Trial opens for ex-adviser for Ohio workers’ comp
A U.S. attorney called Mark Lay a ‘manipulator’ and a ‘liar.’
AKRON (AP) — A former adviser for the Ohio Bureau of Workers’ Compensation lied to state officials and manipulated investments that lost $215 million meant for injured workers, the government said Monday as his trial began. The defense said he followed state guidelines.
Mark D. Lay, head of a money management firm, exceeded his investment authority by using high-risk hedge investment funds, Assistant U.S. Attorney Benita Pearson said in opening statements in U.S. District Court.
“It was not Mr. Lay’s money to gamble with,” Pearson said.
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 wide-reaching bureau investment scandal that reached to the former governor.
Pearson said violating the agreement with the state on how to invest the money was the issue, not the losses. “He’s a manipulator, a liar,” she told jurors.
Lay put state money at risk by using hedge investments with borrowed assets, Pearson said. While such investments can mean big profits, “It also allows your losses to be much bigger,” she said.
Lay’s attorney, Richard Kerger, said the case was about shifting blame for the scandal.
He asked the jury to acquit Lay, founder and chief executive of MDL Capital Investment in Pittsburgh.
“You’re not going to let them pin the blame on Mark Lay,” Kerger predicted.
Kerger said the investments were meant to respond to Lay’s concern expressed to state officials that interest rates could increase, thus making fixed-income bond investments worth less.
Kerger said the higher-risk investments were meant to get bigger profits and avoid the need for a politically unpopular increase in the premiums paid by Ohio employers to the fund for injured workers.
Kerger said the defense would present testimony that showed the investments were appropriate and that Lay had properly reported to the state on investment moves.
Judge David D. Dowd Jr. interrupted Kerger’s comments about an unorthodox $50 million investment in rare coins by the workers’ compensation fund to say “the Bureau of Workers’ Compensation is not on trial, the defendant is on trial.” The judge repeated the warning when Kerger mentioned an upcoming prosecution witness who has been sentenced to prison in the scandal.
The indictment emerged from a case that began with the 2005 revelation that prolific Republican donor Tom Noe was investing state money in rare coins. He’s now serving 18 years in prison for theft and other crimes. Nineteen people have been convicted in the scandal, which rocked state politics.
More than $300 million in losses were reported at the bureau. Former Gov. Bob Taft pleaded no contest to charges that he failed to report golf outings and other gifts on his disclosure forms and was fined $4,000.
In the wake of the scandal, Democrats made significant inroads in the November elections, gaining four of five statewide offices, including the governor’s office, which was wrested from Republican control for the first time in 16 years.
The bureau was the sole investor in the hedge fund that Lay set up in Bermuda, according to the indictment against Lay. He is accused of repeatedly failing to tell bureau officials when questioned beginning in 2004 about the extent of the risks he was taking with the fund.
The bureau paid MDL fees of nearly $1.8 million. Prosecutors are seeking that money back as part of their action against Lay.
If convicted, Lay faces a maximum sentence of 20 years in prison, but would likely receive less time under federal sentencing guidelines.