AKRON, Ohio (AP) — An adviser lost nearly all of the $225 million the state agency for injured workers put into a hedge fund, but that doesn't mean it was a crime, his attorney said Monday.
Mark Lay, chief executive and founder of MDL Capital Management of Pittsburgh, was following a strategy that officials at the Ohio Bureau of Workers' Compensation agreed upon, defense attorney Richard Kerger said during closing arguments at Lay's fraud trial in U.S. District Court.
"There is nothing in the charges that says loss is a crime," Kerger said.
Lay hid the extent of the risk he took, which went way beyond the limit that state officials set, assistant U.S. Attorney Antoinette Bacon said. Lay occasionally shook his head during her closing argument.
"Because of his cheating, because of his lies, he turned what would have been a $2 million market loss to over $200 million," Bacon said. Nearly $216 million was lost from the $225 million fund.
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Lay, 44, was indicted in June on charges of investment advisory fraud, mail fraud and conspiracy to commit mail and wire fraud. The charges were part of an investigation into a wide-reaching investment scandal at the state's agency for injured workers that reached to former Gov. Bob Taft.
Jurors deliberated for about two hours Monday before going home. They had listened to two weeks of testimony in the case .
Bacon said the risk Lay took could be equated with someone driving more than 7,000 miles per hour in a 55 mph zone.
"This is beyond crazy. This is a suicidal level of risk. In one trade you could win it all or lose it all. This is absolutely insane," Bacon said.
Defense lawyer Percy Squire said the hedge fund included a guideline describing the amount of risk that should be taken, but there was no firm limit.
"Mr. Lay should have never even been indicted," he told the jury.
The bureau was the sole investor in the hedge fund that Lay set up in Bermuda, according to the indictment against him. He is accused of repeatedly failing to tell bureau officials, when questioned beginning in 2004, about the extent of the risk he was taking with the fund.
The defense contends that Lay was not an investment adviser to the bureau — only to the hedge fund in which it invested, therefore he had no fiduciary responsibility to bureau officials.
But prosecutors say Lay acknowledged his investment adviser relationship to the bureau while giving a deposition in a civil case.
"Mark Lay admitted under oath seven times that the bureau was his client," assistant U.S. Attorney Benita Pearson said.
The jury asked to hear that testimony again and Judge David D. Dowd Jr. told jurors it would be read to them Tuesday morning.
The case against Lay emerged from a probe into another case, the 2005 revelation that Republican donor Tom Noe was investing state money in rare coins. Noe's now serving 18 years in prison for theft and other crimes. Nineteen people have been convicted in the scandal.
More than $300 million in losses were reported at the bureau. Taft pleaded no contest to charges that he failed to report golf outings and other gifts on his disclosure forms and was fined $4,000.
In the wake of the scandal, Democrats made significant inroads in last November's elections, gaining four of five statewide offices, including the governor's office, which was wrested from Republican control for the first time in 16 years.
If convicted, Lay faces a maximum 20 years in prison, but would likely receive less time under federal sentencing guidelines.
