|“||I am the law in Indiana!||„|
|~ Stephenson to Madge Oberholtzer while raping her.|
In 1925, Stephenson was tried and convicted in a notorious abduction, rape, murder, and partial cannibalization of a young schoolteacher, a state education official named Madge Oberholtzer. His trial, conviction, and imprisonment ended the portrayal of Klan leaders as law abiding. Denied a pardon by Governor Jackson, in 1927 he started talking with reporters of the Indianapolis Times and released a list of elected and other officials in the pay of the Klan. This led to a wave of indictments in Indiana, more national scandal, the rapid loss of tens of thousands of members, and the end of the second wave of Klan activity in the late 1920s.
On January 7, 1941, the Valparaiso Vidette-Messenger reported that Governor M. Clifford Townsend, a Democrat, was considering granting an early parole to Stephenson. No parole was approved that year. Stephenson was paroled on March 23, 1950, by a Democratic administration, but violated parole by disappearing on or before September 25, 1950. On December 15, 1950, he was captured in Minneapolis and returned to custody. He was sentenced in 1951 to serve 10 years in prison. In 1953, he pleaded for release, denying that he had ever been a leader of the Klan.
On December 22, 1956, the state paroled him, on condition that he leave Indiana and never return. Stephenson relocated to Seymour, Indiana, where he soon married Martha Dickinson (they were separated less than a year later).
Stephenson then moved to Jonesborough, Tennessee (the town name was briefly spelled as "Jonesboro" during this time), where he was employed at the Jonesboro Herald & Tribune, and where he also married Martha Murray Sutton without having been divorced from Dickinson.
In 1961, at the age of 70, Stephenson was arrested in Independence, Missouri, on charges of attempting to sexually assault a sixteen-year-old girl but he was later released after paying a $300 fine because the charges were dropped on grounds of insufficient evidence. He was ordered to leave Missouri immediately. A few years later, in 1966, Stephenson died at his home in Jonesborough, Tennessee, and he was buried at the USVA Mountain Home National Cemetery in Johnson City, Tennessee.