AKRON, Ohio A federal judge on Tuesday sentenced an investment adviser to 12 years in prison on fraud charges related to the loss of $216 million in a hedge fund at the state agency for injured workers.
Mark Lay, chief executive and founder of the now defunct MDL Capital Management of Pittsburgh, also was ordered to pay $212.9 million in restitution and a $590,000 forfeiture. The forfeiture is the amount of money the jury determined he earned from his work on the hedge fund.
U.S. District Judge David D. Dowd Jr., who sentenced Lay after the second day of a lengthy sentencing hearing, ordered Lay to be taken into custody immediately. He was led away in handcuffs. His mother shouted, It s going to be OK, babe, we re here. Lay had faced a maximum of 27 years in prison.
The Ohio Bureau of Workers Compensation was the sole investor in a high-risk hedge fund Lay set up in Bermuda. He was convicted in October of repeatedly failing to tell bureau officials when questioned beginning in 2004 about the extent of the risk he was taking.
Lay s defense attorneys argued that he was a scapegoat for a legitimate investment loss that wasn t a crime.
I do accept full responsibility for all trading involved in the case with the Bureau of Workers Compensation. ... I made mistakes no question about it, Lay told Dowd before sentencing.
Prosecutors said Lay hid the extent of the risk he took with the fund and went way beyond the limit state officials set.
Lay was convicted of investment advisory fraud, two counts of mail fraud, and conspiracy to commit mail and wire fraud.
The state settled a civil lawsuit against Lay in April when he agreed to pay $5 million in a settlement with former Attorney General Marc Dann s office. Lay did not admit any wrongdoing.
The state spent about $2 million in legal fees on the civil case.
MDL Capital Management collected about $1.7 million in fees from the bureau and the jury in the criminal case ordered Lay to pay back about $590,000, based on his 35 percent ownership stake in the company.
Lay lost the bulk of $300 million in investments by the workers comp bureau. He was the 19th person convicted in Ohio s wide-reaching corruption scandal, which began with the 2005 revelation that the bureau was investing $50 million in rare coins through Republican donor Tom Noe. Noe is serving 18 years in prison for theft and other crimes.
The scandal included former Gov. Bob Taft, who pleaded no contest to charges that he failed to report golf outings and other gifts on his disclosure forms and was fined $4,000.
In the wake of the scandal, Democrats won four of five statewide offices in November 2006 election, including the governor s office.