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The Securities and Exchange Commission is suing three outside auditors of the former Allegheny Health, Education and Research Foundation, claiming they shuffled funds to cover $37.7 million in losses and instead reported nearly $22 million in earnings in 1997. The suit, filed Wednesday in U.S. District Court in Philadelphia, contends the accountants “conspired with AHERF to devise a scheme to conceal its deteriorating financial condition.” The suit named William F. Buettner, Mark D. Kirstein and Amy S. Frazier, who did work for PricewaterhouseCoopers, formerly Coopers & Lybrand, on the AHERF account, as defendants. PricewaterhouseCoopers has not been accused of wrongdoing. The scheme “ultimately involved the fraudulent transfer of $99.6 million” in reserves from an entity AHERF had recently acquired to the books of another cash-strapped AHERF entity — Delaware Valley Obligated Group, the lawsuit states. AHERF’s Delaware Valley subgroup included Delaware Valley Hospitals and Delaware Valley University. “When you have accountants actually participating in creating (the) means of covering up deteriorating financial conditions, that is a serious breach of their obligations,” said Ronald C. Long, the SEC’s Philadelphia district administrator. The SEC is asking the court to issue an injunction barring the three from engaging in further fraudulent activities. That would have the effect of letting prospective employers know the accountants have been sanctioned by the SEC, Long said. Attorneys for Buettner, who has retired, and Kirstein did not immediately return messages placed Thursday by The Associated Press seeking comment. Frazier’s attorney, Martin Perschetz, called the SEC’s claims “baseless” and said it was “absurd to suggest that … Amy Frazier had anything to do with alleged misconduct at AHERF.” Frazier and Kirstein are still working for PricewaterhouseCoopers. “We don’t take action based on unproven allegations,” company spokesman Steven Silber said Thursday. The SEC previously charged former AHERF employees with participating in the fraud and these latest charges represent the end of the SEC’s investigation, Long said. Before filing for bankruptcy protection in July 1998, AHERF operated the largest nonprofit hospital chain in the state with 14 hospitals. In May 2000, the SEC charged four former AHERF financial officers and accountants with participating in the fraud. Former chief financial officer of AHERF’s Philadelphia-area hospitals Charles P. Morrison, former chief financial officer David McConnell, former senior accountants Albert Adamczak and Stephen Spargo have all settled claims that they overstated income by about $160 million. AHERF’s former chief executive officer, Sherif Abdelhak, faces trial on 709 charges that he illegally spent $52 million in charitable funds to keep the organization running. Copyright 2001 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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