In 1920 at the age of 29, he moved to
Evansville, Indiana, where he worked for a retail coal company. He joined the
Democratic Party that same year. In
1922, he ran unsuccessfully for the Democratic
congressional nomination for
Indiana's 1st congressional district, placing third behind
William E. Wilson and Edward E. Meyer. Part of his election loss was due to opposition from the
Anti-Saloon League, which would later cause him to change his party affiliation from
Democratic to
Republican in 1922. He had already married and abandoned two women before settling in Evansville. Joseph M. Huffington, whom the
Ku Klux Klan had sent from Texas as an agent for organizing in Evansville, recruited Stephenson to the group's inner circle. The historian Leonard Moore characterized them both as young men on the make. The Evansville Klavern became the most powerful in the state, and Stephenson soon contributed to attracting numerous new members. For example, more than 5,400 men, or 23 percent of the native-born white men in
Evansville, joined the Klan.
Hiram Wesley Evans, who led recruiting for the national organization, maintained close ties to state leaders throughout 1921–1922 and he was especially close to Stephenson, because by then, Indiana had the largest state Klan organization. Stephenson backed Evans in November 1922 when he unseated
William J. Simmons as
Imperial Wizard of the national KKK. Evans had ambitions to make the Klan a political force in the country. in Indianapolis in the 1920s. After Evans won, he officially appointed Stephenson as
Grand Dragon of Indiana. He also made him head of recruiting for seven other states north of Mississippi. In the 1920s, Klan membership grew dramatically in these states. In Indiana, membership grew to nearly 250,000 or about one third of all white males in the state. Stephenson acquired great wealth and political power by leading the Klan; agents received a portion of $25 initiation fee paid by new recruits, and he began to wield other powers. Evans, who had a monopoly on the sale of Klan uniforms and paraphernalia, appointed Stephenson as Grand Dragon of the Indiana Klan at a 1923 Fourth of July rally of the Klan in
Kokomo, Indiana, with more than 100,000 members and their families in attendance. Stephenson at the rally falsely claimed presidential favor: My worthy subjects, citizens of the Invisible Empire, Klansmen all, greetings. It grieves me to be late. The President of the United States kept me unduly long counseling on matters of state. Only my plea that this is the time and the place of my coronation obtained for me surcease from his prayers for guidance. On May 12, 1924, at an assembly in the
Cadle Tabernacle in Indianapolis, Stephenson pontificated:God help the man who issues a proclamation of war against the Klan in Indiana now ... We are going to Klux Indiana as she has never been Kluxed before ... I'll appeal to the ministers of Indiana to do the praying for the Ku Klux Klan and I'll do the scrapping for it ... And the fiery cross is going to burn at every crossroads in Indiana, as long as there is a white man left in the state. Stephenson frequently boasted, "I am the law in Indiana." == Murder of Madge Oberholtzer ==