Okla. AG Drummond calls for resignation of Secretary of Tourism Zumwalt following state audit

OKLAHOMA CITY, Okla. — Oklahoma Attorney General Gentner Drummond is calling for the resignation of Secretary of Tourism Shelley Zumwalt following a recent audit alleging misuse of millions of tax dollars.

The latest audit findings from State Auditor and Inspector (SAI) Cindy Byrd allege that Shelley, who was appointed as the executive director of the Oklahoma Employment Security Commission (OSEC) in May 2020, used her position to approve millions of dollars in contracts for a software company, Phase 2 Development (P2), where her husband, John Zumwalt, was employed as the vice president.

The Oklahoma Office of Management and Enterprise Services (OMES) contracted with P2 to stabilize and update the OESC mainframe. This contract was not competitively bid and P2 had not been previously contracted with the state.

Between April 2020 and August 2022, OMES paid P2 a total of $7 million through a contract and multiple change orders to stabilize and update the OESC mainframe.

By April 2022, Shelley had approved additional contracts and change orders to P2 totaling $8.5 million.

Shelley was required to complete annual forms that attested that she had no related party transactions in the performance of her duties in the spending of funds. On three separate instances, Shelley checked ‘no’ on those forms.

“Federal law requires that any entity receiving Federal grant money must disclose any conflict of interest in writing,” reported Auditor Byrd. “Any person who could possibly benefit from a Federal grant cannot be part of the selection, award, administration, or contracting of that money.”

In Fall 2022, legislation went into effect that required appointees to heads of agencies to disclose any conflicts of interest to the Ethics Commission. Shelley then disclosed her husband’s employment at P2 after she was named the executive director of tourism in 2022.

Drummond has now called for Shelley’s immediate resignation and said his office will investigate to see if there were any violations of Oklahoma statutes.

You can find Drummond’s full statement below.

“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.

One of the most egregious findings is 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. She should resign immediately and cooperate fully with my office as I seek to determine whether any Oklahoma statutes were violated.”

The audit also examines OMES and its establishment of a new set of rules for vendor contracts in the wake of the COVID-19 pandemic. SAI concluded that the rules are not in the best interest of taxpayers in the state.

The audit also explains how OMES has allegedly neglected to follow a statutory duty of properly evaluating whether private vendors are providing the state with the highest quality service for the best price.

The audit claims that OMES had millions of dollars in questionable costs in the fiscal year of 2022 that are related to their disregard for competitive bidding requirements and a lack of oversight and accountability.

Instead of using the required competitive bidding policies and procedures, OMES was using a 2019 program called ‘Rolling Solicitations’. This program allowed OMES to give themselves permission to place any vendor of their choice on a list to be awarded state contracts without a competitive bid.

Bryd is asking for the legislature to take the following three steps to protect taxpayers.

• Investigate the ‘Rolling Solicitation’ process employed by OMES.
• Investigate the revenue stream associated with the ‘Rolling Solicitation’ process and determine if this has created an incentive for not complying with sound competitive bidding procedures.
• Review the growing list of exemptions to competitive bidding laws that do not protect taxpayer dollars.

Byrd concluded the audit findings with the following statement in part.

“The Office of State Auditor has learned through its audit that questionable conduct has led to an abuse of taxpayer dollars and I am sounding the alarm.”

To read the full audit, click here.