Zumwalt: “I will not be resigning” after scathing audit released

Editor’s Note: This story has been clarified to accurately reflect Shelly Zumwalt’s roles within the Oklahoma Office of Management and Enterprise Services (OMES). During her time there, she was a budget analyst for OMES. She spearheaded communications for the OMES Employees Group Insurance Division. She was the Director of the Public Affairs Division at OMES and she was the Chief of Innovation at OMES.

OKLAHOMA CITY (KFOR) — Oklahoma Secretary of Tourism, Shelley Zumwalt, refused to step down Tuesday after Oklahoma Attorney General Gentner Drummond called for her to resign following the release of a state audit.

The audit revealed two state agencies Zumwalt previously worked for awarded a company, of which her husband is the vice president, no-bid contracts totaling millions of dollars.

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“Transparency has always been a top priority of mine and I will not be resigning,” Zumwalt said to reporters late Tuesday evening. “It was not an issue and it’s not a conflict of interest.”

While Zumwalt currently serves as Oklahoma’s Secretary of Tourism, she previously held several different roles at multiple state agencies.

Zumwalt became the Chief Innovation Officer at the Oklahoma Office of Management and Enterprise Services (OMES) in February 2020.

Two months later, OMES awarded Oklahoma City-based IT firm ‘Phase 2’ a nearly $1 million dollar contract to upgrade computer systems for the Oklahoma Employment Security Commission (OESC).

The Vice President of Phase 2 is John Zumwalt—Shelley Zumwalt’s husband.

In May 2020, Shelley Zumwalt was appointed as the director of OESC.

The audit revealed over the following two years with Zumwalt in charge of OESC, she personally signed off on an additional $8.6 million in extensions of the original no-bid contract with Phase 2.

To date, the auditor’s office says the state has paid Phase 2 more than $21 million.

State auditor Cindy Byrd told News 4 there a few red flags with Zumwalt’s situation that caught her attention.

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First, Byrd said those high-dollar contracts awarded to Phase 2 were never put out for competitive bidding—despite an executive order from Gov. Stitt requiring all state contracts for more than $250,000 be put through the competitive bidding process.

“There was still that requirement for anything over $250,000 to be competitively bid to make sure that OMES was getting the best price, the best product for the taxpayer,” Byrd said.

Secondly, Byrd said if the initial contract were to have been properly put out for competitive bidding, OMES should have been able to find there was a “related-party” conflict-of-interest between Zumwalt and her husband.

“If they had put out a competitive bid process, they could have asked that question and they could have made sure that any high dollar award for a contract did not have a related-party transactions,” Byrd said.

On Tuesday, Zumwalt claimed she made her connection to Phase 2’s VP known at the time she accepted her role with OESC, and lawyers from OMES and OESC told her she was in the clear.

“I have disclosed this information for probably going on three years now,” Zumwalt said. “There was not a moment where that was not disclosed.”

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But the state auditor’s office released a sworn-affidavit Zumwalt signed at the end of 2020, in which she declared she had not been “involved in any related-party transactions with the OESC” that year, and that and her “spouse or dependents were not involved” in any OESC transactions either.

Despite that sworn affidavit Zumwalt signed, the state auditor’s office revealed Zumwalt signed and approved a no-bid contract extension between OESC and Phase 2 for $40,000 in November 2020.

Zumwalt approved four additional extensions of the no-bid contract between November 2020 and April 2022, totaling more than $8.6 million.

“It was a true arm’s length transaction for the state of Oklahoma,” Byrd said.

On Tuesday, Zumwalt denied Phase 2’s initial no-bid contract, as well as the subsequent extensions of which she signed off on, could have benefitted her husband financially.

“I want to be crystal clear John Zumwalt has not and has never been part of the Phase 2 ownership group,” Zumwalt said.

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However, at the top of Phase 2’s website, the company proclaims it is “employee owned” beneath its main logo.

On Tuesday, Oklahoma Attorney General Gentner Drummond called on Zumwalt to resign her position as Secretary of Tourism and cooperate with an investigation being performed by his office.

While Zumwalt told reporters she would not be resigning, she said she would cooperate with any investigation by Drummond’s office.

Video below is of the interview with Zumwalt after the audit was released.

Byrd’s office released an 80+ page document of what they described as “receipts” proving the audit’s findings about Zumwalt. It includes all the contracts she signed and the dates she signed them.

You can view the document below.

Zumwalt-Conflict-of-Interest-SupportDownload

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