Before it was tarnished by $300 million in losses from risky rare-coin and hedge-fund investments, the Ohio Bureau of Workers' Compensation cultivated an image as a careful steward of public money.
Like so many aspects of the BWC's multibillion-dollar operation, we know now that the glowing image was a mirage. A report by a state consultant hired to sort fact from fiction found the bureau was exaggerating its investment returns.
In April, BWC reported that its investments had brought an average annual return of 16.51 percent since 1995. The actual return was 10.3 percent, according to the consultant, Chicago-based Ennis Knupp, nearly 40 percent less than the bureau's claim.
"We've concluded … that you can't trust any numbers produced in the investment department of the bureau," the consultant declared.
The bureau's former chief investment officer denies the figures were fudged, but all that should be sorted out by several investigations under way of improprieties at the agency since the late 1990s, including operation of Tom Noe's infamous $50 million Capitol Coin funds.
The growing realization that all was not as it seemed at BWC has provided an impetus for reform measures, including privatization of the bureau's function, which is to provide treatment for injured workers.House Speaker Jon Husted (R., Kettering) likes the idea of privatization, under which compensation of injured workers would be taken over by private insurance companies. Only Ohio and four other states have a public workers' comp monopoly.
Other legislative leaders, including Senate President Bill Harris (R., Ashland), are less keen about privatization, but it is clear that major reform is necessary. It is also clear that the BWC's $14.3 billion investment fund makes an inviting target for scammers seeking to convert public money into private gain.
Removing the tempting pile of money from the hands of state bureaucrats through privatization may one day become necessary.
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