Businessman testifies at McMahans’ trial

Muskogee, Oklahoma (AP) 6-08

A southeastern Oklahoma businessman entangled in two high-profile corruption investigations said he hatched a plan to illegally funnel more than $150,000 into the campaign of state Auditor and Inspector Jeff McMahan.

Steve Phipps of Pittsburg County took the stand on June 3 in the federal trial of the embattled state official and his wife, Lori, who are accused in nine counts, including mail fraud, conspiracy and violating the Travel Act to commit bribery.

Phipps testified that he helped raise money for McMahan’s campaign against his Republican opponent, Gary Jones, who now heads the state GOP.

Jones had advocated abolishing abstract companies, which are regulated by the auditor’s office. Phipps and former state Sen. Gene Stipe wanted to protect the abstract companies they own, which brought in $200,000 to $400,000 annually for them, Phipps testified.

Phipps already had provided more than 20 times the $5,000 legal limit to McMahan’s 2002 campaign. With no “straw donors,” or people who contribute under their own names but with others’ money, Phipps gave the money directly for McMahan to buy last-minute radio spots.

McMahan, his wife, Phipps and Phipps’ business partner, Tim Arbaugh, were at a Shawnee restaurant on Oct. 22, 2002, when McMahan excused himself so he could go pick up the couple’s children, Phipps testified.

As McMahan left the table, Lori McMahan told her husband she and Phipps had “business to discuss,” which was a cue to give her an envelope with $10,000 inside, the businessman testified.

“We tried to make sure Jeff had deniability” about any illegal contributions, he said.

They had other code terms, including one Phipps said he learned from Stipe about providing in-kind contributions without anyone knowing.

“We called it ‘flying under the radar,”’ Phipps said.

McMahan shook his head as Phipps testified.

In all, Phipps, Stipe and a third business partner, Larry Witt, gave $157,882 to the Mc-Mahan campaign, Phipps said.

Only $77,600 of that was reported, he said. The 2002 campaign reported $383,088 in total contributions.

Phipps, Stipe’s former business partner, also is involved in a case in which prosecutors allege former legislators used their influence to steer state funds toward a foundation. The money then ended up in Phipps’ Indian Nation Entertainment, which was seeking to place gaming machines in American Indian casinos.

He has reached a plea agreement in the case.