Bankrupt Pa. Health System Sued by Creditors Demanding $1-Billion

Creditors of the bankrupt Allegheny Health Education and Research Foundation, in Pittsburgh, have sued leaders of the non-profit health-care system for more than $1-billion.

The suit, filed last month in a federal bankruptcy court, charges that seven of Allegheny’s top officials and four of its trustees “took their charitable institutions on an uncontrolled journey of irresponsible acquisitions, financial manipulations, bureaucratic excess, lavish spending, grossly improper use of funds, and self-aggrandizement.”

The complaint alleges, for example, that the hospital group paid salaries to its top managers that were “grossly out of line” with those paid at comparable institutions. It also states that the base salary of Allegheny’s chief executive, Sherif S. Abdelhak, was raised from $900,000 to $1-million only months before the system filed for bankruptcy.

Lawyers for Mr. Abdelhak and most of the other officials named in the complaint could not be reached, or declined to comment.

A lawyer for board member Frank V. Cahouet, former president of Mellon Bank Corporation, and a lawyer for Allegheny’s interim chief financial officer, Joseph D. Dionisio, each denied the allegations, noting that their clients had joined Allegheny shortly before the system filed for bankruptcy.

Allegheny declared bankruptcy last year, claiming more than $1.3-billion in debts.