Thursday, May 6, 2004

Con man's crimes also taint Deters

State treasurer got big contributions

By Debra Jasper
Columbus Enquirer Bureau

COLUMBUS - State Treasurer Joe Deters insists that nothing is going to stop him from becoming Ohio attorney general in 2006.

But a public corruption probe linked to his office threatens to derail the political ambitions of the former Hamilton County prosecutor.

It's a situation that supporters and critics alike say will be difficult for the 47-year-old Republican as he tries to move from being the state's chief investment officer to its No. 1 law enforcement official.

"The supreme irony is that to win a seat as attorney general, you want to be as clean as a hound's tooth. But even if the facts bear him out, perception is everything in politics and this case hurts him badly," said Robert Adams, an associate political science professor at Wright State University. "However you look at it, Deters is in real trouble."

The source of Deters' trouble is his relationship with Frank Gruttadauria, a former Cleveland stockbroker serving prison time for swindling investors around the country out of $125 million over 15 years.

Gruttadauria was introduced to Deters in 1999, shortly after Deters became state treasurer. Gruttadauria was trying to help his employer land the lucrative job of managing some of the state's $150 billion investment portfolio. He succeeded.

From 1999 to 2001, Gruttadauria's two employers, SG Cowen Corp. and Lehman Brothers Inc., did a combined $5.9 billion in investment trades with Deters' office.

Gruttadauria also worked to develop a relationship with Deters, giving him rides on his Lear jet and donating thousands of dollars to Deters' campaign as well as to the Hamilton County Republican Party, which Deters chaired in 2000 and 2001.

Then, one day in January 2002, Gruttadauria just disappeared.

After a month on the run, he surrendered to the FBI. In August 2002,Gruttadauria was sentenced in federal court in Cleveland to seven years in prison for bank fraud, securities fraud, wire fraud and identity theft.

Campaign connections

But the case didn't end there. It caught the attention of William Mason, the Democratic prosecutor in Cleveland, who launched his own investigation.

In March, Gruttadauria, 46, pleaded guilty to bribing an unnamed person from 1999 to 2002 to get state investment business, racketeering, theft, money laundering, forgery and election law violations.

He also admitted to making a $50,000 donation to Deters' campaign that he masked as a contribution to the Hamilton County Republican Party. And he admitted to making illegal campaign donations to Deters by funneling $7,000 through clients and employees to Deters' campaign.

As part of a plea agreement to settle the case, Gruttadauria promised to cooperate with a grand jury investigation of state government corruption. The evidence in his case has been sealed, so the name of the bribe target has never been disclosed.

The Cleveland Plain Dealer reported that the bribe was made to an unnamed official connected to Deters' office. The newspaper also reported that in 2001, Deters twice hopped a ride on Gruttadauria's Lear jet - once to a Chicago fund-raiser and another time flying home from a personal trip to South Carolina. The newspaper said Deters paid less for the trips on Gruttadauria's plane than regular airline customers would have paid.

Deters said he had no idea at the time he took trips on Gruttadauria's jet that the stockbroker was crooked.

"Gruttadauria had a very good reputation, especially in the Italian community in Cleveland," Deters said.

He said his campaign staff followed federal ethics guidelines for reimbursement, and noted that he isn't the only Ohio politician to take such trips.

"If you took the congressional delegation, and the statewide elected officeholders and listed how many times they've flown privately, I'd be darn near at the bottom of the list," he said.

Democrats exploit scandal

More broadly, Deters denied that his office engaged in a "pay-to-play" strategy, where stockbrokers who gave the most money got the most state business. "Do brokers support my campaign? Sure they do. But if they don't get the job done, they don't get the work," he said.

Deters has acknowledged that some brokers who did business with the treasurer's office knew they might help his campaign by giving money to the Hamilton County Republican Party.

Gruttadauria donated $50,000 in December 2001 to the party's operating account, which unlike other accounts doesn't have to disclose who contributes, and has no limit on donations. Deters said he was unaware of Gruttadauria's donation to the party fund until his fund-raiser, who also raised money for the county party, notified him early in 2002. Deters said he told him to call the FBI.

The Hamilton County Republican party has been very generous to its former chairman. It contributed about $300,000 to Deters when he focused on the GOP nomination for attorney general in 2001.

Democrats see the Gruttadauria guilty pleas as evidence that the treasurer's office under Deters has been for sale to the highest bidder.

"If you had a bipartisan state government watching each other, you wouldn't have these shenanigans going on," said Democratic Party Chairman Denny White. "But with one party in control, it's like the fox watching the chicken coop at the Statehouse."

Democrat Mary Boyle tried to unseat Deters as treasurer in 2002, in part by using his connection to Gruttadauria. She accused Deters of "steering contributions from brokers to secret political accounts."

Republican Party Chairman Robert Bennett concedes the case is taking its toll. "The headlines in the newspaper look bad," Bennett said. "Right now, I don't think Joe or anyone else thinks this is too helpful for (Deters') career."

He said the case is motivated by politics because Mason, the Cleveland prosecutor who started the probe, is a Democrat who also wants to run for attorney general in 2006.

Mason has since turned the case over to a special prosecutor, but attorneys in Mason's office are helping to run the investigation. Bennett said their involvement taints the entire case.

"They seem to be using this case as a slow-drip public relations campaign for Mason's career," Bennett said. "It's 100 percent political."

Mason laughs when told of the criticism. "That's ridiculous," he said.

"I didn't make my bed with Frank Gruttadauria. Deters did."

Uncertain future

Gruttadauria's attorney, Roger Synenberg, said his client was asked by prosecutors about the plane rides taken by Deters and about Gruttadauria's political contributions to Deters.

"But what they put before a grand jury I can only speculate," he said.

Matt Borges, Deters' former chief of staff and former spokesman for his re-election campaign, has testified twice before the grand jury. His attorney, Karl Schneider, said Borges has not taken any plane rides with Gruttadauria nor has he flown on his plane.

"It is my firm belief that Matt didn't shake down anybody and he was not the subject of a bribe by Frank Gruttadauria," said Schneider.

He called the investigation "a fishing expedition."

Special Prosecutor Thomas J. Sammon wouldn't say whether the unnamed public official will ever be disclosed or if more indictments are coming. He said he had hoped to wrap up the probe by the end of April, but now will likely ask to extend the grand jury investigation for several weeks.

"We need a few more weeks to be as complete as possible," he said.

Deters acknowledges he must try to counter political fallout as he prepares to run for attorney general in 2006. He is already traveling around Ohio trying to convince newspaper editorial boards that he and his office did nothing wrong.

He is reluctant to say more about the case until Cleveland prosecutors wrap up their investigation. For now, he said, he is holding off because people close to him are still testifying before a grand jury.

"Innocent people are being hurt, so eventually I'm going to have to say something," he said.

Deters said he doesn't spend much time worrying that voters will lose faith in his ability to hold office, especially people from Greater Cincinnati.

"It doesn't keep me awake at night," Deters said. "I'm the same person I was when I was prosecutor. People in southwest Ohio know my reputation - and it hasn't changed."

He predicted he will survive the controversy just fine. In fact, "It's going to make me a great attorney general."


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