WND has learned that criminal investigators in Ohio and the U.S. Department of Justice have taken an interest in the “pay to profit” scheme currently rocking the Ohio Republican Party.

As WorldNetDaily reported yesterday, the “pay to Profit” scheme in Ohio involved attorneys who were hired by the state as “special counsel” authorized to collect past-due state obligations, including past-due taxes. In Ohio, an attorney could make millions acting as special counsel. In exchange for the privilege, attorneys made large campaign contributions to prominent state Republican Party candidates and to the Republican Party itself.

According to a prominent law suit filed in the scandal, Ohio Attorney General Jim Petro and former Attorney General Betty Montgomery, both candidates in the 2006 Republican gubernatorial primary in Ohio, were involved in perpetrating the scheme.

Of the three top contenders in the primary race, only Ken Blackwell has not been named in the scandal. Blackwell, Ohio’s current secretary of state, is leading in the polls.

Democrat Timothy Hagan surfaced the scandal by filing a civil case against Ohio Republican Gov. Robert Taft, charging that “pay to profit” contributions in the 2002 gubernatorial contest helped Taft beat Hagan because the scheme was integral to Taft’s being able to collect a 12 to 1 advantage in fundraising over Hagan in the campaign.

On Dec. 19, Cleveland attorney Kenneth F. Seminatore, who represented Hagan in the lawsuit, filed papers with the Cuyahoga County Court of Common Pleas that produced evidence of the special counselor “kickback” charge.

Seminatore’s Dec. 19 court filing, a copy of which WND has obtained, alleged Columbus attorney Lee Smith “has been a member of Defendant Montgomery’s and Defendant Petro’s Special Counsel Collection Team for many years. He has earned millions of dollars in special counsel fees, and he has rewarded not just the Defendants Montgomery and Petro, but Defendant Ohio Republican Party (and constituent County Parties) and Defendant Deters generously.”

Joseph Deters was former Ohio state treasurer. Hagan’s lawsuit charged that special counsel frequently laundered their campaign contributions through county parties to mask their true source.

A letter dated Nov. 23 from Lee Smith to attorney Seminatore was written to explain the contributions Smith made to the Hamilton and Licking County Republican Parties. The letter reads:

As I recall, I contacted both the Deters Campaign and the Petro Campaign though their fundraisers, Eric Sagun and Kyle Sisk, respectively. I specifically asked the fundraisers which counties they were attempting to help in their quest to receive endorsements in the race for Attorney General. I must presume that each of these fundraisers let me know counties to which I could make donations.

Seminatore’s filing charged that Lee, “because he has been such a long time participant in the ‘pay to profit’ scheme” did not need to ask any more. Smith made the political contributions, according to the allegations in the court filing, fully anticipating that Hamilton and Licking County would write similar checks to Defendant Petro’s and Deter’s campaign organizations. Also alleged is that Smith understood his checks would help Petro and Deter get the endorsement of the county parties in question.

So, to follow the argument of Hagan’s civil complaint, Smith took money he had “derived from taxpayer dollars” in his role as special counsel and returned those dollars to Republican Party campaign war chests as directed by Petro’s and Deter’s campaign fundraisers. The charge further was that when Hamilton and Licking Counties wrote checks to Petro’s and Deter’s campaign, “they became not only the beneficiaries of paid-for, solicited endorsement assistance but also the beneficiaries of a direct return of funds derived from taxpayer dollars and solicited by their fundraisers for their political purposes.”

“Pay to profit” then was allegedly a kickback scheme in which Ohio Republicans received campaign contributions by allowing lucrative state contracts to be given on a “no-bid” basis.

Moreover, the charge is that Republican Party officials in Ohio had played “pay to profit” for so many years that participating lawyers and politicians simply understand the rules of the game, without any need for incriminating directives to connect the dots.

Campaign contributions were made and special counsels were appointed accordingly. Checks were written and nods were given, all on a “no-bid” understanding. The currency being traded is taxpayer dollars, earned here in the form of huge special counsel fees, with the understanding that a large chunk of that money would be circulated back to the Republican Party politicians through direct campaign contributions.

To make the scheme harder to prove, the allegation is that campaign contributions often were laundered as contributions to the Republican Party or one of its county divisions, rather than to the politicians themselves.

Then, on Dec. 23, just before Christmas weekend, plaintiff Hagan instructed attorney Seminatore to drop the case. Still, the case is unlikely to die as a result. Several Ohio newspapers have informed Seminatore and others they intend to continue independent inquiries and pick up where the lawsuit left off.

Seminatore has told WND he has already been visited on the case by the Ohio State Inspector General’s Office, the State Ethics Committee and the Ohio State Highway Patrol. Seminatore also told WND the U.S. Justice Department’s Public Integrity Section has been in touch with him.

Momentum in Ohio is building to call for a federal criminal grand jury to investigate the “pay to profit” allegations.

WND asked Seminatore what was needed to clean up the mess in Ohio.

“We have to get rid of the ‘no bid’ system in all state contracts,” Seminatore explained. “All contracts offered through Ohio’s state government have to be on an ‘open-bid’ basis, including the contracts that are given out to appoint special counsels.”

Who are the losers in the Ohio “pay to profit” scheme?

“The taxpayers,” Seminatore argues. “Millions of taxpayer dollars are being taken from intentionally inflated no-bid contracts and recycled into Republican Party campaign contributions at the state level, and it has to stop.”

Is Ken Blackwell involved?

“No,” Seminatore answered. “Blackwell’s clean. If he had been involved, we would have named him as a defendant. We looked, but we found nothing. As far as we know, Blackwell did not play in the ‘pay for profit’ scandal.”

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