Oklahoma’s attorney general on Tuesday dismissed the state’s lawsuit against a vendor hired to distribute federal education pandemic relief funds, finding the allegations made under his predecessor “almost wholly without merit.” 

Former Attorney General John O’Connor filed the lawsuit in August, alleging Florida-based Kleo, the parent company of ClassWallet, failed to properly monitor the funds. 

Gentner Drummond, who defeated O’Connor in the GOP primary and took office Jan. 9, said he will now focus on whether any individuals or state officials should be held accountable for the role in what he called an “egregious misuse of tax dollars.”

“It is clear that a number of state actors and other individuals are ultimately responsible for millions in misspent federal relief dollars,” Drummond said in a written statement announcing the dismissal. 

The dismissal marks a change of course in the state’s investigation into misspending under the federal COVID-19 relief program. More than half a million in aid dollars meant for children’s education was spent on TVs, grills, furniture, Christmas trees and hundreds of other non-educational items, an investigation by Oklahoma Watch and The Frontier revealed. 

State officials hired ClassWallet in 2020 to distribute $17.3 million in federal Governor’s Emergency Educational Relief funds, a program also known as GEER. ClassWallet provided services for two programs: Stay in School, which offered up to $6,500 in tuition assistance to private school families, and Bridge the Gap Digital Wallet, which provided $1,500 grants to low-income families to buy educational materials. 

Oklahoma paid ClassWallet $650,000 from its GEER allotment. 

After misspent funds came to light, the state blamed ClassWallet for allowing parents to use their platform to buy items “not directly tied to education.” Records show the state could have limited what parents could buy, and instead gave “blanket approval” to all items from approved vendors, such as Office Depot and Staples.

Oklahoma’s attorneys never served ClassWallet, which means the company didn’t have an opportunity to respond in court — leading some critics to question whether the lawsuit was an honest attempt to recoup the funds. 

A spokeswoman for Gov. Kevin Stitt responded to the lawsuit’s dismissal with this emailed statement: 

“The governor’s office strongly disagrees with the decision to dismiss the state’s legitimate effort to recover federal taxpayer dollars from a bad out-of-state vendor,” said Kate Vesper, a spokeswoman for Stitt. 

ClassWallet, through a spokesman, said it was gratified the state dismissed the lawsuit.

Before he was elected state superintendent of public instruction, Ryan Walters helped ClassWallet secure the contract and made key decisions about the programs as secretary of education and as executive director of Every Kid Counts Oklahoma, according to an investigation by Oklahoma Watch and The Frontier published in May. Every Kid Counts Oklahoma was the public face of the Bridge the Gap program.

Former secretary of education Michael Rogers and Brent Bushey, executive director of the Oklahoma Public School Resource Center, an Oklahoma City not for profit, were also key to setting up the programs.  

A watchdog agency in July recommended the U.S. Department of Education claw back at least $650,000 in misspent funds and require the state to review an additional $5.5 million in purchases, according to a federal audit

Oklahoma returned $2.9 million in unspent GEER dollars to the federal government, at least some of which was reallocated to the state Education Department. 

The U.S. Department of Education is working with Oklahoma officials to resolve the findings from the audit and strengthen its oversight of federal grants, said Roy Loewenstein, press secretary for oversight at the U.S. Department of Education. Few details have been provided, but Oklahoma Watch has learned the state followed up with GEER recipients.  

Last week, the Office of Management and Enterprise Services emailed families about purchases they made with GEER funding. The email, provided to Oklahoma Watch, asks: “What was the particular purpose surrounding your purchases during the pandemic?” And “were you homeschooling your children, or were they still in school?”

Additional detail about the state’s handling of GEER funds is expected in an annual review of all federal funds by the state auditor and inspector. That report is expected to be released between March and July.