From Staff and Wire Reports

MUSKOGEE, Okla. -- A federal grand jury in Muskogee has indicted state Auditor and Inspector Jeff McMahan and his wife Lori on charges of conspiracy, racketeering and fraud.

The two are accused of accepting improper cash and gifts from southeast Oklahoma businessman Steve Phipps.

The nine-count indictment reads the McMahan's received jewelry, trips and excessive contributions to Jeff McMahan's first campaign for auditor in 2002.

The indictment came shortly after Phipps testified behind closed doors Friday morning. Phipps has appeared several times before the grand jury since cutting a deal with federal prosecutors in which he pleaded guilty to a conspiracy count.

FBI agents searched the McMahans' home in Tecumseh in August for jewelry and campaign records. The agents later went to the home of Lori McMahan's sister and recovered jewelry thought to have been bought by Phipps.