THE BURNED OVER DISTRICT

In his NYT column, Paul Krugman gives an excellent recap of Coin-Gate and what it means to all of us.

We're not just talking about campaign contributions, although Mr. Noe's contributions ranged so widely that five of the state's seven Supreme Court justices had to recuse themselves from cases associated with the scandal. (He's also under suspicion of using intermediaries to contribute large sums, illegally, to the Bush campaign.) We're talking about personal payoffs: bargain vacations for the governor's chief of staff at Mr. Noe's Florida home, the fact that MDL Capital employs the daughter of one of the members of the workers' compensation oversight board, and more.

Now, politicians and businessmen are always in a position to do each other lucrative favors. Government is relatively clean when politicians are sufficiently afraid of scandal to resist temptation. But when a political machine controls all branches of government, and those officials charged with oversight are also reliably partisan, politicians feel safe from investigation. Their inhibitions dissolve, and they take full advantage of their position, until the scandals become too big to hide.

In other words, Ohio's state government today is a lot like Boss Tweed's New York. Unfortunately, a lot of other state governments look similar - and so does Washington.

And from the Toledo Blade we get a picture of the Ohio BWC acting like every other uninformed investor.

With their Bermuda hedge-fund hemorrhaging cash last fall, Ohio Bureau of Workers' Compensation officials scrambled for cover, injecting $25 million into the failing venture and praising the investment's manager, documents released yesterday show.

Even with the $25 million infusion the fund lost $215 million of its total investment, but bureau officials took a number of actions in the waning days of its relationship with MDL Capital Management last fall:

●The bureau pumped a fresh $25 million into the near-depleted fund by the end of September, 2004, but rejected a request more than a month later for an additional $25 million.

●Former bureau administrator James Conrad decided on Oct. 28, 2004, to omit the MDL news from the governor's weekly report.

●Bureau Chief Investment Officer Jim McLean sang the praises of Mark Lay, the chairman of MDL, in a Nov. 23 e-mail to a consultant, citing his talent and "tremendous potential."

●The bureau allowed Mr. Lay to subtract $1.01 million in management fees from the fund, in addition to about $447,303 directly paid by the bureau last year for the firm's services.

And notice that the chief thief is again named Lay.