Worthen, Lamb Demand 'Unethical' Working Oklahomans Alliance Donations Be Returned

Republican House and Senate leaders today criticized the "dishonest and underhanded fundraising tactics of the Working Oklahomans Alliance political action committee" and called on the dozens of Democratic members, candidates and PACs who received money from the group to return all contributions immediately.

The Oklahoman reported Sunday that many of the 2,200 individual contributors since 2006 to the Working Oklahomans Alliance were unaware they were donating to political campaigns.

The money was often deducted from workers' compensation claim checks intended to pay for medical expenses and necessities while a worker is unable to work.

"I am appalled by the actions of the Working Oklahomans Alliance PAC and the deceptive tactics they have used to swindle working Oklahoma families out of their hard-earned dollars," said Rep. Trebor Worthen, a member of the House Republican leadership team and political director for the House Republican campaign activities.

"I demand that those PACs, members and candidates who received donations from this unethical PAC return this tainted money; money that was taken off the backs, and sometimes the broken backs, of hardworking, injured Oklahomans."

With ever-growing health insurance costs and higher food and fuel prices, many of the workers quoted in the story said they could have used the money unknowingly taken from them for political campaigns to buy groceries for their families or a tank of gas for their cars.

"The deceitful tactics used by these workers' compensation attorneys to gather these donations are reminiscent of old Louisiana-style corruption. We don't need this kind of politics in Oklahoma, so we're hopeful that the Democrat candidates and PACs who took this dirty money will agree with us and return these contributions," said Senator Todd Lamb, R-Oklahoma City/Edmond. "The attorneys involved in this secretive scheme have proven they will stop at nothing to funnel money to candidates who will block workers' compensation reform, lawsuit reform, and other pro-jobs reforms that would benefit Oklahoma workers," Lamb said.

The Working Oklahomans Alliance gave to a dozen Democratic House and Senate members and candidates in 2008, and has given to many others previously. The PAC also gave thousands in contributions to both the House and Senate Democratic fundraising committees.

"Like the recent federal investigation of former Senator Gene Stipe, this deceitful behavior could go beyond mere state ethics violations. This could be the tip of the iceberg," said Worthen, R-Oklahoma City.

Worthen and Lamb called on the following members and candidates who received the tainted contributions to return them immediately to the workers who desperately need those funds, some of whom are unemployed as a result of their injury. They also urged House and Senate Democratic leadership to return the PAC funds they have received and to not accept further contributions from this group until they change their deceptive and misleading tactics on innocent and often injured workers.

Recent Working Oklahoman's Alliance contributions: Senators Nancy Riley, $5,000; Richard Lerblance, $5,000; Senate candidate Robert Murphy, $5,000; Rep. Eric Proctor, $750; Sen. Tom Adelson, $5,000; Democrats of the Oklahoma State Senate, $10,000; Oklahoma House PAC, $5,000; Sen. Charlie Laster, $2,500; Rep. Mike Shelton, $1,500; Rep. Anastasia Pitman, $1,000; Rep. Jerry Elli, $1,250; Rep. Jabar Shumate, $1,500; Sen. Judy Eason McIntyre, $5,000; WIN PAC, $5,000; Rep. Scott Inman, $2,000; Organized Democratic Youth, $5,000.

Other House and Senate members who have received contributions in past election cycles from the PAC include Reps. Wallace Collins, Al Lindley, Richard Morrissette, Ken Luttrell, Ryan McMullen, Jeannie McDaniel, Randy Terrill, and Sens. Daisy Lawler, Randy Bass, Tom Ivester, Andrew Rice, Sean Burrage, and John Sparks.

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The Oklahoman: Henry, Senate Democrats Lead Secretive Group's List Of Beneficiaries

The Oklahoman reports that Democrats "have been the leading beneficiaries of contributions from the Working Oklahomans Alliance's political action committee."

The newspaper's Sunday edition reveals the existence of the secretive fund and in a sidebar to the main story, reporters Nolan Clay and Randy Ellis report: "It (the PAC) donated $5,000 to (Governor Brad) Henry when he was a state senator and almost $10,000 to his two campaigns for governor. It spent $67,210 in 2002 on a television ad buy for Henry, a so-called independent expenditure.

"The governor was overseas Friday and could not be reached for comment.

"The alliance has donated $45,000 to the Senate Democrat political action committee.

"Since April 1, the alliance has donated $113,750 to candidates and political action committees. The biggest donations include $5,000 to state Sen. Judy Eason McIntyre, D-Tulsa; $5,000 to state Senate candidate Bob Murphy, D-Stillwater; and $5,000 to state Sen. Nancy Riley, D-Tulsa.

"Workers' compensation lawyers last year created two new political action committees."

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SCANDAL: Secretive Workers Comp Alliance Donations Revealed By The Oklahoman

The Oklahoman reports in its Sunday edition, "A secretive organization has raised close to $1 million throughout the last decade for political purposes, mostly from injured workers who sometimes don't even know they've donated."

Reporters Nolan Clay and Randy Ellis write that some injured workers listed as political donors to the Working Oklahomans Alliance "were represented by Norman attorney Richard Bell, a key figure in a campaign corruption scandal in the 1990s involving then-Gov. David Walters."

Read the entire story at http://www.newsok.com/.

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Randall Erwin Indicted By Federal Jury

Muskogee ~ Former Rep. Randall Erwin of Nashoba on Thursday was indicted by a federal grand jury for allegedly steering state funds to a phony nonprofit entity and receiving kickbacks from its owner, southeast Oklahoma businessman Steven Phipps, as part of a scandal that has rocked southeastern Oklahoma and implicated at least four former lawmakers and Auditor and Inspector Jeff McMahan and his wife, Lori.

Read The Indictment

Erwin, 56, a Democrat, is charged with one count of conspiracy, three counts of mail fraud and three counts of money laundering.

The indictment alleges that Erwin, former Rep. Mike Mass and another, unnamed person were involved in the conspiracy to steer state funds to the Rural Development Foundation.

The third, unnamed alleged co-conspirator is former Rep. Jerry Hefner, a source close to the investigation confirmed to the Tulsa World. He was not charged in Thursday’s indictment.

Money from the phony nonprofit foundation was then funnelled to Indian Nation Entertainment, a company owned by Phipps, the indictment alleges.

Erwin, Mass and Hefner used their influence to have INE gaming machines placed in Indian casinos, according to the indictment.

Phipps then periodically paid the three an agreed upon percentage of gross profits from the machines in cash, the indictment alleges.

The indictment does not say how much was paid to the former lawmakers.

Neither Phipps nor Mass, who earlier this year entered into plea deals with federal prosecutors in exchange for their cooperation, were charged in Thursday’s indictment.

Conviction of any of the seven counts in the indictment is punishable by 5 to 20 years in prison and a fine of $250,000 to $500,000 each, U.S. Attorney Sheldon Sperling said.

Phipps is the former business partner of former longtime Democratic Senator Gene Stipe. Stipe’s brother, Francis, pleaded guilty to conspiracy, mail fraud, witness-tampering and engaging in an illegal monetary transaction. The charges included an allegation that Francis Stipe engaged in an illegal monetary transaction that directly dealt with a $48,000 kickback paid to Mass and drawn on Gene Stipe’s account.

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McMahan Used Funds To Pay Personal Loan

The Oklahoman's Tony Thornton reports today that Auditor and Inspector Jeff McMahan used much of what his campaign raised at a July golf tournament to pay on a personal loan rather than pay others who guaranteed campaign loans, and that McMahan's attorney says there's been no indication his client is about to be indicted by a federal grand jury. Those are just two points in Thornton's lengthy article. Read it at http://www.newsok.com/article/3170873/.

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Francis Stipe Faces January Trial

His politician brother might be the bull's-eye of a federal investigation into Little Dixie corruption, but McAlester businessman Francis Stipe faces the same charges as his older sibling and will go to trial first. Stipe, 76, pleaded not guilty Friday before U.S. Magistrate Steven Shreder to conspiracy, mail fraud, tampering with a witness and engaging in an illegal monetary transaction. A trial date was set for Jan. 7. The maximum punishment on all four counts is 45 years in prison; the maximum fine would be $1 million. Stipe was allowed to leave court after posting an unsecured bond for $20,000, but he must not leave the state. He also must report to the U.S. Probation Office on Monday. Read all of the Tulsa World story at http://www.tulsaworld.com/.

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Phipps-Stipe Abstract Companies To Be Sold

The Oklahoman's Tony Thornton reports from McAlester today that two abstract companies owned by Steve Phipps' wife and former Senator Gene Stipe will be sold to resolve the lawsuit Stipe filed against Phipps two years ago.

Phipps and Stipe have been targets of a federal investigation that thus far has resulted in Phipps' guilty plea to conspiracy; he admitted paying kickbacks to three former legislators as part of a scheme to funnel state funds into entities he owned. Former Rep. Mike Mass also has entered a guilty plea to charges in the probe.

Latimer County Abstract Company in Wilburton and Stigler Abstact Company will be sold to the highest bidder in a January auction. Two-thirds of Meurer Abstract Company in Pawnee also will be sold. Proceeds will go to Stipe, along with $800,000 from Phipps' wife, Brenda, to whom Phipps transferred ownership before entering his guilty plea.

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Jones Says Stipe Scandal Will Be State's Largest

Republican State Chairman Gary Jones says the scandal swirling around former State Senator Gene Stipe and his southeastern Oklahoma associates will become the largest, and worst, in Oklahoma history when it's all said and done.

In a statement, Jones also questioned why state officials "are rarely the ones to uncover and expose wrong-doing...."

Here is Jones' statement:

When you compare the major scandals in Oklahoma history one has to question why Oklahoma’s Attorney General and State Auditor are rarely the ones to uncover and expose wrong-doing even though it is their responsibility to do so.

The Oklahoma County Commissioner scandal that was allowed to go unchallenged for decades was repeatedly ignored by local DAs, the State Attorney General as well as the State Auditor It wasn’t until the federal government got involved that anything was done about it. In addition to the feds cracking down the state auditor was also involved working closely with the feds to help clean up the mess. Federal Prosecutor Bill Price was a long time friend of the newly elected Auditor Tom Daxon. Daxon the only Republican ever elected to the position won a close election from the previous Auditor John Rogers who was involved in a scandal of his own.

The scandal and prosecution gained so much public attention that both Daxon in 1982 and Price in 1990 ran for Governor citing their roles in the prosecution as reasons as to why they should be elected. Both Daxon and Price were handily defeated in their effect. Daxon lost to longtime Lt. Governor George Nigh losing every county to the popular Nigh. Price on the other hand was defeated by David Walters who used illegal campaign funds to beat fellow Democrat Wes Watkins in a hard fought runoff.

While the commissioner scandal was extremely broad in scope and involved many people it may be relinquished to second place in the Oklahoma scandal ratings if you bring all the Stipe connected scandals under one tent. Ghost employees. health department, abstract monopoly scams, title insurance scams, bond financing, Rural Development Foundation, National Pet, American Products, Walt Roberts campaign, straw donors to the Governor, A.G., Auditor, Congressman Boren, the train deal, the bike path, Randy Green’s contract and who knows what else, as we don’t have an A.G. or Auditor investigating any of this still today.

Truth is I believe this is likely the biggest scandal in Oklahoma’s 100 year history, and it wasn’t the A.G. or the Auditor exposing it. It was a hand full of private citizens who put up with years of name calling, threats, and accusations, who did the research to shine the light on Stipe and his associates.

While Oklahoma’s State Auditor and Attorney General have literally hundreds of employees and they themselves are drawing 6 figured salaries it was private citizens who not only will never draw a single cent from their effects and who may never be known to the public that spent their time and own money working with the federal government that exposed this, what I believe the biggest scandal in Oklahoma history. You have only seen the tip on the iceberg. Sit back and wait as "the rest of the story" unfolds.

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STIPE, BROTHER INDICTED BY GRAND JURY

UPDATED ~ A federal grand jury in Muskogee today indicted former State Senator Gene Stipe and his brother Francis Stipe.

The allegations include mail fraud, witness tampering and money laundering.

The indictment documents are available for viewing on The Oklahoman's website, www.newsok.com.

The witness tampering charge alleges the Stipes bought the mortgage on former State Rep. Mike Mass' house to keep him from testifying against them in the grand jury investigation.

It's the latest development in federal investigations that resulted in Stipe's fall from power. He resigned his Senate seat and lost his license to practice law in earlier action.

Stipe, 80, once the most powerful politician in the Oklahoma Legislature, is on federal probation after being convicted of felony conspiracy and perjury stemming from his involvement in Walt Roberts' 1998 campaign.

Francis Stipe, McAlester businessman, reportedly has been involved in numerous transactions with his brother over a long period and that relationship is at the heart of the indictment.

Stipe has been been accused of giving a $48,000 kickback to Mass in October 2002, for a real estate deal with Stipe involving National Pet Products. Mass pleaded guilty in April to a mail-fraud scheme for his role in funnelling $250,000 in state funds to the Rural Development Foundation, which provided funds to National Pet Products and Indian Nations Entertainment Corp.

Stipe is also accused of owning abstract companies in north Oklahoma that sold title insurance. Larry Witt, an alleged “straw donor” in a campaign contributions scheme, ran the insurance companies. Because he is a convicted felon, Stipe is prohibited from being involved in the insurance industry.

Stipe image courtesy the Tulsa World.

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Mass Sentencing Set October 10th

U. S. District Judge Ronald A. White of Muskogee has set sentencing for former State Rep. Mike Mass (left, in happier days) for 9 a.m. on October 10th, court records show.

Mass faces up to five years in prison after pleading guilty to a federal conspiracy charge. He admitted in April that he received kickbacks from Pittsburg County businessman Steve Phipps when Mass was chairman of the powerful House Appropriations and Budget Committee.

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Seized Jewelry 'Unpretentious Set Of Earrings'?

From The Tulsa World ~ The jewelry that investigators suspect the state auditor and inspector accepted from an abstractor he regulated is an unpretentious set of earrings.

Kevin Krahl, the attorney for Lori McMahan, the wife of State Auditor and Inspector Jeff McMahan, said his client met with the FBI on Tuesday. Krahl said the gift allegedly from the abstractor, Steve Phipps, was a set of earrings, but "not an elaborate set."

FBI agents with a search warrant went last month to the home of McMahan's sister-in-law and seized an unidentified item of jewelry. The FBI has conferred several times with McMahan regarding his connections to Phipps, who once ran abstracting businesses in partnership with former state Sen. Gene Stipe of McAlester. The partnership is no more. Phipps has pleaded guilty to paying kickbacks to lawmakers who funnelled state money to his businesses.

McMahan's spokeswoman, Terri Watkins, said she was not aware that McMahan has any intention of stepping aside while the inquiry continues

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Insiders: McMahan In Precarious Position

Will Auditor and Inspector Jeff McMahan serve out the rest of the 4-year term to which he was elected last year?

The question is making Capitol rounds this week following the revelation, by investigative reporter Tony Thornton of The Oklahoman, that agents of the Federal Bureau of Investigation seized an expensive piece of jewelry from the Tecumseh home of McMahan's sister-in-law as part of its investigation into the admitted illegal acts of Kiowa abstract company co-owner Steve Phipps; his partner, former Senator Gene Stipe; and others.

If the jewelry was first given to McMahan, or given with his knowledge to his wife's sister, Capitol insiders say, he could have violated the prohibition against taking anything of value from those he regulates. And then there's the matter of three known trips McMahan took with Phipps and who paid for what. As auditor, McMahan licenses and regulates the abstract industry.

McMahan has declined to discuss the matter with reporters; he has confirmed he's been interviewed three times by FBI agents. The latest was last week in a 90-minute session. McMahan's spokeswoman, Terri Watkins, says he will remain in office despite a call by Republican Rep. David Dank of Oklahoma City that he step aside until the investigation is completed.

The seizure of the jewelry, and campaign records from McMahan's home in Tecumseh, indicates that McMahan himself is a target of the investigation although there's been no confirmation of that.

One legislator said he had a brief conversation with another legislator about possible impeachment proceedings. He added it was "just a passing conversation, speculation mostly." He said that by the time the Legislature convenes in February, "we should know a whole lot more about the jewelry and how it came to be in the possession of McMahan's sister-in-law, and we can make a decision."

That legislator, and others, say the seizure of the jewelry appears to be enough for a state investigation, which apparently would fall to a multicounty grand jury, normally headed by McMahan's friend, fellow Democrat Attorney General Drew Edmondson. Edmondson and McMahan (and Congressman Dan Boren and Governor Brad Henry) both received illegal campaign donations from "straw" donors linked to Phipps and his abstract company partner, Stipe.

Former Insurance Commissioner Carroll Fisher was investigated and impeached, and then resigned, before he could be removed from office in a controversy that began with the revelation he had accepted expensive office furnishings from an insurance company investor. That case is being mentioned today by some when they discuss McMahan's situation.

It's obvious the FBI knew exactly what to look for at the home of McMahan's sister-in-law. The most obvious way they would know exactly what to look for is that Phipps himself told them about the jewelry, believed to be a diamond-studded bracelet, and described it for them. Phipps has pleaded guilty to federal charges and is cooperating in the ongoing investigation. That cooperation, the legislators speculate, apparently places McMahan in a precarious situation given the FBI's action in seizing the items and the clear inference they are evidence.

The Tulsa World, in a Thursday editorial saying McMahan should not step aside yet, raised another question: "More troubling is an admission by McMahan that he took three trips with Phipps, who owns several abstract companies in southeast Oklahoma. The auditor's office regulates the abstract industry. State Ethics Commission rules prevent McMahan from receiving anything of value from people he regulates. Right now two things need to happen: The FBI needs to finish its investigation, and McMahan should continue to do the job that Oklahomans elected him to do."

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FBI CLOSES IN ON JEFF McMAHAN

Federal Bureau of Investigation agents seized campaign records from Auditor and Inspector Jeff McMahan's home in Tecumseh and seized at least one piece of jewelry from his sister-in-law's home at the same time, The Oklahoman's Tony Thornton reports today.

The jewelry allegedly was purchased by Steve Phipps of Kiowa, abstract company owner under investigation by the FBI in a wide-ranging scandal in southeastern Oklahoma. Phipps has been in business with disgraced former Senator Gene Stipe; both are targets of the investigation, which thus far has implicated other former state officials, employees of the Phipps-Stipe abstract companies, and employees of Stipe.

McMahan's office licenses and regulates the abstract industry, members of which poured tens of thousands of dollars into his 2002 and 2006 campaigns. (For details of TMRO's extensive reports on the donations last year, click on McMahan's name below.)

Thornton reports the seizures occurred last Thursday, the same day two agents spent 90 minutes interviewing McMahan in his Capitol office. It was McMahan's third visit by FBI agents.

A retired federal agent told TMRO today that agents would not have seized jewelry, or anything else, from a relative's home unless agents possessed "positive proof" that the items were "the product of an illegal act." The seizure almost certainly indicates that McMahan is a target of the investigation, he said. He added that the seizure of finance records in a state campaign by federal agents could indicate there is suspicion that federal funds somehow wound up in the campaign, or that they are searching for evidence of a criminal conspiracy.

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McMahan Says Its Third Visit By FBI

Auditor and Inspector Jeff McMahan said Friday his Thursday visit from FBI agents was the third time he's been interviewed by them.

"I am attempting to cooperate fully with their ongoing investigation," McMahan said in a statement released Friday morning. On Thursday, he had refused to make a comment to The Oklahoman's Tony Thornton, who broke the story.

"I have not been told that I am a target of their investigation nor have I been asked to appear before the grand jury," McMahan said in a statement. "Because it is an ongoing investigation, I have been asked not to talk about what we discussed in any of our meetings. I am going to honor that request." McMahan said the meeting lasted a little more than an hour.

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Phipps Says He's Guilty

Steve Phipps, the former longtime business partner of former State Senator Gene Stipe, pleaded guilty Wednesday to a mail fraud charge and admitted paying kickbacks to three state legislators.

Phipps, 52, admitted in federal court in Muskogee that he paid the lawmakers, who have since left office, for their help in funneling taxpayer money to private businesses. He has been cooperating with federal prosecutors. The charge carries a maximum penalty of five years in prison.

Phipps was freed on $20,000 bond by U.S. Magistrate Kimberly West. Phipps became the second person to plead guilty to a felony charge linked to alleged kickbacks to legislators. Former Rep. Mike Mass pleaded guilty to a similar charge in April and also is cooperating with federal authorities.

"I agreed with Mike Mass and others on a plan to have state funds appropriated by the legislature and steered to an entity known as the Rural Development Foundation," Phipps said. "The RDF then provided funds to National Pet Products and Indian Nation Entertainment, businesses then largely owned and operated by me. In order to secure state funding for RDF, that would then be provided to INE, I agreed to periodically pay Rep. Mike Mass and two other influential state legislators each a percentage of the gross income from the gaming machines that were manufactured as the result of the state funding."

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Phipps In Muskogee Court Today

Steve Phipps, longtime business partner of former state Senator Gene Stipe, will appear in federal court today in Muskogee to plead guilty to a felony mail fraud charge linked to alleged kickbacks to state lawmakers.

FBI court documents allege Phipps and Stipe used state money for private business ventures to give money to political campaigns through so-called straw donors as a way of getting around campaign contribution limits. Phipps' attorney, Dan Webber, says Phipps has been working with federal prosecutors and was a cooperating witness before former state Rep. Mike Mass pleaded guilty to a similar charge in April.

Stipe is scheduled to appear in federal court tomorrow for a probation revocation hearing.

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Witnesses Testify Before Federal Grand Jury

From The Oklahoman ~ MUSKOGEE — Witnesses appearing Wednesday before the federal grand jury investigating former state Sen. Gene Stipe included one former public official who's now in prison and another who's headed there. Three people alleged to have been "straw donors” to political campaigns also testified. (Stipe's niece, Janice Gray, Norman certified public accountant listed as a donor to several campaigns, also apparently testified.) Read reporter Tony Thornton's story here.

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Dank: McMahan Should Vacate Office

Rep. David Dank (R-Oklahoma City) today introduced a resolution urging State Auditor and Inspector Jeff McMahan to vacate his office until all questions surrounding an ongoing ethics investigation are settled.

"There is a cloud over the office of the State Auditor," Dank (pictured) said. "I do not believe Mr. McMahan should resign unless and until he is accused of a crime, but he can help remove this cloud if he will simply recuse himself from the duties of his office until the full story has been told. This is the office that monitors and investigates other areas of state government. It cannot function when the head of that office is under suspicion of unethical conduct."

Dank's House Resolution 1030 would ask Gov. Brad Henry to appoint an interim head of the state auditor's office during McMahan's absence. If McMahan is ultimately charged and convicted of a crime, he would be permanently stripped of the office. If no criminal proceedings result from the investigation, he would return to his full duties.

McMahan has fired the chief of his abstract division, Tim Arbaugh, in connection with the ongoing federal and state investigations of ghost campaign donations, many of which apparently went to McMahan from sources close to former Senator Gene Stipe (D-McAlester), his abstract company partner Steve Phipps, and the abstract industry. Most recently, the fired abstract chief was again linked to a Stipe-Phipps-connected deal involving the sale of railroad cars to an entity using state funds.

House Resolution 1030 notes that McMahan "is frequently mentioned as a principal party" in the federal investigation "by virtue of the substantial campaign contributions and paid trips provided to him by key figures targeted in the grand jury investigation."

House Resolution 1030 declares the controversy "tarnishes"McMahan's credibility and "further jeopardizes public trust in state government."

"The smell gets worse every day. Stipe, Phipps and their cronies keep popping up every time you lift a new rug, and the people of Oklahoma deserve to know that the state auditor's office is clean and above suspicion," Dank said. "That cannot happen as long as Jeff McMahan sits in that office spending most of his time trying to fend off a series of grand jury investigations."

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The Oklahoman: Morgan Paid By Title Companies Partially Owned By Steve Phipps, Gene Stipe

The Oklahoman reports in its Sunday edition ("Senator's income examined") that Senate Democratic leader Mike Morgan of Stillwater, an attorney, was paid $13,750 by "companies owned in part by two men under investigation for allegedly paying kickbacks to legislators...."

The two men are former Senator Gene Stipe and his abstract/title company empire partner, Steve Phipps of Kiowa.

Investigative reporters Nolan Clay and Tony Thornton report Morgan has not been contacted by the Federal Bureau of Investigation, which is deep into an investigation involving the funneling of state funds to entities owned by Phipps and Stipe, and the use of "straw donors" to funnel illegal donations to numerous political campaigns.

Clay and Thornton report Morgan was paid $5,000 by University Land Title Services in Stillwater in May 2000, and $8,750 by Guaranty Title Company of Oklahoma City in October 2000.

Morgan's attorneys, hired to answer questions about the transactions, told the reporters Morgan did not know the two firms were partially owned by Phipps and Stipe; they said he dealt only with the man he thought was the owner, Larry Witt of Stillwater. They said Morgan "has not been involved in anything inappropriate or improper."

A key part of the on-going FBI investigation apparently has been the funneling of state funds to private businesses owned by Phipps and Stipe. The FBI alleges the two paid kickbacks to three legislators (Randall Erwin, Jerry Hefner and Mike Mass) for helping divert the funds to the Phipps/Stipe businesses. The payments to Morgan apparently were made about three years before the alleged diversion of state funds occurred.

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Arbaugh Linked To Stipe Train Deal

The Oklahoman's Tony Thornton reports today that Tim Arbaugh, former head of the abstract division in the auditor and inspector's office, was involved in successful efforts to secure state money to buy a train owned by former Senator Gene Stipe.

The revelation is another connection between Arbaugh and Stipe, primary target of a federal investigation into campaign straw donors and an abstract company empire Stipe built with southeastern Oklahoma businessman Steve Phipps, also a target of the probe. It's also another indication of Arbaugh's ties to Phipps and the abstract industry he was in charge of regulating.

Arbaugh was fired by Auditor and Inspector Jeff McMahan after Arbaugh was identified in an FBI affidavit as a straw donor. It is alleged that some illegal donations were made to McMahan's campaign. Arbaugh and his wife (pictured) operate a bed and breakfast, Victorian Garden Inn, in Guthrie.

Thornton reports that Stipe collected $300,000 in state funds for seven railroad cars, which now "sit abandoned on a track near the Guthrie train depot, having never been used for their stated purpose." The money apparently came from the Oklahoma Historical Society and the Association of Central Oklahoma Governments (ACOG). A letter the newspaper obtained shows the cars were owned by Phipps Enterprises, one of Steve Phipps' operations in which Stipe allegedly was involved.

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