Joined: Sat May 29, 2004 11:46 pm
Coingate allegations arose before '04 election — Democrats say Noe case concealed to assist Bush
Posted on Monday, June 20 @ 09:54:18 EDT
By James Drew and Steve Eder, Toledo Blade
COLUMBUS - In the final weeks of the 2004 presidential race, the nation focused on Ohio as both campaigns carefully choreographed every move by their candidates, knowing one misstep could throw the keys to the White House into the hands of the opponent.
The national media scrutinized every detail of the high-stakes political battle, as President Bush and Democratic challenger John Kerry crisscrossed Ohio, energizing their bases and reaching out to swing voters in the Buckeye state, which ultimately decided the race by fewer than 120,000 votes.
At the same time - beneath the surface and out of public view - allegations were swirling that Tom Noe had laundered contributions into President Bush's campaign, and facts were emerging that the Ohio Bureau of Workers' Compensation had lost $215 million meant for injured workers in a Bermuda hedge-fund.
Now, more than six months later, those bombshells have created the biggest state government scandal in decades in Ohio. Democrats are charging that Republican leaders suppressed the potentially explosive information until all the votes were counted to save the President's re-election campaign.
The Blade has learned that the U.S. Attorney's Office for the Northern District of Ohio knew of the campaign-finance allegations against Mr. Noe about three weeks before the November, 2004, election, giving it little time to do a thorough investigation.
Mr. Noe, a Toledo-area coin dealer, was chairman of the Bush-Cheney campaign in northwest Ohio.
Democratic allegations of a GOP cover-up in the loss of $215 million managed by a Pittsburgh firm have surged in the last few days. Records released last week show that high-ranking aides to Gov. Bob Taft worked to suppress revelations about the hedge fund loss in the final days before the presidential election.
"Would it have been enough?" asked Jim Ruvolo, a Toledo consultant who was chairman of Mr. Kerry's presidential campaign in Ohio last year. "With only 118,000 votes, it doesn't take much." Republicans scoff at the talk.
"The President won on the merits of his candidacy,'' said Aaron McLear, a spokesman for the Republican National Committee.
David Mark, editor of Campaigns & Elections, a Washington-based nonpartisan political magazine, said if the scandal at the Bureau of Workers' Compensation had leaked before last year's election, the national media would have jumped on the story.
"It could potentially have had a tremendous impact on the Republican machine, which won Ohio for Bush and ultimately won him the election," Mr. Mark said.
"If there was all of this negative publicity surrounding Noe as Bush was trying to carry Ohio, there would have been a firestorm of negative publicity," he added.
Mr. Kerry, a U.S. senator from Massachusetts, conceded the presidential race on Nov. 3 after concluding that the counting of provisional ballots would not prevent Mr. Bush from carrying Ohio. Mr. Noe was one of several dozen Ohioans whom the Bush campaign recognized as a "pioneer" for raising more than $100,000 each for the re-election campaign. Mr. Noe and his wife, Bernadette, met with Mr. Bush backstage at a campaign stop in downtown Toledo in October and co-sponsored Ohio's inaugural gala in January in Washington.
Mr. Bush and Mr. Noe embraced. The President then hugged Mrs. Noe.
Questions arise early
The air was thick with talk in Toledo about investigations surrounding the Noes long before last year's election. It centered on contributions to the Bush campaign at an Oct. 30, 2003, fund-raiser in Columbus, where Mr. Noe sponsored a table and invited a number of people to attend.
At issue was whether Mr. Noe gave others money in order for them to give to the Bush campaign, allowing him to skirt federal spending limits, law enforcement sources told The Blade.
Last week, Lucas County Prosecutor Julia Bates, a Democrat, offered details on the investigation that started in her office in January, 2004, when Mr. Noe's wife and Sam Thurber, members of the Lucas County Board of Elections, came to her with complaints about Joe Kidd, then executive director of the elections office.
Frank Stiles, an investigator who works for Ms. Bates, began examining the allegations in March, 2004. Mr. Kidd denied the claims and then fired off one of his own.
Officials won't disclose that allegation, but they have confirmed they are probing whether Mr. Noe gave several people money so they could contribute to Mr. Bush's re-election.
Mr. Kidd, like several other high-profile Toledo-area residents, gave $2,000 to the Bush campaign. On June 1, he appeared as a witness before a federal grand jury in Toledo that is investigating Mr. Noe.
Also testifying before the grand jury were several prominent area Republicans who contributed to the President's campaign, including former Toledo Mayor Donna Owens, Lucas County Commissioner Maggie Thurber, Toledo Councilman Betty Shultz, and former state Rep. Sally Perz.
Although Mr. Kidd made his allegation in March, 2004, it wasn't until September that the county prosecutor's office received information - generated by a subpoena that a county grand jury issued - that ruled out the allegation by Mrs. Noe and Mr. Thurber against Mr. Kidd. That's when the investigation turned to Mr. Noe, Ms. Bates said.
Another subpoena was issued to get records to check out Mr. Kidd's counterallegation. Ms. Bates will not say what records were sought, citing confidentiality of grand jury proceedings.
The county prosecutor's office received that information Sept. 29, 2004. Mr. Stiles, the investigator, was on vacation, and he did not see the records until Oct. 12. He immediately went to Ms. Bates, and she called David Bauer, the assistant U.S. attorney in Toledo, because the allegations involved violations of federal campaign finance laws.
"The interest level was, `Yes, we'll take it,'" Ms. Bates said.
On Oct. 13, 2004, Ms. Bates met with Mr. Bauer, other assistant U.S. attorneys, and FBI agents.
That same day, Mr. Bauer contacted the Public Integrity Section of the U.S. Department of Justice in Washington. In an e-mail later that day to the U.S. attorney's office in Cleveland, the Public Integrity Section authorized the opening of the investigation.
On Oct. 15, 2004, the files from the Lucas County prosecutor's office were turned over to the FBI.
Gregory White, U.S. attorney for the Northern District of Ohio, said there are "standard procedures" on national campaign issues and the Justice Department handled the allegations against Mr. Noe with "professionalism and dispatch and in keeping with the rules and the regulations."
"This is something that requires a significant amount of investigation before you do, in essence, a public interview. A public announcement was made the first time that matters were overtly handled, in terms of search warrants and interviews of folks," Mr. White said.
"In the interim time, investigative techniques were used, and disclosing them would be a violation of what we do during those investigations. Records had to be gathered and analyzed to prepare agents to conduct interviews," he said.
When two Blade reporters interviewed Mr. Noe in March, he read a written statement when asked about a federal investigation into campaign contributions.
"If this fabrication of facts by you, your editors, or anyone involved in the newspaper persist, I assert they are libelous and slanderous in content, and I will take whatever legal action is necessary to protect my reputation and my business interests. So you should be governed accordingly," Mr. Noe said.
Officials muffle concerns
The Blade first reported problems with Ohio Bureau of Workers' Compensation investments on April 3 in a story revealing that the agency had given $50 million since 1998 to Mr. Noe to create a rare-coin fund.
At the time, he was a Republican appointee to the Ohio Board of Regents and Ohio Turnpike Commission and a major GOP fund-raiser for not only President Bush but for Governor Taft and a host of other top Ohio Republicans.
Three weeks ago, Mr. Noe's attorneys told law enforcement authorities that $10 million to $12 million of the state's rare-coin assets were "unaccounted for."
In a 2000 review of Mr. Noe's coin investment, Keith Elliott, manager of internal audits for the bureau, wrote that the practices of the coin fund "could potentially expose both the BWC and the fund managers to adverse public scrutiny regarding the appropriate use of state funds."
In the year before the election, a number of concerns about the coin fund came to the attention of top state officials, who failed to make them public.
First, in October, 2003, two state-owned coins worth $300,000 were reported stolen in the mail, and then a 2004 audit of the venture's Colorado subsidiary showed that 119 coins worth $93,000 were reported missing.
Mr. Noe never notified Colorado authorities about the missing coins - and information was not made public about the loss until The Blade's stories began.
Pace of inquiry defended
On April 27, Mr. White confirmed the federal investigation of Mr. Noe for possible violations of campaign contribution laws.
Mr. White, a former Republican Lorain County prosecutor who was appointed by Mr. Bush in 2003 as U.S. attorney for the Northern District of Ohio, said it was not possible to make that announcement before the Nov. 2, 2004, election.
"These things happen all over the country and on both sides of the political spectrum. In my view, I'm appointed by the President to supervise enforcement of the law, and that is what I intend to do. I take pride in that and the people who work in this office who maintain the integrity of the Justice Department in the Northern District of Ohio," Mr. White said.
Mr. Bauer declined to talk about specifics of the investigation into Mr. Noe, but he said financial cases are complicated and can sometimes take years to unravel.
Last week, state Sen. Teresa Fedor (D., Toledo) said in every election people "monitor information," and she questioned how federal authorities managed the information they had about Mr. Noe last October.
"To assume that information probably wasn't controlled is to assume the American people don't have minds of their own. Connect the dots," Senator Fedor said. "Bernadette Noe was the head of the board of elections. There is no mistake that Lucas County had the highest [percentage] of provisional ballots rejected in Ohio.
"Tom Noe was chairman of the Bush-Cheney campaign in northwest Ohio, a Pioneer, a member of the Board of Regents who threatened the president of the University of Toledo because George Soros was going to speak there," said Ms. Fedor. Mr. Soros, a billionaire, traveled around the country last fall to criticize Mr. Bush.
Mr. McLear, the RNC spokesman, said: "As far as any suggestion that there was some kind of conspiracy, it's so far-fetched, I wouldn't even want to entertain that."
Ms. Bates, who supported Mr. Kerry for president, said she knew the allegations against Mr. Noe were politically explosive. But if unfounded, they could improperly tar Mr. Noe, she said. "It was a very difficult situation to be in to have something in your possession that could be very damaging and political,'' she said last week. "If this dropped in my lap on Oct. 13, I'm not sure if I would have time to do much before the election."
Hedge fund loses $215M
Last fall, high-ranking officials with the Ohio Bureau of Workers' Compensation and Governor Taft's office found themselves in a similar situation - with information that could be damaging to the political fortunes of Mr. Bush and U.S. Sen. George Voinovich, a Republican and former governor.
The bureau is the state agency charged with paying medical bills and providing monthly checks to Ohio workers injured on the job.
In 1998, during the final year Mr. Voinovich was governor, the bureau hired Pittsburgh-based MDL Capital Management. Over the years, the state invested $355 million in a long-bond fund that the firm managed.
In September, 2003, the bureau agreed to a proposal from MDL to create an "active duration fund," which would act like a hedge fund.
But in just a few months last year, MDL lost $215 million from the bureau's investment portfolio when the Bermuda-based hedge fund tanked, wiping out the millions the state had placed in it.
On Sept. 27, 2004, the bureau's administrator-chief executive, James Conrad, learned about the state's loss in the hedge fund, according to records the bureau released last week.
That evening, James McLean, the bureau's chief investment officer, told Mr. Conrad in a conference call that when he wanted to "tighten the screws" on MDL, chief financial officer Terrence Gasper had told him that Mr. Conrad had given permission to "give MDL a break."
Mr. Conrad said that was untrue, according to records. Mr. McLean also said Mr. Gasper had told him that George Forbes - a member of the bureau's oversight commission appointed by Mr. Voinovich and a former Cleveland City Council president who was Mr. Voinovich's ally when he was mayor - had called Mr. Conrad to discuss giving MDL a break.
According to records, Mr. Conrad then called Mr. Forbes, "who adamantly denied having called Conrad." MDL hired Mr. Forbes' daughter, Mildred "Mimi" Forbes, as an executive in 2001. The Ohio Ethics Commission and inspector general are investigating the bureau's investment practices.
Two days later, after Mr. Conrad learned about the hedge-fund investment, the bureau requested that Mark Lay, MDL's chairman and chief executive, terminate it.
In a recent interview, James Samuel, a former bureau official who in July, 2003, joined the governor's office as executive assistant for business and industry, said he recalls getting a phone call in late September from Mr. Conrad. Mr. Samuel said Mr. Conrad talked about an investment problem, and he may have mentioned MDL.
Mr. Samuel said he met with Mr. Conrad and Jon Allison, the governor's chief of staff, that day or the next.
Based on that meeting, Mr. Allison then told Mr. Taft that there was an investment loss at the bureau from $10 million to $20 million, said press secretary Mark Rickel.
In an Oct. 26, 2004, e-mail to Mr. Samuel, Mr. Conrad wrote that the "entire value" of the portfolio that MDL managed was down about $225 million.
Mr. Samuel said he "probably" received the Oct. 26, 2004, e-mail from Mr. Conrad. He said he recalls briefing Mr. Allison about the topic.
"In all honesty, I don't remember talking about the $225 million," Mr. Samuel said. "Maybe I did. Maybe I didn't."
By the time the state exited the hedge fund, it had gained back about $9 million, resulting in a final loss for the bureau of $215 million.
In an Oct. 28, 2004, e-mail, Mr. Conrad wrote that Mr. Allison and Mr. Samuel had agreed to exclude information about the MDL loss from a weekly report to the governor "due to the wide and uncontrolled circulation of the Governor's weekly."
State waits to reveal loss
On Election Day, which was Nov. 2, 2004, a Columbus law firm was hired as special counsel by Republican Attorney General Jim Petro's office to examine MDL and its Bermuda hedge fund.
But the state did not release any information about the $215 million loss until June 7 - a day after The Blade began making calls after learning that state investigators had uncovered huge losses at the bureau.
At a June 9 press conference, Mr. Taft said he was not told about Mr. Conrad's Oct. 26, 2004, e-mail and did not know of the extent of the loss until two weeks ago.
"Should I have been told? Obviously," Mr. Taft said. "Should the administrator of the bureau have informed me directly, personally? I think so. I think that was his obligation; $200 million is a huge amount of money to lose."
Mr. Conrad announced his resignation May 27 after Mr. Taft said the bureau had "failed to implement proper controls to safeguard" the rare-coin investments. Mr. Taft demoted Mr. Samuel Friday for failing to inform him last year about the $215 million hedge fund loss.
Was election affected?
U.S. Rep. Sherrod Brown, a Lorain Democrat, said if Ohioans had learned about the MDL loss and the federal investigation into Mr. Noe's campaign contributions to President Bush before the Nov. 2, 2004, election, state results may have been different.
In addition to the presidential race, the ballot included a U.S. Senate seat. Voters re-elected Mr. Voinovich to a second six-year term over Democratic state Sen. Eric Fingerhut of Cleveland.
"This is likely the biggest scandal in our state's history," Mr. Brown said. "To keep that out of the public domain to save George Bush and George Voinovich's political future is pretty reprehensible," he added.
Mr. Ruvolo, the Toledo-based consultant who was chairman of Mr. Kerry's presidential campaign in Ohio last year, said voters tend to focus on the two presidential candidates and state politics often play a small role in that choice.
But the scale of the scandal at the Bureau of Workers' Compensation could have made a difference in the presidential race in Ohio, he said. "The massiveness of this might have cut through."
Mark Weaver, a GOP political consultant who represented the Ohio Republican Party last year in election-law disputes with the Democrats, referred to that Democratic sentiment as "wishful thinking times 10."
He recalled giving a speech to Republican county chairmen in Ohio in the spring of 2004. Based on polling results, Mr. Weaver said he told them that the presidential race in Ohio was "over."
"Everyone snickered. I told them, `That does not mean we have won.' What it means is the persuasion part was over. We had to find out who our people were and get them to the polls. Those who were for Bush could not be moved. Those who were for Kerry could not be moved. And those who were undecided could not be found," said Mr. Weaver, who is working for Republican Auditor Betty Montgomery's gubernatorial campaign.
Mr. Mark, the editor of Campaign & Elections, said it is not surprising that The Blade began reporting on investment problems at the Bureau of Workers' Compensation just a few months after the presidential election was certified.
He said major U.S. political scandals tend to come to light in the aftermath of a campaign.
"With Watergate, within a couple of months, all of this started to unravel after [President] Nixon won the election. It's always hard to pinpoint if information was held based on political reasons, but in this case it looks like a lot of people could have had that in mind."
Blade Staff Writer Mike Wilkinson contributed to this report.
© 2005 The Blade.
Reprinted from The Toledo Blade:
http://toledoblade.com/apps/pbcs.dll/ar ... 4/50619020
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