FBI probing Phipps' campaign funds

Investigator has contacted Board of Elections about state ag chief's finances

Staff WriterJuly 24, 2002 

Agriculture Commissioner Meg Scott Phipps is facing more trouble: an FBI investigation into her campaign finances and a call from a fellow Democrat for scrutiny into the contract she signed with a carnival company for this year's N.C. State Fair.

The State Bureau of Investigation already was looking into the campaigns of Phipps and Bobby McLamb -- a campaign rival she later hired. Another probe, by the State Board of Elections, concluded last month when Phipps was ordered to pay $130,000 and McLamb's campaign was fined $64,000 for violating state campaign laws.

The chairman of the elections board called her campaign "grossly negligent" in its fund raising and campaign-finance reporting. The board found that the campaign had taken $84,202 in cash from donors whom it could not identify and more than $14,000 in illegal corporate contributions.

Phipps' campaign funding,which included more than $285,000 from carnival donors,has been the subject of scrutiny almost from the minute she took office after the 2000 election.

Neither Phipps nor her attorneys nor anyone in the agriculture department has been contacted by the FBI, said Mike Blanton, a department spokesman. If Phipps is contacted, she will cooperate fully, he said.

An FBI investigator has contacted the Board of Elections about its investigation into the two campaigns, said Don Wright, the board's attorney.

A spokesman for James E. Strates Shows, an Orlando company that had the State Fair contract for more than 50 years and made an unsuccessful bid for 2002, said it, too, had been contacted by the bureau.

Phipps has acknowledged making serious mistakes: She wrote a public letter of apology after the hearing. But she has consistently claimed not to know about the violations during the campaign.

The State Fair decision, which she made last fall, also has been controversial from its beginnings. The latest twist came Friday when state Sen. Eric Reeves, a Raleigh Democrat, wrote to state Attorney General Roy Cooper asking him to look into the legality of the contract Phipps awarded to New Jersey-based Amusements of America, ending a 53-year tradition of giving the contract to Strates.

Her decision may have been influenced by campaign contributions, Reeves wrote.

Reeves served on a committee last year that Phipps created to evaluate proposals from carnival companies and advise her on which to pick. He said Tuesday that after reviewing the Board of Elections' findings, he wondered whether the committee was a sham.

Blanton blamed Reeves' letter on Strates and on Farrow Amusement Co., a Mississippi company that also had sought the contract. They're using lawyers, public relations experts and lobbyists to continue to undermine Phipps, he said, in an effort to get another shot at the lucrative deal.

Earlier this month, Reeves and state Rep. Alice Graham Underhill, a New Bern Democrat who was also on the fair advisory panel, said in interviews that they had traded messages about sending a joint letter to Cooper.

Underhill said Tuesday that the idea evolved from a draft letter she received from a lobbyist for Farrow. But Underhill's name isn't on the letter Reeves sent. She said she decided not to get involved, in part because some might think she was influenced by contributions she had received herself from Strates and from employees of Ward and Smith PA, the New Bern law firm that Strates has used to press the contract issue.

Underhill is the daughter of former Agriculture Commissioner Jim Graham, who for more than three decades awarded the fair contract to Strates.

Reeves also said that people affiliated with Strates and Farrow had contacted him. But he said that he also had been contacted by constituents and that the decision to send the letter was based on legitimate concerns. If a contract is based on illegal acts, he said, it should be void.

"I don't parrot people, and I don't do their bidding," he said. "I just want to make sure that, as part of the scope of any investigation, that the contract is part of what they look at."

Blanton said Phipps awarded the contract entirely on merit. If she could have been bought by campaign contributions, he said, the contract would have gone to Strates, which along with its vendors donated more than $150,000. Amusements of America officials gave less than $15,000.

Cooper ruled months ago that Phipps had the authority to pick the carnival company. The Board of Agriculture supported the contract, and so did a joint legislative committee, Blanton said.

"From our perspective, the contract is valid," he said. "I'm not aware of any legal challenges that could be mounted against it."

A spokesman for Cooper declined to comment on the letter Tuesday, citing the investigation.

Staff writer Jay Price can be reached at 829-4526 or jprice@newsobserver.com.

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