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Ohio Gov. Bob Taft agreed Thursday to an interview at The Blade about the recent controversy surrounding the Ohio Bureau of Workers' Compensation investments in rare coins.
On Sunday, The Blade reported that the bureau gave $50 million to be invested in rare coins by two funds managed by Tom Noe, a local coin dealer, prominent Toledo-area Republican, and a frequent campaign contributor to Mr. Taft and other top GOP officeholders in the state.
The story raised a number of issues regarding the investments by the Noe funds:
●Two coins purchased with state money and worth roughly $300,000 were lost in the mail in 2003.
●The funds wrote off $850,000 in debt over the last three years to cover a failed business relationship between Mr. Noe's funds and a fellow coin dealer who was managing a subsidiary set up by Mr. Noe.
●A Noe fund had loaned some of the state's money to a Toledo real estate business owned by John Ulmer, who buys and sells central-city homes, charging home buyers 10 to 12 percent interest. Neighborhood backers, especially in the Lagrange Street area of North Toledo, have complained that Mr. Ulmer's business is blighting the area.
Following are excerpts of Thursday's Blade interview with Governor Taft:
BLADE: A number of people have asked for an investigation. Should the state investigate Mr. Noe's rare coin funds?
TAFT: Whether or not I think it's needed, I know the Ohio inspector general is looking at it and he may decide to look into it, which is fine with me. We would welcome that.
In reading the articles, to me it's not unusual for our retirement systems, or any long-term fund, to invest in nonconventional, higher-risk investments to diversify their portfolios, to hedge against inflation, and also to hedge against the stock market downturns.
And accountability is built into the system. The accountability is: Do you perform? I mean, what's the return? If a company doesn't return, they're out. The bureau has probably terminated any number of companies that didn't perform. So there's a bottom line here.
BLADE: Ohio is the only state we've found that's invested in rare coins. Do you find that at least unusual?
TAFT: Because it's innovative it's a problem?
BLADE: What may be more unusual is that they lost some of the investment. Two of the coins were lost in the mail.
TAFT: What's the overall rate of return? Are you sure that none of the other companies that invested never lost a piece of paper? Certainly they had losses; they all have losses.
BLADE: $300,000 in coins isn't a piece of paper. He's also written off several hundred thousand dollars of the state's money to a partner of his. There seems to be enough questions to us to call for an independent investigation.
TAFT: Those issues you're talking about have to do with performance. What about the other 50 [investment firms that received bureau money]? Why don't you ask for an investigation on them? Let's look at everybody. The bureau paid closer attention to this investment because it was unique. That's why they sent the auditor in there.
The bottom line is: Is it making money for the state? And it was. He was making money for the state; what's the problem?
BLADE: The bottom line is if you'd asked for your $50 million back he probably couldn't give it to you.
TAFT: He's making money for the state. What's the problem? Funds invest in commodities all the time. People invest in commodities. What's so surprising? People invest in gold. People invest in silver.
BLADE: I'm sure the Lagrange Development people would love to take you on a tour and show you what state money has bought in Toledo - blighted homes that are sitting empty today, purchased by John Ulmer. They'd probably be happy to have you interview poor folks who have been charged above-market interest rates [to buy these homes].
TAFT: Then write a story about John Ulmer. The issue is the return, the rate of return for the state.
BLADE: Regardless of its effect on neighborhoods in Toledo?
TAFT: These people, these firms, they are hired to do a job. They are hired to get a return for the state on its investment.
BLADE: And it doesn't matter how they get that return?
TAFT: Of course it matters. It's got to be legal and so forth. This is an investment that's given a return for the state. It's helped us lower workers' compensation rates, which is good for the state.
BLADE: We don't want to imply or state that you don't care that Ohioans are being charged above-market interest rates, poor Ohioans, based on a state investment.
TAFT: You're looking for whatever angle you can find, and that's fine if you want to do that. I don't have all the facts on that. All I can say is that the Workers' Compensation Bureau has a very open, a very competitive policy with regard to how they choose investors. They hold them accountable for results, and that policy seems to have worked in this case to the advantage of the state.
BLADE: Do you think Tom Noe was given the contract because of his political contributions to Republicans?
TAFT: The way you write the article it's like damning by association. If you're going to eliminate from being able to compete on state projects anybody up here in Toledo that happens to give a lot of contributions ... that's not going to be good for this part of the state, I hate to tell you. You're not going to have anybody bidding. I mean, you probably have 20,000 people up here who contribute to state campaigns. When you associate that and imply that when there's no evidence of the connection, that's not responsible and of course people would think that when you write it. You juxtapose it like that ... What evidence do you have that there was any preferential treatment for Tom Noe?
BLADE: You appointed him to the [Ohio] Board of Regents that oversees higher education and he doesn't have a college degree. Why did you do that?
TAFT: What's that got to do with the price of eggs in Siberia? That's ridiculous.
BLADE: You reappointed him to the position. He does not have a college degree. Does he have a special expertise in higher education?
TAFT: What you're saying implies to me that you guys have got a vendetta against Tom Noe. Because you're trying to dredge up every conceivable fact that would be harmful to him. He's probably been the most effective advocate for this part of the state in Columbus that you've got and you're going after this guy. You're trying to kill him for some reason. I don't know why. He was on the board of trustees for Bowling Green State for nine years, that doesn't qualify him to be on the board of regents? He's highly qualified. He gives an incredible amount of time to state issues. He's given a lot of time to the Turnpike [Commission], he's given a lot of time to the board of regents. There are few people that are talented and knowledgeable and smart and willing to give that amount of time. You ought to praise him, for Christ's sake.
BLADE: Everyone keeps saying there isn't any evidence of politics. That seems like a legal answer. Was there politics involved?
TAFT: Your article implies there's a connection without any evidence. Is that good journalism?
BLADE: It's not an implication. It's a statement of fact. He was giving money, he got the contract, and after he got the contract he gave more money.
TAFT: It is an implication. It's implication. It is. That's why people think there's a connection. That's why people get cynical about politics.
BLADE: If people who get government contracts didn't suddenly start giving money to the people running the government, there wouldn't be an implication.
TAFT: Tom Noe's been supporting me since I first ran for secretary of state. He probably supported me when I ran with Jim Rhodes, for God's sake. He didn't have any contracts with the state.
BLADE: Does that give him a different access than someone who doesn't give?
TAFT: I don't know. You tell me.
BLADE: I assume when he calls you, you would pick up his calls versus somebody else.
TAFT: Anybody could have bid. This bidding was wide open, anybody could have bid. Firms from all over the country bid and they got pieces of the action.
BLADE: And he was the only one that wasn't graded. The rest were graded by a series of benchmarks of other investments.
He was the only one not graded, and [the bureau's] answer was, we had nothing to grade him against. They gave him $25 million and after the auditor raised questions they gave him another $25 million.
TAFT: It was based on his performance. He was getting a return that was better than the stock market.