United States Attorney Gregory A. White (Northern District of Ohio) and United States Attorney Gregory Lockhart (Southern District of Ohio), announced that Mark D. Lay was charged today in United States District Court in Cleveland, Ohio in a four-count indictment related to his management of an off-shore investment fund that resulted in the Ohio Bureau of Workers' Compensation's ("OBWC") recovering only $9 million of its $225 million investment.

Lay, age 43, 710 Laughlin Avenue, Aliquippa, PA, is the founder of MDL Capital Management, Inc., located in Pittsburgh, PA. According to the Indictment, Lay directed the majority of the trade activity of the MDL Active Duration Fund, an investment vehicle through which United States tax exempt investors and non-United States resident investors could invest in a portfolio consisting primarily of government, corporate and mortgage-backed fixed income securities. The Indictment further charges that Lay and others concealed the true nature and effect of the use of leverage in the Active Duration Fund by, among other means, failing to disclose the use of excess leverage and its effect on the OBWC investment funds to the OBWC and to others. This use of leverage was in contravention of Lay's fiduciary role as an investment advisor to act in the best interest of the OBWC. For example leverage allows a firm to invest in assets that have the potential to generate high returns. Unfortunately, a leveraged firm brings about additional risk because if the investment does not provide the returns expected, the firm still has to pay back the debt and interest.

The Indictment charges Lay with investment advisory fraud, 15 U.S.C. §§ 80b-6 & 17, mail fraud, 18 U.S.C. § 1341, and conspiracy to commit mail fraud and wire fraud, 18 U.S.C. § 1349. It also seeks forfeiture of $1,793,231.00, which represents the amount of compensation MDL Capital Management, Inc. received from the OBWC for managing the Active Duration Fund.

United States Attorney Gregory White said this of the Indictment filed today, "Those entrusted to manage public funds owe the public a duty of good faith, loyalty, and fair dealing. When that trust is violated, offenders must be held accountable."

Gregory G. Lockhart, United States Attorney for the Southern District of Ohio added that "This indictment should reassure Ohioans that law enforcement agencies in this state continue to pursue, with determination, any person who violates our laws, regardless of their position or political connections."

Ohio Inspector General Tom Charles added " The indictment of Mark Lay is the culmination of hard work and commitment by the task force that has worked together effectively for two years. I congratulate the team of prosecutors and investigators."

If convicted, Lay's sentence will not exceed the statutory maximum penalty of twenty years imprisonment and/or a fine of $500,000 or two times the gain or the loss from the offense, and may be less than the maximum. The court may determine the actual sentence under the Federal Sentencing Guidelines, which depend upon a number of factors unique to each case, including the defendant's prior criminal record, if any, his role in the offense and the characteristics of the violation.

The investigation is being conducted by a task force of federal, state and local law enforcement officers from the offices of the Inspector General for the State of Ohio; the Ohio State Highway Patrol; the Ohio Ethics Commission; the OBWC Special Investigations Department; the Ohio Department of Commerce, Division of Securities; and the Cleveland and Cincinnati Divisions of the Federal Bureau of Investigation, as well as prosecutors from the Franklin and Lucas County Prosecutors' Offices; the Columbus City Prosecutor's Office; and the Offices of the United States Attorneys for the Northern and Southern Districts of Ohio. The case is being prosecuted by Assistant United States Attorneys Benita Y. Pearson and Antoinette T. Bacon (NDOH), and Brenda Shoemaker (SDOH).