Several Bermuda parties have been dropped as defendants in a lawsuit to recover $216 million lost because of alleged mishandling of Ohio Bureau of Workers? Compensation (BWC) investments by a Bermuda-based MDL Active Duration Fund.

Ohio Attorney General Jim Petro launched the suit against MDL and its directors including the Bermuda companies and residents who sat on the hedge fund?s board in a bid to recover the losses on behalf of the bureau a $15 billion insurance fund for injured workers. His suit accused the fund of frequently exceeding the leverage limits it had agreed upon with the bureau, without disclosure to or consent of the bureau, its sole shareholder. At one point the assets of the fund were leveraged by approximately 100,000 percent.

MDL Capital formed the Bermuda mutual fund company, MDL Active Duration Fund in 2002 and selected British Virgin Islands-based Olympia Capital International Inc. as the fund?s administrator. Because MDL Capital, Olympia Capital and its Bermuda affiliate were all involved in the funds operations, the fund?s board of directors was initially comprised of individuals from those entities. Founder and chairman of Bermuda?s Olympia Capital Oskar P. Lewnowski and president and chief accountant of Olympia Capital C. Raymond Morrison relinquished their positions on MDL?s board in 2004 and were replaced by Hamilton Fiduciary Services and Warwick Fiduciary Services.

AG Petro had accused the individual director defendants of being ?actively and personally involved? in tortious conduct, however Ohio District Court Judge James Graham found nothing in the record to suggest that the individual director defendants voted to allegedly ?overleverage the fund?. He also noted that the Bermuda director defendants lacked influence and control over the Fund?s marketing and investment decisions.

He dismissed the Bureau?s complaint against the fund?s individual Bermuda directors Mr. Lewnowski, Mr. Morrison, Hamilton Fiduciary Services and Warwick Fiduciary Services on jurisdictional grounds. Pennsylvania residents and MDL directors Steven Sanders and Edward Adapte were also released from the Ohio lawsuit for their same lack of ties to Ohio.

The Bureau can continue to pursue its claims against the fund as well as its director and ?architect?, Mark D. Lay, who is CEO of Pittsburgh-based MDL Capital Management.

The bureau?s $216 million loss led to the resignation of chief financial officer Terry Gasper, 59, who had authority to approve hedge fund transfers.

Yesterday, in an unrelated Ohio investment scandal, Mr. Gasper pleaded guilty to federal and state charges, admitting that he took bribes in exchange for government investment opportunities in rare coins.

The charges against Mr. Gasper are the first in an expected series of charges against others connected with the bureau?s investments, Franklin County Prosecutor Ron O?Brien said.

Mr. Gasper confirmed he is co-operating with federal and state authorities as part of the plea agreement. He had faced a maximum 20-year prison sentence.