Adviser Guilty in Ohio Investment Loss

Date: Wednesday, October 31, 2007
Author: Joe Milica, Associated Press

AKRON, Ohio (AP) — An investment adviser to the state agency for injured workers was convicted Tuesday of fraud charges connected to the loss of $216 million in a high-risk hedge fund, becoming the 20th person convicted in a wide-reaching scandal.

Mark Lay, chief executive and founder of MDL Capital Management of Pittsburgh, appeared stunned after the first verdict was read, rubbing his hands together and leaning back in his chair.

He was convicted of investment advisory fraud, two counts of mail fraud, and conspiracy to commit mail and wire fraud. He will remain free on bond and be sentenced early next year, Judge David D. Dowd Jr. said. He could face as many as 20 years in prison.

Lay's lawyer, Richard Kerger, said he would seek to have the judge overturn the verdict and would appeal if that failed.

Prosecutors said Lay hid the extent of the risk he took, which went far beyond the limit state officials set. The defense contended that the financial loss to the Ohio Bureau of Workers' Compensation wasn't a crime.

The bureau was the sole investor in a hedge fund that Lay set up in Bermuda, according to the indictment. He was accused of repeatedly failing to tell bureau officials about the risks he was taking.

The case against Lay emerged from a probe into the 2005 revelation that Republican donor Tom Noe was investing state money in rare coins. Noe is now serving 18 years in prison for theft and other crimes.

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 last November's elections.