Oklahoma leaders have refiled a lawsuit against an out-of-state vendor the governor blames for failing to prevent education funds from being misspent.
The Florida-based company, ClassWallet, has denied wrongdoing throughout the yearslong saga. Federal and state auditors said officials working for the state government, not the company, were at fault for failing to place proper guardrails on an $8 million COVID-19 stimulus program.
Regardless, Gov. Kevin Stitt announced Monday evening the state is again suing Kleo Inc., which does business as ClassWallet.
“A vendor, which said it would eliminate the possibility of fraudulent use of grant funds, didn’t uphold its end of the contract and taxpayer dollars were misused,” Stitt said. “We have to hold this vendor responsible and protect Oklahoma taxpayers from being left holding the bill.”
The Office of Management and Enterprise Services filed the lawsuit Monday in Oklahoma County District Court, alleging a breach of contract.
ClassWallet was unable to return a request for comment Monday evening.
Former Attorney General John O’Connor sued the company in August 2022, but his successor, Gentner Drummond, dropped the lawsuit once he took office in January 2023.
Drummond said the original lawsuit was “almost wholly without merit” and state actors were to blame for the program’s failures.
A spokesperson for the attorney general said Monday evening that Drummond has not yet reviewed the new lawsuit and was unable to comment.
The program at the center of the controversy, Bridge the Gap Digital Wallet, gave $1,500 grants to 500 families to spend on their children’s educational needs. ClassWallet provided the digital platform for families to access their funds.
Federal and state audits found recipients instead spent the money on kitchen appliances, power tools, video game consoles and other non-educational items.
About $1.7 million — about 20% of the available funds — was misused, State Auditor and Inspector Cindy Byrd reported. Federal investigators said the state should pay some of the funds back.
Stitt and state Superintendent Ryan Walters have repeatedly said ClassWallet was responsible for not implementing the appropriate protocols.
The state audit found Oklahoma officials failed to limit the items families could buy through ClassWallet’s system and didn’t review any purchasing reports that could have alerted them to inappropriate expenses. Walters gave “blanket approval” to all vendors within the system, which applied to all the items those businesses offered, state auditors found.
Walters helped administer the program, even before he was appointed Stitt’s education secretary. At the time, he was the executive director of Every Kid Counts Oklahoma, a pro-school-choice nonprofit.
The funds came from the $39.9 million Governor’s Emergency Education Relief Fund. Separate from the federal aid that went to schools and the Oklahoma State Department of Education, the GEER Fund was controlled by Stitt and the officials he chose to administer its various programs.
“The pandemic was a difficult and unprecedented time for all Oklahoma families, and it was our goal to do all we could to swiftly ease some of the burdens lower income families faced as they struggled to keep their kids in school or otherwise to do school from home,” Stitt said in a statement Monday.
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