MUSKOGEE — The wife of state Auditor and Inspector Jeff McMahan told the FBI she alone was to blame for accepting illegal campaign contributions, trips and jewelry from a southeast Oklahoma businessman, an FBI agent testified Monday. Lori McMahan is expected to testify, perhaps as soon as today, when the defense begins its case in the McMahans' criminal trial. However, one crucial topic of her proposed testimony may not be settled until at least this afternoon. Lori McMahan's attorney, Kevin Krahl, asked U.S. District Judge James H. Payne to allow her to discuss a plea deal she was offered by prosecutors in exchange for her testimony, presumably against her husband. Krahl said his client rejected the offer, which he said shows "consciousness of innocence.” Prosecutors objected to the proposed testimony, saying a federal rule of evidence prohibits it. Krahl said appeals courts have allowed it to be used by the defense. Payne instructed the defense to file a motion by this morning, with a prosecution response due by 1 p.m. today. At defense attorneys' request, Payne dropped one of nine felony counts against the McMahans. A mail fraud count dealt with a poster sent from Boston, where the McMahans attended the 2004 Democratic National Convention with $3,500 allegedly given by Phipps.
FBI agents say stories differed in three interviews at state CapitolA federal grand jury indictment accuses the McMahans of benefiting from trips, jewelry and more than $100,000 in illegal contributions to the auditor's 2002 campaign, all provided by Phipps. In return, a grand jury indictment alleges, the auditor, sometimes at his wife's urging, gave special favors to Phipps' abstract companies, which the auditor's office regulated. The prosecution rested Monday after testimony from four FBI agents, including Steve Kaitcer, who said Jeff McMahan gave conflicting stories during three interviews. All three occurred at the auditor's state Capitol office between August 2006 and Aug. 23, 2007 — the same day the FBI executed a search warrant at the McMahans' home in Tecumseh. After first denying in August 2006 that he attended any business meetings with Phipps, McMahan later acknowledged going to New Orleans on a "teaching” trip funded by Phipps, Kaitcer said. That bus trip involved about 30 people, many of them Phipps' abstract company employees. Kaitcer said the McMahans told him the auditor could teach courses on the trip if Phipps paid for no more than $300 of his expenses. Other witnesses testified that the auditor did no teaching on that trip, and that the McMahans' expenses far exceeded $300. Kaitcer said that during a second interview with Jeff McMahan, the auditor admitted meeting with Phipps and two legislators at the Capitol between November 2002, when he was first elected, and January 2003, when he took office, Kaitcer testified. Jeff McMahan also gave conflicting accounts about two pieces of expensive jewelry Phipps bought for the auditor's wife, Kaitcer said. During the second FBI interview, in June 2007, the auditor said Phipps had given his wife some earrings, but he figured they were costume jewelry worth maybe $50, Kaitcer testified. He said Jeff McMahan told him he wasn't aware of a ring Phipps bought for Lori McMahan. Lori McMahan later would tell the FBI her husband was present when the ring was given, Kaitcer testified. Kaitcer said the auditor also denied that Phipps paid the McMahans' way for the Boston trip. "Mr. Phipps is not a sugar daddy,” the FBI agent recalled Jeff McMahan telling him. By the third interview two months later, the FBI had photos of the ring and earrings Lori McMahan had accepted from Phipps. Phipps testified he paid a total of $2,140 for the two pieces. The auditor acknowledged the ring, Kaitcer said. He said his wife told him she tried several times to give it back, but Phipps wouldn't take it.
Auditor ‘didn't want to know' source of campaign cash, agent saysKaitcer said Jeff McMahan also saw his wife with cash, perhaps $5,000, to be used for signs during the 2002 campaign. "He said he didn't know where the money came from and didn't ask, because he didn't want to know,” Kaitcer said. By the third interview, the auditor also admitted knowing that someone helped pay their way to the 2004 Democratic National Convention, but he didn't know who it was. Kaitcer said he interviewed Lori McMahan during the search of her home, and she admitted accepting cash from Phipps at least twice during the 2002 campaign. She also admitted knowing it was wrong, he testified. Kaitcer said the auditor's wife also told him she twice tried to give Phipps $1,200 to cover their expenses for a 2003 trip to New Orleans, but Phipps wouldn't take it. When pressed by Kaitcer, she told him she couldn't recall whether she really left the money on a coffee table for Phipps, "or whether I just told my husband that to satisfy him,” Katicer said, quoting Lori McMahan. Kaitcer said the auditor's wife told him that she handled the family's financial affairs. As for the $3,500 she received from Phipps through an intermediary for the Boston trip, Lori McMahan told the FBI she didn't disclose it as income, "because she'd have to disclose it to Mr. McMahan,” Kaitcer said.
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