By Jon Kocan
STILLWATER (MCT) — Though few may realize it, the corruption trial of state Auditor and Inspector Jeff McMahan has ties to Stillwater.
McMahan and his wife, Lori, are accused in nine federal counts of taking illegal money, jewelry and trips from Steve Phipps for political favors. Their trial continues in Muskogee.
The McMahans allegedly accepted illegal campaign donations, jewelry and trips from Phipps for political favors. Phipps first took the stand Tuesday and provided testimony throughout the week that included him providing $70,000 in illegal campaign contributions to Gov. Brad Henry in January 2003.
According to an affidavit for a search warrant of the McMahans’ home filed in the federal court for the Western District of Oklahoma on Aug. 2, Phipps is co-owner of Corporate Financial Group. CFG, doing business as Ryson Corp., is owned equally by former state Sen. Gene Stipe, Larry Witt and Phipps. According to the affidavit, CFG owns American Land and Aircraft Title, Guarantee Title and Stillwater Abstract Co.
Stillwater Abstract is the parent company of Payne County Title, Oklahoma Abstract, Oklahoma Closing, University Land and Title and University Closing Services in Stillwater.
Phipps has testified over the last week that he helped raise money for McMahan’s 2002 campaign against Republican Gary Jones, who now heads the state Republican Party.
According to the AP, Jones had advocated abolishing abstract companies, which are regulated by the auditor’s office. Phipps and Stipe, who has been sentenced to prison for his role in funneling illegal donations to a campaign opponent of former U.S. Rep. Wes Watkins, R-Stillwater, wanted to protect the abstract companies they own, which brought in $200,000 to $400,000 annually for them, Phipps testified.
Phipps also outlined a plan to use “straw donors” to funnel money to McMahan’s campaign. Phipps, Stipe and a third business partner, Larry Witt, gave $157,882 to McMahan’s campaign, with Phipps testifying that only $77,600 was reported.
In 2002, Phipps hosted a campaign fundraiser in Guthrie. According to the AP, Tim Arbaugh, who regulated the abstract industry for McMahan’s office, asked McMahan whether he was concerned about the large number of Phipps’ abstract company employees who paid up to $1,000 to sit next to McMahan or his predecessor, Clifton Scott.
Arbaugh’s testimony came Thursday. “Clifton Scott told me that it might be a problem, and it might be best if I just didn’t notice,” Arbaugh testified.
His testimony worked to establish a “veil of deniability” that was developed so McMahan could claim he was not aware of illegal contributions. Arbaugh later testified that he asked Lori McMahan if some of the people might be “straw donors,” who gave under their own name with Phipps’ money so Phipps could avoid the $5,000 campaign contribution limit.
Arbaugh testified Jeff McMahan approached and asked what they were talking about. According to Arbaugh, Lori replied, “You don’t want to know.”
The Oklahoma Abstractors Board was formed following the accusations against McMahan, and removed the state Auditor and Inspector’s Office from the oversight of property title abstractors. The board’s first chairman, Randy Dittman, stepped down in January after being accused in an FBI affidavit of making illegal contributions to McMahan’s 2002 and 2006 campaigns.
Phipps has already pleaded guilty to a federal conspiracy charge of providing kickbacks to three state legislators for their help getting taxpayer money for two private ventures.
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