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State Election Board Orders Phipps Campaign To Repay $130,000

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RALEIGH, N.C. — State elections officials Friday orderedthe campaign of Agriculture Commissioner Meg Scott Phipps to pay$130,000 for taking illegal campaign contributions and paying downan ex-rival's loan.

The state Board of Elections voted 5-0 to order the payment tothe state, which includes $23,000 for the cost of investigating theallegations.

The board said the Meg Scott Phipps Campaign 2000 was "grosslynegligent in the conduct of its fund-raising and campaign reportingactivity."

Board Chairman Larry Leake said the findings would be forwardedto the Wake County District Attorney's office, which will determineif criminal charges are warranted. The board declined to issueadditional civil penalties.

"We hope this will deliver a painful message," Leake saidafter the hearing. "The message to the campaigns is that youbetter follow the law, and if not there will be something to pay."

The board determined that the Phipps' campaign had accepted$84,202 in unreported cash contributions, as well as more than$14,623 in corporate contributions. State law limits cashcontributions to $100, and corporate donations are illegal. Theboard also found nearly $20,000 in unreported expenditures.

The Democrat's campaign collected some of its contributions with"the intent to deceive" the board and the public, the boardruled. The board said that Phipps' campaign had received at least$22,500 in illegal donations or loans from people related to thefair industry.

Leake said he had never seen the level of reporting errors asfound in the Phipps' investigation.

Phipps' campaign had "a treasurer and a campaign who justtotally appeared to be inept," Leake said.

Agriculture Department spokesman Mike Blanton said after thehearing that Linda Saunders was removed Thursday as Phipps'campaign treasurer. Saunders had been blamed by board members forthe inaccuracies in Phipps' campaign report.

Blanton said Phipps will obey the board's order but hasn't ruledout an appeal to Wake County Superior Court.

Evidence presented in the three-day hearing showed Phipps didn'tknow five checks dated last year totaling $64,184 in payments fromher campaign were used to retire the debt of rival-turned-allyBobby McLamb. The board ordered McLamb to pay to the state thosepayments he received from the Phipps campaign.

State law limits direct giving by a campaign - even for loanrepayments to another campaign - to $4,000 per election.

McLamb was beaten by Phipps in the 2000 Democratic primary, thenthrew his support behind her. McLamb told the board he believedPhipps knew last year that her campaign money was being used toretire a $75,000 loan he had taken out for his campaign.

But Phipps testified this week she never agreed to pay offMcLamb's debt but only to help retire it. She said she firstlearned about using the campaign money this spring.

Saunders' testimony Friday morning appeared to back up Phipps'story, saying she never talked to the commissioner about any of theMcLamb debt payment or other unlawful contributions.

Blanton said the evidence backed up Phipps' contention.

"It was fairly clear that in the 2-1/2 days of testimony that thecommissioner was not aware originally or initially that hercampaign was actually repaying the campaign debt of Bobby McLamb,"Blanton said.

Saunders testified Phipps' campaign adviser, Brad Crone, toldher about taking on McLamb's debt, an accusation Crone denied laterFriday.

Phipps declined comment after the hearing and left to visit herfather, former Gov. Bob Scott, who is hospitalized for pneumonia.

Phipps has blamed her problems in part on agriculture and fairindustry officials unhappy with her selection of Amusements ofAmerica to operate the midway at the 2002 North Carolina State Fair.

McLamb declined comment after the hearing. His attorney, DavidLong, said his client hasn't determined whether to appeal.

"I thought it was a fair decision," Long said. "I thought itwas an appropriate decision."