SECURITIES EXCHANGE ACT OF 1934
Release No. 42743 / May 2, 2000

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1253 / May 2, 2000

ADMINISTRATIVE PROCEEDING
File No. 3-10196

__________________________________
: ORDER INSTITUTING
In the Matter of : PROCEEDINGS PURSUANT TO
: SECTION 21C OF THE
: SECURITIES EXCHANGE ACT
ALBERT ADAMCZAK, C.P.A., : OF 1934 AND RULE 102(e) OF
: THE COMMISSION'S RULES
: OF PRACTICE, MAKING
Respondent. : FINDINGS, IMPOSING
: SANCTIONS AND IMPOSING
: A CEASE-AND-DESIST ORDER
__________________________________ :

I.

The Securities and Exchange Commission deems it appropriate that proceedings be, and hereby are, instituted against Albert Adamczak pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 102(e) of the Commission's Rules of Practice.1

II.

In anticipation of the institution of these proceedings, Adamczak has submitted an Offer of Settlement ("Offer") that the Commission has determined to accept. Solely for the purpose of these proceedings, and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, Adamczak, without admitting or denying the findings contained herein, except that he admits the jurisdiction of the Commission over him and over the subject matter of these proceedings, consents to the entry of the findings and the issuance of this Order Instituting Proceedings, Making Findings, Imposing Sanctions and Imposing a Cease-and Desist Order (the "Order").

Accordingly, IT IS ORDERED that proceedings against Adamczak be, and hereby are, instituted.

III.

On the basis of this Order and the Offer submitted by Adamczak, the Commission finds that:2

A. Albert Adamczak, age 40, is a certified public accountant licensed in Pennsylvania. He became Vice President of Corporate Support Services (the "Accounting Department") for Allegheny Health Education and Research Foundation ("AHERF") in June 1997, reporting directly to AHERF's Chief Financial Officer ("CFO"). Prior to his promotion in June 1997, he served as a senior director of accounting for AHERF and AHERF's western subsidiaries. Adamczak worked as an accountant for a large accounting firm for eight years prior to joining AHERF. In that position Adamczak participated in one or more audits of the financial statements of public companies, which were included in filings with the Commission.

B. AHERF is a Pennsylvania nonprofit healthcare organization formed in 1983. Until recently, it was the parent holding company and sole member or owner of numerous subsidiaries.3 On July 21, 1998, AHERF instituted bankruptcy proceedings under Chapter 11 of the United States Bankruptcy Code on behalf of itself and four of these subsidiaries in the U.S. District Court for the Western District of Pennsylvania.

C. From 1987 to 1997, AHERF expanded rapidly, acquiring other non-profit healthcare organizations, including several in the Philadelphia metropolitan area: the Medical College of Pennsylvania, United Hospitals, Inc., Hahnemann University Hospital and the Graduate Health System ("Graduate"). The acquired entities became direct or indirect subsidiaries of AHERF.

D. As an umbrella holding company, AHERF managed and provided centralized corporate support services for the acquired entities, but did not assume liability for their pre-existing debt. The obligation to repay debt within AHERF was placed on collections of one or more of its non-profit subsidiaries known as "obligated groups." By 1997, AHERF had five obligated groups: Allegheny General Hospital ("Allegheny General"), Allegheny University Medical Centers, Delaware Valley, Allegheny Hospitals, Centennial ("Centennial"), and Allegheny Hospitals, New Jersey.

E. By the time of the bankruptcy in July 1998, AHERF's obligated groups were responsible for, at least, thirteen bond issues, with outstanding debt of more than $900 million.

F. Pursuant to contractual obligations, the obligated groups, through AHERF as their agent, provided to nationally recognized repositories annual Secondary Market Disclosure Reports ("Disclosure Reports") containing audited financial statements prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), debt coverage ratios and other information with respect to certain of its obligated groups. These Disclosure Reports were made available to the public through these repositories and were the most easily accessible source of information for investors and potential investors in AHERF bonds.

G. From at least June 1997 through July 21, 1998, AHERF's financial reporting function, including the initial preparation of financial statements, was primarily handled by the Accounting Department, which reported to Adamczak. Significant aspects of the financial reporting function also were the responsibility of other departments or entities within AHERF.

H. As a member of AHERF management, Adamczak participated in most, if not all, significant decisions affecting the financial statements of AHERF and its subsidiaries. Subject to AHERF's chief financial officer, he oversaw AHERF's accounting department. He further was responsible for the accuracy of the numbers in the financial statement, and received and reviewed drafts of AHERF's 1997 consolidated Disclosure Report.

I. On or about February 6, 1998, AHERF distributed its 1997 audited consolidated financial statements with consolidating schedules and consolidated Disclosure Report to the nationally recognized repositories and numerous other third parties.

J. AHERF's audited consolidated financial statements with consolidating schedules for the year ended June 30, 1997, purportedly prepared in accordance with GAAP, were materially false and misleading and failed to comply with GAAP in that:

1. they materially overstated AHERF's 1997 consolidated net income; and

2. they materially overstated Delaware Valley's 1997 net income.

K. AHERF's 1997 consolidated Disclosure Report was materially false and misleading in that:

1. it mirrored the numerical misstatements in the AHERF 1997 audited consolidated financial statements and consolidating schedules;

2. it materially misrepresented the condition of Delaware Valley accounts receivable; and

3. it materially misrepresented the financial condition of Centennial.

L. From at least June 1997 through July 21, 1998, Adamczak willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder in that he, directly or indirectly, in connection with the purchase or sale of securities, namely, AHERF bonds, by use of the means or instrumentalities of interstate commerce, or the mails: (1) employed devices, schemes or artifices to defraud; (2) made untrue statements of material fact and omitted to state material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading; and (3) engaged in acts, practices and courses of business which operated as a fraud and deceit upon persons, including the purchasers and prospective purchasers of such securities. Such violations include Adamczak's deliberate and/or reckless misrepresentation or failure to disclose, directly or indirectly, to investors:

1. the overstatement of AHERF's consolidated net income at June 30, 1997 because of the failure to adjust Delaware Valley's reserve and expense accounts related to uncollectible receivables in accordance with GAAP;

2. the overstatement of Delaware Valley's net income at June 30, 1997 because of the failure to adjust Delaware Valley's reserve and expense accounts related to uncollectible receivables in accordance with GAAP;

3. the overstatement of AHERF's consolidated net income at June 30, 1997 because of the misclassification of certain restricted funds;

4. the misrepresentation of the condition of Delaware Valley accounts receivable in AHERF's 1997 consolidated Disclosure Report, including the misrepresentation of the reason for the decrease in net patient accounts receivable; and

5. the misrepresentation of Centennial's financial condition in AHERF's 1997 consolidated Disclosure Report, including the misrepresentation of the reasons for certain Centennial restructuring costs and for the change in Centennial intercompany account balances from a receivable position to a payable position.

IV.

On the basis of this Order and the Offer submitted by Adamczak, the Commission finds that Adamczak willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

V.

In view of the foregoing, the Commission deems it appropriate to accept the Offer submitted by Adamczak.

Accordingly, IT HEREBY IS ORDERED pursuant to Section 21C of the Exchange Act, that Adamczak cease and desist from committing or causing any violations and any future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and

IT IS FURTHER ORDERED, effective immediately, that:

A. Adamczak is denied the privilege of appearing or practicing before the Commission as an accountant.

B. After three years from the date of this Order, Adamczak may request that the Commission consider his reinstatement by submitting an application to the Office of the Chief Accountant to resume appearing or practicing before the Commission as:

1. a preparer or reviewer, or a person responsible for the preparation or review, of any public company's financial statements that are filed with the Commission. Such an application must satisfy the Commission that Adamczak's work in his practice before the Commission will be reviewed either by the independent audit committee of the public company for which he works or in some other acceptable manner, as long as he practices before the Commission in this capacity; and/or

2. an independent accountant. Such an application must satisfy the Commission that:

(a) Adamczak, or the firm with which he is associated, is a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section");

(b) Adamczak, or the firm, has received an unqualified report relating to his, or the firm's, most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section; and

(c) As long as Adamczak appears or practices before the Commission as an independent accountant he will remain either a member of the SEC Practice Section or associated with a member firm of the SEC Practice Section, and will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education.

C. The Commission's review of an application by Adamczak to resume appearing or practicing before the Commission may include consideration of, in addition to the matters referenced above, any other matters relating to Adamczak's character, integrity, professional conduct, or qualifications to appear or practice before the Commission.

D. Adamczak shall comply with his cooperation agreement, as set forth in paragraph IV.C. of his Offer.

By the Commission.

Jonathan G. Katz
Secretary


Footnotes

1 Paragraph 1 of Rule 102(e) provides in relevant part that:

The Commission may ... deny, temporarily or permanently, the privilege of appearing or practicing before it in any way to any person who is found by the Commission after notice and opportunity for hearing in the matter... (iii) [t]o have willfully violated ... any provision of the Federal securities laws or the rules and regulations thereunder.

2 The findings herein are made pursuant to Adamczak's Offer and are not binding on any other person or entity in this or any other proceeding.

3 AHERF's underlying entities are referred to as "subsidiaries," although technically AHERF was their sole "member", not a shareholder.