State audit critical of tourism director Shelly Zumwalt. AG calls for director's resignation
- Oops!Something went wrong.Please try again later.
- Oops!Something went wrong.Please try again later.
An audit released Tuesday by Oklahoma State Auditor and Inspector Cindy Byrd raised numerous questions about how the state spent millions in federal COVID-19 funds and said new purchasing rules established by the Office of Management and Enterprise Solutions were not in the best interest of Oklahoma.
The audit also harshly criticized the management of Oklahoma Employment Security Commission and the agency's then-Executive Director Shelly Zumwalt, questioning how Zumwalt approved $8.5 million in contract payments to Phase 2, a firm where her husband is employed.
"Subsequent contracting and payments were transacted by Oklahoma Employment Security Commission and signed by Shelley Zumwalt, who was appointed as the executive director of OESC in May 2020," Byrd said in a media statement accompanying the audit. "By April 2022, Zumwalt had approved additional contracts and change orders to P2 totaling $8.5 Million."
During this period, Byrd wrote, "Zumwalt failed to disclose the fact that her husband, John Zumwalt, was employed as the Vice-President of Phase 2."
"As the Director of OESC, Zumwalt was required to complete annual forms attesting that no related party transactions existed in the performance of her duties regarding the expenditure of funds. In three separate instances, Zumwalt checked ‘No’ on these forms," Byrd said.
The audit's release sparked a harsh response from Attorney General Gentner Drummond, who called on Zumwalt to resign.
"The audit findings released today show troubling and all too familiar patterns of mismanagement, costing taxpayers millions as a result. Today’s report confirms my previous order of an investigative audit of OMES, which is sorely needed and long overdue," Drummond said.
Drummond said the audit's most egregious findings were "the wholly inappropriate and potentially unlawful actions of Secretary Shelley Zumwalt, who used her position as executive director of OESC to approve millions of dollars in contracts for a software company where her husband was a vice president."
"This level of self-dealing represents an unforgiveable breach of trust that disqualifies Ms. Zumwalt from overseeing the expenditure of our tax dollars," Drummond said. "She should resign immediately and cooperate fully with my office as I seek to determine whether any Oklahoma statutes were violated.”
Shelly Zumwalt says she will not resign
Late Tuesday afternoon, Zumwalt held a brief press conference at the Capitol. She called the audit "misleading" and said she would not resign her post.
"I've never had a conversation with auditor Byrd or anyone on her team on this matter," Zumwalt said. "A thorough review of the situation would have easily cleared up any confusion on the many sign-offs and disclosures that happened well before I was named executive director of OESC. Transparency has always been a top priority of mine and I will not be resigning."
While Zumwalt — who some are touting as a possible candidate for lieutenant governor in 2024 — reported that OESC had not engaged in any related-party transactions, she did not disclose her ties through her husband to Phase 2, Byrd's audit reported. The audit showed that Zumwalt later reported the connection to Phase 2 after she was hired as the Tourism head.
Byrd said federal law was clear on conflicts of interest.
“Federal law requires that any entity receiving federal grant money must disclose any conflict of interest in writing,” she said. “Any person who could possibly benefit from a federal grant cannot be part of the selection, award, administration, or contracting of that money.”
Zumwalt said OMES hired Phase 2 to conduct a major overhaul of the OESC's "outdated technology, to ensure hundreds of thousands of Oklahomans receive the benefits and services."
She said the contracts were executed and approved by OMES and the state's chief information officer.
"The initial contracts and all agreements to begin work with Phase 2 were executed before I was appointed by the OESC Board of Commissioners on May 27, 2020," Zumwalt said. "I did not have any decision-making Authority when OMES hired Phase 2 to work with OESC in May of, excuse me, in March of 2020."
She said she sought advice from legal counsel about the potential conflict "out of an abundance of caution."
"And it was determined this agreement was not a conflict of interest," Zumwalt said. "Upon being named the executive director at OESC I had a direct conversation with legal counsel at OESC and OMES to ensure all were aware of my husband's employment and the hard separation Phase 2 had with my husband working on state work, and I was assured there was no conflict of interest. I want to be crystal clear John Zumwalt has not and has never been part of the Phase 2 ownership group."
This article originally appeared on Oklahoman: Calls for Shelly Zumwalt to resign in Oklahoma amid scathing audit
