Papers cite more in illegal election funds

Tony Thornton and Michael McNutt in the Oklahoman, has a story in today paper about two more abstract company owners making illegal campaign contributions to Jeff McMahan.

Papers cite more in
illegal election funds

By Tony Thornton and Michael McNutt

Court records unsealed Friday accuse two abstract company owners — including the chairman of a new state board assigned to regulate the industry — of making illegal campaign contributions to state Auditor and Inspector Jeff McMahan.

McMahan had to rely heavily on Randy Dittmann for his 2006 re-election campaign because the main money source for his 2002 campaign, Steve Phipps, was under grand jury investigation, according to an FBI agent's affidavit.

Also included in the affidavit are transcripts of taped conversations in which McMahan's wife allegedly tells Phipps that “as long as we all stick to the same story, we'll be fine.”

The affidavit is part of FBI agent Gary Graff's request in August for a warrant to search the McMahans' Tecumseh home.

The affidavit remained sealed in Oklahoma City's federal courthouse for the last five months, as did a separate court filing showing what was seized.

They were unsealed Friday, when Jeff and Lori McMahan appeared in Muskogee's federal court to face a nine-count indictment accusing both of accepting bribes and illegal contributions from Phipps.

The affidavit is based primarily on information provided by two unnamed informants. Those informants are Phipps and Tim Arbaugh, who oversaw the auditor's abstract division for McMahan, The Oklahoman confirmed. FBI agents recorded conversations between Arbaugh and Lori McMahan, according to the affidavit.

Phipps pleaded guilty in June to conspiracy involving bribes paid to former legislators. He is cooperating with investigators as part of his plea agreement.

The affidavit alleges Phipps spoke to Jeff McMahan in code when discussing illegal campaign contributions he made through other people, called “straw donors.”

Dittman denies claims
Gov. Brad Henry appointed Dittmann in November to the Oklahoma Abstractors Board, which legislators created amid reports of McMahan's ties to Phipps.

Dittmann, 51, was recommended by the Oklahoma Land Title Association and state Reps. Chris Benge, R-Tulsa, and Lucky Lamons, D-Tulsa, said Paul Sund, Henry's spokesman. Dittmann is on the land title association's board.

According to the affidavit, Arbaugh told McMahan in 2006 that Dittmann was reimbursing employees who made straw donations to McMahan's campaign.

“How many more employees does he have?” the affidavit quotes McMahan as asking Arbaugh.

Asked last week if he was aware of any illegal contributions being made to McMahan's campaign, Dittmann said, “Any of the campaign stuff, I don't know anything about.”

On Friday, he said: “I have no idea what employees donated funds to anybody's campaign by the use of a credit card. I have never given an employee an illegal bonus for anything. I'd like to see this affidavit ... before I make any further comments,”

To read the full story, click here

McMahan turns over day-to-day duties.

McMahan turns over day-to-day duties after pleading not guilty to conspiracy, mail fraud and bribery.

Can He do this ?

Oklahoma Auditor and Inspector Jeff McMahan announced Friday afternoon that he will turn over the day-to-day operations of the office to assistant State Auditor Michelle Day.

McMahan and his wife Lori McMahan were arraigned Friday morning in federal court in Muskogee on nine felony counts of conspiracy, mail fraud and state bribery. The couple pleaded not guilty.



"I will continue to be available to the office for consultation during the ongoing efforts to prove my innocence," McMahan said in a statement.

McMahan plead not guilty to conspiracy, mail fraud and bribery

Oklahoma Auditor and Inspector Jeff McMahan and his wife, Lori McMahan, pleaded not guilty in federal court Friday on nine counts of conspiracy, mail fraud and state bribery.

The McMahans were ordered to report the federal probation office in Oklahoma City by Jan. 28, pending a trial that has been set for March 3.

As part of the conditions of their release, the McMahans were ordered to stay within the eastern and western federal districts of Oklahoma and not to speak to any potential witnesses in the case. Jeff McMahan, a Democrat, remains in office, despite a public calling by Gov. Brad Henry and Attorney General Drew Edmondson to step down.

McMahan is in the second year of his second term in office.

The McMahans had no comment following their court appearance.

The indictment alleges that McMahan and his wife received more than $100,000 in cash, other items of value, supplies and straw donor contributions far exceeding the amount limited by law through Kiowa businessman Steven Phipps, who was a former business partner of former state senator Gene Stipe.

Conspiracy to commit mail fraud is punishable by up to five years in prison and a fine of up to $250,000. The six counts of mail fraud are punishable by up to 20 years in prison and a fine of up to $250,000 for each count. The two counts of bribery are punishable by up to five years in prison and a fine of up to $250,000 for each count.

VIDEO: Reynolds Calls for Legislative Investigation of State Auditor

For more info click here

Reynolds Calls for Legislative Investigation of State Auditor

FOR IMMEDIATE RELEASE:
Contact: State Rep. Mike Reynolds
Capitol: (405) 557-7337

Resolution Calls for
Legislative Investigation
of State Auditor

Special Committee Would be
First Step toward Impeachment

OKLAHOMA CITY (January 24, 2008) - State Rep. Mike
Reynolds today filed legislation to create a special
committee to investigate State Auditor and Inspector
Jeff McMahan and determine whether Articles of
Impeachment should be pursued.

"Given the very serious charges leveled against Mister
McMahan by federal investigators, the members of the
Oklahoma House of Representatives now have a clear
constitutional duty to investigate those charges and
determine if impeachment is appropriate," said
Reynolds, R-Oklahoma City.

House Resolution 1051, by Reynolds, calls for the
creation of a Special Investigating Committee of
the House of Representatives "to conduct a
comprehensive and detailed study and investigation
of the activities of Jeff McMahan, State Auditor and
Inspector ..."

The committee would have the power to subpoena
witnesses, documents and records; take testimony
under oath and request punishment for contempt
for "any disobedience of process."

Speaker Lance Cargill (R-Harrah) would appoint
the committee members.

The process outlined in the resolution is similar to
the one used during the investigation and eventual
impeachment of former Insurance Commissioner
Carroll Fisher.

McMahan has been indicted on one count of
conspiracy, six counts of mail fraud and two counts
of violating the federal Travel Act to promote bribery.

Following McMahan's indictment, several officials
suggested the auditor should step aside until a
conviction or acquittal occurred, but Reynolds said
that may not be legally permissible.

Reynolds noted there is no provision in the
Oklahoma Constitution allowing an elected official to
"step aside" while still retaining office. In fact, he said
some legal experts believe McMahan will effectively
vacate his office should he step aside and, as a result,
could then actually be impeached for "nonperformance
of duty."

Reynolds said he will ask Attorney General Drew
Edmondson to issue a formal opinion on that legal
question.

Statement from Jeff McMahan's attorney

Click here to read

Governor Henry Wants State Auditor To Step Aside Amid Grand Jury Allegations

Governor says allegations are very serious.
By Beth Myers
Friday, January 18, 2008

Governor Henry says the grand jury allegations against State Auditor and Inspector Jeff McMahan are very serious allegations and he is greatly concerned about them. In a statement he says, "Before I pass judgement, I want to review all the available information and hear the auditor's public response to the charges. In the meantime, however, I believe it would be appropriate for the auditor to step aside on administrative leave and turn over the office's day to day operations to his chief deputy while the allegations are resolved. It is important to protect the public interest in this matter and ensure that the daily functions of the auditor's office are not impeded by the ongoing legal proceedings."

Grand jury indicts McMahan

Grand jury indicts McMahan, wife
By SUSAN HYLTON World Staff Writer

A federal grand jury on Friday indicted Oklahoma State Auditor and Inspector Jeff McMahan and his wife, Lori McMahan, on nine felony counts involving conspiracy, fraud and racketeering.

The indictment alleges that McMahan and his wife received cash, other items of value, supplies and straw donor contributions far exceeding the amount limited by law. U.S. Attorney Sheldon Sperling said he expects the McMahans to be arraigned next week.

The conspiracy began in February 2002 and ran through August 2007, indictment alleges. Sperling said the object of the scheme was for the McMahans to receive bribes and gratuities in exchange for favorable treatment.

"This is a sad day," Sperling said. "Political offices should not be for sale."

Count 1, conspiracy to commit mail fraud, is punishable by up to five years in prison and a fine of up to $250,000. Counts 2 through 7 are mail fraud and are punishable by up to 20 years in prison and a fine of up to $250,000 for each count.

Counts 8 and 9 are tied to bribery allegations; they are punishable by up to five years in prison and a fine up to $250,000 for each count.

The FBI has questioned McMahan several times regarding his connections to Steven Phipps, a former business partner of former state Sen. Gene Stipe.

McMahan has admitted that Phipps took him on a fishing trip, a trip to New Orleans and a trip to a casino in Biloxi, Miss. He also has admitted that Phipps has sponsored several fundraisers for him.

Phipps co-owned several abstract companies with Stipe. McMahan's office regulates the abstract industry.

FBI investigators obtained a search warrant and in August went to the home of McMahan's sister-in-law, where they seized an unidentified item of jewelry.

Kevin Krahl, attorney for Lori McMahan, said she received a pair of earrings from Phipps.

Sources have said that FBI agents also went to McMahan's home to confiscate campaign records.

Phipps has pleaded guilty to paying kickbacks to lawmakers who funnelled state money to his businesses and has agreed to cooperate in the ongoing grand jury investigation.

Grand jury indicts Demo Oklahoma State Auditor and Inspector

State auditor McMahan and wife indicted

By Tony Thornton and Michael McNutt
Staff Writer
Fri January 18, 2008

MUSKOGEE — A federal grand jury indicted state Auditor and Inspector Jeff McMahan and his wife today, accusing them of accepting improper cash and gifts from a southeast Oklahoma businessman.

The nine-count indictment alleges Jeff and Lori McMahan received jewelry, trips and excessive contributions to Jeff McMahan's first campaign in 2002.

In return, the indictment alleges, the auditor granted special favors to an unnamed abstract company owner. That businessman is Steve Phipps of Kiowa, The Oklahoman confirmed.


McMahan's office regulated the abstract industry until Jan. 1. The Legislature last year created a separate agency for that purpose amid reports of McMahan's ties to Phipps.

"Political offices should not be for sale," U.S. Attorney Sheldon Sperling said upon the indictment's release.

The indictment came shortly after Phipps testified behind closed doors this morning. Phipps has appeared several times before the grand jury since cutting a deal with federal prosecutors nearly a year ago. He awaits sentencing on a conspiracy count.

The McMahans weren't arrested Friday. Sperling said he expects them to appear in Muskogee's federal courthouse next week.

Jeff McMahan's attorney, Rand C. Eddy, said the McMahans have cooperated fully with investigators.

"While they are capable of errors in judgment or in association, Jeff and Lori are innocent of the charges," Eddy said.

Lori McMahan's attorney, Kevin Krahl, called the indictment "unfortunate."

"We answered every question they posed to her," Krahl said.

What indictment alleges

Both Jeff McMahan and Lori McMahan, a Tecumseh schoolteacher, face the same nine counts: one conspiracy count, six mail fraud counts and two counts of violating the Travel Act to promote bribery.

The maximum total prison time possible for the nine counts is 135 years.

The Travel Act allegations concern trips the McMahans allegedly took on Phipps' tab. One trip was to New Orleans in the summer of 2003; the other was to Boston for the 2004 Democratic National Convention.

During the New Orleans trip, Phipps gave Lori McMahan — with her husband's knowledge — a ring that cost $1,640, the indictment alleges.

The indictment actually mentions two other trips allegedly paid for by Phipps: a fishing trip involving McMahan and his teenage son; and a second trip to New Orleans by Jeff and Lori McMahan in October 2004.

Phipps also contributed, either directly or indirectly, $77,600 to McMahan's 2002 campaign through straw donors, according to the indictment.

In addition, Phipps handed an envelope containing $10,000 to Lori McMahan on Oct. 22, 2002, the indictment states.

The cash exchange allegedly occurred at a Shawnee restaurant. Lori McMahan told her husband she and Phipps had business to conduct, the indictment states.

Reaction swift

Gov. Brad Henry said today it would be "appropriate" for McMahan to take an administrative leave of his office.

"Before I pass judgment, I want to review all the available information and hear the auditor's public response to the charges," the governor said. "In the meantime, however, I believe it would be appropriate for the auditor to step aside on administrative leave and turn over the office's day-to-day operations to his chief deputy while the allegations are resolved."

Oklahoma Republican Party Chairman Gary Jones, who opposed McMahan in the 2002 and 2006 general elections, called for McMahan to resign.

"The honorable thing to do would be for him to step down," Jones said. "The problem is that he's not known to do the honorable thing."

Jones alleged during his 2006 campaign that McMahan received questionable contributions in the 2002 campaign.

He repeated his request Henry name a special prosecutor to look into a scheme uncovered by federal authorities in which state money was used for business ventures and to reimburse "straw donors" on political campaigns.

"They need somebody without a conflict of interest," Jones said.

When Jones made his original request in June, Henry, a Democrat as is McMahan, said a separate probe is unnecessary because "an extensive investigation" is under way, said his spokesman, Paul Sund.

Auditor's staffers testified

FBI agents searched the McMahans' home in Tecumseh in August, looking for jewelry and campaign records. The agents later went to the home of Lori McMahan's sister and recovered jewelry thought to have been bought by Phipps.

The McMahans have been using separate attorneys since last summer, when prosecutors told the couple they might have conflicting legal interests.

Witnesses who testified before a federal grand jury in Muskogee include several current and former employees of the auditor's office, along with McMahan's predecessor, Clifton Scott.

The same grand jury indicted former state Sen. Gene Stipe and his brother Francis in October as part of an ongoing probe of political corruption.

The panel's investigation prompted former state Rep. Mike Mass to plead guilty last year to a conspiracy count. He will be sentenced after testifying at Francis Stipe's upcoming trial.

Separate investigation netted former insurance commissioner

McMahan is the second statewide elected official in four years to be indicted on corruption charges.

A state grand jury indicted then-Insurance Commissioner Carroll Fisher in 2004 in an unrelated case. He eventually was convicted of embezzling money from his campaign and lying on a campaign report. He is serving a three-year prison term and still faces felony charges, including tax evasion and accepting bribes in return for favorable treatment.