Taft demotes aide over withheld data
6/18/2005Yesterday was James Samuel s final day in the governor s office, said Mark Rickel, Mr. Taft s press secretary.
He made a very critical mistake in not passing along information on the size of the MDL loss, Mr. Rickel said.
The bureau confirmed June 7 that a high-risk hedge fund that it invested in through Pittsburgh-based MDL Capital Management had lost $215 million in just a few months last year.
On June 8, an e-mail surfaced that James Conrad, the bureau s former administrator-CEO, wrote to Mr. Samuel on Oct. 26, 2004, explaining that the entire value of the hedge fund that MDL managed had been lost.
I did not directly tell the governor about the dollar figure, Mr. Samuel said last night, repeating his statement a week ago that he recalls briefing Jon Allison, the governor s chief of staff, about the Oct. 26, 2004 e-mail but does not remember telling Mr. Allison that the entire $215 million had been lost.
Maybe I did. Maybe I didn t, he told The Blade on June 9.
Mr. Allison has said Mr. Samuel, 35, did not forward or discuss the e-mail contents with him.
Mr. Taft has said he was not told about Mr. Conrad s e-mail and didn t know the extent of the loss until last week.
Mr. Samuel, who in July, 2003, joined the governor s office as an executive assistant for business and industry after working eight years for the bureau, is being demoted to a post in the taxation department. He ll work on tax amnesty programs, with his salary trimmed from $80,000 to $76,000, Mr. Rickel said.
Mr. Conrad announced his resignation May 27 after Mr. Taft said the bureau had failed to implement proper controls to safeguard the bureau s $50 million investment in rare-coin funds controlled by Tom Noe, a Toledo-area coin dealer and Republican fund-raiser.
Mr. Taft decided not to fire Mr. Samuel because he has been a very capable employee who has worked tirelessly on the governor s plan to overhaul the state tax system, Mr. Rickel said.
Karen Huey, director of the Ohio Office of Criminal Justice Services since November, 2003, will be Mr. Taft s new liaison to the bureau, the governor announced yesterday.
Bush-Cheney campaign
As Mr. Taft demoted Mr. Samuel, bureau officials confirmed that one of its investment analysts served as director of events for the Bush-Cheney re-election campaign last year in Ohio.
Jeremy Jackson, the bureau s press secretary, said he believed that the employee, John Scharer, began working for the bureau early last year, resigned, and then was rehired by the bureau in January.
It is our understanding that his activity was with the Bush-Cheney campaign when he was not an employee with the Ohio Bureau of Workers Compensation, Mr. Jackson said.
Mr. Jackson said he did not know if the bureau which has denied that politics played any role in its decision to invest in Mr. Noe s Capital Coin funds or in the hiring of other fund managers who have contributed to GOP officeholders, including President Bush had any rules pertaining to political activity by employees.
Mr. Scharer was listed on the Bush-Cheney Ohio campaign roster as director of events for the campaign and as an assistant legislative liaison for the bureau. Mr. Jackson said he is considered as part of the administrative support staff at the bureau.
To my understanding he is not involved in any investment-making decisions. He merely provides administrative support, Mr. Jackson said.
Mr. Rickel said he has never heard of Mr. Scharer, and he didn t think the governor knew him. Did he take a leave of absence? Mr. Rickel said, when reached for comment about Mr. Scharer.
Taft in Bowling Green
Yesterday morning, after attending the Buckeye Boys State program in Bowling Green, Mr. Taft lashed out at the bureau and proposed that a new independent board should oversee its investment portfolio.
BWC has failed repeatedly, Mr. Taft told reporters.
Mr. Taft said the three-member management review team he appointed on June 3 continues to review the bureau s investments.
They can stabilize the patient, but radical surgery is in order to make BWC s investments function properly and professionally, said Mr. Taft in a written statement. In order to provide injured workers and employers the peace of mind they deserve, responsibility of investments should be completely removed from the bureau.
The statement was another dramatic example of how the governor s views on the bureau have changed in recent months.
After The Blade on April 3 published the first story about the bureau s $50 million rare-coin investment, Mr. Taft defended the bureau and Mr. Noe personally, and watched Mr. Conrad write several letters critical of Democratic legislators and Democratic Columbus Mayor Michael Coleman, who raised questions about the investment.
But on May 27, two days after state and federal authorities said they were pursuing criminal and civil charges against Mr. Noe for allegedly misappropriating $10 million to $12 million from the state s rare-coin funds that he controlled, Mr. Taft said the bureau had made a bad decision by investing with the wrong person.
The governor demoted Mr. Samuel a day after the state released more than a thousand pages of documents about the MDL investment loss, including a series of e-mails that documented that bureau head Mr. Conrad had discussed with top Taft staffers how to contain the news about the $215 million hedge-fund loss.
Out of the loop
At 7:22 a.m. on Oct. 28, 2004, Mr. Conrad wrote an e-mail to his assistant, Ben Taylor.
I ve decided we should not put the MDL article in the Governor s weekly [report]. There are 13 copies of it made (or thereabouts) and we don t need it getting unnecessarily passed around. Perhaps we should send it under separate cover to Jon Allison, Jim Samuel, and the Governor. Thoughts?
Mark Nedved, the bureau s lobbyist, replied at 8:15 a.m. to Mr. Conrad: Since you already have sent the e-mail, I don t see the harm in keeping it out. If you hadn t sent the e-mail, then I d say it probably needs to conveyed in the weekly. (Mr. Nedved referred to the Oct. 26, 2004, e-mail from Mr. Conrad to Mr. Samuel, in which he explained that the entire value of the MDL hedge fund was gone.)
At 10:33 a.m., Mr. Conrad wrote to Mr. Nedved: I talked to both Samuel and Allison. They have enough information at the present time and both agreed it would be a mistake to put it in the weekly due to the wide and uncontrolled circulation of the Governor s weekly.
Mr. Rickel said yesterday that Mr. Allison, the governor s chief of staff and a veteran Taft aide who also worked for him when Mr. Taft was Ohio s secretary of state, was not disciplined because he didn t know the state had lost $215 million in the MDL investment until last week.
Mr. Taft yesterday said he did not know about the Oct. 28 e-mails or the decision to keep information about MDL out of the weekly report. He would not comment on the timing of the e-mails, only five days before the November presidential election.
I can t speculate on politics, said Mr. Taft, who was chairman of
President Bush s re-election campaign last year in Ohio.
Critics attack bureau
But state Sen. Eric Fingerhut (D., Cleveland) said the bureau is infected with politics.
Everything that went on there, from who they gave money to to how they release information, is clearly political. And I don t get a sense they understand the full extent of their malfeasance. They have learned better how to berate those who are being critical, Mr. Fingerhut said.
Democrats also swiftly dismissed Mr. Taft s proposal that a new independent board should oversee its investment portfolio.
We know there has been a deliberate attempt to conceal the loss of a quarter-billion dollars from the people of Ohio, House Minority Leader Chris Redfern (D., Catawba Island) said. We don t know the extent of this cover-up, and we don t know who in state government has been telling the truth and who has not.
So why is Bob Taft trying to dictate a solution to the General Assembly before it has even held a single committee meeting to investigate this scandal? Mr. Redfern said.
Mr. Rickel said the current five-member oversight commission would retain its role in reviewing how the bureau is managed.
But five of the seven members on the proposed new investment board would consist of investment and financial management experts, Mr. Rickel said. Two of its members would be from the bureau s oversight commission. Mr. Taft urged the legislature to approve creation of the new investment board by the end of this year.
State Sen. Jeff Jacobson, a Republican from suburban Dayton, said it is clear the bureau needs more investment professionals on the oversight commission, but it is not clear whether a second board is needed.
State Sen. Marc Dann, a Democrat from suburban Youngstown, said another board is not needed. What is needed is a commission with an equal number of Republican and Democratic lawmakers to investigate the bureau investment scandal, Mr. Dann added.
The governor s proposal just isn t good enough. Anything less than a bipartisan, bicameral commission with subpoena power and a comprehensive staff of lawyers, actuaries, and accountants fails to get the answers we need, Mr. Dann said yesterday. The governor is putting the cart before the horse. This is just another attempt to cover up corruption and scandal. Ohioans won t accept it.
Blade Staff Writer Christopher Kirkpatrick contributed to this report.
Contact James Drew at:
jdrew@theblade.com
or 614-221-0496.