In contrast to the Reconstruction-era Ku Klux Klan, the second Klan was a relatively public, mixed-sex national organization with significant strength in the North. Indiana was one of the Klan’s strongholds and provided important national leadership for the movement. Power struggles, financial malfeasance, and rumours of heavy drinking and sexual misconduct dogged Klan leaders throughout the 1920s, but in the early years of the decade, the KKK’s oratory and organizational skills overrode the whispers. But the cover-ups eventually collapsed. Stephenson’s 1925 rape of Oberholtzer, her subsequent death, and the resulting trial brought the scandals of the Indiana Klan to light and helped bring down the second Klan. By 1927, Indiana membership dropped from approximately 250,000 to 4,000, with a similar loss of national support.
Even before Stephenson fixated on Oberholtzer, the national Klan leadership and local subordinates worried that his personal habits would reflect poorly on the Klan’s claim of moral superiority, so they worked to keep his treatment of women hidden. Twice divorced – for abandoning his pregnant first wife and for beating his second wife – Stephenson drank heavily and developed a reputation as a “ladies’ man.”
As early as 1923, Stephenson started having run-ins with the law. On a recruiting trip to Columbus, Ohio, a sheriff caught him attempting to have sex with his secretary in a parked car. A year and a half later, on a different trip to Columbus, a drunken Stephenson turned violent when a hotel manicurist refused his sexual overture. Although the manicurist did not press charges, two Columbus newspapers reported on the incident. With stories like these adding up, Imperial Wizard Hiram Evans, the national leader of the Ku Klux Klan, ordered an inquiry into Stephenson’s behaviour and condemned his former ally. Claiming he’d been framed, Stephenson resigned from the national Klan. Since the Klan had covered up other leaders’ sexual predation of women, Stephenson made a persuasive point that Evans censured him for political rather than moral reasons. Within Indiana, Stephenson retained considerable power, successfully rallying Klan support for Republican candidates in the 1924 elections, notably gubernatorial winner, Edward L. Jackson.