COIN SCANDAL Audit revealed unreported losses last year
However, no one said or did anything to indicate that something was wrong.
An annual audit of a $55 million state investment in rare coins showed only $42 million in coins last year, a discrepancy that should have been addressed by the state insurance fund for injured workers, a fund spokesman said Tuesday.
Also, Attorney General Jim Petro and the bureau said a $3 million loan the former coin investment manager made to himself to buy stock might have violated his contract with the Bureau of Workers' Compensation.
Accountants did the inventory reviews as part of an annual audit of funds handled by Toledo-area coin dealer Tom Noe, now under state and federal investigation for his investment and campaign fund-raising practices for the Republican Party.
The audits came up with a full value of $55 million for the fund last June by adding investments in other coin-related entities and in real estate, bureau spokesman Jeremy Jackson said. It's now clear the noncoin activities should have been scrutinized more aggressively, Jackson said.
"It should have been a red flag," Jackson said. "At the time folks didn't think it was too out of the ordinary."
The first Capital Coin fund showed an inventory of $12.5 million in June 2004, according to a review by Broomall, Pa.-based Doyle & amp; McDonnell. The second Capital Coin fund showed an inventory of $20 million, according to a review by Toledo-based Plante & amp; Moran. A third review of a coin investment spun off from the other two funds showed it was worth $10 million.
The Plante & amp; Moran audit also noted that about 119 coins worth $93,000 were missing. Bureau officials later determined two more valuable coins worth $300,000 were missing after being mailed to a Colorado dealer.
A message seeking comment was left with Noe's attorney, William Wilkinson, who has told the state that $12 million to $13 million could be missing from the investment that should now be worth $58 million.
U.S. Bankruptcy Judge William T. Bodoh, formerly of Youngstown, addressed the coin scandal Tuesday during a press conference at the Ohio attorney general's office.
The bureau's former administrator and chief financial officer have resigned amid growing investment scandals.
The records, obtained by The Associated Press and other media organizations, were made public late Monday following lawsuits against the bureau filed by The Columbus Dispatch, The Blade of Toledo, and Sen. Marc Dann, a Youngstown Democrat.
"There was a colony of red flags," Dann said Tuesday. "Clearly no one was willing to raise questions regarding the politically connected campaign contributors" such as Noe.
Also, Noe's loan to buy $3 million in stock in a Florida coin-grading company should not have been approved under his contract, which only allowed him to make small, short-term loans from the fund for investments such as real estate to generate cash for the coin funds, Jackson said.
"I'm not sure how well we understood the full scope of that transaction," he said.
Noe's attorneys complained last week that Petro wouldn't allow Noe to sell the stock back to the privately held company to repay the loan.
Petro said he won't sign off on the deal until it's clear whether Noe or the state is legally entitled to the proceeds. His first reading of the contract indicates that Noe could not borrow money to buy stock in his name.
The state believes it now holds in either a bank vault or a state crime lab all the coins belonging to the fund, Petro said, except for the missing ones and about $6 million worth involved in active trades.
Petro also is suing a second former fund manager, MDL Capital Management Inc. of Pittsburgh, which lost $215 million of a $225 million investment.
The bureau knew of losses last August, but Petro and Gov. Bob Taft, both Republicans, weren't aware of the scope of the problem until this month. Taft demoted an assistant who didn't pass along an e-mail. Petro on Tuesday blamed an attorney at a law firm hired as special counsel by the bureau who described the case in updates only as a dispute with MDL.
If he had known sooner, Petro said, he could have sued sooner to recover the money.
"I think we're still going to do well in this lawsuit," he said. "I don't think it was a cover-up. It was a screw-up."