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Watchdog's Complaint v. Ohio Attorney General Jim Petro The communications set forth below deal with Jim Petro's conduct regarding his employment of and relationship with the Schottenstein, Zox & Dunn and their negligence (legal malpractice) in representing both the Bureau of Workers' Compensation and Jim Petro regarding the MDL Investment fiasco that cost Ohioans at least $215 million. Below you will find copies of the following:
The Watchdog - David Palmer - Sacramento, California June 28, 2005 To: Jonathon Coughlin - Disciplinary Counsel, Ohio Supreme Court Re: Misconduct of Jim Petro - DR 6-101-Failing to Act Competently; DR 7-101-Representing Client Zealously; Engaging in Conflict of Interest Dear Mr. Coughlin: On Oct. 4, 2004, the Bureau of Workers' Compensation asked Petro to appoint special counsel to investigate the MDL investment fiasco. On Nov. 2, 2004 (Election Day) Petro appointed attorney David Robinson of the Schottenstein, Zox & Dunn law firm. When Petro appointed Robinson he knew or should have known that Robinson and the Schottenstein firm were employed by BWC since 2001 as special counsel to evaluate private equity investment agreements (MDL, Noe-coin, etc.) (Toledo Blade - June 22) Petro's conduct in employing Robinson to investigate the conduct of their employer (BWC) and MDL constitutes an outrageous conflict of interest. Moreover, the fact that the Schottenstein firm and/or its members contributed at least $36,413 to Petro over the past several years raises additional questions about his employment of Robinson. (See June 9 letter to Petro attached) As Ohio's chief law enforcement officer, Petro must be held to a higher standard of conduct or at least I would hope that is the case. Petro had an absolute duty to act competently and zealously in representing his clients, which are the taxpayers and voters of Ohio. Sadly, his conduct in employing Robinson cannot be construed as being in the best interest of his "real" clients. A more egregious example of engaging in a conflict of interest would be difficult to imagine. It may well be that Petro's statements that Robinson kept him in the dark about the MDL losses ($215 million) are untrue. Either Mr. Petro is lying or Mr. Robinson is a liar in this regards. Since you are Mr. Petro's client, your office and/or Jonathon Marshall's office cannot be involved in investigating this matter. It is imperative that this complaint be submitted to an impartial, unbiased, and unconnected person. Anything less would smack of a cover-up, etc. Please make sure I'm provided with a copy of Mr. Petro's reply. Sincerely, The Watchdog - David Palmer - Sacramento, California June 28, 2005 To: Jonathon Coughlin - Disciplinary Counsel, Ohio Supreme Court Re: Misconduct of David Robinson - DR 6-101-Failing to Act Competently; DR 7-101-Representing Client Zealously; Engaging in Conflict of Interest Dear Mr. Coughlin: This complaint deals with Mr. Robinson's conduct in regards to the MDL Investment scam that led to the state incurring a loss of $215 million. According to media stories, AG Petro hired Robinson and the Schottenstein, Zox and Dunn firm as special counsel on Nov. 2 (Election Day) to investigate the $215 million loss the Workers' Compensation Bureau suffered at the hands of MDL Investments A memo from the Bureau to Gov. Taft (Toledo Blade) proves that on Sept. 27,. 2004, the Bureau was aware it had lost $215 million. On Oct. 4 the Bureau requested that Mr. Petro appoint special counsel regarding the MDL fiasco. Mr. Petro admits that he was aware of the MDL mess in later Sept. 2004 or just after the Bureau realized the $215 million loss. On June 22, the Blade did a story titled "Attorney is dropped from probe into fund." Mark Anthony, a spokesman for Petro told the Blade that Mr. Robinson "withdrew" as special counsel because he neglected to keep AG Jim Petro informed about the fund's supervisor, MDL Capital Management. "This had to do with communication problems with respect to MDL dating back to last fall (Oct. '04). We were surprised by the news on June 7 about the losses incurred by MDL. We should have known months ago." For the sake of argument, I'm going to assume that Mr. Petro was telling the truth that Mr. Robinson concealed the magnitude of the MDL loss from him and that he did not learn of it until it was reported by the Blade on June 7. When Petro employed Robinson on Nov. 2, 2005, he, Robinson and the Schottenstein firm knew that Robinson was being paid $150,00 a year by the Bureau since 2001 as special counsel to evaluate private equity investment agreements. (Blade - June 22) At the time Petro employed Robinson to investigate the MDL fiasco; he was already on the Bureau's payroll. Therefore, Robinson and the Schottenstein firm were involved in a blatant conflict of interest because they accepted employment from the Petro investigate investments that Robinson was being paid $150,000 to evaluate, which had to include the MDL mess. Which master was Robinson and Schottenstein more beholding to? It would be frivolous to the nth degree for Robinson to argue that prior to June 7, 2005 he was totally ignorant of the $215 million MDL loss. In fact, given his "insider" status as a $150,000 consultant at the Bureau, it must be presumed that he knew of the loss before the Blade did. As counsel for Petro, Robinson had a duty to immediately report the actual loss of $215 million when he and the Schottenstein firm were hired on Nov. 2. If Petro is to be believed, Robinson knowingly and intentionally concealed this fact from Petro for eight (8) months. Clearly, this is a rank violation of DR 6-101 and DR 7-101. The only reasonable explanation for Robinson's conduct in concealing the $215 million loss from Petro is that he and the Schottenstein firm were more interested in protecting the client (BWC) that had paid them about $600,000 in fees since 2001. Regardless of Robinson's motives, there can be no dispute that he (a) failed to act competently and (b) failed to zealously represent his client Petro (aka, "the voters/taxpayers of Ohio") Robinson and the Schottenstein firm should also be required to refund any and all fees they billed Petro from Nov. 2, 2004 through June 20, 2005. Please provide me with a copy of Robinson's and/or the Schottenstein firm's reply. (Robinson/Schottenstein refused to allow me to receive a copy of their response) Sincerely The Watchdog - David Palmer - Sacramento, California June 29, 2005 To: Jim Petro - Ohio Attorney General Re: Appointment of Schottenstein, Zox & Dunn re: MDL & 215 million loss Dear Mr. Petro: The Toledo Blade reported that on Oct. 4, 2004, the Bureau of Workers' Compensation requested that you appoint special counsel to review activities of the fund manager at MDL Capital Management to determine the manner in which the state lost $215 million. The Blade further reported that on Nov. 2, 2004 you retained the Schottenstein, Zox and Dunn law firm. Upon learning that you retained Schottenstein at taxpayer expense, I thought it might be prudent to do some research to see if this firm engages in the same "pay-to-play" antics as Mr. Tom Noe. That research led to the following contributions being made by the firm and/or its partners/associates to the same players involved in receiving funds from Noe.
The total above is $107,320, however, because partners/associates come and go, I'm sure the number is much higher. It is obvious that the Schottenstein firm has a vested financial interest to assure that you, Ms. Montgomery and Justices O'Donnell, Lanzinger and O'Connor remain in office into the unknown future. To suggest that the Schottenstein firm is the only entity able to properly investigate the shenanigans involving MDL and the so-called financial geniuses at BWC is absurd. From 1998 to 2001 you were the Auditor and were responsible for performing at least 2 audits of the Bureau, however, we now know that you failed to see any red flags as it relates to the Tom Noe and MDL Investments. Likewise, Ms. Montgomery also failed to discover anything from 2002 to 2005. As State Treasurer from 1999 to 2004, Joseph Deters was responsible for reviewing the investment schemes involving the Bureau and the five retirement systems, which amounted to well over $100 billion. We now know that in addition to Noe and Schottenstein, MDL also contributed to Deters. Again, we have yet another public official failing to protect the public from the Noe and MDL scams. It seems to me that you, Ms. Montgomery, and Mr. Deters were blinded by the glow of Noe's coin in failing to take appropriate action before the Toledo Blade uncovered the coin-scam and the MDL fiasco. Why do you continue to employ insiders like Schottenstein when any reasonably intelligent (unconnected and disinterested) person could perform the same task? This ongoing policy of employing insiders gives incest a bad name. I have been a Republican since 1955, and I am thoroughly embarrassed at your conduct and that of Ms. Montgomery, Bob Taft, Joe Deters, Ken Blackwell, Tom Moyer and Terrence O'Donnell regarding the unseemly "pay-to-play" politics in Ohio. It is sadly apparent to me that, one-party rule eventually leads to egregious corruption whether it be Democrats or Republicans. On behalf of all Ohioans, I would respectfully request that you forthwith fire the Schottenstein firm and that you recuse yourself from any further participation in any matters dealing with Tom Noe and/or MDL. It is time that a true outsider, one who has no political ties to anyone in Ohio and whose integrity is beyond reproach is appointed to ferret out the real truth wherever it may lead. If it is necessary to employ such a person from another state, then so be it. Anything less will only further inflame the public's disdain and contempt for the manner in which Ohio officials have engaged in a system designed to reward their friends and punish their enemies. Sincerely, Jim Petro - Attorney General - State of Ohio July 27, 2000 Mark H. Aultman - Special Counsel - 870 S. High St., Worthington, OH 43085 Re: Response to Grievance of David Palmer Dear Mr. Aultman: This is my formal response to the grievance filed by David Palmer, which you may share with him pursuant to Gov. Bar R. V(11)(F)(3). Mr. Palmer's grievance is premised upon incorrect facts. Contrary to his statement, Mr. Robinson was not serving as legal counsel for the Bureau of Worker's Compensation (BWC) prior to employment by my office as special counsel. Rather, Mr. Robinson and his firm were retained as special counsel by the Ohio Attorney General's Office. Further, Mr. Robinson's firm was not first employed by my office on Nov. 2, 2004. His appointment as special counsel began in January of 2001 under my predecessor, Attorney General Betty Montgomery. Assignment letter attached as Exhibit A. The terms of the assignment covered legal services for BWC related to private equity agreements. That assignment was renewed every year up to and including fiscal year 2005, which ended on June 20, 2005. Assignment letters attached as Exhibits B, C, D, and E. During the appointment for fiscal year 2005, special counsel began to review, at the request of BWC, certain concerns that the Bureau had regarding investments with MDL. Although special counsel conducted an in-depth review of the matter, special counsel admitted that my office was never informed of any of the findings as required by the standard special counsel contract. I did not learn of the extent of the investment losses related to the MDL investments until June 7, 2005. Upon learning the facts related to the MDL losses, my office formed an internal team of lawyers to review all the facts known at that time. A lawsuit was filed in Franklin County Common Pleas only three days later, seeking recovery on behalf of BWC. See Complaint attached as Exhibit F. Simultaneously, the Robinson-BWC special counsel appointment was terminated. All of this information is in the public domain. Mr. Palmer is therefore incorrect when he alleges that Mr. Robinson had a legal relationship with BWC separate from his special assignment contract. Chapter 109 of the Ohio Revised Code makes it clear that no state agency, board, or commission may retain legal counsel not appointed by my office. Mr. Robinson was not hired by my office as special counsel to investigate the relationship between BWC and MDL. Rather, Mr. Robinson's firm undertook a review of MDL's action in investing funds pursuant to a contract between MDL and BWC. This review was consistent with Mr. Robinson's special counsel contract to advise BWC on equity investments. Further, Mr. Palmer's allegation that Mr. Robinson was hired as special counsel for BWC due to political contributions made to me is also unfounded. As noted above, the special counsel relationship between Mr. Robinson and BWC began under my predecessor. Further, it is beyond dispute that during the time of the special counsel appointment, Mr. Robinson's firm provided bona fide legal services {yeah, saw nothing wrong with Noe's scam]. The failure in communication that occurred in the MDL matter, while extremely disappointing and unfortunate, was immediately remedied by my quick action in filing the lawsuit. My office would clearly have moved more quickly in filing a legal action against MDL had we known the circumstances sooner. However, my office has fulfilled all of its duties to zealously represent both the citizens of this State and BWC when I took immediate action to file the complaint. The remainder of Mr. Palmer's complaint is a mix of unfounded speculation and hyperbole (BS). His letter fails to substantiate a violation of any disciplinary rule. As I have demonstrated, the facts prove that I acted diligently and competently as soon as I learned of the losses in the MDL hedge fund. My office will continue to make every effort to recover the money lost as a result of MDL's action. Accordingly, I request that this complaint be dismissed. If I may be of further assistance to you, please contact Senior Deputy AG Kari Hertel, Director of Special Counsel, at 466-8240. The Watchdog - David Palmer - Sacramento, California August 17, 2005 To: Mark Aultman, Special Counsel Re: Response to Petro's July 27, 2005 response to Grievance Dear Mr. Mr. Aultman: First, I'll address Mr. Petro's response and then I'll address the Robinson complaint. Unfortunately, Mr. Petro's response is chock full of misleading statements and/or outright misrepresentations. Mr. Petro first engages in a linguistic tango by claiming that no conflict of interest existed in employing Robinson/Schottenstein on Nov. 2, 2004. Mr. Petro laughingly states that he didn't hire Robinson "to investigate the relationship between BWC and MDL." He hired Robinson to undertake "a review of MDL's action in investing funds pursuant to a contract between MDL and BWC." Isn't this really a distinction without a difference? Petro then goes about laying the blame on hiring Robinson in 2001 on his predecessor Ms. Montgomery. On July 1, 2003, Petro executed Assignment Number AG)-1974 (Ex. D to his response), which states in part: "Pursuant to your Appointment as Special Counsel to the Attorney General, I hereby assign you to my client, BWC. I request that you provide legal services to this client for private equity agreements. During this assignment, you will be working with James Barnes, Senior Deputy Attorney General of the Workers' Compensation Section of the Attorney General's Office." On July 1, 2004, Petro executed another assignment of Robinson and the Schottenstein firm that includes the same language as above. It should be noted that from Jan. 2001 through 2005, Deputy AG James Barnes was working with Robinson/Schottenstein regarding BWC private equity agreements, which would have included MDL and in all likelihood the Tom Noe scams. This fact, in and of itself raises serious questions as to Petro's claim that he didn't have a clue about the magnitude of the MDL losses until the Blade reported it on June 6, 2005. If this is true and I seriously doubt it is, then who was Mr. Barnes beholding to and why did he also fail to communicate with his boss Mr. Petro? I respectfully suggest that you should interview Mr. Barnes under oath and request (subpoena if necessary) any and all communications of any kind, including emails from Barnes to Petro and Barnes to Robinson and Robinson to Barnes and Petro. I find it absolutely amazing that an underling like Mr. Barnes would knowingly and intentionally deceive Mr. Petro about the magnitude of the MDL loss for nearly a year. If true, then Mr. Barnes should be fired and/or disciplined by the Ohio Supreme Court since he is also an attorney. At paragraph 2 of page 1, Petro states that during fiscal year 2005, special counsel (Robinson/Schottenstein) "began to review, at the request of BWC, certain concerns that the Bureau had regarding investments with MDL." Isn't this what Petro assigned them to do on July 1, 2003 and July 1, 2004 at $150,000 a year? Petro then has the chutzpah to deny a conflict of interest existed when he assigned Robinson on Nov. 2, 2004 to "review certain concerns BWC had regarding investments with MDL." It was Robinson/Schottenstein that was paid $150,000 a year pursuant to Petro's assignments to "provide legal services to BWC for private equity agreements." The truth is that Petro knowingly engaged in a conflict of interest in employing attorneys on BWC's payroll to advise it on the MDL investment to now investigate the manner in which the investment was handled. Put simply, Petro employed the "right hand" to investigate what the "left hand" was doing. By so acting, Petro did in fact engage in an egregious conflict of interest. It's that simple Mr. Aultman! Response as to Robinson Grievance In your Aug. 8 letter, you advise that Mr. Robinson refused to you to provide me with a copy of his answer. Such conduct raises serious questions as to his credibility. After all, Robinson and his firm earned $600,000 pursuant to assignments by the AG from 2001 while giving questionable advice to BWC regarding equity investments such as MDL and the Noe-coin scams. One must truly wonder what Robinson and Schottenstein fear by allowing me to obtain a copy of their response. Of course in so acting, they have free reign to attack the messenger and put forth false and/or fabricated facts in their defense. So much for due process and the search for the truth. In Mr. Petro's July 27, 2005 response, he basically confirms that Robinson is guilty of misconduct by stating as follows: Paragraph 1 of page 1: "Although special counsel (Robinson/Schottenstein) conducted an in-depth review of the matter, special counsel admitted that my office was never informed of any findings as required by the standard special counsel contract. (breach of contract)." Paragraph 2 of page 2: "The failure in communication that occurred in the MDL matter, while extremely disappointing and unfortunate, was immediately remedied by my quick action in filing the lawsuit. My office would clearly have moved more quickly in filing a legal action against MDL had we known the circumstances sooner." Breaching an employment contract by failing to communicate with a client constitutes egregious misconduct. This is especially true given Robinson's conduct in knowingly failing to act early on by informing Petro of the $215 million loss in Sept. 2004 when BWC acknowledged it. Moreover, it would be laughable to suggest that Robinson was ignorant of this loss prior to BWC's admission in Sept. because he and the Schottenstein firm were being paid $150,000 to advise BWC. Robinson's guilt cannot be questioned. In fact, it is a foregone conclusion given Petro's statements of July 27. I would respectfully request that you ask Robinson and/or Schottenstein to provide me with a copy of their response. Given the fact that Petro has so acted, I cannot think of any valid reason for them to conceal it from me. Sincerely,
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