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News: Deters Is Safe at Home

Prosecutor's race is chance to duck his own scandal

By Pete Shuler · October 6th, 2004 · News
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His office marred by scandal, Ohio Treasurer Joe Deters hopes to return to his old job.
Jymi Bolden

His office marred by scandal, Ohio Treasurer Joe Deters hopes to return to his old job.



No longer welcome in Columbus, Joe Deters is poised to resign his current position as state treasurer and crawl back to his old job as Hamilton County Prosecutor after the upcoming election.

Deters easily won the prosecutor's office in 1992 and 1996 and is expected to win handily in 2004, even as a write-in candidate. A high-profile Cincinnati politician, he brings the laurels of statewide office back with him like a pro athlete returning to coach his old high school team. Because Deters' involvement in the scandals that destroyed his office could never be proven, Hamilton County voters likely will overlook those problems as if they never occurred.

But for those working beyond Hamilton County's provinciality, Deters is a political liability. He served adequately as state treasurer, an office that generally runs on autopilot, until a criminal investigation of former Cleveland broker Frank Gruttadauria. That probe unearthed a questionable relationship between the state treasurer's office and Gruttadauria, who swindled more than $125 million from his clients and who is now serving seven years in a federal prison for securities crimes.

Gruttadauria had earned millions in the retail brokerage business, but he had no experience handling government trades. Wishing to expand into that lucrative arena, he hired lobbyist Andrew Futey in April 1999 to guide him through the halls of the statehouse. According to court records, Futey introduced Gruttadauria to Eric Sagun, fund-raiser for both Deters and the Hamilton County Republican Party (HCRP), before he even introduced him to Deters or to Deters' chief of staff, Matthew Borges.

Futey also explained Ohio's campaign contribution laws to the broker.

Most political contributions are limited to an annual maximum -- for example, direct contributions to a candidate are capped at $2,500. Not limited, however, are contributions to political party operating accounts, which must be used only to fund expenses such as party employee salaries, utility bills and maintenance costs.

Sagun solicited campaign contributions from Gruttadauria -- as he commonly did from those seeking to do business with the treasurer's office -- for both Deters and, when limits on direct contributions to Deters were met, for the HCRP operating account.

Less than eight months after hiring Futey to facilitate an introduction to the treasurer's office, Gruttadauria had raised $60,000 for Deters. By January 2000, the value of the trades that his employer made for the state increased 10-fold, from $20 million to $215 million. Gruttadauria's employers ultimately performed $5.9 billion worth of trades for the state.

Gruttadauria's generosity continued. He raised more than $110,000 for Deters and the HCRP, spent nearly $12,000 on meals and trips for Deters and his staff, shuttled the treasurer around on at least two trips in his Gateway Learjet, hosted parties and fund-raisers and bought tickets to an Alan Greenspan speech for Deters' chief investment officer.

After this significant investment, Gruttadauria not only made the cut when Borges pared the treasurer's preferred broker list from 50 to 12 but was ranked third on the list, ahead of many experienced and capable brokers. Yet Gruttadauria had no experience as a government securities trader and was not capable of performing the job correctly, as evidenced by his bungling of numerous trades for the state and his need for assistance and training to get the transactions made correctly.

Sagun's fund-raising tactics also might have facilitated the laundering of political contributions. The HCRP has the legal ability to accept anonymous, unlimited donations to its operating account. Because the HCRP can support individual candidates with its funds, Sagun could have very easily directed Gruttadauria and others to donate to the operating account and then worked with the HCRP to ensure that a significant chunk of those donations, legally meant only for operating expenses, went to Deters through HCRP contributions.

Gruttadauria now contends that this is exactly what happened. Specifically, he claims that a $50,000 contribution he made to the HCRP in December 2001 was always intended for Deters and that all involved parties understood that. Sagun was convicted of misdemeanor election violations related to this contribution.

As outlined in CityBeat in 2002 (see "Deters' Questionable Fund-Raising," issue of April 18-24, 2002), evidence of such a money-laundering scheme can also be seen in the flow of cash from the HCRP to various candidates. At Deters' request, the HCRP funneled more than $300,000 into his campaign from March 2001 to January 2002. Gov. Bob Taft's re-election campaign received only $12,020 from the HCRP during the same period, and Secretary of State Kenneth Blackwell received just $94,500. Like Deters, both Taft and Blackwell began their political careers in Hamilton County and retain close ties to this area.

Democrats allege that this money-laundering scenario also explains why investment brokers based in Columbus and Cleveland donated money to the Hamilton County GOP, already one of the richest county parties in the state.

The direct evidence of wrongdoing in the treasurer's office was strong enough to secure only misdemeanor convictions against Sagun, Borges and Futey, but it was much more powerful in the political arena.

At least for the short term, Deters' career is running in reverse as he returns to Cincinnati. If he ever surfaces again on the statewide level, Ohioans might remember that Deters either directed the questionable actions of his staff or that he was an ineffective leader who exercised inadequate control over his subordinates. ©

 
 
 
 

 

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