Scandal erupts from losses in coins

Ohio officials say firm lost $215 million of state money

June 10, 2005|By Tim Jones | Tim Jones,CHICAGO TRIBUNE

A political scandal over the loss of millions of dollars in rare coins has mushroomed in Ohio, where officials in charge of the state's injured workers fund have revealed that a politically connected private investment company lost $215 million of state money.

Although Republican Gov. Bob Taft said he did not know about the loss until Tuesday, Democrats are charging a cover-up and some are demanding a recall of the governor after the release of an October 2004 e-mail from a Taft administrative aide. The memo reportedly warned Taft's office of major losses from investments by MDL Capital Management, a Pittsburgh-based firm that also managed teacher retirement funds in Illinois.

MDL Capital managed a $138 million bond fund for the Illinois Teachers Retirement System until October 2003, when pension administrators dumped the firm. John Day, a TRS spokesman, said yesterday that MDL did not meet the fund's investment return expectations for about nine months.

"Our process is to make sure we catch problems. ... They were underperforming," Day said, adding that TRS had had a relationship with the firm since late 2000.

During a news conference yesterday, Taft said that "$200 million is a huge amount of money to lose" and that the matter is "very serious." But he emphasized that the Ohio Bureau of Workers' Compensation, the state agency that made the investments, is "solvent and actuarially sound."

Taft repeated that he had no knowledge of October's memo and laid the blame for his being unaware of the losses on one of his aides and the director of the bureau, who resigned last month. He called Democratic charges of a cover-up "totally inaccurate.

Republicans control all major statewide offices in Ohio, as well as both houses of the legislature. Democrats have almost daily charged that the scandal is the product of a "culture of corruption."

Although this week's revelations from the Bureau of Workers' Compensation dwarf a $12 million to $13 million loss from rare coin investments by the same state agency, it has quickly added to the perception of mismanagement, cronyism and scandal.

Tom Noe, the former chairman of the Bush-Cheney re-election campaign in northwest Ohio, has been blamed for losing up to $13 million in rare coin investments in funds that he controls, and state and federal investigators are poring over Noe's records.

The Chicago Tribune is a Tribune Publishing newspaper.

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