COLUMBUS - The state yesterday said it plans to follow up on a five-year-old review that raised strong concerns about its investment in rare-coin funds controlled by prominent Toledo-area Republican and coin dealer Tom Noe.
The follow-up review will focus in part on the loss of two coins in the mail in 2003 that were worth roughly $300,000, said Keith Elliott, manager of internal audits for the Ohio Bureau of Workers' Compensation.
The bureau also wants to "make sure Noe is complying with some of the things we asked him to do during the prior review," Mr. Elliott said in an interview yesterday.
He referred to the 2000 review he did that raised concerns about whether the state's millions were adequately protected.
The bureau is the state agency charged with paying medical bills and providing monthly checks to Ohio workers injured on the job.
Yesterday, Democrats stepped up their calls for an investigation into why the bureau since 1998 has invested millions of dollars in unregulated rare-coin funds that Mr. Noe controls.
His firm made more than $1 million off the deal last year alone.
The Blade reported Sunday that it could find no other instance of a state government investing in a rare-coin fund. Neither Mr. Noe nor the state could provide one.
"Why would the bureau wait five years in the first place to follow up?" said state Rep. Peter Ujvagi (D., Toledo), who added that an audit should begin immediately.
Columbus Mayor Michael Coleman, a Democrat, called on Gov. Bob Taft to appoint a team of private sector and government auditors, treasurers, and investment experts to investigate the rare-coin investments, including the potential conflict of interest of Mr. Noe and the Capital Coin funds that he created.
"Noe's knowledge of the rare-coin business may be extensive, but his political influence got hisfoot in the door," said Mr. Coleman, who is running for governor in 2006.
"No other state invests in this risky practice, and the bureau's own auditors have warned about its potential pitfalls," he added.
Inspector General Thomas Charles yesterday said he had not received a request to investigate. He said he was reading The Blade articles "with interest."
"I'll wait and see if somebody points out some wrongdoing. That is what we base our opening investigation on," Mr. Charles said.
Mr. Noe, a former Lucas County Republican Party chairman, has contributed more than $11,000 in campaign funds to both Mr. Taft and George Voinovich, a former governor and now a U.S. Senator, over the last decade. He has contributed $70,000 to other GOP candidates over the last 11 years.
Mr. Voinovich appointed Mr. Noe to the Ohio Board of Regents, and Mr. Taft appointed him to the Ohio Turnpike Commission.
The state and Mr. Noe have said that politics had nothing to do with the selection of Capital Coin to invest $50 million of the bureau's funds, saying the funds always have returned a profit to the state and generated returns last year of 10 percent.
Mr. Taft, whose spokesman said on Saturday and Sunday that the governor would not talk with The Blade about the state's decision to allow Mr. Noe to invest its money in rare coins, again refused to comment on the investment with Mr. Noe yesterday when a reporter caught him after a public appearance in Cleveland.
The governor said he had not read The Blade's Sunday story.
"Talk to the Bureau of Workers' Compensation. They're the ones who make the investments," he said.
So, do you think rare coins are a good investment, he was asked.
The governor again would not answer, turning away as one of his aides ended the impromptu interview, saying, "That's a no comment."
Mr. Taft appoints the administrator of the Bureau of Workers' Compensation and its governing commission.
Greg Haas, a political adviser to Mr. Coleman, said Mr. Taft's refusal to answer questions "is another example of the lack of leadership" in state government.
The GOP controls all statewide executive posts, both chambers of the General Assembly, six of the seven Supreme Court seats, and both U.S. Senate seats.
Montgomery County Treasurer Hugh Quill, a Democrat, called on the legislature yesterday to increase its oversight of the bureau's investment funds.
Mr. Quill, who is running for state treasurer in 2006, said Ohio needs more restrictive investment guidelines such as those that apply to other state and county government investments.
"It further concerns me that the state has been speculating in coins since 1998, when the markets were performing at record levels. What were these state leaders hedging against? Making too much money? Republican leaders need to stop rewarding their friends and start rewarding taxpayers," Mr. Quill said.
In an interview yesterday, Mr. Elliott, the bureau's internal auditor, said he plans to follow up on a May, 2000, review of Capital Coin that was the only internal review performed on any of the "emerging-manager firms."
In March, 1998, the bureau's oversight commission approved a list of 28 managers including Mr. Noe's Capital Coin for the program, which includes nearly $500 million of the bureau's $18 billion investment portfolio.
By August, 1998, Capital Coin had received its first $25 million.
But Mr. Elliott asked several questions in his 2000 review.
● Should the managers of the fund be allowed to personally buy and sell coins to and from Capital Coin? Was that a conflict of interest?
● Are the mortgages that Capital Coin held adequately supported by the value of the real estate?
● Should Capital Coin pay advances to partners in advance of profits from coin deals that had not yet occurred?
The bureau's review ended with a January, 2001, letter from Robert Cowman, then the bureau's chief investment officer, to Mr. Noe.
Mr. Cowman's letter required changes in the way the funds were operated. Capital Coin would no longer grant advances to partners against future profits; the state would maintain a list of all collateral - like real estate, coins, and other assets - received by the fund, and coins would be purchased at wholesale prices or lower.
Reached for comment yesterday, Mr. Noe called Mr. Elliott's 2000 review "no big deal" and noted the bureau in 2001 invested $25 million more in a second coin fund that Mr. Noe set up.
Mr. Elliott, who was accompanied at yesterday's interview by bureau press secretary Jeremy Jackson and chief legal officer John Annarino, said he didn't do any follow-up reviews on the Capital Coin funds after 2000 because of staff turnover.
In response to a question from Mr. Jackson about whether bureau management had pressured him not to follow up on the 2000 review, Mr. Elliott replied: "No, not at all.''
He repeated that answer to a similar question from The Blade. When asked if Mr. Noe had adhered to all of the changes outlined in Mr. Cowman's January, 2001, letter, Mr. Elliott replied: "I have not done a follow-up, so I can't really speak to that.''
He noted that last year, a wholly owned subsidiary of Mr. Noe's Capital Coin, Numismatic Professionals, informed the state about a potential problem: an employee misappropriating assets.
Mr. Noe, in a recent interview, wouldn't provide details but said Capital Coin is studying the business deals of its subsidiary. He said that review is unrelated to two coins that Mike Storeim, manager of Numismatic Professionals, reported lost in October, 2003.
Mr. Storeim, who has an office in Evergreen, Colo., used state money Mr. Noe had given him to buy the coins for about $185,000. The market value of the coins was estimated at $300,000, he said.
Mr. Noe said yesterday he hadn't heard the bureau planned to follow up on its 2000 review.
"Anything they've ever asked me for - I have always been very cooperative," he said.
Asked if he had complied with all of the changes outlined in Mr. Cowman's January, 2001, letter, Mr. Noe replied: "It is hard for me to answer something I don't have in front of me."
Mr. Elliott said that the 2000 review didn't focus on "detailed testing of different transactions" and that the follow-up - likely to start after the new fiscal year begins on July 1 - also would not.
"Because of the nature of the investment, to do a really focused coin review, you would almost need to be a coin expert to really know, in selling these coins, are we getting the proper value?" Mr. Elliott said.
Blade staff writer Christopher Kirkpatrick contributed to this report.
Contact James Drew at:
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The state yesterday said it plans to follow up on a five-year-old review that raised strong concerns about its investment in rare-coin funds controlled by prominent Toledo-area Republican and coin dealer Tom Noe. The follow-up review will focus in part on the loss of two coins in the mail in 2003 that were worth roughly $300,000.