Governor's BWC power questioned

7/7/2006

Dann

COLUMBUS The governor has too much power over the Ohio Bureau of Workers Compensation, states a report that the state inspector general released yesterday.

The authority to hire the agency s administrator-CEO should be shifted to the bureau s Oversight Commission, according to Evaluation Associates, a Norwalk, Conn., firm hired by Inspector General Tom Charles.

So long as nearly absolute power is vested with the governor, the potential for the abuse of this power exists. The only way to assure that power will not be abused is to spread it among a variety of persons, according to the report.

The report made references to media coverage of the ongoing scandal at the agency, which began in April, 2005, when The Blade first reported on problems with the bureau s $50 million investment in rare-coin funds controlled by Tom Noe, a former Toledo-area coin dealer and Republican fund-raiser.

The ensuing scandal, commonly known as Coingate, has attracted the attention of federal and state law enforcement officials and has resulted in resignations, terminations, and recently, indictments of key individuals involved with BWC investments, the report states. More importantly, the close scrutiny of BWC activities which Coingate has drawn has exposed countless failures in the process of managing, controlling, supervising, and monitoring the investment of BWC assets.

The report also states the governor should not pick all of the Oversight Commission s five voting members. Instead, the legislature, state auditor, attorney general, and perhaps other offices should have an equal number of appointments as the governor has, according to Ellen Petrino, a senior consultant with Evaluation Associates.

If lawmakers adopted those recommendations, it would roll back the changes that then-Gov. George Voinovich, now a U.S. senator, persuaded the GOP-controlled legislature to adopt in the mid 1990s. Those included restoring the governor s power to pick the bureau s administrator and expanding the bureau s investment authority.

After scrapping a 10-member board in charge of the bureau that was split evenly between business and labor representatives, Mr. Voinovich in 1995 appointed James Conrad as the bureau s administrator-CEO. Terrence Gasper, the bureau s chief financial officer who last month pleaded guilty to corruption charges, used the new investment authority to sharply increase the number of bureau investment managers, including the Noe rare-coin funds.

Mr. Charles, a member of the federal-state task force investigating the bureau s investment practices, said he was not taking a stance on any of the recommendations.

Republican legislative leaders were noncommittal about whether the legislature would adopt any of them.

They made some interesting and sweeping recommendations, which I think we will look at very carefully, said Senate President Bill Harris (R., Ashland), adding that the privatization of the bureau also should be debated.

House Speaker Jon Husted (R., Kettering) said one issue is whether more power should be given to the Oversight Commission. Secretary of State Ken Blackwell, the GOP candidate for governor, last year called for the resignation of all voting commission members, saying they were asleep at the switch as the bureau in 1998 invested in the Noe rare-coin funds and lost $216 million two years ago in a Bermuda-based hedge-fund managed by Mark D. Lay of MDL Capital Management.

George Forbes, a former Democratic City Council president in Cleveland who was a close ally of Mr. Voinovich, resigned last year from the Oversight Commission after press reports that his daughter, Mildred Mimi Forbes, was MDL s human resources manager.

State Sen. Marc Dann, a Youngstown-area Democrat and early critic of the bureau s investment practices, said state government already has oversight and checks and balances, but Republican officeholders failed to do their jobs.

Bill Burga, president of the Ohio AFL-CIO who was appointed by Mr. Voinovich to the Oversight Commission in 1995 to represent labor interests, said he and others had warned Mr. Voinovich about his plan to gain control over hiring and firing the bureau s administrator-CEO.

There was no need to change the governing structure, said Mr. Burga, adding that Mr. Voinovich abused his power by doing so and Taft just went along with what was there.

Reached for comment, Chris Paulitz, Mr. Voinovich s press secretary, said: Senator Voinovich took what he called the silent killer of Ohio jobs and, by the time he left the governor s office, turned it into an Ohio asset with a $3.5 billion surplus. He declined to comment further.

Mark Rickel, Gov. Bob Taft s press secretary, said the governor s office is studying the report released by the inspector general.

Mr. Taft continues to support creating a separate board that would oversee the bureau s investments. The governor would appoint one member; the state treasurer and legislature would appoint four members, and two members would be from the Oversight Commission, Mr. Rickel said.

The Evaluation Associates report praises the work of William Mabe, the bureau s administrator-CEO. Mr. Taft appointed Mr. Mabe in October, 2005, to replace Mr. Conrad, who resigned five months earlier in the wake of the rare-coin investment scandal. But Evaluation Associates says the bureau s head should be more of an executive director than a CEO.

The primary fiduciaries are the members of the Oversight Commission. The buck, as it were, stops with them. If the members of the Oversight Commission are to be held fiduciarily responsible for everything that happens at the BWC, then they must have the power to exercise that responsibility, the report says.

Mr. Mabe said he wasn t sure if it makes a difference whether the governor or the Oversight Commission hired the bureau s administrator-CEO and whether the governor appoints all or some of the commission s voting members.

If the governor appoints the individual, then people will argue the governor has too much control. If the Oversight Commission hires the CEO, then people will say the CEO is just a mouthpiece of the Oversight Commission, he said.

Last year, the legislature expanded the Oversight Commission from 9 to 11 members, with the state treasurer appointing an investment expert, and the Senate president and House speaker jointly picking an investment expert.

The number of voting members remained at five, although the investment experts are allowed to vote on investment matters only.

The state paid $220,000 to Evaluation Associates for the review, which was mandated by the state budget bill that the legislature adopted in 2005.

Also yesterday, the Ohio Republican Party accused Mr. Dann of hypocrisy for asking the governor s office last week why Terrence Gasper, the bureau s former chief financial officer, was appointed in November, 2003, to the Ohio Venture Capital Authority.

The Ohio GOP said Mr. Dann sat on the Senate committee that consented to the appointment in March, 2004.

Marc Dann either wasn t doing his job or he wasn t paying attention, Bob Bennett, chairman of the Ohio Republican Party, said in a written statement.

Mr. Dann said if Mr. Bennett wants to point a finger, he should look to state Auditor Betty Montgomery, whose office was in charge of auditing the bureau.

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