A story of seven tainted races
Auditor's trial: A story of seven tainted races

By Tony Thornton

Published: June 5, 2008

MUSKOGEE — Southeast Oklahoma businessman Steve Phipps testified Wednesday he provided $70,000 in illegal campaign contributions to Gov. Brad Henry in January 2003, within days after Henry took office. A spokesman for Henry quickly said that the governor did not know the money came from "straw donors” reimbursed by Phipps.

During his third day of testimony in the criminal trial of state Auditor and Inspector Jeff McMahan, Phipps said Henry was among seven political candidates — all Democrats — for whom he infused illegal cash. He said this was done mainly through "straw donors,” or people who gave under their own names but with Phipps' money.

However, Phipps admitted that not all of those candidates were aware of his actions.

The other races: Mike Mass' unsuccessful bid for Congress in 2002; Dan Boren's 2004 congressional race; John Edwards' 2004 presidential bid; McMahan's 2002 race; several of state Auditor and Inspector Clifton Scott's races, ending in 1998; and Jerry Hefner's 2006 race for Muskogee County commissioner after Hefner left the House of Representatives.

"I really don't know what to think of it,” Scott said when told of Phipps' testimony. "I knew he had fundraisers for us; they never were what I thought were large amounts. If there were straw donors, I wasn't aware of it.”

Asked if he recalled Phipps asking him for favors, Scott said: "I don't know what he's talking about. I can't recall any.”

Phipps' testimony about Henry and Scott came during cross-examination by Jeff McMahan's attorney, Rand C. Eddy.

Under questioning by Kevin Krahl, Lori McMahan's attorney, Phipps admitted he had engaged in "numerous” criminal acts over the years.

Looking at an investigative document concerning his grand jury testimony, Phipps said he had information on up to 36 people — many of them public officials — involved in criminal activity, political corruption and what Krahl called "the manipulation of juries.” That number doesn't include all the straw donors, Phipps said.

Phipps also amplified testimony given Monday by Nita Magdalena, a Democratic Party organizer from Pottawatomie County, where McMahan lives.

Magdalena referred to a fundraiser for Henry in Guthrie in January 2003. It was just after Henry's inauguration, she said.

That event, which Henry attended, raised $105,000, she said. Phipps said $70,000 was from his straw donors.

Phipps testified, he then went to the governor's office seeking support for a "chicken litter project.” The Oklahoman previously has determined it involved a Phipps-owned company called American Project Development, whose aim was to convert chicken litter into electricity, using state money.

Phipps said Henry was "supportive” of the project, "but it never got off the ground.”

"If that project had gotten off the ground, you could have made the same claims against Governor Henry that you're making now against Mr. McMahan, isn't that right?” Eddy asked.

"I don't think so,” Phipps said.

"You could say he knew about the $70,000 from straw donors, and you wanted a favor from him, and he granted that favor,” Eddy said.

Phipps said he didn't consider the two situations to be the same. Paul Sund, a spokesman for Henry, confirmed that the governor met with Phipps on the chicken-litter project, just as he has met with hundreds of other Oklahoma businessmen seeking input on economic development projects.”

"After the meeting, the proposal was deemed to have no merit, and no action was pursued by the governor's office,” Sund said. "Governor Henry never spoke to Mr. Phipps again after the meeting.”

Sund said the governor was unaware of any potential problems with donors until March 2007, when the FBI alleged that Phipps helped finance several political campaigns.

"Everyone who donated to the governor's campaigns was required to sign a sworn statement attesting that their contribution was their own and in compliance with state law,” Sund said. "Because of those sworn statements, there was no reason to believe anything improper had occurred.”

Based in part on the FBI document, Henry announced in March 2007 he was donating $35,000 in campaign funds to the USS Oklahoma Memorial at Pearl Harbor, Hawaii, and the Oklahoma National Guard Relief Fund.

After Phipps admission to "numerous” crimes, Eddy, the defense attorney, focused on McMahan's predecessor.

"Did you give illegal campaign contributions to Clif Scott?” Eddy asked.

"Yes,” Phipps answered.

"Did he know about it?”

"Yes.”

Scott was the state auditor from 1983 until he retired after the 2002 election. He now serves as executive director of the state Commissioners of the Land Office.

Phipps said he gave excessive contributions to Scott's campaign through "straw donors” around 1988, and then each election thereafter until Scott left office.

Contributing: Michael McNutt, Capitol Bureau

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