By Mick Hinton and Randy Krehbiel, Sunday Tulsa World ~ State Auditor and Inspector Jeff McMahan (left) on Friday admitted that he had ties to the man suspected of helping former Sen. Gene Stipe funnel illegal straw donations to favored candidates.
Two years ago, McMahan said his only connection to Steve Phipps (right) of Kiowa was that his son had sung a jingle used in McMahan's 2002 campaign for auditor.
At the time, Stipe said Phipps was McMahan's campaign manager.
Stipe and Phipps are former business partners who are locked in a civil lawsuit.
McMahan now says he recalls two fundraisers put on by Phipps and Tim Arbaugh, a former employee in the auditor's office. "I believe there were two fundraisers in Guthrie," McMahan said. "We had dinner and then (contributors) would go to the theater for a play." McMahan said the fundraiser tickets cost $100 a person. The auditor said donors were required to sign a form saying they had made the contribution themselves. "I'm not aware of anyone getting a ticket for nothing. Unless there was someone who contributed $500, they probably had (extra) tickets."
Last week, the auditor fired Arbaugh. The termination was prompted by allegations in a federal search warrant asserting that Arbaugh was a $2,000 "straw donor" to U.S. Rep. Dan Boren. Arbaugh was reimbursed the $2,000 by Phipps, the court document alleges.
"I don't know what kind of relationship Phipps and Arbaugh had," McMahan said. "I knew that they had been friends, but I always was very careful in checking whether there was any favoritism on abstract plants (businesses) connected to Phipps."
McMahan said he has never received a straw donation. However, Rita Benson, who prepared tax forms for Phipps' company, testified in Pittsburg County District Court on Tuesday that she was a "straw donor" to McMahan and Boren. "Steve Phipps paid me the check for the money I donated," she said.
Benson's testimony came a week after FBI agents seized records at Stipe's McAlester office. An affidavit released March 7 alleges that Stipe and three other former Democratic lawmakers conspired to funnel $2.27 million in state funds to companies linked to Phipps and Stipe. Records show that a dozen contributors to Boren's 2004 congressional race were connected to the abstracting industry. They also gave about $30,000 to McMahan's campaign in 2002. In his 2002 race for assessor, McMahan took fundraising for an auditor and inspector race to new heights. In his first race, McMahan raised about $360,000. Four years later, he raised $499,000 in contributions for a post that pays $109,250. McMahan's predecessor, longtime auditor Clifton Scott, said his last campaign in 1998 cost in the neighborhood of $100,000.
McMahan relied heavily on donations from abstract company personnel in 2002 and 2006, according to state campaign finance reports. His contributors included a substantial number of people associated with abstract companies connected to Stipe and Phipps. Stipe's connection to those companies became public two years ago, when the former senator sued Phipps, saying that he was not getting his fair share from their businesses. This was when Stipe's connection to several abstracting companies became public for the first time.
Gary Jones, who lost to McMahan in 2002 and 2006, said he did not take any donations from abstractors. Jones called last week for regulation of abstractors to be removed from the auditor's office. "Basically, the auditor controls it lock, stock and barrel, and this way if they controlled one person, they could control their monopoly," Jones said.
McMahan said he has never been able to "get my arms around" the abstractor aspect of his office. It was something that came with the office, having been placed within a state agency by law. "They have to get their certificates of authority to operate here. We also license abstractors. We have somewhere between 800 and 1,000 renewed yearly," McMahan said.
But starting a new abstract company is nearly impossible. A 1984 law requires the compiling of a complete "abstract plant" -- all land records for the county in which an abstract company plans to operate -- before a new applicant can be certified. Consequently, McMahan said, 30 to 40 of Oklahoma's 77 counties have only one abstractor's office. Jones said it costs about $1 million to copy all the records and meet other requirements to set up a new office. He said in the last 20 years, only one new abstractor has been granted a certificate. McMahan said a new abstract plant has been built in LeFlore County. He said he thought four more have applied and only one of those has been denied.
Jones contends that Phipps met with three former lawmakers, Mike Mass of Hartshorne, Randall Erwin of Nashoba and Jerry Hefner of Wagoner, in Arbaugh's basement office. Although he doesn't have any firsthand knowledge, Jones said that is where they worked out the deal that the lawmakers would designate more than $2 million in state appropriations to benefit Phipps' enterprises in return for kickbacks.
"I don't know anything about those secret meetings. I have looked through my itinerary and don't find anything referring to that," McMahan said. The auditor said that about a year ago he talked to the FBI, although he was not subpoenaed. "Close to a year ago, they just stopped by my office," he said.
