Tulsa World: McMahan: Crimes came as a surprise

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McMahan: Crimes came as a surprise
His wife confessed her involvement when the FBI showed up, he says.

TESTIFIES
Jeff McMahan: He says he didnt know about illegal activities until last August, when the FBI served a search warrant at his Tecumseh home.

By SUSAN HYLTON World Staff Writer
Published: 6/13/2008 2:04 AM
Last Modified: 6/13/2008 2:56 AM

His wife confessed her involvement when the FBI showed up, he says.

MUSKOGEE — Oklahoma State Auditor and Inspector Jeff McMahan testified Thursday that he didn't know of the crimes being committed during and after his 2002 campaign and that he didn't know that his wife, Lori McMahan, was involved.

But it all became clear on Aug. 23, 2007, he said in the eighth day of testimony in Muskogee federal court, where he and his wife are on trial on charges of conspiracy, mail fraud and accepting bribes.

That was the day the FBI served a search warrant at his Tecumseh home and his wife confessed her illegal activities to him, he said.

Jeff McMahan's voice became shaky and his eyes watery at that point in his testimony.

What did he learn that day?

"That my wife had done something wrong," he said softly.

Lori McMahan dabbed her own tears with a tissue.

While Jeff McMahan said he accepts responsibility for the things that went wrong in his campaign, he also said the following crimes occurred without his knowledge:

$157,882 in illegal "straw donor" and in-kind contributions were made to his 2002 campaign, bankrolled by Kiowa businessman Steve Phipps, whose abstract companies were regulated by the auditor's office.

The McMahans took all-expense paid trips to New Orleans and Boston, funded by Phipps.

Lori McMahan accepted cash donations from Phipps for campaign signs and radio spots.

Lori McMahan failed to return a ring and matching earrings that she had received from Phipps, who purchased them at a New Orleans jewelry shop for about $2,140, after Jeff McMahan said he told her to return them.

But he did not admit that Phipps ever received anything in return for the money and gifts.

"I haven't done any political favors for anyone," he said.

McMahan said he didn't learn that Phipps' partner in the abstract companies was former state Sen. Gene Stipe, D-McAlester, until that partnership was publicized in 2005.

"Everything I knew about Gene Stipe was not favorable," said McMahan, also a Democrat.

Because Stipe is a convicted felon, McMahan said he thought the abstract companies' certificates of authority were invalid by law and that he felt public pressure to do something about it.

Despite legal advice from his office as well as from the Attorney General's Office, McMahan moved to revoke the license of Phipps and Stipe as owners of Phipps Enterprises, a holding company of several abstract companies, as well as a third partner, Larry Witt, who operated an abstract office in Stillwater.

"I wanted to shut them down," he said.

Phipps and Tim Arbaugh, a former employee of the auditor's office, have previously testified that McMahan's action was exactly what Phipps wanted him to do.

At the time, Stipe had filed a civil suit against Phipps over ownership of the abstract companies, and Phipps thought the state's move to revoke their license because of Stipe's status as a felon would help him in that lawsuit, they both said.

McMahan said he "wasn't real thrilled" that the majority of his campaign contributions were coming from the abstract industry.

"However, it became clear to me that if we didn't raise $300,000, we weren't going to win," he said.

Jeff McMahan said his predecessor, Democrat Clifton Scott, introduced him to Phipps and described him as a good man who could help him raise campaign funds.

In describing what he thought was supposed to be an educational trip with Phipps' abstract company employees aboard a bus bound for New Orleans, Jeff McMahan said Phipps instead played a video of the new auditor being hypnotized during a party.

"I should have got off the bus. It was embarrassing," McMahan said.

Assistant U.S. Attorney Gay Guthrie tried to suggest in his cross-examination that McMahan must have known that his wife's jewelry was worth more than $300, the legal limit for gifts in 2003.

"It didn't look that expensive," McMahan said.

McMahan said he tried to return a $5,000 contribution from Stipe but that political consultant Pat Hall assured him that it wasn't illegal as long as it was accompanied by a contributor's statement.

"He said, 'Jeff, you don't raise money — you don't win,' " McMahan said.

Both the defense and prosecution have rested. The jury will hear closing statements Friday and then are expected to begin deliberations.

Susan Hylton 581-8381
susan.hylton@tulsaworld.com
By SUSAN HYLTON World Staff Writer

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	Report Comment Isaac Parker, Tulsa (6/13/2008 6:03:56 AM) Okie justice and good ole boy (and wife) network on trial again. Will justice prevail for these sleezoids? ... we'll soon see.
	Report Comment Fred, (6/13/2008 9:11:24 AM) You've heard it at the rink too. "All skate"........ Weasels are hard to catch. "I didn't like the fact that $300,000 was coming from the Abstract Industry, but if we didn't have $300,000 we weren't going to win". Jeff's quote These positions should be appointed, not elected. Then you have one person to go after when the Stipe's and the Phipps' start playing dirt games.
	Report Comment debra, (6/13/2008 9:46:40 AM) Wonder when the divorce papers will be filed?
	Report Comment Claremore Momma, (6/13/2008 1:35:56 PM) Yeah he didn't know.
	Report Comment Ignatz, Broken Bow (6/13/2008 4:27:08 PM) Smart lawyering here. Remember same defense for Judge Hogue and his wife when they plundered an elderly lady's estate, "I'm stupid and she's crazy" worked for them, no hard time for either and estate was never repaid.
	Report Comment Nite, Oklahoma City (6/13/2008 11:28:10 PM) Not to defend MaMahan at all, but we are so focused on the small group involving a few million and few $100,000s in illegal donations, everyone is totally ignoring the -- tax credit abuse fraud --- costing at least $850 million. ---- The law creating the program, the --- "Capital Formation Incentive Act", ---- declared that --- everything about the program be kept totally secret --- from all but one political appointee, in the Tax Commission. --- Allowing state officials to avoid a conflict of interest while taking millions. --- This money does not appear on the state budget. ---- This law allows state officials and friends to make millions in unearned investment profits without the public having a clue. The act was quietly amended on the last day of the 2006 session while lawmakers have no time to read let alone study what they are voting on. The author of the changes was Rep Kelvin Calvey, who received --- nearly $400,000 in suspicious donations --- while he was responsible for the amendment. --- Helping Calvey write the language was Paul Doughty, President of Altus Ventures, --- the biggest known abusers. --- But, don't take my word for it read the act. --- Details are at --- Prowlingowl com.

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