BWC SCANDAL Review team mulls over decisions by ex-official
The head of a BWC team is confused by decisions made by the former administrator.
By DAVID SKOLNICK
VINDICATOR POLITICS WRITER
YOUNGSTOWN -- If his department were involved in an investment scandal such as the one at the state Bureau of Workers' Compensation, the Ohio Lottery Commission director said he would go directly to Gov. Bob Taft.
Director Tom Hayes also said he would have held a press conference about the problems.
Former BWC Administrator James Conrad did neither when he discovered his agency's investment losses were more than $240 million.
Hayes, who calls Conrad a close friend, is heading a three-person BWC management review team that hired an independent investment consulting firm to conduct a comprehensive review and audit of the BWC's investment programs.
The review team will make recommendations for changes and improvements to the BWC's investment policies, with a preliminary report due about Aug. 1 and a final report done around Sept. 30.
"We have to figure out what modern insurance companies invest in, and do that," Hayes said.
Hayes, along with Tina Kielmeyer, BWC interim administrator, and Jeremy Jackson, the agency's press secretary, met Tuesday with Vindicator writers.
Hayes said Conrad was a "great public administrator," but "it doesn't make sense what he did on the investment side."
Conrad showed poor judgment when he gave BWC officials under him the power of attorney to invest in coins and hedge funds, Hayes said. The agency lost $215 million in a hedge fund, and up to $13 million from a rare coin investment managed by a prominent Republican contributor. Hayes said the coin investment was a "dumb decision."
There are several criminal and civil investigations ongoing related to the BWC scandal.
State Sen. Marc Dann of Liberty, one of the most vocal critics of how the BWC handles its investments, said he isn't sure Conrad had the legal authority to permit those under him to make those investments.
Kielmeyer said she told Conrad in September 2004 about the hedge fund problem, but the loss at the time was $7 million.
The BWC had 156 investment contracts with only 12 people in its investment division overseeing those contracts.
The BWC's portfolio includes $14.5 billion in investments.
The review team hired Ennis, Knupp & amp; Associates Inc. of Chicago to determine the performance of each of those investments, and see if the BWC can get out of the contracts, Hayes said. He wants either the BWC, with a much larger staff, or the state treasurer's office to oversee the investments of the agency that helps injured workers.
The review will cost about $3 million to $5 million.
When Conrad learned of the financial problems, he told members of Gov. Bob Taft's staff. Taft has insisted he knew nothing about the BWC investment problems until it hit the newspapers.
"I would directly tell the governor in a case like that," Hayes said. "The governor is easily accessible to his Cabinet members. You focus on the problem, and you put the information in your weekly report to the governor. Jim Conrad didn't do that."
When told of Hayes' comments about Conrad, Dann said he too finds Conrad's behavior curious, but for a different reason.
"Conrad is too good of a bureaucrat to do this accidentally," said Dann, D-32nd. "It doesn't make any sense unless he knew it was a payoff to Republicans. Conrad viewed this lack of oversight as part of the process to raise money for Republicans. I believe he was well aware of the problems, and Taft knew as well."
Hayes, who formerly headed the Ohio Job and Family Services under Taft before moving to the lottery commission, was quick to defend the governor.
"I've worked for Gov. Taft, and he never told me to give contracts to certain people," he said. "Bob Taft is honest enough to have said something if he knew."
Dann is filing a lawsuit today in Ohio Supreme Court to get all of Conrad's weekly reports to Taft. Taft turned over Conrad's weekly reports from August 2004 until the BWC official's resignation a little more than a month ago. Dann wants all the reports dating to 1998 when Conrad was hired to run the bureau.