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COLUMBUS — The almost daily exchange between Statehouse Democrats and Republican Attorney General Jim Petro intensified yesterday, with Democrats charging that he failed to investigate investment problems at the Ohio Bureau of Workers’ Compensation.

Mr. Petro quickly fired back, calling his main accuser, state Sen. Marc Dann (D., Warren), the Democrats’ “designated hit-man.”

A day after the attorney general asked for evidence that three brokerage houses charged the bureau illegally high fees, Senator Dann demanded proof that Mr. Petro actually looked into allegations by the U.S. Securities and Exchange Commission of excessive fees that the bureau was paying brokerage firms.

“Jim Petro has been so busy covering the tracks of the other constitutional officers of the state, he forgot that the constitution requires he exercise independent judgment,” Mr. Dann said. “I’m not asking him to do anything differently than any public corporation in the world expects their general counsel to do.”

The suburban Youngstown legislator sent the attorney general a letter yesterday that seeks records of Mr. Petro’s examination of the Bureau of Workers’ Compensation’s payments to Great Lakes Capital Partners, Mantor Watson Securities, and U.S. Discount Brokerage.

Mr. Petro said that Mr. Dann’s request amounts to partisan politics and that his response to the SEC’s concerns were in line with his office’s policies.

“I happen to be a worthy political target,” the 2006 Republican gubernatorial candidate said. “I’m actually flattered.”

The SEC contacted bureau officials in 2002, and after not receiving a satisfactory response wrote to Mr. Petro in 2004 with its concerns about high fees paid to the three brokerages, whose commissions to trade securities were 20 percent higher than the industry standard.

Patrick White, a former Cleveland police officer, operated both Great Lakes and U.S. Discount Brokerage. He and other employees of Great Lakes have contributed nearly $30,000 to Ohio politicians, most of them Republicans.

The SEC has received multiple notices this June about the bureau’s investments from state Rep. John Boccieri (D., Middletown), even though his military reserves unit is currently serving in Afghanistan.

“Ohioans’ faith in their government has been rocked over the past several weeks due to almost a quarter of a billion dollars lost from our BWC fund,” he wrote.

An SEC office in Philadelphia responded to Mr. Boccieri’s letter this month, stating that it “can neither confirm nor deny that it is investigating any particular company or individual.”

Diane Dallianis, an attorney in the SEC’s Chicago office, wrote Mr. Petro on March 17, 2004, that the bureau had ignored since 2002 the federal agency’s concerns about its high payments to brokerages.

“This letter is to inform you of possible abuse of discretion by the Ohio Bureau of Workers’ Compensation in paying excessive brokerage commissions to certain brokerage firms doing business in the state of Ohio,” the letter said.

Mr. Petro defended the bureau’s position in a April 13, 2004, letter to the SEC. Jim McLean, the bureau’s chief investment officer who is on paid leave because of massive investment failures at his agency, said last week that he authored the response to the SEC, which was then placed on Mr. Petro’s stationary.

“It has been the BWC’s experience that possibly saving a few cents per share in commission costs will not compensate the BWC for millions of dollars it would pay in expenses associated with less efficient trade execution,” the letter stated.

Mr. Petro told The Blade yesterday that the SEC should be blamed for waiting so long before notifying him of its initial Nov. 8, 2002 letter to the bureau.

“She sent the letter 13 months late,” he said, referring to Ms. Dallianis’ follow-up. “I’m not sure she has any reason to be angered. We have reasons to be angry with her.”

Rather than share any written records with Mr. Dann, the attorney general said he would calmly explain his office’s responsibilities to the state senator and that he lacked the authority to question the bureau’s contractual arrangements.

“It’s an insult to every lawyer in the state that he’s hiding behind legal ethics to excuse that kind of conduct,” said Mr. Dann after learning of the attorney general’s planned response. He said that a paper trail would at least demonstrate that Mr. Petro understood the gravity of the SEC’s letters.

“I think it’s laughable,” Mr. Dann said. “He was in a position to do something. That’s why we elect the attorney general, so that when the executive branch makes a bad decision, there’s someone to blow the whistle.”

Mr. Dann attacked the attorney general’s shareholder advocacy, stating, “He’s going to these securities fraud lawyers and using them to raise money.”

On Monday, two Democratic lawmakers on the state controlling board attacked Mr. Petro’s award of $19 million in outside legal work to law firms that had contributed $803,000 to his campaigns since 1998.

“We have a consistent pattern of an attorney general unwilling to stand up to anybody even when they’re wrong,” Mr. Dann said. “If he wants to stand up to me that’s great. But I think it’s more important for him to stand up to state agencies engaging in pay-to-play.”

Contact Joshua Boak at:jboak@theblade.com or 419-724-6050.

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