Amid mounting concerns from lawmakers and a criminal investigation, the Oklahoma Tourism and Recreation Department will be amending its contract with a Swadley’s Bar-B-Q affiliate, according to Lt. Gov. Matt Pinnell, who serves as Gov. Kevin Stitt’s secretary of tourism and has an advisory role with the agency.
Pinnell made his remark days after the Legislative Office of Fiscal Transparency released a report critical of OTRD’s expenses and the Swadley’s Foggy Bottom Kitchen contract in particular. The state agency paid heavily for Swadley’s to renovate the state park restaurants, and the state is currently obligated to cover up to $1.2 million in annual operating losses. For Fiscal Year 2021, the contract was amended to provide a one-time $2.1 million payment to cover losses.
“That contract is going to be changed,” Pinnell said. “We’re having those conversations now and will continue to.”
Pinnell said the LOFT report and committee hearing revealed a need for change.
“I’m committed to making sure a lot of those recommendations are followed moving forward, as well as making sure that any contracts are a good investment for taxpayers in the state of Oklahoma moving forward,” Pinnell said.
Asked if the current Swadley’s contract is a good investment for taxpayers, Pinnell said it is not.
“That contract is going to be changed,” he said.
The Tourism and Recreation Department is led by director Jerry Winchester, who Stitt hired in April 2019. A spokesperson for the governor was supportive of Winchester when asked about the LOFT report and the Swadley’s contract.
“Gov. Stitt has the utmost confidence in Jerry Winchester and appreciates the Oklahoma Tourism and Recreation Department’s efforts to improve our state parks,” said Charlie Hannema, chief of communications for Stitt.
Swadley’s contract fees called ‘exorbitant’
The Oklahoma State Bureau of Investigation has opened an inquiry into the Swadley’s contract, the unclear origins of which were the subject of extensive questions March 31 from LOFT Oversight Committee members. OTRD director Jerry Winchester told lawmakers that his agency received limited interest in the contract to renovate and operate the state park restaurants.
House Appropriations and Budget Vice Chairman Ryan Martinez (R-Edmond) said he could hardly believe such a claim.
“You’re telling me that this offer was made to all kinds of different restaurants and vendors, saying, ‘Hey, open this operation. It doesn’t matter how you perform, how much food you sell, you’re going to have your losses covered,’ and people weren’t lining up to take that deal?” Martinez said during the March 31 LOFT meeting.
Since then, Martinez has been reviewing invoices and other OTRD documentation related to the Swadley’s contract. On Tuesday, he highlighted a series of questionable reimbursements labeled “management” and “consultant” fees.
“My main concern is that there are these management fees throughout these invoices. They’re not consistent, they change. And this very specific invoice, there is almost $42,000 in management fees paid to Swadley’s and Premiere Custom Homes on about $53,000 worth of work,” Martinez said. “A 44 percent ‘management fee’ that is very vague? That is not the industry standard, and that seems exorbitant to me.”
Brent Swadley, the founder and owner of Swadley’s restaurants, told NonDoc on Wednesday that his company has managed subcontractors “a bunch” during his career.
“Twenty-five years we’ve been doing that,” Swadley said before referencing the management and consultant fees specifically. “That’s just standard stuff. We charge for our services.”
Swadley said he is not worried about the LOFT report’s allegations or the criminal investigation into his company’s contract to operate state park restaurants.
“It’ll all come out. We didn’t do anything wrong. It will all come out with the investigation and all this stuff,” Swadley said. “We’re not worried or concerned.”
Martinez said he is “still waiting” for information from OTRD regarding if and how it requested official bids from companies for the state park restaurant contract ultimately signed with Swadley’s.
“I know they mentioned 20 to 25 different entities that they spoke to, but I’ve asked for paper trails of those conversations, and I still haven’t seen any of that,” Martinez said. “Nobody has ever seen it. That’s the thing. They were very unclear about how they did that.”
Despite lack of cocktails, state reimbursed Swadley’s for mixed beverage licenses
Mike Jackson, the director of LOFT, is also unclear about another item he found while reviewing the Tourism and Recreation Department’s reimbursements to Swadley’s. According to one Office of Management and Enterprise Services claim form, the tourism agency paid $7,650 to reimburse Swadley’s for its purchase of five $1,530 mixed beverage licenses from the Alcoholic Beverage Laws Enforcement Commission.
The $1,530 figure covers ABLE’s $1,005 mixed beverage license, a $500 administrative fee and a $25 surcharge, according to ABLE staff. Under a mixed beverage license, an operator can sell liquor, beer and wine. Under a less expensive beer and wine license, an operator pays only a $500 license and a $25 surcharge.
Although Swadley’s Foggy Bottom Kitchen purchased and was reimbursed for five $1,530 mixed beverage licenses for state park restaurants, the restaurants only list beer and wine on their menus.
“I just thought it was interesting since they were not selling mixed drinks,” Jackson said. “[The fact] they were still reimbursed for those licenses made it onto our radar.”
Swadley confirmed that the Foggy Bottom Kitchen restaurants only sell beer and wine, but he speculated as to why the more expensive mixed beverage licenses were purchased.
“That could just be for special events,” Swadley said. “You know, most of these parks have banquet halls and stuff like that.”
Plenty of other elements of the Swadley’s Foggy Bottom Kitchen contract made it onto Jackson’s radar as well. He said citizens have been contacting him about the Swadley’s deal specifically.
“In the course of our review, LOFT observed several areas of concern regarding expenditures, including overpaying for items, paying excessive surcharges and fees, and a general lack of internal controls,” Jackson said. “Since our report became public, our office has been contacted by whistleblowers and other individuals who have concerns and knowledge of improper transactions. We are pleased the public sees LOFT as an independent and objective place to voice those concerns, as they have on other reports as well.”
McCall: ‘There is always a conversation’ on oversight
While Martinez and other members of the LOFT Oversight Committee have been digging into the details of OTRD’s contract and reimbursements with Swadley’s, the issue has also caught the attention of the leaders of the House and Senate.
“It seemed odd, but I want to hear everyone out,” said Senate President Pro Tempore Greg Treat (R-OKC). “We’ll see. The auditor, the OSBI, others involved in it. I try not to discuss pending things like that.”
“LOFT is doing exactly what we hoped it would do in terms of maintaining accountability on government,” McCall said. “We’ve set them up to look at things independently and report back to the Legislature. Ultimately, we’re always interested in knowing how agencies spend the money that we appropriate to them. They always come and tell us before session how they will spend the money if we will set their budgets a certain way, but it’s always good to have that verification piece — that check and accountability piece on the system.”
Sen. Julia Kirt (D-OKC) criticized Republican legislative leadership for having run HB 3603 in 2018 to change the Oklahoma Tourism and Recreation Commission from a governing body to an advisory body.
“I’m really concerned in that the report very much ties some of these questionable and perhaps not defensible expenses back to the time period when the Legislature gave control to the governor over hiring and firing the director and turned the commission into an advisory body,” Kirt said. “Transparency is important, and I think this raises a lot of concern about how we get information, how we know what is happening in agencies and how they are being overseen. All of that authority is vested in the governor now, and I think that when the Legislature decided to do that, we have to hold those agencies accountable still for the public good.”
Asked if he felt the state had enough oversight of OTRD in place with the commission now acting only in an advisory role, McCall said that was a “relevant and really good question.”
“It’s one that the Legislature looks at from year to year. There are decisions that we make based on information we have in that period of time, and then going forward we have the opportunity to reevaluate whether or not those decisions met the level of effectiveness that we had hoped. Or maybe we overlooked something,” McCall said. “There is always a conversation in our caucus about reevaluating how things are structured in government as a whole.”
Kirt said she worries that Winchester — or any future director of OTRD — could unilaterally make a decision to sell a state park without having such a transaction approved by the Legislature.
David White, director of communications and government relations for OTRD, said “ongoing internal and external investigations” prevent the agency from discussing specifics of the Swadley’s contract at this time.
“Over the last two years, the department has invested heavily in updating the state park system after decades of deferred maintenance due to underfunding, including the planning and installation of more than 100 new bathroom and shower units, the modernization of RV sites across the system, and critical infrastructure improvements,” White said. “We respect the Legislature’s important agency oversight role and look forward to working together to continue improving the state park system.”
The six Swadley’s Foggy Bottom Kitchen restaurants established under the OTRD contract are located in:
- Beavers Bend State Park in Broken Bow
- Lake Murray State Park in Ardmore
- Quartz Mountain State Park in Lone Wolf
- Robbers Cave State Park in Wilburton
- Roman Nose State Park in Watonga
- Sequoyah State Park in Hulbert
(Correction: This article was updated at 10:05 a.m. Thursday, April 14, to correct reference to the state’s contractual obligation to cover losses at Swadley’s Foggy Bottom Kitchen restaurants.)