C. Long, district administrator for the S.E.C.’s mid-Atlantic office, in Philadelphia.
Seeking Punishment
Mr. Long says that the foundation floated $900-million in bonds while nearly $100-million was shuffled in 1997 from a new foundation entity to a financially strapped Allegheny group that included hospitals and a university. Accountants were involved in moving about one-third of those funds, the suit alleges.
The suit names three PricewaterhouseCoopers accountants: William F. Buettner, of Philadelphia; Mark D. Kirstein, of Chicago; and Amy S. Frazier, of western Pennsylvania. PricewaterhouseCoopers is not named in the suit.
The S.E.C. has asked the court to punish the auditors if they violate the regulatory agency’s laws in the future. If the commission wins the suit and any of the three run afoul of S.E.C. regulations, the S.E.C. can seek monetary damages from them, Mr. Long says.
Mr. Buettner has retired, but Mr. Kirstein and Ms. Frazier are still employed by PricewaterhouseCoopers, says Steven Silber, a company spokesman.
‘Unproven Allegations’
“We don’t take action against our people just because of unproven allegations,” Mr. Silber says.
“It’s important to note that [the Allegheny Health, Education, and Research Foundation]’s bankruptcy resulted from a flawed, decade-long business strategy and had nothing to do with the audit.”
Allegheny Health, which operated a chain of hospitals in Philadelphia and Pittsburgh, filed for bankruptcy in federal court, claiming $1.5-billion in debt.
The organization’s chief executive, Sherif S. Abdelhak, and other officials still face a lawsuit filed last year by the Pennsylvania state attorney general’s office that claimed the group improperly spent $80-million in donations.
In previous years, the foundation’s high earnings had prompted Pennsylvania officials to challenge its tax-exempt status.
