Holy Toledo, it's Coingate!

An Ohio government scheme to invest public dollars in rare coins loses millions -- and all scandalous roads lead back to a Bush Pioneer.

By Bill Frogameni

Read more: Politics, News

June 10, 2005 | Before the 2004 presidential election, northwest Ohio was one of the most hotly contested regions in the most hotly contested of states. At that time, Republican insider, fundraiser and Bush "Pioneer" Tom Noe presided over George W. Bush's reelection campaign in Lucas County, which encompasses the city of Toledo. Noe, a Toledo coin dealer -- and former chair of the Lucas County Republican Party -- now presides over a Byzantine political scandal involving fraud with state money, political cronyism, alleged kickbacks and a federal investigation of illegal contributions to George W. Bush.

The "Coingate" scandal erupted when the Toledo Blade began reporting on Noe's contracts with the state to invest a total of $50 million in coin speculation -- apparently the only public investment fund of its kind in the country. Noe got the money, ostensibly, as an investment for the Bureau of Workers' Compensation, whose chief executive, James Conrad, recently resigned over the affair. In 1998, when Sen. George Voinovich was governor, Noe set up Capital Coin Fund to buy and sell coins on behalf of the state, with 80 percent of the profits supposedly going back to Ohio. Noe was given $25 million for the fund, and in 2001, he launched Capital Coin Fund II with another $25 million from the bureau.

The problem with Capital Coin, as detailed in the Blade's ongoing investigation, is that it operated with little to no oversight from the Bureau of Workers' Compensation or any other state agency. After weeks of media pressure and public records lawsuits, Noe's attorneys recently admitted that Capital Coin cannot account for $10 million to $12 million -- and this after Noe's repeated insistence that the funds were turning a handsome profit for the state.

It turns out Noe used the funds to invest in several subsidiary coin companies, one of which was run by Mark Chrans, previously convicted of laundering drug money through his own, separate coin business. (Capital Coin severed the relationship with Chrans as a result of $850,000 in bad debt Noe had to write off.) Also in the state's portfolio were other collectibles such as artwork, sports cards and autographs. When an auditor for the Bureau of Workers' Compensation flagged the coin deal in 2000 and cited the lack of oversight, he was ignored, the Blade reported.

At present, 121 coins from the funds are unaccounted for. Those coins are valued at nearly $400,000. Among the more egregious losses are two coins valued together at about $300,000: They were "lost" between Noe and one of his subsidiaries after supposedly being sent in the mail. According to an anonymous law enforcement source quoted in the Blade, records also show Noe bought one coin for $100,000 but sold it for $1.

On the heels of Coingate, news reports have revealed that the Bureau of Workers' Compensation lost $225 million by investing heavily in high-risk hedge funds. The executive in charge of this failed fund has also donated widely to political campaigns. The Blade reported on Thursday that the office of Ohio Gov. Bob Taft was alerted to the $225 million loss by the bureau in late October 2004, but Mark Rickel, the governor's spokesman, maintains Taft was not aware of this loss until the recent reports. Rickel is quoted as saying, however, that the governor was told in late September there was a $10 to $20 million shortfall in the bureau's portfolio.

The $225 million was reportedly lost between February and September 2004, months before Ohio tipped the presidential election in Bush's favor. Democrats are asking if Taft's office deliberately kept the losses quiet in order to avoid political fallout in the election. Rep. Marcy Kaptur, a Democrat who represents northwest Ohio, said, "I find it extraordinarily hard to believe that [Taft] did not know and the Republican leadership of our state did not know. Had this all come out beforehand, I think the election would have been more favorable to the Democrats -- I think it would have tipped the election."

When the Blade began digging in early April, Noe and his supporters -- including Taft -- dismissed the story as a "vendetta" by the paper. They repeatedly stated that the fund had been "profitable" for the state, as it "outperformed" the stock market. In an April 8 interview-turned-shouting match with the Blade, Taft was quoted as saying, "[Noe] was making money for the state; what's the problem?"

As it turns out, it's been revealed that Noe and his wife, Bernadette (who chaired the Lucas County Republicans through the election), have together given more than $200,000 to GOP candidates and PACs locally, statewide and nationally over the last 15 years. Among the list of Noe beneficiaries are Taft, Sens. Voinovich and Mike DeWine, Arnold Schwarzenegger and President Bush. Democrats, like state Sen. Marc Dann of Youngstown, suggest plainly that this played a large part in Noe's unusual contracts. "What we're talking about is a culture of corruption," Dann told the Blade.

Now that Noe's lawyers have admitted he can't account for perhaps $12 million, Taft and other top Ohio Republicans are putting distance between themselves and Noe. Taft, Voinovich, DeWine and even Bush are all giving back the money they got from Noe and his wife. Rickel says the governor is "saddened" and "sickened" to learn of Noe's mismanagement and says the state is looking into criminal and civil charges. Mike Wilkinson, one of the Blade reporters who broke the story, puts it another way: "Nobody's using the word 'vendetta' to describe our reporting anymore." Of Taft and the GOP's retreat from Noe, Wilkinson says they've "thrown Noe under a bus."

Next page: Did Noe funnel state money through illegal third parties to Republicans?