Board probes (NC Agriculture Comish) Meg Scott Phipps' funds (Campaign gifts raise questions)

The News & Observer. ^ | June 6, 2002 | JAY PRICE

[jern]

By JAY PRICE, Staff Writer

RALEIGH - Testimony in a State Board of Elections hearing Wednesday made the 2000 Democratic primary for State Agriculture Commissioner seem like a contest to see which candidate could rack up the most campaign finance violations, many connected to carnival companies eager for a shot at the N.C. State Fair contract.

Losing primary candidate Bobby McLamb,once a carnival talent agent,accepted a $75,000 loan from a middleman who had received the money from a carnival company, board members said. McLamb converted that loan to a bank loan, which he paid off in part with unreported contributions from the candidate who eventually won the office, Meg Scott Phipps. She didn't report the transactions.

Phipps, scion of one of the state's most storied political families, alsotook in $84,000 in cash from unreported sources --much of it apparently above the $100 limit for cash donations --and, among other things, accepted $243,000 in out-of-state contributions without proper documentation from the donors. Most of that money, collected during and after the primary, she testified, came from amusement companies and their vendors.

The agriculture commissioner controls the state fair carnival contract, which James E. Strates Shows of Orlando, Fla., had monopolized for more than 50 years. After both McLamb and Phipps vowed during the campaign to open that contract, carnival owners and other vendors opened their wallets. Phipps' campaign has taken in more than $285,000 from carnival sources alone.

The elections board set aside three days for hearings into allegations of campaign-finance violations by McLamb and Phipps.

Phipps testified Wednesday that she was almost completely ignorant of the workings of her campaign's finances and that she was unaware of the host of problems elections board investigators found.

For example, she said, she had no idea that campaign treasurer Linda Saunders, a friend she said was as unversed as herself in state campaign laws,had funneled $64,000 to McLamb, who was hired by Phipps after the 2000 election.

Phipps said she didn't want to know who had contributed money, or how much, because she didn't want the pressure to do favors. Early on, she said, she didn't know which bank her campaign was using.

Her husband, property manager Robert Phipps, said he hadn't kept track of the campaign finances either, except to ask Saunders to write him a check whenever payments were due on the family's own $500,000 campaign loan. He said he found out that Saunders had been sending McLamb money when he told her in March that he needed money and she said she didn't have it because she had just sent a check to McLamb.

Saunders, who worked for Phipps when Phipps was a state administrative law judge, earns $65,000 as Phipps' assistant. She had the authority to write checks from the campaign account without approval from anyone else, Phipps said.

According to Board of Elections Chairman Larry Leake, Saunders also accepted $14,200 in contributions from companies, which isn't allowed; cashed $18,000 in checks from the campaign for unexplained reasons; solicited $14,500 --more than the $4,000 limit --from Norman Chambliss, a Rocky Mount developer who is manager of the annual Rocky Mount Agricultural Fair, on behalf of the campaign; and deposited $2,500 of Chambliss' contribution in the campaign account.

"Nobody really had any control of anything in this campaign, did they?" said elections board member Lorraine G. Shinn of Greenville.

Saunders is still in charge of the campaign account, something Leake repeatedly told Phipps he didn't understand.

"I guess I sound a little like a Linda-basher ...," he said. "But I'm having a very hard time understanding why, figuratively, you haven't thrown her out the window."

Phipps responded that Saunders was one of the hardest-working people she had ever met and that she strongly believed Saunders hadn't done anything wrong intentionally.

McLamb lost to Phipps in the primary, then volunteered to work on her campaign. After she won, he was appointed assistant commissioner. Phipps said he provided an entree to the carnival world --and its ready money.

"I didn't know much about the fair industry then, and probably wish I didn't now," Phipps said.

She said Saunders probably cashed some of the checks for herself because Phipps had urged her to take some of the money as compensation for putting in many hours after work and on weekends. However, Phipps said the amount surprised her.

Leake said his board has firm evidence that McLamb received $75,000 from Chambliss, who, he said, got the money from Amusements of America, the New Jersey-based carnival company that Phipps later picked for the 2002 state fair contract. Amusements of America also provides the rides at Chambliss' fair.

Later, McLamb got a bank loan, which Phipps' campaign helped him pay off.

Saunders, said Phipps, apparently took it upon herself to write four checks to pay off McLamb's loan, apparently because she heard that a Phipps campaign consultant, Brad Crone of Raleigh, had told Phipps and her father, former Gov. Bob Scott, that the campaign should help McLamb with his debt. She told the board that she knows now that paying off McLamb's debt was illegal but that she wouldn't have known at the time it was a problem.

The most likely penalty from the board is being forced to return any contributions found to be illegal, said the board's attorney, Don Wright.

The board also must refer information on any suspected lawbreaking to Wake County District Attorney Colon Willoughby so that he can consider criminal charges.

McLamb and Saunders are among those expected to testify today or Friday.

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