The Blade first reported problems with bureau investments on April 3
in a story revealing the bureau’s $50 million investment since 1998 in
a rare-coin fund controlled by Tom Noe, a Toledo-area coin dealer and
prominent Republican.
That story triggered an investigation of the bureau’s investment
practices by the state’s inspector general and several other state
agencies and the decision by the bureau to pull out of the rare-coin
investment.
Two weeks ago, Mr. Noe’s attorneys told law enforcement authorities in
Columbus that $10 million to $12 million of the state’s rare coin
assets were "unaccounted for."
The U.S. attorney’s office and the FBI are also investigating whether
Mr. Noe violated campaign finance laws.
That probe has focused on an October, 2003, fundraiser in Columbus
that generated $1.4 million for the President Bush’s re-election
campaign.
Mr. Noe and his wife, Bernadette, have contributed more than $200,000
to Ohio politicians, political parties, and political action
committees over the past 15 years.
Their giving increased greatly in 1998, the year Mr. Noe’s coin fund
received the first of two $25 million payments from the bureau to
invest in rare coins.
From The Toledo Blade, 6/10/05:
http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20050610/NEWS24/50610004/-1/NEWS
Taft says he was never told; 'Something very wrong' with BWC
investments, he admits
By JAMES DREW and MIKE WILKINSON
BLADE STAFF WRITERS
COLUMBUS --
Speaking publicly for the first time since Tuesday’s disclosure that
the state lost $215 million last year in a high-risk hedge fund
investment, Republican Gov. Bob Taft yesterday denied Democratic
charges of a "cover-up."
"We are doing everything we can to cooperate and provide information
to the inspector general,’’ Mr. Taft said at a press conference
yesterday afternoon at the Bureau of Workers’ Compensation
headquarters.
James Conrad, the bureau’s administrator-CEO, detailed the investment
loss by Pittsburgh-based MDL Capital Management in an Oct. 26, 2004,
e-mail to Taft aide James Samuel.
But Mr. Taft yesterday said he wasn’t told about the e-mail and didn’t
know the extent of the loss until this week.
There also are no references to MDL in the weekly reports that Mr.
Conrad sent to the governor, said Mr. Taft’s press secretary, Mark
Rickel.
"Should I have been told? Obviously,’’ said Mr. Taft.
"Should the administrator of the bureau informed me directly,
personally? I think so. I think that was his obligation; $200 million
is a huge amount of money to lose."
On Tuesday, state officials admitted that the MDL hedge fund the
bureau had invested in had lost $215 million in just a few months last
year.
"Clearly there was something very wrong with the investment management
at the Bureau of Workers’ Compensation," Governor Taft said during a
19-minute question-and-answer session with reporters.
"I don’t think we know yet everything that went wrong with respect to
that part of the bureau."
Asked yesterday if there are more investment losses within the
bureau’s portfolio, Mr. Taft replied:
"I certainly hesitate to answer no to that question because we keep
being surprised by investments."
Senate Minority Leader C.J. Prentiss (D., Cleveland) said she saw a
"cover-up all the way up and all the way down" the
Republican-controlled state government.
"Jim Conrad was not just an administrator,’’ added Sen. Ray Miller
(D., Columbus).
"He was the fix-it man. He was viewed as the star administrator. When
he writes a memo like that, he should have fired the people involved
in this. That suggests to me there was a cover-up."
Mr. Taft said the bureau should continue to serve as an insurance
system for injured workers, but investments should be transferred to
the state treasurer or another state agency.
Mr. Taft said he met with Mr. Conrad a few days before his final day
at the bureau on June 3, and Mr. Conrad "did not talk about any
specific investment contracts."
In an interview yesterday after Mr. Taft’s news conference, Mr. Samuel
said he recalls getting a phone call in late September, 2004, from Mr.
Conrad about a investment problem and he may have mentioned MDL.
Mr. Samuel said he met with Mr. Conrad and Jon Allison, Mr. Taft’s
chief of staff, that day or the next day.
‘Furious’ about decision
Mr. Samuel said he was "furious" when Mr. Conrad told him that
Terrence Gasper, the bureau’s chief financial officer, had approved
reallocating $100 million to MDL to a high-risk hedge fund investment
without notifying Mr. Conrad.
"We all agreed Terry had to leave,’’ Mr. Samuel said.
Mr. Samuel said Mr. Allison briefed the governor soon after that
meeting.
Mr. Samuel said in the next month, he briefed Mr. Allison on Mr.
Gasper’s forced resignation from the bureau and that the attorney
general’s office had apppointed a special counsel to "review the
activities" of MDL.
Mr. Samuel said he "probably" received the Oct. 26, 2004, e-mail from
Mr. Conrad.
He said he recalls briefing Mr. Allison about the topic.
"In all honesty, I don’t remember talking about the $225 million,’’
Mr. Samuel said.
"... Maybe I did. Maybe I didn’t."
Mr. Allison didn’t return a message seeking comment last night.
Mr. Conrad couldn’t be reached for comment.
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This Repug scandal's turnin' out to be a beaut.
Harry
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