Two Of Phipps' Former Aides Indicted By Federal Grand Jury

Linda J. Saunders, 43, was charged with 17 counts, including extortion, conspiracy, mail fraud, wire fraud and money laundering, and Bobby McLamb, 42, was charged with two counts: extortion and conspiracy to commit mail and wire fraud.

U.S. Magistrate Judge William A. Webb read the charges against the pair in open court late Monday afternoon. U.S. Attorney Frank Whitney discussed the indictments at a news conference Tuesday morning.

"The Justice Department, The U.S. Attorney [General] Office, the FBI and the North Carolina State Bureau of Investigation are very serious about public corruption," he said.

Officials said a summons has been issued to McLamb and an arrest warrant has been issued to Saunders. Officials have not said whether Phipps or other individuals will face indictments.

"There is a continuing investigation and it would be inappropriate to talk about anything that may or may not happen," Whitney said.

Late Tuesday morning, Phipps released a statement reacting to the indictments. She said it's inappropriate for her to comment right now, because the investigation is ongoing. Phipps also said the department has cooperated fully throughout all phases of the investigation.

Saunders and McLamb, who joined Phipps' campaign after losing toher in the Democratic primary, are accused of conspiring to solicitmoney that they said would go toward retiring Phipps' campaigndebt. The indictment said the money was diverted to help payMcLamb's debt.

The indictment said McLamb was trying to repay bank loanstotaling $100,000. Phipps offered to help with repayment after helost the Democratic primary election and gave his support toPhipps.

The indictment also said after Phipps was elected in 2000,Saunders told fair midway companies they would have to contributeto help Phipps repay debts to be considered for a contract for the2002 fair.

An attorney for McLamb didn't return a telephone call seekingcomment and numbers for Saunders in Raleigh and Louisburg weren'tanswered.

Saunders, who became Phipps' assistant when Phipps becamecommissioner, is accused of accepting two cashiers checks totaling$14,500 from unidentified donors who wanted to influence theawarding of the midway contact for the North Carolina State Fair,according to the charges. McLamb, 42, received a $20,000 check fromsomeone seeking a vendor contract at the fair, the indictment said.

Saunders, 43, also allegedly concealed cash contributions andother diversions to keep the transactions from campaign financereports.

According to the indictment, Saunders funneled $22,000 "througha complicated structure of financial transactions in order to avoidtriggering the filing of a currency transaction report."

The counts against Saunders carry a maximum prison sentence of175 years and fines totaling $5 million. McLamb faces maximumpenalties of 25 years in prison and fines of $500,000. Whitney saidneither defendant, if convicted, would get the maximum sentence.

The FBI and State Bureau of Investigation had been looking intothe financing of Phipps' 2000 campaign and awarding of the midwaycontract since a State Board of Elections hearing in June.

The board ruled that Phipps' campaign had taken $84,202 in cashfrom donors it could not identify and more than $14,000 in illegalcorporate contributions. The campaign was fined $130,000.

The elections board also found that the Phipps campaignillegally paid more than $64,000 to help retire McLamb's campaigndebt. He later became an assistant commissioner but was fired inearly 2002.

Investigators also looked into the awarding of the midwaycontract for last year's State Fair to Amusements of America, a NewJersey carnival company. Phipps first met Amusements of Americaofficials at the Ohio State Fair in August 2000, three monthsbefore she won her election.

The indictment said Amusements of America loaned $75,000 toNorman Chambliss, owner of the Rocky Mount Fair, who loaned themoney to McLamb. One bank loan taken by McLamb was used to repayChambliss, who forwarded the money to Amusements of America, theindictment said.

Phipps, 47, is the daughter of former Gov. Bob Scott andgranddaughter of Kerr Scott, who served as governor and U.S.senator.