Tangled Corruption Case Snares Politicians

Monday, March 19th 2007, 9:35 am
By: News On 6

OKLAHOMA CITY (AP) _ The success of politicians in economically hard-pressed areas of southeastern Oklahoma has been tied to ``bringing home the bacon,'' a euphemism for how many government dollars can be obtained for local projects.

But if federal investigators are right, state funds that were supposed to go to some economic development programs wound up in the pockets of individuals.

A widespread federal investigation is ongoing into ex-lawmakers allegedly profiting off of state money they harnessed while in office for projects in southeast Oklahoma.

One facet of the probe centers on allegations that former state Sen. Gene Stipe of McAlester and longtime business partner Steve Phipps of Kiowa took part in an illegal campaign funding scheme.

The 80-year-old Stipe was forced out of the Legislature in 2003 for a similar scheme. He acknowledged funneling $245,000 into the failed congressional campaign of Walt Roberts. Stipe was fined $700,000 and placed on probation by a federal judge.

Other figures in the investigation, according to FBI affidavits, include former state Reps. Mike Mass of Hartshorne, Randall Erwin of Nashoba and Jerry Hefner of Wagoner.

The affidavits, citing interviews with several ``cooperating witnesses,'' contain allegations of kickbacks to lawmakers for getting $2 million that eventually wound up in business enterprises owned by Phipps and Stipe.

The money came from more than $11 million in ``special project'' funds that went to agencies such as the Oklahoma Department of Commerce and the Oklahoma Department of Agriculture to be disbursed to various economic development associations.

A list of allocations to those associations was recently found at the Capitol and a state official confirmed seeing it during negotiations on the special project money, often referred to as ``pork barrel'' funding.

The official, who asked not to be quoted by name, told The Associated Press he was interviewed by the FBI about the special project process.

``They said they understood politics and pork barrel and they weren't interested in money going to worthy projects such as meals-on-wheels. They were interested in money that might wind up in some private individual's pocket,'' the official said.

Adding to the tangle has been proceedings in a civil lawsuit filed by Stipe against Phipps in 2005. In the lawsuit, Stipe is seeking to place Phipps' Enterprises, Inc., a company owned jointly by the two men, into receivership.

Last week, Phipps' attorney, Dan Webber, told a court in McAlester the lawsuit was a sham and an effort to obstruct the criminal investigation. The case was continued until Tuesday.

``It's a groundless comment,'' John Carwile, Stipe's attorney, said Friday of Webber's assertion.

Neither Webber nor Carwile would comment on allegations in affidavits filed to obtain search warrants on businesses of Phipps and Stipe. FBI agents this month raided Stipe's oil and gas business and the office of his certified public accountant in McAlester. The FBI raided Phipps' abstracting company in Antlers last year, as well as his home.

According to a March 6 affidavit by FBI agent Gary Graff, Stipe and Phipps had an interest in National Pet Products Inc. and got lawmakers to obtain state funds for the business. Graf said Phipps later broadened the scheme to get more state funds for National Pet Products and Indian Nation Entertainment.

Mass, who left office in 2006, teamed with Erwin to get at least $1.9 million for the nonprofit Rural Development Foundation and the pet food enterprise and Hefner got $330,000 for the projects, one FBI affidavit said. Hefner is now a county commissioner for Wagoner County.

An affidavit filed last October by the FBI said 96 percent of the funds received by Phipps' tax-exempt foundation went to the pet food company and INE, which had a contract to provide gaming machines to a tribal casino.

The affidavit said Mass got $122,510 in consulting fees from another Phipps company that was tied to a chicken litter project that never developed. Mass also got about $57,000 from the gaming machine company, the affidavit said.

Mass, who served as House appropriations chairman, also was alleged in another FBI affidavit to have received a $48,000 kickback from the pet food company.

The ex-lawmaker has been keeping a low profile and associates say his telephone in Hartshorne has been disconnected for several months ago.

Last week, he was spotted at the federal courthouse in Muskogee, which houses the offices of the U.S. attorney. Mass told a Tulsa World reporter he was not at the courthouse to testify before a federal grand jury, which was in session.

Stipe also has been blamed in an affidavit for pumping as much as $34,600 into U.S. Rep. Dan Boren's 2004 primary campaign by giving money to other people to make contributions.

An FBI affidavit said all of the so-called ``straw'' donations to Boren were made in late March 2004 _ two months after a federal judge sentenced Stipe to house arrest in the earlier scheme.

Agents said there was no evidence Boren knew of irregular contributions. Boren has donated the money to a veterans charity. Gov. Brad Henry also has donated to charity about $35,000 that came from the same donors who gave to Boren.

State Auditor and Inspector Jeff McMahan received a similar amount from the same donors, but a spokeswoman said his campaign fund was depleted so a donation to charity could not be made.

McMahan, however, has fired the head of his abstract division, who was named in an FBI affidavit as being a straw donor.

Officials say Stipe and Phipps have been in business for several years and have an interest in several abstract companies in southeast Oklahoma, which are regulated by the auditor and inspector's office.