AKRON - The former chief financial officer of the state agency for injured workers testified yesterday that he received cash and a job offer in return for supporting a high-risk hedge fund that lost $215 million of the agency's money.
Terrence Gasper, testifying at the federal fraud trial of Mark Lay, chief executive and founder of MDL Capital Management of Pittsburgh, said the money and offer of lifetime employment came from Patrick White, president of the former Great Lakes Capital Partners in Westlake.
"Sounds like a bribe to me," Richard Kerger, one of Mr. Lay's defense attorneys, said to Gasper on the stand.
"Sounds like a bribe to me," Gasper replied.
Mr. White has not been charged. His attorney, Mark Stanton, declined comment.
The state investigation into corruption involving Bureau of Workers' Compensation investments continues, Inspector General Thomas P. Charles said. He did not rule out action against Mr. White.
"The trial of Mark Lay is the priority," Mr. Charles said.
Mr. Lay was indicted in June on charges of investment advisory fraud, mail fraud, and conspiracy to commit mail and wire fraud as part of an investigation into a bureau investment scandal.
Prosecutors say Mr. Lay lied to state officials and manipulated investments.
Mr. Lay's attorneys say he followed state guidelines and the investments were appropriate.
The indictment emerged from a case that began with the 2005 revelation that Republican political donor Tom Noe was investing state money in rare coins. After a Blade investigation exposed problems in the bureau's investment department, the agency in June, 2005, revealed the losses in its hedge-fund investment with MDL Capital Management.
The losses occurred nearly nine months earlier, but the bureau only disclosed its failed offshore investment amid the controversy that enveloped its investment department.
The Blade investigation, which first raised questions about the bureau's $50 million rare-coin venture with Noe, led to a wide-ranging state and federal probe into the bureau's investment operations. State officials, including then-Gov. Bob Taft and the bureau's administrator James Conrad, initially denied any inappropriate conduct in the agency's investment department.
But the Blade's investigation showed a trail of political favors and mismanagement, including the failure of top bureau managers to regulate its venture with Noe despite an internal auditor's warnings.
The fallout from the rare-coin fund's mismanagement led to Mr. Conrad's resignation in May, 2005, and led to the complete reorganization of the bureau's investment department and oversight commission.
The probe, which is ongoing, resulted in charges against 21 government officials and money managers, including Mr. Taft, who was convicted on ethics charges, and Noe, who was sentenced last year to 18 years in state prison for stealing from the coin fund he managed for the state. Noe, convicted separately on federal charges for making illegal campaign contributions to President Bush, is serving a 27-month sentence in federal prison before his state prison term begins.
Mr. Lay faces a maximum 20-year-prison term if convicted.
Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Comments that violate these standards, or our privacy statement or visitor's agreement, are subject to being removed and commenters are subject to being banned. To post comments, you must be a registered user on toledoblade.com. To find out more, please visit the FAQ.