State Politics

Phipps campaign penalized (06/08/2002)

RALEIGH - The State Board of Elections on Friday ordered the campaign of Agriculture Commissioner Meg Scott Phipps to pay $130,000 for taking illegal cash and corporate contributions in 2000. The penalty included an assessment for failing to disclose some contributions.

The board voted unanimously in favor of the penalty, which includes $23,000 to pay for the investigation. The decision came after three days of hearings that featured testimony about a box of $22,000 in cash, a fictitious organization dubbed "Republican Women for Meg" and an agriculture commissioner who insisted she was out of the loop.

Larry Leake, chairman of the State Board of Elections, said the Phipps campaign was "grossly negligent" in its fund-raising and campaign-finance reporting.

Among the findings by the board were that Phipps' campaign accepted $84,202 in cash from contributors whom it could not identify and that the campaign took in more than $14,000 in illegal corporate contributions.

The board also ordered the campaign of Bobby McLamb, one of Phipps' opponents in the 2000 Democratic primary, to pay more than $64,000 for taking illegal contributions from Phipps' campaign.

After the primary, McLamb joined the Phipps campaign and helped raise money from the carnival industry. The Phipps campaign later gave McLamb $64,000 to retire his campaign debt. The limit on such contributions is $4,000. Neither campaign disclosed the payments, as required by law.

The elections board voted to send the transcript from the hearings to Wake District Attorney Colon Willoughby, who said Friday that he has asked the State Bureau of Investigation to conduct a criminal investigation.

Phipps said after the hearing that she had no comment on the board's action, saying she was eager to visit her father, former Gov. Bob Scott. Scott, 72, was hospitalized this week with congestive heart failure and pneumonia.

But Mike Blanton, a spokesman for Phipps, said the commissioner was glad the hearings were over and she was looking forward to getting back to work.

State Republican Party Chairman Bill Cobey called on Phipps to resign "after the unbelievable campaign violations revealed" by the elections board. But Blanton said Phipps has no plans to resign, and that she was already making plans to seek a second term in 2004.

The Phipps campaign was depicted throughout the hearings as one with few controls when it came to money. One elections board member described it as "loose as a goose."

Even Phipps' attorney, Michael Crowell, said it was "surprising and stupefying" what people in the Phipps campaign did.

Witnesses testified that Phipps, a lawyer who worked as an administrative law judge before the election, had no knowledge or interest in how the money was being handled.

"Numbers were just not her thing," said Linda Saunders, who was manager and treasurer of the campaign. She now works at the agriculture department as a special assistant to Phipps, but Blanton said she has been removed as campaign treasurer.

If Phipps had trouble with numbers, Saunders clearly had difficulty figuring out what was legal and what was not.

Board members were incredulous as Saunders repeatedly professed ignorance of campaign-finance laws that prohibit cash contributions of more than $100 and contributions from businesses or corporations. They asked her several times whether she had read the guidelines the elections board provides to campaign treasurers.

"Obviously not well enough," she said.

At one point, exasperated by her comments that she wasn't aware that what she was doing was wrong, Leake suggested that Saunders' college might consider revoking her diploma.

Saunders testified that in August, the wife of Robin Turner, a Florida-based producer of so-called independent midway carnivals for fairs, gave her a box containing $22,000 in cash. Saunders said she was told that the money was to help retire McLamb's campaign debt.

But Turner testified Wednesday that he gave Saunders $8,000 in cash during a fund-raiser in Hickory.

Turner testified that Saunders had told him earlier that Phipps' campaign badly needed help paying back a loan from Phipps' husband, Robert Phipps. Turner said he told Saunders that his help would have to be limited to soliciting industry people.

"She said she didn't care how it got done," Turner said.

Later, Turner said, he gave Saunders $8,000 in cash, which she said would go to Phipps' campaign.

"Why cash?" asked an elections board member.

"I'm in a cash business," Turner said.

Saunders also testified about the $64,000 the Phipps campaign paid to retire McLamb's debt, as well as payments to Robert Phipps, to repay more than $400,000 he loaned his wife's campaign.

Saunders said she was told by Brad Crone, a consultant to the Phipps campaign, that the campaign had agreed to assume responsibility for McLamb's campaign debt. Saunders said she wrote the campaign checks for McLamb without discussing it with Phipps.

Crone testified that he never said that to Saunders. Crone said the question of McLamb's debt had come up in a meeting shortly after the primary with McLamb, Phipps, Saunders and others, but that he was not aware of any pledge to take care of the debt.

"The debt was discussed in very vague and general terms," he said.

Saunders said that Robert Phipps got angry when he found out that Saunders had been paying McLamb out of campaign funds.

"I think he was shocked that the payment had been made," Saunders said. "Robert got upset because he needed a payment, too."

But Saunders insisted that Meg Scott Phipps was never told about the payments to McLamb.

"Did you make a conscious decision not to tell Meg?" Leake asked.

"No, sir. I was not trying to withhold anything or hide anything or conceal anything," Saunders said. "Meg doesn't keep up with the finances."

Crowell acknowledged that Phipps, his client, had not exercised appropriate control of her campaign. "This candidate should have paid more attention, should have known more about the campaign-finance laws," he said. "There's no question about that."

But Crowell said it was important to note that neither Phipps nor her husband had profited from what happened. He said what happened was a matter of ignorance. "None of the people involved thought that they were doing anything wrong," he said.