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June 7, 2005

Coingate, supersized

UPDATED: So as well as losing up to $12 million on its $50 million, uh, “investment” in rare coins, vintage comic books, beanies and George W. Bush wall clocks, the Ohio Bureau of Workers’ Compensation now admits that it burned through an additional $215 million in another ill-fated venture. From the Toledo Blade:

COLUMBUS - The Ohio Bureau of Workers’ Compensation admitted today that it lost $215 million in a high-risk fund that few people knew about.
The bureau had invested $355 million with a Pittsburgh investment firm, MDL Capital Management, beginning in 1998.
But last year, after diverting $225 million into a fund that works like a hedge fund, the fund lost $215 million. Although the bureau has known about the loss since last year, Gov. Bob Taft was notified about it today.
At the center of the MDL deal were Terry Gasper, the former chief financial officer for the bureau, and Jim McLean, the chief investment officer. In a memo to the governor, Tina Kielmeyer, acting bureau administrator, said Mr. Gasper did not notify former bureau Administrator James Conrad about the investment.
In the wake of the growing Noe scandal, Mr. Conrad resigned two weeks ago and left the agency on Friday. Mr. McLean was put on paid administrative leave today pending a management review of the situation.
The bureau last year asked the Ohio Attorney General to appoint special counsel in the case and ordered Mr. Gasper to either resign or be fired. He resigned Oct. 6, 2004.

Seems that what started out as a relatively safe investment in a long-term bond fund somehow morphed into a much bigger bet on what was effectively a high-risk bond hedge fund—even though such an investment contravened the bureau’s investment policy.

The full extent of the loss was discovered back in November 2004. For some strange reason, it wasn’t made public until the Coingate investigation stumbled across it. I wonder why.

UPDATE: Who knew what and when gets murkier by the day. The Toledo Blade again:

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.

So Taft didn’t think that $20 million in losses was worth disclosing to taxpayers? Can you say “cover-up”?

Posted by Stephen at 9:28 PM in Politics | Permalink | TrackBack (0)

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