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Friday, August 17, 2001

By Christopher Snowbeck, Post-Gazette Staff Writer

The former chief of the Allegheny Health, Education and Research Foundation received permission yesterday to defend himself against more than 700 charges that he illegally spent charitable money during the months leading up to the foundation's bankruptcy filing.

Allegheny County Common Pleas Judge W. Terrence O'Brien accepted Sherif Abdelhak's waiver of his right to counsel and set Feb. 25, as the trial date. The judge set aside six weeks for the criminal trial, planning to hear testimony four days a week during that time, said Tony Krastek, the state's senior deputy attorney general who is prosecuting the case.

But lawyers familiar with the case said Abdelhak's move simply allows the case to move forward while negotiations continue about how much, if any, of his legal fees will be paid out of an AHERF insurance policy that covered foundation directors and officers. The lawyers said resolving the payment issue would allow Abdelhak's attorneys, J. Alan Johnson and Judy Olson, to resume his defense.

Johnson and Olson could not be reached for comment.

The "directors and officers" insurance is at the heart of a legal battle in federal court, with creditors eyeing the money as one of the only remaining sources of restitution for businesses that lost millions in the bankruptcy. But it's unclear exactly how much insurance money is at stake because the foundation boosted its coverage from $50 million to $200 million during the months leading up to the July 1998 bankruptcy.

Creditors and the trustee overseeing the bankruptcy estate are opposed to spending any insurance money on Abdelhak's defense. But the trustee, William Scharffenberger, added that he does not know if the terms of the insurance policy would call for such expenditures.

"It would seem highly unlikely that in a criminal proceeding there would be a reimbursement for legal costs," Scharffenberger said. "But it's the policy that would govern that."

State Attorney General Mike Fisher brought more than 1,500 criminal charges against Abdelhak in connection with the foundation's financial failure, but Common Pleas Senior Judge Robert E. Dauer decided earlier this year that just under half the counts were backed by enough evidence to warrant a trial.

At the preliminary hearing, all charges against former general counsel Nancy Wynstra were thrown out; only one charge against former chief financial officer David McConnell was sent on for trial.