Phipps Pleads Guilty to Mail Fraud

Steven Phipps, a former longtime business partner of ex-state Sen. Gene Stipe, pleaded guilty Wednesday to a mail fraud charge and admitted paying kickbacks to three state legislators.^[1] The Legislators, who have since left office, received the money for their help in funneling taxpayer money to private businesses.^[2]

He has been cooperating with federal prosecutors; the charge carries a maximum penalty of five years in prison.^[3]Phipps was released on $20,000 bond by U.S. Magistrate Kimberly West; he became the second person to plead guilty to a felony charge linked to alleged kickbacks to legislators.^[4] Former Rep. Mike Mass pleaded guilty to a similar charge in April and also is cooperating with federal authorities.^[5]

"I agreed with Mike Mass and others on a plan to have state funds appropriated by the legislature and steered to an entity known as the Rural Development Foundation……..The RDF then provided funds to National Pet Products and Indian Nation Entertainment, businesses then largely owned and operated by me…..In order to secure state funding for RDF, that would then be provided to INE, I agreed to periodically pay Rep. Mike Mass and two other influential state legislators each a percentage of the gross income from the gaming machines that were manufactured as the result of the state funding." Phipps said.^[6]

His attorney, Dan Webber, said the state money did go to economic development. "This is not a case where taxpayer money ended up in some offshore bank account….Though obtained improperly, the state funds for National Pet Products and Indian Nation Entertainment were put to use by those companies and did help create manufacturing jobs in eastern Oklahoma,” he said.^[7]

Mail fraud
Mail Fraud is criminalized by 18 U.S.C. § 1341. Section 1341 is a rather dense and convoluted statute. Under this section, it is a crime for a person who has devised or intends to devise any scheme or artifice, to defraud, or to obtain money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice, to place in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or to deposit or cause to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or to take or receive therefrom, any such matter or thing, or to knowingly cause to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing.

We have discussed mail fraud at length in this blog, here.

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^[1] AP Staff, Phipps pleads guilty in federal court, Associated Press Newswire, June 27, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.