It's hard to think of a state outside the Deep South where the Democratic Party has been more thoroughly whupped than Ohio. For over a decade, Republicans have controlled the governor's mansion and all statewide constitutional offices and had near two-thirds majorities in both state legislative chambers. Both US senators are Republican, as are twelve of eighteen Representatives. The sad fact is that the GOP has encountered precious little resistance on its path to hegemony; Democrats have been out-fundraised more than 2-to-1 and fight each other harder than they fight their Republican opponents. Lucas County, around Toledo, has two tribes of Democrats--the local press refers to them as Team A and Team B--whose members regularly battle each other for local office. "The Ohio Democratic Party is so terrible and ineffectual," a friend who worked on the campaign in Ohio last year recently told me, "it ought to be taken into receivership."
But things might be about to change. Thanks to the arrogance and corruption of the state GOP and the tireless investigative journalism of the Toledo Blade, every day Ohio voters are learning more about "coingate," a scandal at once farcical and outrageous, that touches nearly every prominent elected Republican in the state and could finally pave the way for a Democratic resurgence.
The scandal starts back in 1997, when the state's Bureau of Workers Compensation, which provides workplace injury insurance for Ohio's workers, decided to start an "emerging managers" program that would allow outside managers to invest some of the fund's $18 billion in assets. With then-Governor George Voinovich's direct appointee at BWC calling the shots on who got the money, the $500 million set aside for the program offered a jackpot of prime contracts that could be doled out to supporters. In all, one hundred fifty-four fund managers were contracted to invest BWC money under Voinovich and his successor, Bob Taft.
Enter Thomas Noe, a GOP rainmaker (and Bush Pioneer) from the Toledo suburbs who, along with his wife, Bernadette, has contributed more than $200,000 to Republican candidates over the past fifteen years. Noe made his fortune in the rare coin business and somehow convinced the BWC that it could do the same. In 1998, he got a contract to invest $25 million of state money in coins, with 80 percent of the profits supposedly going to the state. It was an unorthodox deal: not a single other state invests in the completely unregulated rare coin market, and there was no supervision of Noe, who acted as the main assessor of the collection's value and kept the coins stashed in warehouses around the country, all but one of which state overseers never visited. When the contract was reviewed in 2000, a state auditor immediately recognized the potential for self-dealing. Noting that Noe and his associates "could potentially be realizing profits on sales of coins to the [fund]" he warned, "such a situation presents a conflict of interest and potentially exposes both the managers and [the bureau] to allegations of improper activity."
Not only did then-Republican State Auditor (and now Attorney General) Jim Petro ignore this warning, Noe was rewarded with another $25 million. The Blade's reporting has revealed that the auditor's concerns were well-founded: 121 precious coins have disappeared, including two worth $300,000 that were "lost" en route to a business partner of Noe in Colorado named Mike Storeim, who's since been accused of scamming the fund). Noe wrote off $850,000 of debt owed to the coin fund by another partner who had served a year in federal prison for laundering drug money, and after much prodding, Noe has now admitted that he can't account for somewhere between $10 and $12 million in state money--cash that investigators suspect he stole.
As an added wrinkle, the FBI is currently investigating Noe for violating federal campaign finance law by distributing cash to associates to donate to Bush at an October 2003 fundraiser. This suggests that the entire enterprise was functioning as a closed loop of cronyism: Republicans gave Noe access to state money, some of which he then skimmed for himself and some of which he funneled back into contributions to Republican candidates, up to and including the President of the United States.
Once reporters and investigators started looking into the BWC management, Noe's coin shenanigans turned out to be the tip of the proverbial iceberg. The BWC also lost $215 million (!) in a high-risk hedge fund and recently the Cleveland Plain Dealer reported that the BWC continued to allow another fund manager, Alan Brian Bond, to manage $50 million for eighteen months after the New York money manager had been indicted in a high-publicity kickback scheme. This prompted Democratic State Senator Marc Dann to craft a bill requiring BWC administrators to Google the investment managers once a month to make sure they haven't been indicted.
With its ever widening circle of misbehavior and Maltese Falcon trappings of rare gold coins and sketchy collectors, the scandal has captured the public's imagination. "I walked in the Memorial Day parade and people were handing me coins," says Dann, who represents suburban Youngstown. "When I go into Speedway, the coffee lady asks me every day about the individual developments in specific detail."
So far the state's prominent Republicans have been remarkably tone deaf in their handling of the fallout. At first Taft insisted the coin investments had outperformed the stock market and lashed out at the Blade for its "vendetta." Then amid calls for the state to file suit against Noe, Petro dragged his feet for fifty-one days, potentially allowing Noe time to move money around and hide assets. Now each day brings a new revelation of misdeeds and the states' Republicans are, in Dann's words, "arguing about whether they're incompetent or corrupt." It's beginning to take a political toll: The head of the BWC has resigned, Governor Taft, whose second and final terms ends in 2006, has an approval rating of 19 percent, and Petro, Secretary of State Kenneth Blackwell and Auditor Betty Montgomery, all of whom hope to succeed Taft, are working furiously to distance themselves from Noe, despite having all been beneficiaries of his largesse.
But will this all add up to Democratic gains in 2006?
Pete Giangreco, a Democratic political consultant who's worked in both Illinois and Ohio, says there's good precedent: In 2002 Illinois Dems swept to power, capturing the governor's mansion for the first time in twenty-six years in the wake of a licenses-for-bribes scandal swirling around then-Governor George Ryan. "I was in Columbus yesterday and was talking about how similar Ohio in '06 is to Illinois in '02. It's déjà vu all over again," Giangreco says. "Two things did it in Illinois, and it looks like the same dynamic: Pretty serious economic problems brought on by a GOP administration and a huge scandal and corruption in completely Republican-dominated state government."
"The public knows the problem is not just the people in power but the system itself," says attorney Chris Glaros, who recently co-founded the grassroots group Blue 88 to bring Ohio back to the Democratic Party. But unless Democrats get behind clean elections legislation, he adds, "disgust with the current scandal will not translate into trust that Democrats can do better."
"Democrats," Glaros says, "are going to win by arguing for real reform rather than making the case that they're inherently more trustworthy."
Christopher Hayes is a contributing editor of In These Times and the Chicago editor of Just Cause magazine.