This story was updated Jan. 9.
Incoming Oklahoma Gov. Kevin Stitt is asking the attorney general to review his plan to step away from his mortgage company as it becomes a bank and to approve a conflict-of-interest policy for his family investments.
Stitt, who takes office Jan. 14, is facing potential conflicts of interest related to Tulsa-based Gateway Mortgage Group LLC, which he founded, and possibly some real estate and other personal investments.
The first step in this shift from private businessman to public official has to do with the state banking commission.
In a seven-page transition plan, Stitt pledged to have no contact with the state banking commissioner, Mick Thompson, on Gateway-related matters, as Gateway converts to a bank.
The Oklahoma Banking Board voted 5-0 on Wednesday to approve Gateway’s application to become a state-chartered bank. It then approved, 5-0, the company’s merger with Farmers Exchange Bank of Cherokee. Those approvals are contingent upon approval by the Federal Depositary Insurance Corp., which is expected in the next several weeks.
The governor appoints the banking commissioner and members of the state banking board, who serve staggered, four-year terms. Thompson has been commissioner for more than 25 years and has been appointed by two Democrats and two Republicans. His current term ends in September 2020. Stitt has the potential to appoint three other members of the banking board in his first term. The Senate must also approve the appointments.
At its Wednesday meeting, banking board members said they were confident the regulator and Stitt could avoid conflicts of interest. With the way the board terms are staggered, Thompson said, Stitt’s appointment power was limited because two members were just reappointed.
“He will not have ‘control,’ if you want to call it that, of the board during his first term,” Thompson said.
Board member Tom J. Thompson, who is not related to the banking commissioner, said bank department staff and leaders worked hard to avoid any potential conflicts during Gateway’s application process.
“Since we as board members are appointed by the governor, you’re appointed by the governor, when this conversation came up, we were all concerned about the perception of conflict of interest and so forth,” Tom Thompson told Mick Thompson. “But having watched you operate, and the deputy commissioner operate, I feel very comfortable that we have covered the situation to where’s there no conflict of interest. I think it’s been well done.”
Within 30 days of taking office, Stitt also will have to file a personal financial disclosure statement with the Oklahoma Ethics Commission, outlining material sources of income or ownership stakes above a certain threshold.
Stitt founded Gateway in 2000. He, his wife and children own the company through a family trust.
“Gov.-elect Kevin Stitt has gone to great lengths to separate himself and his family from a company they built from the ground up,” said Stitt spokeswoman Donelle Harder. “This is the first time in our state’s history where an incoming governor has undertaken such a diligent, thorough and transparent review and separation from a successful nationwide business to reassure the public there is not a conflict of interest.
“The governor-elect recognizes that this process sets precedent for future officeholders, and he is committed to ensuring there is ongoing transparency and review to protect the public trust.”
The transition plan for Stitt’s business interests includes steps to avoid conflicts of interest, including annual bank examinations of the newly created Gateway First Bank to be led by the FDIC. That’s a departure from the normal process of bank examinations for state-chartered banks, where state and federal regulators switch the lead role each year.
The Stitt transition team sent the plan to Attorney General Mike Hunter on Friday.
“We are currently working with the governor-elect and his team to review his plans to divest from his business interests,” Hunter said in a statement. “We are also working with them to identify and resolve potential conflicts of interest during his tenure in office.”
Stitt will be the first Oklahoma governor since Robert S. Kerr to come directly to the office from a private company without having held public office first. Kerr, elected governor in 1942, came from the oil and gas industry and was a co-founder of Kerr-McGee Corp.
Stitt stepped down as CEO of Gateway in August, but he remained as chairman through his campaign for governor. He has since resigned all positions with the company and received his last paycheck Dec. 31, according to the transition plan. Stitt will have access to his Gateway office at the company headquarters in Jenks through the end of May, but he will not take part in any Gateway-related business.
“Kevin Stitt will have no role in the governance structure of Gateway First Bank post bank merger,” the transition plan said.
Gateway CEO Stephen Curry said the FDIC and state regulators have been working on the bank conversion since last summer.
“The FDIC came in late September and spent about a month doing a full examination of Gateway, our business plan and met with managers to review our financials, internal controls and policies and procedures,” Curry said. “It was a pretty exhaustive examination. The outcome of that was positive.”
Gateway First Bank will be one of the top five state-chartered banks in Oklahoma by assets and one of the top 15 mortgage banks in the nation, Curry said. It has about 1,250 employees and expects to add several hundred employees in the next few years. The conversion from a mortgage company to a bank will allow it to offer more financial products to customers.
“We will be able to fund all of our mortgages from our operations here in Oklahoma instead of working with banks in other states,” Curry said. “That’s good for Oklahoma, and it’s good for us. It gives us better footing to grow the business regionally.”
As part of the business transition plan, the Stitt family trust that owns Gateway Mortgage Group will get a new trustee, James Redman, as it transitions to what’s called a “family office” to manage investments and real estate on the Stitts’ behalf. Redman is principal and co-founder of Tulsa-based Gibraltar Capital Management.
An investment policy statement is still being developed to address the Stitt family’s personal and bank investments, according to the business transition plan. The plan does not disclose those investments.