I have had a rather hectic few days, with meetings and the like, so quite a bit to get caught up on here, and it's blockbuster stuff.
Most of the recent news has been focused on the MDL losses of $215 million, but before we turn to that...we report from the "uh-huh" files of coingate after the break.
Toledo Blade -- The suburban Denver home of a former employee of Tom Noe was burglarized over the weekend, with thieves making off with artwork, guns, jewelry, cars, and $300,000 in wine -- possibly purchased with money from the state of Ohio.
Michael Storeim, a suspect in a Colorado criminal probe into Ohio's missing coins, reported Monday night the valuables had been taken from his Evergreen, Colo., home while he was vacationing with his wife..
Convenient huh ? Clearly State Senator Dann thinks so.
State Sen. Marc Dann, a Democrat from suburban Youngstown, called the reported burglary "an amazing coincidence."
"Clearly, this is more than a coincidence," he said. "I hate to be cynical, but I think I'm a little bit suspicious. This whole thing gets weirder and weirder."
Incredible, you go on vacation, in the middle of being investigated for a million dollar fraud, and voila ! your house and most of the evidence gets robbed !
So now to the big stuff. MDL. This "hedge fund" stuff is complex, and way outside my pay grade to do it full justice to be honest, however there is one Ohio Blogger that has risen to the challenge, and i am going to shamelessly "borrow" and direct to Hypothetically Speaking
First, we have "hedge fund 101" or rather, what was really going on, and then a confirmation that this was the case.
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:
* MDL created a massively layered investment pyramid
* That this pyramid was created by using short-selling security documents as collateral to obtain loans (aka, "leverage") to buy additional short-selling securities that were then used as further collateral for additional loans, and so on, potentially to massive levels of borrowing.
* That the purpose of the pyramid was not to "expand" the investment but to create synthetic advantages based on differences in "duration" and returns among short-, medium- and long-term bonds.
* That the leverage-built pyramid scheme introduced an enormous amount of additional risk compared to a simple short-selling bond fund of equivalent size.
* That a Value-At-Risk investment management system (as found in most large private-sector portfolio management operations) could have both provided initial warnings about the scheme and significantly decreased the losses.
* That the MDL scheme was, financial speaking, the inverse of the infamous Orange County, CA debacle that put the county in bankruptcy in the mid-1990s.
Ok, so that all sounds pretty bad to me. but not as bad as this form the dispatch
James McLean, the bureaus chief investment officer, has said MDL was authorized to borrow up to $150 million but actually borrowed between $3.5 billion and $7 billion before the investment was ended last fall.
Ok, SEVEN FUCKING BILLION DOLLARS !! that is just out of hand and off the wall. If that had of collapsed, it represents about 1/3 of Ohio's annual state budget for fuck sake.
what the hell were they thinking ? and The Governor Taft, the auditor Betty Montgomery, and the AG Jim Petro tried to bury it because of the November election !
I am going to say that again. The Ohio GOP top power players could have WIPED OUT Ohio to make sure a scandal didn't break and spoil bush's chances of "re-election".
So asides from the obvious question - who are we going to throw in jail first, there are so many other troubling questions out there.
Like, are any of the other states funds leveraged like this ?!?! Even if they are currently making money they need to be halted.
Like, Who the fuck gave them $7 billion dollars in the first place, in what MUST have looked like a REALLY dodgey deal ?
Like, uh, have we paid that loan back when we liquidated this fund ?
We must be told ASAP, because every Ohioan was a co-signer.
Oh, and just to be clear, when all this was going on, the BWC chief financial officer told folks to "give MDL a break"
toledoblade.com :
COLUMBUS -- As multi million-dollar losses by a Pittsburgh investment firm mounted last year, the chief financial officer of the Ohio Bureau of Workers' Compensation told another top agency official that he had been told to "give MDL a break,'' according to records released yesterday by Gov. Bob Taft.
And why ?
Oh this gets my goat.
The records stated that Terrence Gasper, removed from his post after the bureau lost $215 million in the hedge fund managed by MDL Capital Management, told a fellow official that the instructions had come from the former administrator of the bureau, James Conrad, who had been asked by George Forbes, a member of the bureau's Oversight Commision, to go easy on MDL.
Mr. Forbes daughter, Mildred "Mimi" Forbes, is an executive with the investment firm.
Get that ? They almost ruined Ohio further so little mimi could keep her nice little cushy job.
fuckers.
oh and to cap it all off, yet another fund has lot a bundle. Hypothetically speaking has a diary on this one, that's just slipping off the hit parade charts.
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.
I'll leave you guys to comment on that one.
Update [2005-6-15 21:32:4 by Pounder]:
common cause has a posting over at MyDD on some action you can take.