Ohio Democrats said yesterday they were demanding to know whythe state's attorney general took nine months to move against aBermuda hedge fund that lost $215 million invested by the state'sBureau of Workers' Compensation (BWC).

"We're going to push it until we get to the truth," said StateSen. Marc Dann, D-Liberty Township, an attorney who is helping tospearhead his party's investigation into continuing revelations ofpolitically-tinged investments and losses at BWC.

On Friday, Republican Attorney General Jim Petro said he hadfiled suit in Franklin County Common Pleas Court against MDL ActiveDuration Fund Ltd., alleging fraud, breach of contract and otherviolations of state law.

According to the lawsuit, BWC first allocated $55 million in1998 for MDL Capital to create a long-bond account with a maturityof 10 years or more for the bureau, and in 2003 provided anadditional $300 million for MDL Capital to manage.

The complaint says that under a new contract in 2003, the bureauallocated $100 million in 2003 from its existing MDL account to buyshares in the MDL Active Duration Fund, then allocated anadditional $125 million to the fund in 2004.

A stated investment objective for the fund was to hedge BWC'sinvestments against losses in other investments due to market pricefluctuations.

According to the suit, BWC was erroneously led to believe otherinvestors would purchase shares in the fund when in fact BWC wasthe fund's sole shareholder.

The complaint charges that MDL Capital far exceeded leveragelimits it had agreed upon with BWC, then lied about it to thebureau.

"By the time the bureau discovered the defendant's irresponsibleactivities, the Bureau's investment had been substantiallydepleted. Due to the defendants' irresponsible and inappropriateactivities, the Bureau suffered losses of approximately $215million," the suit charged.

Questions about fund investments first surfaced last month whenit was revealed that up to $12 million the BWC had invested in rarecoins through Tom Noe==a heavy Republican Party fundraiser==haddisappeared. After this revelation, the bureau's director, JimConrad, was forced to resign.

Democrats quickly labeled it "Coingate," but now they think theyare onto something bigger.

According to Sen. Dann, the attorney general had hired a lawfirm as outside counsel in Nov. 9, 2004 to review the MDLinvestment. He said Democrats are seeking answers as to "why theattorney general hesitated so long" to move against MDL, and if thelaw firm failed to uncover anything, why the state shouldn't getits money back.

Mr. Petro's representative, Mark Anthony, said the initialreview of MDL had been routine and the full details of the loss didnot emerge until last Tuesday. Why not earlier? He could notsay.

Mr. Dann said there are 75 funds involved in handling the BWC'sinvestments, and Democratic legislators have asked for requests forinformation on all of them. Today they asked for the weekly reportson the fund that have gone to Republican Gov. Bob Taft.

The governor last Wednesday assured that the BWC, which is theexclusive provider of workers' comp insurance in the state, wouldkeep providing coverage and that no worker would be withoutprotection. Gov. Taft said he was "outraged and disappointed byrevelations of investment losses at the BWC.

The governor's statement said that last year, Mr. Conrad hadassured him that action had been taken on MDL.

MDL, while registered in Bermuda, is based in Pittsburgh. TheToledo Blade quoted MDL owner Mark Lay as saying his company didnothing wrong and the state should accept that it made a badinvestment.

Mr. Anthony said if the case goes to court, the MDL contractcalls for disputes to be heard in a Bermuda court. However, hesaid, that "is an option. We don't see it as a barrier. We think itcan be tried here in Franklin County."

A representative for state Sen. Teresa Fedor, the Democraticwhip, said she has introduced legislation to reform the state'sworkers' comp system and review its investment strategies, but "itgot tabled by the majority party."