Wednesday, 24 August 2016
Last updated 5 hours ago
Oct 30 2007 | 4:09pm ET
A Pittsburgh hedge fund manager was convicted today of defrauding Ohio’s workers’ compensation system. Mark Lay had been charged with losing $216 million he invested for the Ohio Bureau of Workers’ Compensation in a highly-levered hedge fund without authorization.
Lay, the CEO of MDL Capital Management, reportedly appeared stunned when the verdicts were announced. He faces up to 20 years in prison for investment advisory fraud, mail fraud and conspiracy to commit mail and wire fraud, though he is expected to receive about half that under sentencing guidelines. Prosecutors are also seeking to recoup $1.7 million in fees BWC paid to MDL.
Federal prosecutors in Akron, Ohio, told jurors during their closing statement on Monday that Lay’s inappropriate gamble—Lay was accused of exceeding a strict limit on leverage—hit injured workers in the wallet. But Lay’s attorney argued that a poor investment choice did not constitute a crime. After just four and half hours of deliberation, the jury disagreed with Lay’s contention.
The investment losses at the BWC, both in Lay’s mandate and the more highly publicized “coingate” scandal, rocked Ohio politics last year. The state’s then-governor, Bob Taft, was convicted of misdemeanor ethics charges, help lead to a Republican wipe-out in the 2006 elections.
The daughter of the BWC oversight board member George Forbes also worked at MDL Capital.