Former Oklahoma State Auditor’s Federal Sentence Affirmed on Appeal

MUSKOGEE, OK—Sheldon J. Sperling, United States Attorney for the Eastern District of Oklahoma, announced today that that the Tenth Circuit Court of Appeals has affirmed the 97-month prison sentence imposed on former Oklahoma State Auditor and Inspector JEFF McMAHAN, age 50, of Tecumseh, Oklahoma.

McMAHAN and his wife LORI McMAHAN, age 45, also of Tecumseh, were charged by grand jury indictment in January 2008. The charges included conspiracy to deprive another of honest public services and traveling in interstate commerce to promote or further a bribery scheme. Both were convicted by a federal jury in Muskogee in June 2008.

The charges arose from an investigation by the Federal Bureau of Investigation, Internal Revenue Service – Criminal Investigation Division, and the Oklahoma Ethics Commission.

“The Tenth Circuit panel rejected each of McMahan’s assertions of error,” noted United States Attorney Sperling. “This sad chapter of past state public official corruption is at an appellate end.”

“The underlying investigative, trial, and appellate successes are a significant tribute to remarkable investigative persistence and prosecutorial work,” U.S. Attorney Sperling continued. “FBI Special Agents Gary Graff and Jim Dawson, IRS-CI Special Agent Marc Collins, and Assistant U.S. Attorneys Gay Guthrie, Ryan Roberts, and Linda Epperley played crucial predicate roles in acquiring the verdicts of guilt and this appellate decision.”

The evidence proved that former State Auditor JEFF McMAHAN and his wife LORI McMAHAN conspired with each other and with others, to Engage in Interstate Travel in Aid of Racketeering. The defendants received bribes and gratuities in exchange for favorable treatment by JEFF McMAHAN, to co-conspirators and other entities owned by the co-conspirators.

During JEFF McMAHAN’s 2002 campaign for Oklahoma State Auditor, JEFF McMAHAN, LORI McMAHAN, and others on McMAHAN’s behalf, received cash, jewelry, other items of value, and straw contributions which far exceeded the legal limits of allowed contributions. Specifically, as the federal appellate court found, the then-State Auditor received from a co-conspirator $157,882 in campaign contributions and enticements which included

• $27,000 in cash contributions
• $77,600 in cash contributions from “straw donors”
• $53,282 in the form of donations in kind—radio jingles, campaign signs, campaign sign crew members, dinner theater bookings, and radio spots
• guided fishing trips
• trips to New Orleans
• jewelry
• $6,500 for air travel and expenses to attend the 2004 Democrat National Convention in Boston
• a meal for the Oklahoma DNC delegation

The evidence revealed and the appellate court found that, in exchange for the contributions and gifts, co-conspirator Steve Phipps periodically contacted State Auditor and Inspector McMAHAN for favors, which included

• delaying a would-be competing abstract company’s application
• watered-down abstract company state regulatory legislation
• price controls as to abstracting in a southeastern Oklahoma county
• favorable official actions as to certain abstract company settlements
• official administrative legal action, not authorized by law, with respect to a regulated abstract business

The appellate court rejected each of McMAHAN’s contentions. The jury was properly instructed. The statute on which one count of conviction was based—honest services mail fraud—is constitutional, as advanced in this case. The evidence was sufficient, beyond a reasonable doubt, to support the defendant’s convictions. The scope of the evidence admitted by the court was proper. And the defendant’s sentence was reasonable.

The federal appellate panel held that McMAHAN’s jury was properly instructed. At trial, McMAHAN had tried to claim ignorance and to deny knowledge of illegal actions taken by himself and others on his behalf. The appellate court found jury instructions proper and evidence sufficient to prove that the defendant closed his eyes to what was obvious. The court held that a “deliberate ignorance” instruction was warranted because, for example, the evidence established that McMAHAN specifically avoided inquiry into the source of funding for campaign signs because he “didn’t want to know.” Specifically, the court found that McMAHAN’s objections to the Travel Act instructions were precluded by the invited error doctrine, as McMAHAN’s proposed instructions contained the same language which he contested on appeal.

McMAHAN’s convictions for conspiracy to deprive the citizens of the state of Oklahoma of honest services and for traveling in interstate commerce in furtherance of a scheme of bribery, were held constitutional. With respect to McMAHAN’s claims that the convictions amounted to dual punishment, the Court found that the conspiracy fell within an exception to the theory on which McMAHAN based his request for relief.

The evidence was also reviewed and found sufficient—beyond a reasonable doubt—to support the jury’s verdicts and sustain the convictions. The appellate court specifically found the evidence sufficient for a reasonable jury to have found that, as the State Auditor and Inspector, McMAHAN accepted money as well as other in-kind goods and services from co-conspirator Phipps with the intent to allow his official action to be influenced. Furthermore, an unlawful agreement could be properly inferred from the circumstantial evidence against McMAHAN, especially given his level of expertise and efforts to funnel campaign funds through his wife.

As the conspiracy and Travel Act charges did not place McMAHAN’s character directly at issue, the district court properly applied Federal Rule of Evidence 405(b) in limiting McMAHAN to opinion and reputation testimony to the exclusion of evidence of specific acts. The appellate court found unpersuasive McMAHAN’s assertions concerning incidents when he refused some illegal campaign contributions. Thus, the federal district court properly restricted proferred character evidence.

As to McMAHAN’s final argument, the Denver-based appellate court found the district court’s sentence to be reasonable. The trial court properly denied defendant’s request for a downward sentencing variance. The disparity between McMAHAN’s sentence and the sentences of his co-conspirators was justified by the fact that the co-conspirators accepted responsibility for their actions and cooperated with the government’s investigation while McMAHAN did not.

The defendants have been in the custody of the Bureau of Prisons since the verdicts were rendered at trial. Under federal law, their sentences are not subject to the prospect of parole. Lori McMAHAN’s appeal of her 78-month sentence was denied last year.

Chief United States District Judge James H. Payne presided over pretrial, trial, and sentencing proceedings in this case. Assistant U.S. Attorneys Gay Guthrie, Ryan Roberts, and Linda Epperley represented the United States of America.