Bureau of workers' comp fires auditor after delay of 2005 report

5/12/2006

COLUMBUS - The Ohio Bureau of Workers' Compensation, coping with the fallout of an investment scandal that has gripped the agency, yesterday fired KPMG, the international firm that has conducted its audits since 1997.

The bureau, on the advice of state Auditor Betty Montgomery, terminated its relationship with KPMG after the firm's officials refused to release its 2005 audit before the conclusion of all criminal investigations related to the scandal, claiming such a release would violate industry standards.

KPMG, which was hired to conduct the bureau's annual audit covering "alternative investments," came under fire a year ago when problems with the agency's $50 million rare-coin fund came to light.

Bill Mabe, the bureau's administrator and chief executive officer, said in a statement that "KMPG's pace is unacceptable."

KPMG officials had no comment.

"At this time, we think it is beneficial to hire a new, independent firm that does not have historical ties to the bureau and the coin funds and can help with moving the process forward," Mr. Mabe said.

The firm hired to replace KPMG will need to redo the 2005 audit, which must be completed before the 2006 audit is conducted.

Jen Detwiler, a spokesman for the state auditor, said the bureau's financial arrangement with KPMG has not been resolved. The bureau has already paid KPMG $297,000 toward its 2005 auditing services.

Ms. Montgomery, the Republican nominee for attorney general, was not available for an interview. She sent a letter to Mr. Mabe.

"As we both know, the investigations and prosecutions related to the coin funds could continue for several years," Ms. Montgomery said in the letter.

The bureau's former chief investment officer, Jim McLean, who was fired amid the scandal, has said that KPMG never raised concerns about the rare-coin fund.

Ms. Montgomery has accused KPMG of failing to alert her in 2004 that coins were missing from the fund.

In February, GOP fund-raiser Tom Noe was accused of stealing more than $3 million from the coin fund in a 53-count felony indictment.

State Sen. Marc Dann, the Democratic nominee for attorney general, yesterday accused Ms. Montgomery of shopping for auditors who would offer a "favorable opinion."

"It's amazing," Mr. Dann said.

"When they should have fired [KPMG] when they weren't doing their job, they didn't fire them," he said.

"But now that they are doing their job and taking a stand as a professional, now they are going to fire them for that?"

Ms. Detwiler said it would have been "slightly premature" to fire KPMG a year ago.