Democrats call for state probe over coin funds

Mr. Noe, a former Lucas County Republican Party chairman, was appointed by Mr. Voinovich to the Ohio Board of Regents and by Mr. Taft to the Ohio Turnpike Commission.

Mr. Noe has contributed more than $11,000 in campaign funds to both Mr. Taft and Mr. Voinovich, now a U.S. senator, over the past decade.

He has contributed more than $70,000 to other Republican candidates over the last 11 years.

State Sen. Teresa Fedor (D., Toledo) referred to the Ohio Republican Party and Mr. Noe as an "oligarchy."

"No other states run such risks with their state funds. Why Ohio and why Tom Noe? He keeps re-investing his profits in Republican candidates," she said.

Mr. Coleman, a former Columbus city councilman who has been mayor since 2000, said the top three priorities in investing public funds are "safety of the principal, liquidity and marketability, and yield or return."

"The overall rule is if you chase the return, you put the other two in danger,'' Mr. Coleman said.

He cited how Orange County, Calif., lost $1.6 billion in 1994 on risky investments, including derivatives, which are financial instruments whose value is based on another security.

Last night, Mr. Noe said the Democrats' calls for investigations were a "cheap shot."

Referring to Mr. Coleman, Mr. Noe said: "Ask him how his investments did. Were they almost 13 and 14 percent last year? [The coin fund] has never lost money in seven years. Mr. Coleman must be running for something."

House Minority Leader Chris Redfern (D., Catawba Island) said an investigation is needed to determine whether politics played a role in the bureau's deal with the rare coin funds that Mr. Noe's companies control.

"Tom Noe is a respected Republican leader who appears to have been successful in investing in rare coins. Still, one has to wonder whether state government would have been so eager to plunge public dollars into such an unusual, untested investment scheme if it had not been developed by a major donor to Republican candidates for governor,'' Mr. Redfern added.

Mr. Redfern and other area Democratic legislators also questioned why the bureau's administrator, Mr. Conrad, did not respond to requests by The Blade for interviews.

State Rep. Peter Ujvagi (D., Toledo) said Mr. Taft should answer questions.

"If there is nothing untoward happening, it ought to be addressed in a forthright manner,'' Mr. Ujvagi said.

State Sen. Randy Gardner (R., Bowling Green) last night said he saw no evidence of political favoritism in the bureau's dealings with Mr. Noe. Mr. Gardner, whose campaign fund has received $6,950 from Mr. Noe over the last decade, said Mr. Noe is a target for Democratic attacks.

"The key question is, 'What is the performance of the investment for the state?' I believe the bureau has a fundamental fiduciary responsibility to manage its dollars and its invested dollars in the wisest, smartest ways,'' he said.

In addition to a probe by the Inspector General, Democratic legislators said state Auditor Betty Montgomery and Attorney General Jim Petro, both Republican candidates for governor in 2006, should start inquiries. They could not be reached for comment yesterday.

The issue will resonate with so many, Mrs. Perry said, because every employer in the state must buy its workers' compensation from Ohio. The state is one of only five in the country that exclusively sells workers compensation insurance.

The revelation about the state's investment in rare coins also comes at a time that some are pushing the state to reduce workers' compensation benefits to save employers money, Mrs. Perry said.

"Everybody wants to know the answers when questions come out that affect people in the pocketbook," she said.

Dennis White, chairman of the Ohio Democratic Party, said the state's deal to invest money in rare coins is "another example of the arrogance of one-party rule in state government."

"It's another example of when you have one party that controls everything, you will have shenanigans," he said. "They are not looking after the taxpayers' interests. They are looking after their own self-interest.''

Mr. White said Lucas County Prosecutor Julia Bates, a Democrat, possibly should investigate, since the Franklin County prosecutor is a Republican and the state's Inspector General was appointed by Mr. Voinovich and kept in the post by Mr. Taft.

Republicans control all statewide executive posts, both chambers of the General Assembly, six of the seven Supreme Court seats, and both U.S. Senate seats.

State Rep. Edna Brown, (D., Toledo), said she was surprised to learn that state money was invested in rare coins. She allowed that an investigation might find the investments proper, but "on the surface, it does beg a lot of questions," she said.

"I know the stock market and all that can crash, but we understand that at least when we have funds invested in that manner you can have revenue flow," she said. "But with the coins, how do you convert them to funds if you need to?

"There are just a lot of things that were puzzling,'' Ms. Brown said.

Mr. Ujvagi said Mr. Taft and the Bureau of Workers' Compensation must determine what are "safe, logical, and feasible methods" to invest "our workers' and employers' money."

"Nowhere else is this kind of investment being utilized. The interesting part is the state of Ohio never is on the cutting edge of anything. I wish it were on the cutting edge of good things,'' he said.

Mr. Ujvagi said he was disturbed that Mr. Noe has loaned some of the state's money - totaling nearly $1 million - with controversial Ottawa Hills real estate mogul John Ulmer.

Mr. Ulmer's companies agreed to pay Rare Coin Enterprises, one of Capital Coin's wholly-owned subsidiaries, 10 percent or 12 percent on the investment.

Mr. Ulmer takes investors' money and buys homes, often in the lower-income parts of Toledo. He then fixes them and re-sells them, acting as a private bank that charges interest rates above traditional banks and mortgages.

Keith Elliott, the bureau's manager of internal audits, said the bureau had no documentation that the loans to Mr. Ulmer were properly covered by the value of the properties listed on the mortgage.

Mr. Ujvagi said the state "under no circumstances ought to be investing money that ends up potentially causing problems in our older neighborhoods.

"I cannot believe the state knows about it and the governor approves of that kind of investment,'' Mr. Ujvagi added.

When asked about Democratic calls for investigations, Mr. Jackson, the bureau's press secretary, replied: "We have nothing to hide."

"Those who question us have to take into account we have put $10 billion into the pockets of businesses and their workers," he said.

"We go through an investment process that I would challenge anyone to match, in terms of being onerous and arduous to make the selection. If they want to ignore our performance and how we document our [requests for proposals], let them come,'' he said.

Former state Rep. David Hartley, a Springfield Democrat, opposed a Republican-backed bill in 1995 that removed control of the agency from an appointed oversight commission and gave it to the governor's office.

Mr. Hartley, who had served on that oversight commission, left the General Assembly in 2000 because of term limits. He said yesterday he wasn't aware that the bureau had invested $50 million into two rare coin funds that Mr. Noe controls.

He said Republicans were "bound and determined" to gain control over the bureau's investment portfolio.

The legislators who fought the change are out of the General Assembly now because of term limits.

"I felt it was a mistake to move it back under the governor. It didn't seem wise. It's a lot of money to invest, a whole lot of money," said Mr. Hartley, who is a Clark County commissioner.

After reading The Blade's stories about Capital Coin yesterday, Sue Kruse, treasurer for the Triway schools in Wooster, Ohio, wrote an email to the paper, pointing out that her investments are "scrutinized to the penny" by the state auditor's office, unlike the money the bureau "plunked into rare coins."

"Such [an] unwise investment strategy affects more than the stability of the BWC. In fact, the BWC will fare quite well regardless, because the losses will be passed along to the forced participants in the program," she wrote.

Blade staff writer Christopher Kirkpatrick contributed to this report.

Contact James Drew at: jdrew@theblade.com or 614-221-0496.