State Auditor Jeff McMahan Goes To Prison

The Daily Oklahoman posted coverage of the McMahan scandal. Here is an exerpt:

  Jeff McMahan was sentenced  to eight years and a month for taking bribes from a southeast Oklahoma businessman. Wife, Lori McMahan, was sentenced to six years and six months on related charges.

"I am saddened when the political process is corrupted. Seeing people imprisoned generates mixed prosecutorial emotions,” U.S. Attorney Sheldon J. Sperling said Friday.

Jeff McMahan, a Democrat, was accused of showing favoritism as auditor to businessman Steve Phipps in exchange for cash, jewelry, campaign contributions, fishing trips, and trips to places like New Orleans and Boston.

The former state official was convicted of three felony counts June 14. He resigned two days later.

Sperling said after the sentencing that the McMahans were convicted of conspiracy to commit "dishonest public service mail fraud” and of racketeering through illicit interstate travel.

The charges stemmed from an investigation by the FBI, the IRS and the state Ethics Commission.  Sperling said Friday he was "impressed” the prosecution led to legal reform.

"The state auditor’s office no longer has authority over abstract companies,” he said. "A huge temptation towards corruption has been statutorily removed.”

Read The Oklahoman's Full account at: http://newsok.com/ 

OKGOP State Chairman, Gary Jones; posted this assessment:

Anatomy of a Scandal

July 29, 2007

By Gary Jones
OKGOP Chairman

1. Larry Witt and Steve Phipps conspired to funnel corporate contributions into the 2002 State Auditor campaign of Jeff McMahan. FBI affidavits and witnesses have testified that such money was paid to them for the purpose making said contributions. Estimated totals range from $75,000-$100,000. These funds made up a large portion of McMahan’s total contributions and had a significant impact on the election results.
2. Steve Phipps met on numerous occasions in the office of the State Auditor with legislators including Mike Mass to discuss and arrange for state funds to be funneled into a scam non-profit foundation, Rural Development Foundation, located in an abstract company owned by Phipps and Gene Stripe in Antlers, Oklahoma. Both Mass and Phipps have pleaded guilty to federal charges and are now waiting sentencing to connection to the scheme.
3. After denying for months McMahan admitted to going on fishing and gambling trips paid for by Phipps. Such trips would constitute something of value received by an individual regulated by McMahan and his office and may be grounds for removal from office.
4. Duane Smith from the Oklahoma Water Resources Board has reported that he was called into a meeting with the State Auditor Jeff McMahan, Mike Mass and Steve Phipps. During the meeting Smith said he was advised that Mass had put wording in the agency appropriation bill to funnel funds to a trust authority setup by Phipps to aid in selling water from Lake Eufaula. McMahan advised Smith to help get that done and he would make the audit look clean. In 2006 McMahan asked the governor to perform an audit on OFRW. The audit failed to reveal the connection between McMahan and Phipps the principle person being audited and also failed to disclose items which should have been reported and in effect provided the cover-up McMahan had promised.
5. Larry Witt (Ry-son Oil) is seeking to purchase shares in several abstract companies owned by Steve Phipps. The sale of Phipps’ shares can not take place without approval of Jeff McMahan, State Auditor.
6. Witt was named in the university housing bond scandal involving Senate president Pro-Temp Mike Morgan. Morgan is also said to responsible for funneling state funds to but Stipe and Phipps’ train that is sitting and rusting in Guthrie.
7. Jeff McMahan and his office should be removed from the approval process as there exist a clear conflict of interest by McMahan in this matter.
8. A cause of action should be filed against Phipps, Stipe and Witt to recover state funds illegally obtained. The corporate assets of Phipps Enterprises and Corporate Finance Group should be frozen until such action has been litigated.