Friday, June 17, 2005


Conrad, two Taft aides conspired to hide MDL news from public

Nearly all the Ohio papers today reported on a newly-released email from ex-BWC administrator Jim Conrad showing that he and two top Taft aides made a conscious effort to bottle up information on the MDL losses. From the Enquirer:
[A]n e-mail made public Thursday showed former BWC administrator James Conrad decided to keep information about an investment loss that ultimately hit $215 million from weekly reports given to Taft.

Conrad made the decision after talking to Jim Samuel, Taft's top business aide, and Jon Allison, Taft's chief of staff, according to e-mails obtained through a records request.

"I talked to both Samuel and Allison," Conrad said in an Oct. 28 e-mail to Mark Nedved, then BWC's legislative liaison. "They have enough information at the present time and both agreed it would be a mistake to put it in the weekly due to the wide and uncontrolled circulation of the Governor's weekly."
This email further erodes the credibility of Taft's claims that the didn't know of the MDL losses until this Spring. Allison and Samuel are Taft's lieutenants. It is naive to believe anything except that Conrad was meeting with Samuel and Allison so that they would verbally pass on the information about MDL to him without alerting others.

A couple of other developments are worth noting:


Attention to Ohio grows at the Times

Krugman picks up on the Culture of Corruption in Ohio meme.

Thursday, June 16, 2005


Major flaw in BWC MDL reporting

[Edited 6/17 to improve clarityl]

We have heard from, and talked with, several people about what appears to be a significant flaw in the reporting on BWC/MDL debacle. We think they are right

It has to do with a point we have raised a few days ago, but the significance of the flaw is growing given the stories in the Dispatch and Blade about the release of the weekly BWC memos from Conrad to Taft.

The flaw is this: There is a big, big difference between investing in "hedge funds" and "hedging" (what MDL and Terry Gasper did). On a consumer's level, its like the difference between putting some savings into a 401k versus taking your savings to Vegas for a game of Hold 'Em, if you get our drift.

Allow us to explain this more. Over the last few years, many so-called hedge funds have been created and operated more or less successfully. Originally these were marketed to the extremely wealthy as another way to diversify their personal investments and maybe make higher returns than the average investor.

These funds were called hedge funds because they invested in more exotic types of investments than ordinary stocks. They invested in a wide-range of instruments that the financial world has used for hedging (or insurance purposes). These might include foreign currency contracts, futures, forward contracts, weather futures, swaps, etc. They have holdings in a diversified set of hedging instruments, and in a sense they are just specialized mutual funds. The point is that hedge funds don't engage in hedging - they only invest in the kind of securities that various business use to hedge.

A lot of people, even investment experts are leery of investing in hedge funds. They are leery of them not because of their risk (they do tend to be riskier than typical equity investment funds) but because the regulations and disclosure requirements are too weak. In other words, it's hard to tell what you are "buying". Nevertheless, if someone is willing to spend extra time investigating and monitoring a hedge fund investment, it might be worthwhile.

Back to BWC. Clearly, the reports show that there was a discussion at a meeting of the Oversight Committee about hedge funds, and ultimately they agreed to invest in some of these funds. As today's stories reveal, there was a proposal to make investments in several established (and diversified) hedge funds: FrontPoint Partners, Clinton Group Multistrategy Fund, Laurus Master Fund Ltd., and KBW Asset Management.

That would have probably been okay, but because of its nature, the Oversight Commission would have had to have clearly approved a new policy allowing this type of investment - and apparently it did.

What the Drew Crew and the reporters at the Dispatch and PD don't seem to get is that the MDL affair had NOTHING to do with an investment in a hedge fund of they type discussed above.

The MDL affair was about a risky attempt to "hedge" BWC's Insurance Fund. It had nothing to do with diversifying BWC's investment holdings (as an investment in an established hedge fund would have done). Yes, MDL purpose was to hedge, and, yes, it created a fund. But that by itself doesn't make MDL a hedge fund. It was a fund used to hedge, but it wasn't a "hedge fund" in the normally accepted use of the term.

Why do we say that MDL was NOT a hedge fund? First and foremost, it wasn't a true hedge fund because there was no diversification. True hedge funds (and other funds) diversify so that if one type of their holdings starts to have losses, the chances are that other holdings are making gains. Diversification balances things out.

But MDL was PURELY a scheme to engage in short-selling of bonds. It was an attempt cooked up by BWC staff and Mark Lay to either hedge against losses in the BWC portfolio that were occurring because of rising interest rates, or it was just an enormous gamble in a field where they had no experience gambling. There was no diversification. And, as the facts have shown, when things went bad, the entire investment went bad.

The point of all this is:
  1. The discussions about approving investments in "hedge funds" is a red herring. It has NOTHING to do with MDL. It is a distraction from getting to the bottom of what happened with MDL and who was responsible.

  2. The real question is whether Conrad, McLean, Gasper or the members of the Oversight Commission had any discussion or created any policies that permitted significant short-selling and/or hedging.


Another $1.3 million lost at BWC

It's deja vu all over again!

We apologize, but this is going to sound a lot like yesterday's post. The Plain Dealer reported today that the BWC investment fund lost $1.3 million of the $20 million it had given another shady character to invest on its behalf:
At the same time a Maryland investment manager was losing millions of dollars in a fraud scheme, the Ohio Bureau of Workers' Compensation allowed him to continue managing $20 million of its money.

In the end, the bureau says, it lost $1.34 million of the $20 million it invested with Chapman Capital Management, a firm owned by Baltimore investment manager Nathan Chapman.

The bureau gave Chapman Capital Management $20 million to invest between May 1998 and February 2000 and allowed him to invest that money until March 7, 2003, according to bureau spokeswoman Emily Hicks.

During two of those years, one of Chapman's companies lost about $40 million in clients' money in a well-publicized fraud scheme perpetrated by another bureau investment manager, Alan Brian Bond, according to published reports.

[. . .]

Bond is now in federal prison. Chapman is in legal trouble, too, for a separate scheme.

On Aug. 12, a federal jury convicted Chapman of defrauding two pension funds, shareholders in his company and the public. He was sentenced to 90 months in prison on 23 counts and ordered to pay more than $5 million in restitution.

[. . .]

He was indicted on those charges on June 26, 2003 - three months after the bureau had ended its business with Chapman.

And, besides being a crook, what kind of guy was Chapman? Read it and weep:
Prosecutors said Chapman, 47, used some of that money to lavish gifts on mistresses, including $7,000 for a college graduation party for one of them.

Wednesday, June 15, 2005


New BWC revelations: $4 million lost to indicted manager

Man, when it rains, it pours. The Plain Dealer late this morning reported that:
The Ohio Bureau of Workers' Compensation allowed Alan Brian Bond to continue investing $50 million of its money for at least 18 months after Bond was indicted on charges of taking more than $6.9 million in kickbacks that were billed to his clients.

The bureau lost $3.86 million in that investment, according to spokeswoman Emily Hicks.
Now, all this happened back in the 2000-2001 period.
Bond, president and CEO of Albriond, was indicted on Dec. 16, 1999, the same day the SEC sued him, alleging that he had accepted the kickbacks.

Three weeks later, Robert Cowman, then the bureau's chief investment officer, told The Plain Dealer that the bureau had no immediate plans to stop doing business with Albriond, despite Bond's legal troubles.

But on Tuesday, Hicks said the bureau wasn't aware that Bond had been indicted until December 2001. That's when Bond was indicted on a second set of charges related to the cherry-picking scheme.

[. . .]

"Do we have to pass a bill that you have to do a Google search on each investment manager every month?" [State Senator Mark] Dann asked.

"Clearly, nobody was minding the store. There was no oversight of these investment managers," he said.
Surely you want to know a little more about Bond, don't you?
Bond, a New York money manager who made appearances regularly on "Wall Street Week With Louis Rukeyser," used the kick backs to support an opulent lifestyle that in cluded two homes in Florida, more than 75 luxury and antique auto mobiles and spending sprees that totaled as much as $470,000 a month, according to the Securities and Exchange Commission.

He paid for those things, according to the SEC, by defrauding clients, among them the pension and retirement funds of police officers and other blue-collar workers.In 1997 and 1998, campaign finance records show, Bond and two of his associates gave $5,500 to Republican Ken Blackwell, then state treasurer; $2,000 to Democrat Lee Fisher, who was running for governor of Ohio; and $1,000 to Republican Betty Montgomery, then attorney general.
BWC really knew how to pick 'em.

The "Culture of Corruption" drum beat gets louder and louder.


Voinovich: Better late than never

Americablog reports that Voinovich has finally signed on as co-sponsor of the anti-lynching resolution.


MDL memorandum confirms investment scheme

One of the questions that hasn't been fully addressed in the MDL/BWC scandal is exactly how MDL lost $225 million of the bureau's money.

Virtually alone (as compared to the Ohio newspapers and internet sources), we started in a June 10 post to layout what we strongly believed to be the mechanism and fundamental problems associated with this idiotic affair.

This much is apparently confirmed by everybody: MDL shifted its money from "long" investments in bonds to short selling of bonds based, gambling on Mark Lay's mistaken belief that long-term interest rates would rise.

But what we asserted - and what we believe is now substantiated by previously confidential documents - is that MDL created a startling complex, risky and exotic "short selling" scheme. In particular, we asserted that:
Unknown to us, at the same time we were writing our first post, AG Jim Petro confirmed one part of our theory when he revealed that MDL indeed had leverage the fund - to the tune
$3.5 billion - $7 billion!

We believe our theory has now been fully confirmed with the AG's release of the "Confidential Private Placement Memorandum" (.pdf document) from MDL that prospectively - and precisely - lays out Mark Lays plan exactly as we had tentatively sketched out.

A few highlights:
In addition, an Aug. 11, 2004 letter from MDL to BWC indicates that the Private Placement Memorandum must be amended to account for a surge in borrowing:
With respect to US Treasury Securities leveraging has been and will continue to be significantly higher than 150% [the limit in the original PPM - ed.]
The amendments added to the PPM nearly two pages of discussions and warnings about expanding the leverage of the fund.

So, there you have it folks. There's the confirmation we were looking for. Despite BWC and MDL having not experience in this type of investment structure, hand-in-hand they skip off with dreams of glory only to find that the whole thing blew up in their faces.

Many details need to be filled in and questions answered.
We expect much more to come out over the next few weeks.

Tuesday, June 14, 2005


Voinovich, DeWine more vulnerable?

During the last few senatorial elections, Ohio Democrats have treated Mike DeWine and George Voinovich as unbeatable and only thrown up token opponents.

But a new SurveyUSA poll (click on the names to get the crosstabs) of U.S. Senators' approval ratings suggest DeWine and Voinovich may have more vulnerabilities than the Dems give them credit for, and it clearly shows that the duo rank near the bottom in the approval ratings compared to their peers.

The poll shows that during the first week of June 2005, only 50% approved of the job Voinovich was doing and 37% disapproved. His approval rating ranked him 81st out of 100.

Likewise for DeWine, 44% approved of the job he was doing and 43% disapproved. He ranked 94th out of 100.

At the other end of the spectrum Barack Obama ranked #1 with 72% approval. The top third of the list had ratings of 60% or better. In comparison, Mike and George appear to be on shaky ground.


Burga: Boo hoo hoo, wah wah wah

Bill Burga is crying over the embarrassing position he is in as one of the five members of the BWC's Nearsighted Commission. However, it's a little late to be complaining. From the Dispatch and Blade:
Also yesterday, William Burga, a longtime member of the bureau Oversight Commission, said he would not resign in the wake of the scandal over the MDL losses and a separate rare-coin investment that has a reported shortfall of up to $13 million.

Burga, president of the Ohio AFL-CIO and a representative of organized labor on the commission, said he was "misled, misinformed and otherwise kept in the dark" about investment problems.

"To say that I am damn angry about it is a gross understatement," said Burga.
Burga should shut the fuck up, resign and apologize for letting himself be duped. His decision to un-resign and these comments are self-serving crap that is not about defending labor's interest or fighting for the integrity of BWC or the Commission. We believe he is simply laying the groundwork for a legal defense that he may need if and when legal action is taken against the five commission members (and others) who have fiduciary responsibility over the BWC investments.

Make no mistake, we are a big labor supporter. In fact, there needs to be more union oversight and involvement with BWC not less. Real oversight and involvement - not just showing up for meetings, posing for photo-ops and going to conferences and "trainings" in warm locales.

Unfortunately, Burga is not the only labor leader appointed to a state board who is essentially clueless about what it means to be a fiduciary and how seriously their reponsibilities are.

That also true for the non-labor appointees, too. We've been to a lot of meetings of various state board and commissions. In some cases, we did sense that staff were likely misleading the board members or were keeping in the dark. In other cases, staff were providing an incredible amount of detailed and accurate information. What's common in our experience is that it didn't seem to make much difference. That's because too often the board members were either too apathetic or too unprepared to absorb what was going on. Either way, the tail was wagging the dog with staff effectively running the show.

Back to Burga, we believe with leadership and service comes accountability. Does he?

In many ways, this is no different than the fight that taking place at the national level of the AFL-CIO.

In brief, the national labor fed's struggles essentially boil down to pinning down who is responsible for repeatedly-missed organizing and political opportunities. No one person is holding the cure-all for labor, but those who are desperately trying to hang onto power are there more or less because of well . . . we guess we have to call it seniority . . . rather than astute skills and leadership. Seniority is great as long as the person utilizing it truly has the chops to do the job right.

At the local level, we have guys like Bill Burga, who on one hand have truly worked hard in the past for labor's interest and accomplished some significant things. But, Burga has also presided over the Ohio AFL-CIO during a period of continued decline, shrinking influence and a flawed 2004 election strategy.

Burga will try to appeal to other labor leaders and the rank-and-file for support, and, unfortunately he will probably get it. We only wish that our brothers and sisters in the labor movement could understand that Burga was asleep at the wheel, and that they deserve a representative on the Commission that is truly focused on BWC's performance.


Voinovich AWOL on anti-lynching vote?

This is weird, but according to all of the original and amended co-sponsor lists (here, here and here) for SRes 39, the "apologizing for not passing anti-lynching laws" Senate resolution, our own George Voinovich failed to sign on.

Any explanations? Is this right?

UPDATE 12:15 pm:
From a commentator at Americablog:
I just called my Senator (Voinovich) to ask what's going on. They said they have no explanation at this time as for why he didn't put his name on the resolution. The guy answering phones took down my name and address and promised a letter within the next 10 days. Very odd. Considering how easily the Senator trounced Fingerhut last fall, I wouldn't think he'd need to worry so much about all the yokels south of Cleveland...
Stay tuned.

Monday, June 13, 2005


New BWC magazine - Real or satire?

What if the Onion did a special issue about BWC?

It might start off with fascinating column by (former) BWC administrator Jim Conrad telling readers that the agency's "investment portfolio is not only profitable, but cutting edge."
After receiving proposals from managers, BWC uses a combination of appropriate internal staff and external consultants to make preliminary selections. Before BWC can do business with any investment manager, the firm must be approved by the independent Workers' Compensation Oversight Commission.

The investment manager selection is purposely arduous and goes well beyond what's required by law; in fact, BWC could privately invite managers in and provide funding without publicizing the opportunity. Instead, such an exhaustive process provides transparency and allows the Ohio State Insurance Fund to be comprised of innovative and diverse managers.
The Onion staff might also include a fancy center-spread story allowing BWC flack Jeremy Jackson to further strut the agency's stuff:
Because of BWC's cutting-edge techniques and calculated risk-taking, Ohio has become a national leader in workers' compensation.

[. . .]

Because the law did not require a public, formal selection process, conventional wisdom suggested that most [state investment funds] would work privately with potential managers behind close doors.

Yet BWC chose to do otherwise.

[. . .]

This pioneering approach led to the creation of arguably one of the most meticulous, thorough investment manager selection processes of any institutional fund. Instead of privately awarding contracts, BWC chose to:
  • Publish a request-for-proposal and advertise it in major industry publications;

  • Install specific components for successfully completing a proposal, which includes disclosure of investment performance and manager expertise among other elements (all of which are public record);

  • Use a combination of internal staff and a nationally recognized external consultant to determine which managers best mirror BWC's investment objectives;

  • Focus on finding and funding Ohio-qualified emerging, and minority-based managers and brokers by establishing guidelines in its investment policy outlining goals for doing business with these groups.
Additionally, with the reform of BWC's operations in the mid-1990s, came an independent Workers' Compensation Oversight Commission. Comprised of five voting members from business and labor, including the president of the Ohio AFL-CIO, it's task was [sic] to oversee BWC's financial and investment policies. This includes approval of all investment managers, which means BWC could not give one dollar to an investment firm until approved by the oversight commission.

[. . .]

All of BWC's successes, including its investments, are the results of original, inventive decisions that have modernized the bureau's operation.
And, if we are really lucky, the Onion staff might throw in a few knowlegeable observations from Ohio's crackerjack business leaders:
"BWC's investment Strategy coupled with astute professional management has been an asset to Ohio's business community." - Andy Doehrel, president of the Ohio Chamber of Commerce

"Because of their investment performance, BWC has cemented its reputation as a national leader in workers' compensation." - Eric Burkland, president of the Ohio Manufacturer's Association.
But, hey, who needs the Onion when BWC can put such barbed humor together themselves.

(Thanks go to friends who sent us these articles from the Summer 2005 edition of BWC's slick magazine, the Workers' Comp Quarterly. My how these fucking blowhards must wish that rag never went to press.)

Sunday, June 12, 2005


Could the losses at BWC have been detected in advance?

In our post yesterday we asked:
Could BWC have known of the scope of the losses and done anything to lessen them as MDL's investment scheme started to blow up? Could this kind of economic catastrophe happen at the state's other funds, such as one of the five public worker pension funds. The answer is yes, yes, and yes.
As we mentioned - without explanation - there is a relatively simple method for avoiding disaster with big-time investments. It's a risk management concept called Value-At-Risk that's been around for over a decade (and arguably much longer).

Rigorous VAR discussions are usually best left for MBA numbers freaks and Finance PhDs. That's because it relies heavily on intense statistical modeling to understand conceptually and high-speed computers to actually implement. But, throw together some math whizzes, a subscription to equity & fixed income databases and some kick-ass servers, and anybody these days can have a VAR system to keep their CFOs from shooting themselves in the foot and their investment managers from running off with the money or accidentally running their organizations into the ground.

The following explanation of how VAR works and could have prevented or lessened the MCL and Noe debacles will necessarily have some flaws because we are going to try to keep it simple.

So here goes:

VAR is a method of measuring the risk at a specific point in time over a specific time period of an investment or trading portfolio. It can easily be used with portfolios that just have equities and bonds, or with some extra tricks, it can also be used for portfolios that have real estate, private equity holdings, and, hey - even hedges and coins.

Let's leave aside for now how the risk is measured. The "why" the risk is measured is shown precisely by the BWC situation. No self-respecting portfolio manager wants to wake up one day to find that he/she is suddenly, say, about $215 million short. At least they don't if they want to keep their job and stay out of jail.

No, a good portfolio manager wants to keep a finger on both his entire portfolio and each of the sub-investments he is responsible for. For example, a good portfolio manager would want to be able to have a fast answer to the question, "What's the most I could lose today (or this week, or this month)?"

(Really, that's a fair question to ask anyone - not just an investment manager - who has fiduciary responsibilities over an investment portfolio. This would include the BWC Nearsighted, sorry, Oversight Commission as well as the trustees of the five state retirement commissions. We wish someone would ask them because the answers would be fascinating. We'd bet money that half of them wouldn't even understand the question.)

Now, a real portfolio manager would actually try to answer the question with much more precision and with something that indicates how certain he is of his answer.

Let's use a somewhat clumsy example. What if someone asked us, "What are the chances today that while traveling on the interstate, a car going the other direction will cross the median and strike another car?" Let's say we also know that a car has to be traveling at least 75 mph to make it through a median barrier.

So, we might answer the question by saying that based on current traffic flow, there is a 1% chance that a car will veer across the median with a speed in excess of 75 mph. Put another way, there is a 99% probability that no car will cross the median doing less than 75 mph. That would probably make us feel pretty safe to drive.

Continuing with this same example, what if we detected that the traffic has suddenly picked up on the interstate and because of the added congestion, we now believe there is a 5% chance that a car will veer across faster than 75 mph. Given that change, we might want to change plans and take a safer route.

Back to the financial world, an investment manager using VAR might say that there is a 99% probability that the fund will lose less than $50 million that day. Inversely, there is a 1% chance that the loss will be greater than $50 million.

So far, we have been talking about investment funds and investment managers in the abstract. Let's say we are talking about the portfolio of "Big Time Bank" that uses VAR. The BTB's board of directors, or it's investment committee or maybe even a risk management committee, will have set a policy that says that the risk of the portfolio must not make things any worse that having a 99% probability of losing $50 million.

This tells the overall manager of the portfolio that if he/she detects an increase in the risk, than the portfolio must be altered to bring the entire risk back in line with BTB's policy. This might require selling an investment, moving money into another investment type, hedging an investment, or any number of ways risk can be adjusted.

The overall portfolio manager will also "budget" the portfolio's risk, i.e., allocate a specific amount of the overall risk to each large subdivision of the portfolio, and the manager or sub-manager will typically further budget the risk right down to each specific investment.

One specific purpose of having VAR and budgeting risk is to keep an eye on investment managers. From the excellent
For institutions to manage risk, they must know about risks while they are being taken. If a trader mis-hedges a portfolio, his employer needs to find out before a loss is incurred. VaR gives institutions the ability to do so.
Hmmm, "mis-hedges a portfolio." Sound familiar?

This issue raises what we believe to be a major problem at BWC and potentially a major problem at the five state pension funds: portfolio managers don't know enough or don't care enough about how their investment managers meet their goals. This is problematic because financial history is full of examples (add Tom Noe to the list) of renegade investment managers who gamble (sometimes literally) on investments that are far from what they are supposed to be investing in.

Unfortunately, portfolio managers are frequently either overjoyed when their investment managers exceed their goals or are blindsided when they start mounting losses. Both are wrong. For example, the correct reaction of a portfolio manager to a subordinate who exceeds his/her goals shouldn't be to celebrate. Instead, it should first be to find out how it happened. Did they really invest in what they were suppose to? Did they do it by exposing the entire fund to excess risk (remember, there is a relationship between risk and reward in the financial world, and if the rewards have increased there must be some place where risk was increased, too)? Who authorized the altered investments or risk?

VAR gives portfolio managers the ability to put their investment managers on a very short leash. VAR can effectively sound alarms about changes in risk at both macro and micro levels.

Okay, the one thing we haven't addressed is what makes a VAR system possible. In brief, VAR operates by applying statistics to investment prices and returns. Although financial theory says that it's impossible to predict whether a stock price will rise or fall in value the next day (the so-called "random walk" of prices) it is possible to predict with some certainty that a price will fall in a certain range.

For example, let's take a look at the price of a share of stock in the XYZ Corporation. Over the past 100 days, although the price of the share has risen slightly, the daily price changes have been less than +/- $.05 for 99 of those 100 days. Although history can't predict the future with certainty, this data suggest that tomorrow we'd have a 99% probability of losing $.05 on our share of XYZ stock. That, in a way, is the VAR for that stock

If we had shares of stock in multiple companies, we could repeat this process for each, and put all this data together to give us a VAR for our entire portfolio.

If, however, the next day, the price of the XYZ stock increases by $.09 cents, and then drops by $.08 the following day, and then $.07 the day after that, and so on for the next 20 days, this new data suggests that the XYZ stock has become more volatile and riskier. Depending on our risk tolerance, we'd have to decide if we still wanted to hang onto that share of stock.

Whew! If you've stuck with this so far, bless you. This is some pretty thick stuff. Throughout all of the above, we have had to cut some corners in order to make some of this sensible to the non-statistically inclined. However, we want the takeaway to be:
  1. That a highly-proven and relatively simple method exists to prevent fraud and excessive losses in portfolios, namely Value-At-Risk.

  2. That the big funds like BWC, OPERS and STRS could easily afford to implement a VAR system, and that the smaller funds like SERS, OPFF, and the OHP funds could probably afford it, too.

  3. That these funds lag behind private sector businesses with similarly large portfolios by 5-10 years in investment management theory and practice.
OPERS will claim that they have something of a VAR system in place. But they don't. We and others have looked at what they have and it falls far short. Some of the other funds may claim to have some VAR, too. Again, how shall we put it? Well, that's just bullshit.

Again, the test is to ask a fiduciary how much money their fund might lose this year. If they can't answer something along the lines of there being a XX% probability that the losses will be less than $ZZ millions, they don't have VAR.

[UPDATED 3:00 PM 6/13/05 with edits to make meanings clearer]


Petro: I don't know who the BWC fiduciaries are

We missed this unbelievable nugget when we first read Laura Bischoff's story today:
Petro said he is not sure who are fiduciaries at the bureau or if the five voting members of the BWC Oversight Commission hold that legal responsibility.
Well, that seems to raise two fundamental questions:
  • How in the hell can/does BWC operate without a clear designation of fiduciary responsibility?

  • If Ohio's attorney general can't say who has fiduciary responsibility, who can?
Now, we know that most trustees of the state's pension systems know they are fiduciaries. We strongly suspect, however, the few have much of inkling of what that means.

But for the state's primo lawyer to suggest that the fiduciary duties at a major state agency are murky - this is revealing. Revealing, that is, about the operations at BWC and about the abilities of Jim Petro. If Bischoffs story is accurate, this admittance should cost him any consideration for governor.

Just when we think our jaws can't drop any more, this shit gets weirder and deeper.


What's new on Coingate and MDL

Today's papers have a couple of new wrinkles. Here is a synopsis:

Lay claims his hedge scheme was MDL's first. Translation: He and Terry Gasper started out cocky but quickly discovered they were way over their heads, but BWC knew about it all.

Dispatch managing editor Ben Marrison takes the somewhat rare and step of directly commenting on a news story and calls on Taft for full disclosure of weekly BWC reports. Translation: Bob Taft now can add "bumbling liar" to the list of his other bumbling attributes.

Chris Kirkpatrick of the Blade says Jim Petro feels confident he can pursue the case against MDL U.S. courts instead of in Bermuda. Translation: Petro is pretty much screwed and better start boning up on the British court system.

The Blade's Steve Eder also reports that the Noe story is starting to get stronger national legs. Translation: Outrageous levels of campaign money laundering and corruption are starting to give credibility to allegations of serious irregularities in the conduct of Ohio's 2004 elections.

Bill Hershey of the Dayton Daily News weighs in on how much harm the various scandals will do to GOP candidates in future elections. Translation: Despite the tremendous opportunity that has developed, it's not cynical to suggest that the Ohio Democratic Party structure(s) may be incapable of organizing a viable vision, campaign and set of candidates as an alternative to the GOP's culture of corruption.

Finally, from this past Friday, the PD reports that National City Bank is accusing Tom Noe of stiffing the firm to the tune of over $203,000. Translation: The pirahnas are in the water.

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