Federal panel digs into charges against ag commissioner

RALEIGH, N.C. -- On Wednesday morning, 23 people will gather in the grand jury room of the federal courthouse on New Bern Avenue. They are ordinary citizens, unremarkable except that their identities are confidential and their work is sealed by law.

Behind closed doors, they will begin digging into one of the biggest political scandals to erupt in North Carolina recently: the election campaign of Agriculture Commissioner Meg Scott Phipps.

The grand jury is likely to probe much deeper than the State Board of Elections, which in June fined the Phipps campaign $130,000 for "grossly negligent" violations of campaign law, including taking illegal cash contributions and illegal corporate contributions, and making illegal contributions to a former political rival who later joined the Phipps campaign.

While the elections board was focused on violations of election law, which are misdemeanors generally punished with fines, the grand jury has the power to bring criminal charges. According to people interviewed by federal and state agents, potential charges include mail fraud, perjury, embezzlement, bribery or tax evasion.

Phipps, 46, is the daughter of one North Carolina governor, Robert Scott, and granddaughter of another, Kerr Scott. She has declined to speak about her problems since the election board hearings.

State and federal investigators have questioned state employees, people in the carnival industry and agricultural leaders. The U.S. attorney has subpoenaed four employees of the Department of Agriculture and several boxes worth of documents: Board of Agriculture minutes, Phipps' travel records and daily calendars, employee records of key aides and meeting notes.

High on the list was a request for all information relating to the award of the midway contract for the 2002 N.C. State Fair.

The intersection of the State Fair and campaign finance have been at the heart of Phipps' problems. She spent more than a million dollars to win the election but raised only half that in campaign contributions. To make up the difference, she and her family borrowed more than $500,000.

To finance the campaign and repay her debt, Phipps turned to the carnival industry, which has contributed at least $285,000.

Late last year, Phipps decided to award the lucrative midway contract to Amusements of America, owned by the Vivona family of New Jersey. The decision drew protests from some members of the state Board of Agriculture and from James E. Strates Shows, the Florida-based company that had held the midway contract for 53 years.

Strates Shows owner E. James Strates has repeatedly contended that Amusements of America won the contract through unethical or illegal means. While Strates acknowledges that he is not impartial on the issue, the State Board of Elections hearing generated testimony and evidence to lend some credence to his claim.

A key figure in this investigation is Norman Y. Chambliss III, a Rocky Mount developer and former chairman of the Nash County Republican Party. After the State Board of Elections granted him immunity, Chambliss admitted campaign-law violations. They included concealment of $14,500 in campaign contributions to Phipps, forming a bogus "Republican Women for Meg" committee and making unreported contributions to pay off the campaign debt of Phipps' primary election rival, Bobby McLamb, who joined Phipps' campaign after he lost to her.

Chambliss knows the Vivona family well. Chambliss owns and operates the private Rocky Mount Fair, at which Amusements of America has provided the rides for decades. Chambliss is also registered at the Secretary of State's Office as the agent for Amusements of America in North Carolina.

When longtime Agriculture Commissioner Jim Graham announced he would not run again in 2000, Chambliss knew the midway contract for the N.C. State Fair might open up.

Chambliss' testimony made clear that he wanted Amusements of America to take over the N.C. State Fair. Initially, he threw his support in the Democratic primary to McLamb, a veteran of the carnival and fair circuit both as a performing comedian and a talent broker.

Amusements of America helped McLamb as well. Late in the primary campaign, McLamb needed $75,000 to buy TV advertising and had difficulty arranging a bank loan. Chambliss borrowed $75,000 from Amusements of America and lent the money to McLamb.

After Phipps won the primary, Chambliss and McLamb quickly threw their support to her.

"It was important to me that I get to know I the probable winner of the election, so that I could if possible give that person an opportunity to get to know my friends, the Vivona family," Chambliss testified.

To make the introduction, Chambliss organized a trip to the Ohio State Fair in August 2000 -- three months before the general election -- for Phipps to meet the Vivonas. Chambliss, campaign manager Linda Saunders and McLamb went along.

At the Amusements of America office trailer in Columbus, Phipps met with Dominic Vivona Sr., who handed her an envelope of checks and cash. Phipps "took the envelope, she thanked Mr. Vivona very much for his help, and she turned and handed it to Linda Saunders," Chambliss testified.

Chambliss said the envelope contained about $14,000. McLamb testified he thought it was $28,000.

Members of the Vivona family came to Raleigh during the campaign for a fund-raiser and attended Phipps' election-night celebration.

After her victory, Phipps hired McLamb as an $80,000-a-year deputy, and appointed Chambliss to her State Fair Advisory Committee, which was to recommend a company to be awarded the midway contract for the 2002 fair.

In August 2001, Phipps' family had a big payment due on the loan it had taken out for the campaign. Chambliss testified that Saunders called him for help.

Chambliss agreed. He made out a check to himself for $6,500, cashed it and converted this to a cashier's check payable to Linda Saunders. He testified that he intentionally did not make the check out to the Phipps campaign.

"I felt it was inappropriate for me to be doing what I was doing, and so I sent it in a manner that Linda could handle it whatever way she felt best," he said.

Chambliss has said that Amusements of America did not assist him in this illegal contribution or any other that he made to the Phipps or McLamb campaigns.

Investigators may have questions, however, about the note he wrote in the memo field of his $6,500 personal check: "Phipps Loan for AofA."

Did this mean Chambliss was funneling money from Amusements of America to Phipps? The Board of Elections did not ask.

Rick Gammon, Chambliss' lawyer, said he hasn't seen the check and doesn't know what his client meant by the notation. But Gammon said Chambliss did not help Amusements of America win the State Fair contract through illicit means.

Under oath, Phipps repeatedly testified that she knew nothing about her campaign's fund-raising, and little about campaign finance law. She said she didn't know who gave her campaign money, how much they gave or when they gave it.

"I do have a real strong feeling of not wanting I to know what campaign contributions from particular people I receive," Phipps testified. "I feel very strongly that I shouldn't be in a position of making decisions based on who made campaign contributions."

That testimony got a skeptical reception from members of the elections board. It may also be hard to square with Phipps' habit of thank-you notes to contributors. Strates Shows has provided The News & Observer with six such notes from Phipps written over the course of a year.

There may be one consolation for Phipps: Despite rumors to the contrary, there is little likelihood that the State Fair, which begins in mid-October, will be disrupted by any indictments.

"It's my expectation that the investigation will not be concluded by that time," said Wake County District Attorney Colon Willoughby, who is overseeing the state's part of the probe.

I'm sure it's obvious to everyone else, but is Meg Phillips a Dimocrat or a Republican?

And how could she be so stupid as to take money from a New Jersey "family"?

Thanks for posting this!

You're welcome.

I guess Mr. Reporter is going to leave the penalties for mail fraud, perjury, embezzlement, bribery, and tax evastion to our imaginations.

This whole mess stinks to high heaven.

I'd love to see Ms. Phipps crash and burn. Can't hurt the Repubs that this is happening right before an election either.

Time to clean house in this state.

MKM

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