A disastrous investment by the state in rare coins (search) has erupted into both a financial and political scandal, with Ohio's Republicans running for cover and the Democrats seeing great opportunity.

At least $10 million is feared missing from a $55 million fund that the Ohio Workers' Compensation Bureau set up in a risky and highly unorthodox foray into the buying and selling of coins. The investment was managed by coin dealer Tom Noe (search), a prodigious fundraiser who has showered contributions on Republicans in Ohio and beyond.

In the past few weeks, a slew of Republicans, including President Bush and Gov. Bob Taft (search), have moved quickly to distance themselves from Noe by returning more than $100,000 in donations.

The Democrats have seized on the scandal, hoping it will enable them to break the GOP's decade-long grip on Ohio state government next year and even help them retake the White House in 2008

"It's an example of the arrogance of power that comes with one-party rule," said Columbus Mayor Michael Coleman, one of two Democrats running in 2006 to succeed Taft, who cannot seek a third term. "It reinforces the need for change in Ohio."

No charges have been brought against Noe. But investigators say that at least 121 coins worth about $400,000 are missing, and they are looking into whether some of the money he handled went to Republican officeholders.

The financial scandal deepened in the past week with word that the state's insurance fund for injured workers lost $215 million in a hedge fund that was not handled by Noe.

Ohio Republicans are portraying Noe as just one "bad apple." Democrats say that the scandal is a symptom of GOP corruption and self-dealing, and that Noe received the state contract because of his political ties, which include raising more than $100,000 for Bush's re-election.

"This isn't necessarily the end of the Republican reign, but I'm sure it's got them very concerned," said William Binning, chairman of political science at Youngstown State University, who also works for Taft as a liaison in northeastern Ohio. "We just don't know what the fallout is going to be. It's potentially explosive."

The GOP has controlled the Ohio governor's office since 1991, has held all statewide non-judicial offices for 10 years, and dominates both houses of the Legislature. In Ohio, voters do not register by party, but based on the party affiliations given by primary voters, perhaps two-thirds of the electorate is independent, while Republicans and Democrats are close to even in numbers.

Democrats believe that if they can capture the governor's office, the party's presidential nominee will have a better shot at winning the state in 2008. Last year, the presidential election came down to Ohio, with Bush winning by 118,000 votes. No Republican has ever won the White House without carrying Ohio.

"One of the reasons everybody's so worried about this is that it does have the potential to change not only Ohio politics but also national politics," said John Green, director of the University of Akron's Ray C. Bliss Institute for Applied Politics.

Republican National Committee spokesman Aaron McLear said it is too early to say whether the troubles in Ohio will hurt the GOP's chances in 2008.

The head of the state GOP, though, said the problems will have an effect next year when voters select a new governor and four other statewide officeholders.

"Of course it's an embarrassment," said Ohio Republican Party chairman Bob Bennett. But he said that "every once in awhile a bad apple does come along," and that party leaders are returning contributions and aggressively investigating the missing money.

At least 17 Ohio officials are returning contributions, including all three GOP candidates for governor: Attorney General Jim Petro, Secretary of State Ken Blackwell and Auditor Betty Montgomery. They have given back a total of $17,100.

Taft has returned $22,190, the most of any officeholder, saying Noe "has done a great disservice to the people of Ohio by mismanaging our public resources and abusing our trust." Bush returned $4,000. Five GOP justices on the Ohio Supreme Court said they, too, will identify and set aside campaign contributions from Noe.

Noe also gave $10,000 to California Gov. Arnold Schwarzenegger (search). But he is keeping the money.