Ohio State Senator Says Explanation of Comp Fund Losses 'Defies Credibility'
The Insurance Journal
June 10, 2005
Someone in state government had to know that its insurance fund for injured workers was making bad investments, with losses now at $300 million from four accounts, a leading critic of Ohio Gov. Bob Taft's handling of the scandal says.
Ohio Bureau of Workers' Compensation interim administrator Tina Kielmeyer on Thursday terminated investment dealings with a company hired to manage bureau investments after it was discovered the manager lost $71 million.
The bureau blamed $60 million of the losses on poor decisions by Allegiant Asset Management, a subsidiary of Cleveland-based National City.
Allegiant is the fourth fund manager with which the bureau has severed ties. On June 7, the bureau revealed that Pittsburgh-based MDL Capital Management had lost $215 million of the agency's investments. The bureau also lost $10 million to $13 million in a fund managed by coin dealer and top Republican Party donor Tom Noe and $4.8 million in funds managed by American Express.
Sen. Marc Dann, a Youngstown-area Democrat, said he cannot believe no one in the bureau or Taft's office knew of losses that occurred years ago.
"It seems to me to defy credibility that they did not,'' Dann said.
National City's political action committee has contributed more than $20,000 to Taft campaigns since 1990. Dann, who has sued Taft to obtain records of communication between bureau officials and the governor's office, said the announcement is more evidence of state business going to big political donors.
"Now we're at $300 million and counting, either through the neglect or corruption that's pervaded the operation of the fund,'' Dann said.
The Allegiant losses were confirmed by Chicago-based Ennis, Knupp & Associates Inc., which the bureau hired on June 30 to examine each of the its investments, bureau spokesman Jeremy Jackson said. The bureau says its insurance fund is worth $14.3 billion.
Taft, who ordered a top-to-bottom review of the bureau, didn't know what he would find but the review is proceeding as it should, spokesman Mark Rickel said. Although the bureau knew of the losses in the fund managed by Noe, a contributor to Taft campaigns, the governor has said he did not find out about it until April.
"With a management review team and interim administrator Kielmeyer, this is what the governor had asked them to do,'' Rickel said. "This is all part of the process, to do a full review.''
The Allegiant investments were in major corporations and were taken with a "long-term outlook'' but did not perform well from July 2001 to June 2003, when the losses occurred, said John Abunassar, executive vice president of National City.
Jackson said that Allegiant operated within the terms of its agreement with the bureau, which could no longer afford to maintain its investments with the fund manager. The review found no evidence of improper behavior, he said. The bureau is discussing possible moves to recover the losses with Attorney General Jim Petro, Jackson said.
"This appears to be strictly related to poor management decisions,'' Jackson said. "They made poor choices.''
Abunassar said the company kept the bureau advised of its investments.
"We continue to conduct our business as we always have, with full integrity and full transparency,'' Abunassar said.