From The Toledo Blade, 6/8/05:
http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20050608/NEWS24/50608003

RARE-COIN CASE

Workers' comp bureau concealed $215M loss;

Taft, Petro knew about fund's woes many months ago

By MIKE WILKINSON and JAMES DREW
BLADE STAFF WRITERS


COLUMBUS --

Democrats were screaming "cover-up" yesterday after state officials
admitted that a high-risk hedge fund that the embattled Ohio Bureau of
Workers’ Compensation had invested in had lost $215 million in just a
few months last year.

The bureau acknowledged that the fund, managed by a Pittsburgh-based
investment firm, lost the money between February and September, 2004.

MDL Capital Management relinquished control of the fund in November.

Although the bureau has known about the losses since September, it
wasn’t revealed until yesterday, a day after The Blade began making
calls upon learning that state investigators had uncovered huge losses
at the bureau.

A spokeman for Gov. Bob Taft said last night that Mr. Taft had been
told in September that there was an investment loss at the bureau -- a
loss of $10 million to $20 million.

Bureau records show that Attorney General Jim Petro’s office also was
informed of the investment loss in September.

Spokesmen said Mr. Taft and Mr. Petro did not learn the full extent of
the loss until yesterday.

State Rep. Chris Redfern (D., Catawba Island) was among legislators
who were shocked by the news.

"It begs the question, ‘Where was the oversight?’ It looks to me that
the Bureau of Workers’ Compensation needs to hire an independent
forensic auditor within the department itself. There seems to be no
one in charge.

"Somebody tried to cover this up,’’ said Mr. Redfern.

"The bureau, by its own admission, fired its chief financial officer
and never told us why.’’

For the first time in weeks, the talk out of the bureau wasn’t about
rare coins and Tom Noe.

Instead it focused on hedge funds and MDL, a Pittsburgh firm with
clients across the country.

The investments with MDL are unrelated to the bureau’s coin funds
managed by Mr. Noe, a prominent Toledo-area coin dealer.

But the news of the MDL losses were revealed just a day after the Ohio
Ethics Commission reported expanding its probe into whether bureau
employees complied with state ethics laws.

Earlier yesterday, before news of the MDL losses were reported,
Inspector General Tom Charles confirmed that his office was
investigating other bureau investments.

Jeremy Jackson, spokesman for the bureau, would not comment on whether
the Noe investigation uncovered the MDL losses.

"There are investigations going on, including the [Ohio] inspector
general," Mr. Jackson told The Blade, which first uncovered the
bureau’s rare-coin investment on April 3.

Actions questioned

Tina Kielmeyer, the bureau’s interim administrator, said the bureau
believes MDL’s fund managers "acted outside the scope of the contract"
and the bureau could take civil or criminal action against the
"appropriate parties."

Ms. Kielmeyer disclosed yesterday that Terry Gasper, the bureau’s
former chief financial officer, was forced to resign last year because
of the losses.

Earlier this year, however, bureau officials told The Blade that Mr.
Gasper left for health reasons.

James Conrad, forced by the unfolding Noe rare-coin scandal to resign
as the bureau’s administrator, told Ms. Kielmeyer in his last meeting
with her that the investment loss would require her "immediate
attention."

She said she and a management review team appointed by Mr. Taft Friday
are looking for other questionable investments.

"We are scouring all of the investment records to ensure that all of
the proper protocols were followed,’’ she said.

Mark D. Lay, the chairman and chief executive of MDL, defended the
fund and the losses.

He said the "active duration fund" was a hedge fund that gambled that
long-term interest rates would rise.

If they had, the hedge fund would have made money, offsetting expected
losses by the bureau’s overall bond funds.

When long-term rates instead fell, the value of the hedge fund
plummeted.

Mr. Lay said that means the other funds gained in value; however, the
bureau could not confirm that last night.

"We’ve done nothing outside the scope of the contract," Mr. Lay said.

"It was a simple overlay strategy done through a hedge-fund vehicle."

Ms. Kielmeyer, in a memo to Governor Taft yesterday about the loss,
offered a chronology that both answers and raises questions about the
deal.

Mr. Conrad wasn’t told about the losses until they had already
occurred, although Jim McLean, the bureau’s chief investment officer,
was aware of them.

___________________________________________________

The mud gets thicker every day in this new Republican scandal.

Harry

From The Toledo Blade, 6/8/05:
http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20050608/NEWS24/50608003
RARE-COIN CASE Workers' comp bureau concealed $215M loss;
Taft, Petro knew about fund's woes many months ago
By MIKE WILKINSON and JAMES DREW BLADE STAFF WRITERS COLUMBUS --
Democrats were screaming "cover-up" yesterday after state officials
admitted that a high-risk hedge fund that the embattled Ohio Bureau of
Workers’ Compensation had invested in had lost $215 million in just a
few months last year.

From The Toledo Blade, 6/8/05:
http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20050608/NEWS24/50608003

RARE-COIN CASE

Workers' comp bureau concealed $215M loss;

Taft, Petro knew about fund's woes many months ago

By MIKE WILKINSON and JAMES DREW
BLADE STAFF WRITERS


COLUMBUS --

Democrats were screaming "cover-up" yesterday after state officials
admitted that a high-risk hedge fund that the embattled Ohio Bureau of
Workers’ Compensation had invested in had lost $215 million in just a
few months last year.

The bureau acknowledged that the fund, managed by a Pittsburgh-based
investment firm, lost the money between February and September, 2004.

MDL Capital Management relinquished control of the fund in November.

Although the bureau has known about the losses since September, it
wasn’t revealed until yesterday, a day after The Blade began making
calls upon learning that state investigators had uncovered huge losses
at the bureau.

A spokeman for Gov. Bob Taft said last night that Mr. Taft had been
told in September that there was an investment loss at the bureau -- a
loss of $10 million to $20 million.

Bureau records show that Attorney General Jim Petro’s office also was
informed of the investment loss in September.

Spokesmen said Mr. Taft and Mr. Petro did not learn the full extent of
the loss until yesterday.

State Rep. Chris Redfern (D., Catawba Island) was among legislators
who were shocked by the news.

"It begs the question, ‘Where was the oversight?’ It looks to me that
the Bureau of Workers’ Compensation needs to hire an independent
forensic auditor within the department itself. There seems to be no
one in charge.

"Somebody tried to cover this up,’’ said Mr. Redfern.

"The bureau, by its own admission, fired its chief financial officer
and never told us why.’’

For the first time in weeks, the talk out of the bureau wasn’t about
rare coins and Tom Noe.

Instead it focused on hedge funds and MDL, a Pittsburgh firm with
clients across the country.

The investments with MDL are unrelated to the bureau’s coin funds
managed by Mr. Noe, a prominent Toledo-area coin dealer.

But the news of the MDL losses were revealed just a day after the Ohio
Ethics Commission reported expanding its probe into whether bureau
employees complied with state ethics laws.

Earlier yesterday, before news of the MDL losses were reported,
Inspector General Tom Charles confirmed that his office was
investigating other bureau investments.

Jeremy Jackson, spokesman for the bureau, would not comment on whether
the Noe investigation uncovered the MDL losses.

"There are investigations going on, including the [Ohio] inspector
general," Mr. Jackson told The Blade, which first uncovered the
bureau’s rare-coin investment on April 3.

Actions questioned

Tina Kielmeyer, the bureau’s interim administrator, said the bureau
believes MDL’s fund managers "acted outside the scope of the contract"
and the bureau could take civil or criminal action against the
"appropriate parties."

Ms. Kielmeyer disclosed yesterday that Terry Gasper, the bureau’s
former chief financial officer, was forced to resign last year because
of the losses.

Earlier this year, however, bureau officials told The Blade that Mr.
Gasper left for health reasons.

James Conrad, forced by the unfolding Noe rare-coin scandal to resign
as the bureau’s administrator, told Ms. Kielmeyer in his last meeting
with her that the investment loss would require her "immediate
attention."

She said she and a management review team appointed by Mr. Taft Friday
are looking for other questionable investments.

"We are scouring all of the investment records to ensure that all of
the proper protocols were followed,’’ she said.

Mark D. Lay, the chairman and chief executive of MDL, defended the
fund and the losses.

He said the "active duration fund" was a hedge fund that gambled that
long-term interest rates would rise.

If they had, the hedge fund would have made money, offsetting expected
losses by the bureau’s overall bond funds.

When long-term rates instead fell, the value of the hedge fund
plummeted.

Mr. Lay said that means the other funds gained in value; however, the
bureau could not confirm that last night.

"We’ve done nothing outside the scope of the contract," Mr. Lay said.

"It was a simple overlay strategy done through a hedge-fund vehicle."

Ms. Kielmeyer, in a memo to Governor Taft yesterday about the loss,
offered a chronology that both answers and raises questions about the
deal.

Mr. Conrad wasn’t told about the losses until they had already
occurred, although Jim McLean, the bureau’s chief investment officer,
was aware of them.

___________________________________________________

The mud gets thicker every day in this new Republican scandal.

Harry