Unlocking ‘Coingate’

By: Joe Strupp

When Gov. Bob Taft of Ohio faced reporters at the state house on May 27, it was not a typical press event. On this day, only one thing was on the minds of all present: a strange but growing scandal dubbed “Coingate.” The Blade of Toledo had first broken the story on April 3, revealing how a well-known Republican fund-raiser had invested $50 million of the Ohio Bureau of Workers’ Compensation fund in rare coins. He lost $300,000 worth in the mail, and mishandled nearly $1 million more. The scheme became the talk of statewide politics, as well as national news. It took the state’s other major papers at least a month to catch up, their editors now admit, while the Blade ran with the story and broke new ground almost daily.

Still, Gov. Taft had not held a news conference on the scandal in all that time. He had initially defended Tom Noe, the GOP “rainmaker” and rare- coin dealer who had brokered the investment-turned-boondoggle. So when Taft met the press, it marked a dramatic acknowledgement that this was an issue that was not going to disappear.

Among the assembly of reporters gathered for the event, none were likely more satisfied than the Blade’s James Drew. It was Drew who first got wind of the scandal several months earlier while researching a profile of Noe, a longtime GOP loyalist and adviser who had headed President

Bush’s re-election effort in northwest Ohio and sat on several influential state boards. (Noe has since been accused of laundering contributions to Bush.) Drew’s efforts, which included numerous public-records requests, hours of interviews and shoe-leather reporting as far away as California and Colorado, produced the first breaks in the story, which are still coming today.

So as Taft came forth to respond to the scandal on the Friday of Memorial Day weekend, the throng of reporters allowed Drew to ask the first question. “Everyone gave deference to Jim,” recalls Joe Hallett, a veteran political scribe for The Columbus (Ohio) Dispatch who attended the event.

But that was just the start. During the Q&A, Taft said that Noe had “clearly deceived and betrayed” many people, announced that the head of the Bureau of Workers’ Compensation had resigned, and claimed he had not known of the investments until he read about them in the Blade.

Later that day, it was revealed that state and federal investigators were pursuing criminal charges against Noe for allegedly misappropriating up to $12 million from the rare-coin funds. Noe was ordered to surrender his passport.



The competition heats up

Since that press conference, the Blade has kept up its day-to-day coverage while the Dispatch and The Plain Dealer in Cleveland have joined in, grabbing their pieces of the story and garnering their own scoops and bombshells. While the Blade owned the story during most of April and early May, the two competitors have since joined in to make it a true statewide battle.

“It is a great newspaper competition,” declares Plain Dealer Editor Doug Clifton, who has three of his four statehouse reporters on the story, along with six others in Cleveland ? by far the most of any of the leading Ohio dailies. “This comes close to Watergate,” he adds. “It has to do with money, politics, and favor.”

The competition often gets personal, with reporters and editors keeping a closer watch on their colleagues than usual. The normal high-stakes paranoia has reached frightening levels in some cases.

The Dispatch’s Hallett describes the night in Columbus when he saw Ted Wendling of the Plain Dealer’s Columbus, Ohio, bureau “walking down Third Street in a hurry.” Hallett got in his car, “drove past him, and saw someone hand him some documents. I drove around the block again and watched him walk back to his office looking at the papers and I said, ‘Damn! What am I going to read about tomorrow?'”

The veteran reporter could not let go of his curiosity, calling his editor immediately to let him know what he had witnessed, and to speculate about what it might have meant. “We thought he might have gotten something from the Attorney General’s office, and a reporter called the Attorney General’s office to ask about public records requested by the Plain Dealer,” he says. “That is how we are cringing every day when we pick up the other papers.”

Hallett never found out what his competitor was doing. Wendling does not recall the incident, but did not deny it may have happened, noting, “I’m frequently running around picking up documents.”

To maintain its early lead, the Blade has put Drew and Toledo-based investigative reporter Mike Wilkinson on the story full time, along with four other reporters. The paper also dispatched an extra writer to the Columbus bureau, which normally has two reporters, to help pick up the slack. The Dispatch has kept its seven-person statehouse bureau at the same level, but is devoting at least five of them to the coin-scandal beat. “I’ve been making calls myself on my old statehouse sources,” says Dispatch Editor Ben Marrison, a former statehouse bureau chief for the Plain Dealer. “It is a highly complex story.”

“Nobody is getting much sleep,” says Sandy Theis, the Plain Dealer’s statehouse bureau chief who has been in Columbus for 23 years. “We have all been going at it.”

Following the Blade’s initial reports ? and the official investigations that have been launched by the FBI, several county prosecutors, and a state task force created solely to review Noe’s actions ? revelations are being reported almost daily. “At every turn, some unbelievable element emerges,” notes Alan Miller, the Dispatch’s managing editor. “It is one of those stories that causes average citizens to say, ‘I can’t believe this.'” It is the octopus whose tentacles reach further and further out, linking Noe and the investments to state officials, other investors, and even Bush’s 2004 campaign.



Digging yields gold nuggets

But the scandal’s chaotic coverage did not start out with a bang. It came out of a typical idea that newsroom brainstorming often brings, and that any of the Ohio dailies could have attempted.

Blade Vice President/Executive Editor Ron Royhab says the paper had been eyeballing Noe as a good feature subject for more than a year. His ties to the Republican Party, stints on the state’s Board of Regents and Turnpike Authority, and his chairmanship of Bush’s Northwest Ohio campaign in 2004 made him perfect for an in-depth profile.

During Drew’s research, he received a tip that Noe had been involved with investing state money. “We determined it was the Bureau of Workers’ Compensation, and we used the open-records law and several interviews with someone to get the story,” Drew tells E&P, declining to reveal the source. “We received the information in a series of releases.”

But Drew and Royhab contend that their requests made in January and February for BWC documents under the Ohio Public Records Act were not met with complete cooperation. Despite some early roadblocks, the Blade managed to put together its blockbuster story in early April. After the initial piece that introduced the rare-coin investments, the newspaper broke a string of additional stories during April and early May that revealed, among other things, that new investigations had begun by the Ohio Ethics Commission and the state’s inspector general into Noe’s actions; Noe was under federal investigation for allegedly funneling contributions unrelated to the coin scandal to Bush’s re-election campaign; FBI agents raided Noe’s home; and the number of missing rare coins had reached 121, including some that were allegedly stolen by a coin dealer Noe hired.

After the Blade sued the Bureau of Workers’ Compensation demanding the release of records related to the investments ? a suit the Dispatch and a state senator eventually joined ? the bureau released more than 1,000 pages of documents, but not everything.

Then, on July 13, the paper’s persistence paid off as the Ohio Supreme Court ruled 5-2 in its favor, ordering that all transaction records related to the rare-coin deals be turned over.

Drew, 43, has more than 15 years at the Blade, including the last nine in Columbus. He is hesitant to reveal too much about his reporting, but says it is no big secret. “It is going out and interviewing people and getting documents,” he says guardedly. “Having people explain things. The big question is, why is the state doing this?”

For almost a month after the first story, the paper was getting heat from officials and some readers. Other major papers, meanwhile, kept a hands-off approach. “I ran into a GOP press secretary early on who said, ‘why are you beating a dead horse?'” Drew recalls. “This was a week after it began.”

Royhab offers similar accounts, saying he wasn’t even safe from critics in his church. “Some people say we are picking on this guy,” the editor says about his run-ins with readers. “Others just wanted to know where we are getting this information.”



One scoop after another

After Taft’s May press conference, the gloves came off as the Plain Dealer and the Dispatch jumped into the ring, adding more people and breaking news of their own. “The Blade did a great job breaking it,” says Clifton. “But it is blossoming beyond coins. It is really [a story about] pay-to-play.”

Among the Plain Dealer’s early scoops were revelations that money from the rare-coin investments had been spent on other collectibles, such as autographs; the BWC allowed a coin investor to continue working with the bureau even after he’d been indicted on charges of taking nearly $7 million in kickbacks; and the leader of the NAACP’s Cleveland chapter sat on the board that oversees BWC investments ? a clear conflict, since the NAACP received donations from firms investing in the bureau.

For the Dispatch, meanwhile, scoops have included stories detailing how a former gubernatorial chief of staff had “paved the way” for the BWC to invest in Noe’s rare coins; Noe had been involved in 1989 legislation that exempted coin sales from state taxes; and Gov. Taft, the Ohio Republican Party, and several GOP candidates had received some $200,000 from brokers who invested money for the BWC. “It has been a great opportunity for us to challenge ourselves because of the competition,” says the Dispatch’s Marrison.

June 22 was a perfect example. On that day, the Blade and the Dispatch both reported for the first time that Gov. Taft had failed to report expensive golf outings on his annual financial disclosure statements, including those with Noe. But, the Dispatch added that Noe had helped raise more than $100,000 for Taft in recent years. That same day, the Plain Dealer scooped the others with word that former BWC board member George Forbes, who had also led the NAACP, had a conflict involving NAACP donations from firms investing BWC money.

“I don’t think I have seen anything this intense,” says the Plain Dealer’s Theis, who has also covered the statehouse for three other papers. She cited as an example a tip the Plain Dealer received on June 9 related to the BWC losing $215 million in an unauthorized hedge-fund investment. “We heard about it in the late afternoon and called the BWC and they wanted to get back to us the next day, so we agreed,” she recalls. “We got there about noon and they had everyone there ready to explain it, with a timeline. We were there for several hours.”

Theis said she was told no other papers were on the story. “We started to call our sources as the day wore on,” she explains. Eventually, she learned that the Blade had been inquiring the same day, but only about hedge funds in general. “We clearly had a leg up,” she thought. “We came back to the office and got on the phone.” But Theis’ heart sank later that afternoon when the Blade posted the story on its Web site. “Then the AP put it up, and then everyone statewide had it,” she says. “I think our story [in the next day’s paper] was more complete, but it was out the next day.”

The Dispatch’s Marrison recalls the day his paper reported Noe had taken a $200,000 advance from the coin fund in May right after it was revealed that $13 million was missing from the fund. “First we were told we had [the scoop], then we didn’t have it, then we had it,” he says, adding that many days are like that on this story. “But we don’t mind the juggling.”

The story’s effect on newsroom staffers is heavy as well, with many averaging 15-hour days. Marrison says he has one reporter who racked up 40 hours of overtime in two weeks. “Overtime is higher than we anticipated,” admits the Blade’s Royhab, adding that four summer interns are also on the job, with Coingate coverage among their duties. “People are also filling in for others on vacation.”

Then there’s Mark Niquette of the Dispatch, who had been given a weekend off in June and was driving with his wife to Youngstown for a few days away when his cell phone rang.

“It was Mark Lay,” Marrison says, referring to the CEO of a Pittsburgh investment company being sued by the state for losing more than $200 million in BWC investments. “Niquette pulls over, his wife drives, and he interviews the guy on his cell phone. He ends up going to the public library in Youngstown and writing the story on their computer. It was an exclusive that no one else had. This is the kind of thing people are doing.”



Telling the bigger story

Reporters and editors say they must keep two things in mind with this story more than most. First, the political implications a year before the gubernatorial election ? in which the GOP incumbent is barred by term limits from running ? and a year after Ohio became the center of the battle for the presidency.

Along with Gov. Taft, the scandal has the potential for hurting the future of other Republicans, including Secretary of State Ken Blackwell; Attorney General Jim Petro; and former attorney general/current Ohio Auditor of State Betty Montgomery, all of whom are considered gubernatorial hopefuls in the GOP primary. “It may oust them all from office,” says Marrison. Clifton agrees, adding “It is setting the table for what may be a power-shifting election. Democrats are already on TV with ads trying to make hay on this.”

Second, and some on the beat say even more important, is the subject matter. Most readers don’t know the finer points of rare-coin investments ? and coupled with the tedious detail of investment funds, state bureaucracies, and financial jargon, the coverage can become difficult to execute for most political reporters. “It often takes two people to do a story because of the expertise,” says Theis. “This is the first time I’ve ever had to write about a hedge fund.”

After a while, the Blade realized it needed its own coin-investment expert and sent reporter Christopher Kirkpatrick off for several weeks of training in the coinage trading game. Kirkpatrick, 37, had been at the Blade less than a year covering economic development in Toledo when editors shipped him off to New York in April for five days of research. “We needed someone to really go out and learn about it,” says Kirkpatrick, who spent 10 years at The Herald-Sun in Durham, N.C., before joining the Toledo paper. “Very little had been written about it.”

Kirkpatrick’s first stop was the Louis E. Eliasberg Collectors Auction in Manhattan between April 18-19. “I talked to various experts and auctioneers there and they were helpful,” he recalls, adding that he spent several more days in the Big Apple talking to investors and coin appraisers. In May, the Blade reporter attended the Central States Numismatic Society’s convention in St. Louis for further research.

Kirkpatrick’s new expertise helped him provide the history of several of the missing coins, while also offering background on previous rare-coin scandals within the trade dating back more than 25 years. “I guess, like any team, everyone has their different roles,” he says of his unique beat.



Other coverage shortchanged

While reporters are climbing over each other to grab the latest Coingate tidbit, the mad rush for scandal news has forced each paper to juggle other responsibilities. Major stories, such as one of the most important state budget battles in years, are either stuck on the back burner or put aside completely, reporters say.

Theis of the Plain Dealer says the recently approved $51.2 billion, two-year state budget, which will “change the way we pay for schools, apply Medicaid, and tax businesses and individuals” would have been front-page news during any other year. Now, she contends, “It has taken a back seat.” Conversely, any appearance by Taft draws 10 times the reporters it might have in the past. A recent luncheon before the state Department of Development, in which one or two reporters might have shown up previously, saw a “throng of at least 20 standing in the wings,” she says.

At the Blade’s statehouse bureau, reporter Jim Provance is essentially alone covering other news while his colleagues investigate the scandal. “Life still goes on in Columbus, we still have a budget,” he says. Blade editors say they haven’t shut down any bureaus our seriously cut back resources. But Editor Royhab admits, “I think we probably would have taken on some other enterprise” if not for the coin story. He added that the paper “has no other major projects going at this moment.”

Dispatch Editor Marrison says his paper has had to put two big projects on the shelf: a package of stories related to casino interests, and another he declines to reveal.



Weighing gains, losses

What the papers are losing in resources and attention to other stories, they are gaining in readership, Web traffic, and public attention. The Blade, which heavily promotes the story regularly through newsrack signs and other efforts, reports that single-copy sales have increased as much as 5% on a weekly basis since April 3. Subscription cancellations are down at least 10% in the past three months, says John Fortner, director of circulation: “It has been a nice coattail for us to ride on.”

Circulation officials from the Dispatch and Plain Dealer did not return calls seeking information on possible increases in circ. But editors at all three papers report more Web posting of breaking stories, and positive reader reaction. “None of us are waiting a day to post stories if other papers have gotten a whiff of it,” says Miller of the Dispatch. “It has been great for readership. People are stopping me on the street to talk about it.” Managing editor Kurt Franck of the Blade says, “We have been getting e-mails and letters from people all over the country saying, ‘keep it up.'”

The Plain Dealer’s Clifton says his newsroom in has become a complaint center for people who are seeking worker’s compensation benefits but are not getting them: “We’ve gotten several dozen calls, and they keep coming in.”

The Blade’s image, however, has received the biggest boost. Following its Pulitzer-Prize winning “Tiger Force” series in 2003, which drew international attention for its revelations about the destruction of a Vietnam village, sparked a book deal for its lead writers, and led to federal investigations, the rare-coin coverage has locals talking Pulitzer again. “It has caused a lot of people to turn their heads,” says Blade city editor Jim Wilhelm, “and look at the paper.”

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