Prominent Iowa LGBT activist Phyliss Stevens has just been arrested and charged with embezzling $5.9 million from her insurance company employer over the last five years. Stevens is chair of the Iowa chapter of Marriage Equality USA while her spouse, Marla Stevens, is the public policy director of the LGBT Fairness Fund and an original contributor to the Billerico Project. Stevens was also a contributor to the campaign of Ashwin Madia who ran unsuccessfully for Minnesota’s 3rd Congressional district.

As Joe.My.God puts it: “This is gonna hurt.”

The federal government is charging Phyliss Stevens with money laundering and wire fraud, while the conservative blog The Iowa Republican is calling on Iowa organizations and politicians to return any money donated by the couple in the last five years. According to the Billerico Project (who has not recieved any money from either Stevens), since October of 2005, Phyliss Stevens gave $14,669.07 in state political contributions, and since January of 2007, she has donated $15,213 to federal candidates including $2,300 to Madia’s campaign.

Marla Stevens is not being charged yet, but both have been named in a civil suit filed by Phyliss Stevens’ employer, Aviva USA, to recover the stolen $5.9 million, because the embezzlement scheme paid into an account held by both women.

The political fallout is still unclear, but with Iowa progressives battling conservative attempts to void the state’s Supreme Court decision allowing same-gender marriage, loosing a pair of prominent funders and activists before the worst of the battle is joined can’t be good.