SECTION: NEWS; Pg. A03

LENGTH: 513 words

HEADLINE: JUDGE ORDERS BOND, FREEZES ASSETS OF FAILING HMO'S OWNER

BYLINE: RANDY DIAMOND, Trenton Bureau

DATELINE: TRENTON

BODY:
A Superior Court judge Thursday ordered the owner of a financially
insolvent HMO that was taken over by the state this month to put up
$ 848,000 in cash or bond, and he also froze $ 4 million in assets of
other corporations owned by Dr. Magdy Elamir.

In addition, Judge Anthony Parillo prohibited Elamir, who lives in
Saddle River, from transferring any of his personal assets. The
temporary restraints will remain in effect until at least Feb. 1, when
Parillo is to hold another hearing.

Elamir, the owner of American Preferred Provider Plan, must post
the $ 848,000 in cash or bond by Jan. 4 to cover money the state says
Elamir was paid improperly by APPP for medical consulting fees. The fees
were in addition to his $ 400,000 a year salary as chairman of the
Newark-based HMO.

The state had asked Parillo to require Elamir to put up $ 6 million,
the amount officials say Elamir misappropriated from the HMO.

Deputy Attorney General Emerald Keupper said the state was
satisfied with Parillo's order because it protected the assets that
officials say had been diverted by Elamir from the HMO.

APPP was taken over by the Department of Banking and Insurance this
month after the state revealed that the HMO, which primarily serves
Medicaid recipients, was $ 25 million in the red. APPP has 44,000 members
statewide, including 13,000 in Passaic County and 3,000 in Bergen
County.

Elamir's attorney, Michael Chertoff, the former U.S. attorney in
Newark, offered the doctor's first in-depth defense to the state charges
Thursday, insisting that Elamir had not misappropriated any funds from
APPP.

He also blamed the state, saying its decision in 1997 to reduce
Medicaid fees paid to HMOs had a devastating impact on APPP's financial
health.

Chertoff presented a thick document from Elamir's accountant,
Mohammed Hanafy, offering explanations for the money transfers from APPP
to other Elamir-controlled corporations.

For example, Management Services of America, which was paid
$ 1,559,000 by APPP, provided administrative services for the HMO and
paid half the salary of APPP's top executives and the full salary of
consultants working for the HMO, according to the papers submitted by
Hanafy.

Hanafy said APPP's payment of $ 50,000 to the Jersey City
Neurological Center, where Dr. Elamir's private practice is based, was
to reimburse the practice, which paid part of the cost of installing new
elevators at APPP's headquarters at 810 Broad St. in Newark. Elamir owns
the Broad Street building.

And Hanafy maintains that a $ 2,097,000 loan Elamir made to his
start-up HMO in Washington, D.C., was to expand the New Jersey HMO's
subscriber base.

Keupper says the state is not satisfied with Hanafy's explanations,
noting that officials have been unable to obtain a full accounting of
services provided by Elamir's corporations to APPP.

Insurance officials say that the opening of an affiliate in the
nation's capital was of no benefit to New Jersey members.