David Ostrowe, the fast-food magnate charged with modernizing Oklahoma’s antiquated governmental systems as Gov. Kevin Stitt’s secretary of digital transformation, has been indicted on a felony charge of attempted bribery of an official.
The indictment (embedded below) alleges that Ostrowe attempted to threaten a reduction in state appropriations as a way to convince members of the Oklahoma Tax Commission to waive fines and penalties on the company of a former state senator who had contacted two sitting legislators about the issue. Ostrowe is the only person charged so far, according to documents provided by Attorney General Mike Hunter’s office late Thursday.
Ostrowe did not return a phone call from NonDoc seeking comment prior to the publication of this story, but he did tell Nolan Clay of The Oklahoman that he made no threats and stands by his actions. Clay was the first to report the indictment.
The charging document states in full:
On or about Sept. 10, 2020, in Oklahoma County, Oklahoma, David Ostrowe did commit the crime of attempted bribery of an officer by knowingly and unlawfully attempting to commit the crime of bribery of an official by directing Oklahoma Tax Commissioners Steve Burrage and Charles Prater to waive the interest and penalties of JCG Futures, LLC which were owed to the State of Oklahoma and if not compliant with this directive, appropriations to the Oklahoma Tax Commission would be withheld, all performed with the intent to influence an official action but said attempt was prevented or intercepted in the perpetration thereof, contrary to the provisions of 21 O.S. Section 42 of the Oklahoma Statutes, and against the peace and dignity of the State of Oklahoma.”
‘I’ve never even met David Ostrowe’
How Ostrowe allegedly became involved in discussing JCG Futures’ tax penalties is unclear, at least according to Jason Smalley, the company’s owner and a former state senator who resigned in early 2020 to take a job with a telecommunications firm.
Smalley told NonDoc he does not have Ostrowe’s phone number and has never spoken to him, something he said he relayed to the attorney general’s investigator.
“I told them I’ve never even met David Ostrowe,” Smalley said. “I don’t even think he could tell you who I was if I walked through the door.”
Smalley said his company, which operated a restaurant and venue until 2017, was approached by the Tax Commission earlier this year and told him that a numerical error meant his company owed about $5,600 in sales tax over a three-month period. Smalley said that in July or August he paid the state agency that amount plus about $5,000 in fines and interest penalties.
“Actually, to be honest with you the Tax Commission was really easy to work with on that part,” Smalley said. “However, I do think the penalties are excessive and the interest is excessive.”
As a result, Smalley said he called Rep. Kevin Wallace (R-Wellston) and Sen. Roger Thompson (R-Okemah), whom he knew prior to Thompson’s election to the Legislature. In addition to their friendship, Thompson happened to be the neighboring senator to the district in which Smalley lived. That district had no senator at the time owing to Smalley’s own January resignation.
The Senate’s appropriations chairman, Thompson told NonDoc — and the attorney general’s investigator — that he did not make any threat of reduced appropriations for the Tax Commission.
“Like all the other constituents whenever they call and say, ‘Is there anything you can do?’ I said, ‘Well let me ask them to take another look at it,'” Thompson said. “That’s all I do: ‘Would you take another look at this and see if there’s anything you can do?’ Normally they’ll write back and say, ‘There’s a statute, here’s why we can’t do it.’ And I said, ‘OK. I understand.'”
Smalley said that is all he asked Thompson to do, and he said he does not know how Ostrowe became involved.
“I have no idea what behalf he would have done that on. I tell you it wasn’t on my behalf. If it was on behalf of me, it was because he was doing it for somebody else,” Smalley said. “Or it was a whole laundry list of other things he was trying to accomplish and I was lumped in there.”
The probable cause affidavit filed by Tom Helm of Hunter’s office alleges that Ostrowe contacted all three Tax Commission members — Steve Burrage, Charlie Prater and Clark Jolley — and asked them to abate the penalties on Smalley’s company.
But the document also details what might qualify as “other things” Ostrowe was seeking:
Commissioner Prater stated he was approached by Ostrowe in September or October of 2020 in which Ostrowe asked Prater if he (Prater) would be willing to change his political affiliation. Prater, a Republican, stated that he believed the request was to allow Ostrowe to seek the vacant position on the Tax Commission when Commissioner Burrage’s term expires in January. If Prater were to change his political affiliation, this would meet statutory requirements for Ostrowe (registered Republican at the time) to be nominated to the Oklahoma Tax Commission. Prater further stated that he believed Ostrowe’s motive for attempting to influence the JCG Futures matter was that a favorable outcome would help him clear the Senate confirmation process, should he be nominated. After Prater’s refusal to change political parties, Ostrowe changed political affiliation from Republican to independent.
Prater, who narrowly lost a 2018 GOP runoff for state auditor prior to being appointed by Stitt to the Tax Commission, appears to have taken the entire matter to authorities, with the governor’s knowledge. According to Helm’s affidavit:
Commissioner Prater stated he met with Gov. Stitt to inform him of the attempts by Ostrowe to influence the Tax Commissioner’s decision. According to Prater, after discussing the matter with the governor, the two agreed Ostrowe’s actions should be investigated. When Prater asked if the governor wished to call for the investigation or if he (Prater) should, Gov. Stitt, after consideration, requested Prater ask that the matter be investigated by the Attorney General’s Office.
Prater did not return a phone call seeking comment prior to the publication of this story, but Helm’s interview of Thompson indicates that Ostrowe blames Prater for the investigation:
Sen. Thompson stated he was approached by Ostrowe on Dec. 16, 2020, where Ostrowe told Thompson that he (Ostrowe) was not going to speak with investigators because nothing good comes out of those conversations. Sen. Thompson told Ostrowe that he (Thompson) had nothing to worry about because he (Thompson) never said any of the things that were allegedly used by Ostrowe. Ostrowe again acknowledged to Sen. Thompson that Thompson never made any such threat. Ostrowe claimed that he had never made any statements alleging a threat to any of the Tax Commissioners, continuing that “this was all from Charlie Prater.” Ostrowe said that he did say that “it may be in our best interest,” to waive the penalties in fees but he (Ostrowe) never made a specific threat.
According to the affidavit, Thompson said Ostrowe said, “It’s all about Prater. Prater is making this up. He is the one lying to him because he wants to be bulletproof in the Tax Commission.”
Ostrowe told Clay of The Oklahoman that he had no interest in being on the Tax Commission, though he did confirm changing his voter registration.
Charlie Hannema, chief of communications for Stitt, released a statement Thursday evening.
“Gov. Stitt is aware of the allegations involving Secretary Ostrowe and takes them seriously,” he said. “We are still working to obtain more information regarding the details of the situation. The governor has faith in the fairness of Oklahoma’s justice system which includes the presumption of innocence.”
Background on David Ostrowe
David Ostrowe became Oklahoma’s first secretary of digital transformation and administration in 2019 and is responsible for the digital transformation of state services. About 50 state agencies report to Ostrowe, with the Oklahoma Tax commission being the largest.
The position has also included overhauling Oklahoma’s unemployment system in the midst of surging unemployment claims owing to COVID-19. In the private sector, Ostrowe is the president of O&M Restaurant Group, which owns Burger King, Blaze Pizza and Taco Bell franchises in Oklahoma, Arkansas and Louisiana.
In April, Ostrowe participated in a Q&A with NonDoc where he discussed his work on state government systems. Around the same time, he reportedly clashed with House Speaker Charles McCall (R-Atoka) and other legislative leaders over efforts to expand rural broadband and the Legislature’s targeted cut to Ostrowe’s Digital Transformation Fund.