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The state recently filed its second lawsuit against a vendor that distributed federal COVID-19 relief funds through two of the governor’s education programs in 2020.

Attorneys for the state argue Kleo, Inc., whose business name is ClassWallet, was responsible for preventing fraud and misspending through the Bridge the Gap Digital Wallet and Stay in School programs, which distributed $18 million in federal dollars to families in the early months of the coronavirus pandemic. The funds were part of Gov. Kevin Stitt’s $40 million allocation under the Governor’s Emergency Education Relief fund.

Digital Wallet provided $1,500 grants to families to purchase electronic devices, curriculum and school supplies to support at-home learning. But some bought TVs, grills, video doorbells, and Christmas trees, Oklahoma Watch and The Frontier reported in 2022.

Federal auditors found at least $650,000 in questionable expenditures, and the state auditor last year questioned $1.7 million.

Emails revealed Superintendent Ryan Walters, who was then the CEO of a nonprofit organization in charge of Digital Wallet, gave parents “blanket approval” to buy any items from select vendors, which included office supply stores.

Attorney General Gentner Drummond dismissed the first lawsuit soon after taking office in 2023, calling the state’s claims “almost wholly without merit.” He said he would instead focus on whether any individuals should be held accountable, though no charges have been filed.

For the newest lawsuit, filed Jan. 30, the state is represented by private attorneys Cheryl Plaxico and Austin Moseley, court records show. Plaxico is one of several attorneys defending the Statewide Virtual Charter School Board’s approval of a Catholic online school.

Many of the lawsuit’s claims echo those made in the first one, but there are differences. While the state is again alleging breach of contract, it did not renew its claim that ClassWallet fraudulently or negligently misrepresented itself to obtain the contract.

And while the state is again asking the judge to award it damages, the newest filing adds a request that the state not be liable for any claims or demands made by outside entities, including the U.S. Department of Education.

Has the U.S. Department of Education demanded its money back? We’ll be watching. Questions, comments, story tips? Please reach out via email or direct message.

— Jennifer Palmer

Recommended Reading

• Last year, the Legislature gave funding boosts to common education, higher education and CareerTech — the three major legs of the state’s education system. And they seem poised to do it again. [The Oklahoman]
• Until recently, students taking advanced math classes in Tulsa Union schools were mostly white, despite the majority minority student population. Efforts to diversify these classes are paying off. [The Hechinger Report]
• Western Heights principal is forced out of a job over drag queen drama. The district originally supported the principal despite pressure from Superintendent Ryan Walters to part ways. [NonDoc]

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