Papers cite more in illegal election funds

Court records unsealed Friday accuse two abstract company owners — including the chairman of a new state board assigned to regulate the industry — of making illegal campaign contributions to state Auditor and Inspector Jeff McMahan.

McMahan had to rely heavily on Randy Dittmann for his 2006 re-election campaign because the main money source for his 2002 campaign, Steve Phipps, was under grand jury investigation, according to an FBI agent's affidavit.

Also included in the affidavit are transcripts of taped conversations in which McMahan's wife allegedly tells Phipps that “as long as we all stick to the same story, we'll be fine.”

The affidavit is part of FBI agent Gary Graff's request in August for a warrant to search the McMahans' Tecumseh home.

The affidavit remained sealed in Oklahoma City's federal courthouse for the last five months, as did a separate court filing showing what was seized.

They were unsealed Friday, when Jeff and Lori McMahan appeared in Muskogee's federal court to face a nine-count indictment accusing both of accepting bribes and illegal contributions from Phipps.

The affidavit is based primarily on information provided by two unnamed informants. Those informants are Phipps and Tim Arbaugh, who oversaw the auditor's abstract division for McMahan, The Oklahoman confirmed. FBI agents recorded conversations between Arbaugh and Lori McMahan, according to the affidavit.

Phipps pleaded guilty in June to conspiracy involving bribes paid to former legislators. He is cooperating with investigators as part of his plea agreement.

The affidavit alleges Phipps spoke to Jeff McMahan in code when discussing illegal campaign contributions he made through other people, called “straw donors.”

Gov. Brad Henry appointed Dittmann in November to the Oklahoma Abstractors Board, which legislators created amid reports of McMahan's ties to Phipps.

Dittmann, 51, was recommended by the Oklahoma Land Title Association and state Reps. Chris Benge, R-Tulsa, and Lucky Lamons, D-Tulsa, said Paul Sund, Henry's spokesman. Dittmann is on the land title association's board.

According to the affidavit, Arbaugh told McMahan in 2006 that Dittmann was reimbursing employees who made straw donations to McMahan's campaign.

“How many more employees does he have?” the affidavit quotes McMahan as asking Arbaugh.

Asked last week if he was aware of any illegal contributions being made to McMahan's campaign, Dittmann said, “Any of the campaign stuff, I don't know anything about.”

On Friday, he said: “I have no idea what employees donated funds to anybody's campaign by the use of a credit card. I have never given an employee an illegal bonus for anything. I'd like to see this affidavit ... before I make any further comments,”

Dittmann said he owns American Eagle Title Insurance Co, a domestic title insurance company; Lawyers Title of OKC, a title agency specializing in commercial transactions; Buffalo Land Abstract Co., which has a certificate of authority in Johnston County and a main office in Tulsa; Logan County Abstract Co.; Coal County Abstract Co.; and Union-Creek Abstract Co., which has a certificate of authority in Creek County.

Sund said Dittmann underwent and passed an Oklahoma State Bureau of Investigation background check before his appointment.

“The governor's staff went a step further, asking each appointee if they had any involvement or relationship with Steve Phipps or Gene Stipe. Mr. Dittmann told our staff that his only involvement was the purchase of abstracts from Phipps-owned companies,” Sund said.

“Given that response, the recommendations on his behalf and the fact that Mr. Dittmann passed an OSBI background check, we were very surprised by today's allegation,” Sund said. “Certainly, we had no knowledge of the allegation at the time of the appointment.”

Records show Dittmann gave just $1,000 — all to McMahan — for the 2002 elections. He gave McMahan an additional $1,200 in 2003.

In 2006, he spread donations among four Democratic statewide office candidates: the legal maximum of $5,000 to both McMahan and Henry, $3,500 to Lt. Gov. Jari Askins and $2,000 to Insurance Commissioner Kim Holland, records show.

In addition to Dittmann, the affidavit also accuses abstract company owner Larry Witt of organizing illegal contributions for McMahan.

Until a few months ago, Witt was partners with Phipps and former state Sen. Gene Stipe in abstract and title insurance offices in Stillwater, Oklahoma City and Pawnee. The current ownership is now in litigation.

Witt's lawyer has insisted his client did no wrong, but was simply partners with the wrong people.

The affidavit provides partial transcripts of conversations between Phipps, Arbaugh and Lori McMahan concerning alleged cash payments totaling $27,000 from Phipps. In return, according to the indictment, the auditor gave special treatment to Phipps' companies.

The alleged payments took place in 2002. The conversations took place in February 2007.

Concerning Phipps' alleged payments totaling $17,000 for campaign signs, the affidavit quotes Lori McMahan as saying, “I can go down for that if you, you know, if you have to tell about it, it'll be me that goes down with it. I took it and I did it.”

According to the affidavit, she instructed Phipps that if the FBI asks whose cash paid for the signs, “It wasn't yours.”

Three of the felony counts involved trips the auditor took at Phipps' expense.

According to the affidavit, McMahan had Arbaugh contact Phipps and request $3,500 to cover expenses for both McMahans to attend the 2004 Democratic National Convention in Boston.

Another trip involves $3,287 in expenses allegedly paid for by Phipps for a New Orleans trip, including a $1,640 ring Phipps bought for Lori McMahan. McMahan told the FBI he left $1,200 on Phipps' coffee table to reimburse him, the document states.

The affidavit quotes an informant as saying Phipps bought the sapphire, ruby and topaz ring after seeing Lori McMahan admire it.

Contributing: Staff Writer Jay F. Marks

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