An FBI agent testified Friday in the criminal case against state Auditor and Inspector Jeff McMahan and provided a preview of evidence federal prosecutors plan to present when McMahan and his wife, Lori, go on trial on June 2.
FBI agent Gary Graff discussed steps McMahan took to repay millionaire businessman Steve Phipps, whose illegal campaign contributions helped put McMahan in office. He also discussed recorded conversations between Lori McMahan and coconspirator Tim Arbaugh in February and March of 2007, shortly before McMahan fired Arbaugh.
The McMahans face trial on a nine-count indictment that alleges they accepted more than $100,000 in illegal contributions for his 2002 campaign, plus several trips funded by Phipps. In return, the indictment alleges, Jeff McMahan took actions to benefit Phipps' lucrative abstract companies.
The state auditor's office regulated that industry until legislators ended the arrangement last year.
Phipps and Arbaugh are expected to be the government's main witnesses. Phipps is testifying as part of his plea agreement to a conspiracy charge. Arbaugh has immunity from prosecution.
On Thursday, U.S. District Judge James Payne ruled against the McMahans' request to dismiss some counts.
Graff testified that Phipps and Arbaugh told him of specific acts by McMahan to repay Phipps for his help in the 2002 campaign.
They included delaying an application filed in December 2002 by McCurtain County banker John Callaham, who wanted to open an abstract company in direct competition to one owned by Phipps. Callaham eventually got tired of the lengthy delay and "gave up," Graff said.
McMahan also prevented action on a 2005 bill that would have made radical changes to the abstract industry and filed an administrative complaint designed to remove Phipps' abstract company partner, former state Sen. Gene Stipe, from the business, graff testified.
McMahan filed the complaint in October 2005, a few months after Stipe sued Phipps. McMahan filed the complaint despite opinions from his own office attorney and an assistant attorney general that he had no authority to file it, Graff said.
In her conversations with Arbaugh, Lori McMahan told Arbaugh that everyone needed "to stick to the same story" amid an increasing federal investigation, Graff said.
Phipps and Arbaugh told the FBI that Jeff McMahan and others tried to maintain "deniability" for the illegal campaign contributions. Steps to accomplish deniability included making sure Jeff McMahan left with his complete understanding of why he was leaving before Phipps gave cash to Lori McMahan, Graff testified.
Information from: The Oklahoman, http://www.newsok.com
Copyright 2008 The Associated Press.
