To kick off the Oklahoma House’s Special Investigative Committee regarding the controversial and now-terminated contract between the Tourism and Recreation Department and Swadley’s Foggy Bottom Kitchen, Legislative Office of Fiscal Transparency director Mike Jackson today told lawmakers of numerous unusual practices and expenditures.
LOFT provides assistance to the Oklahoma Legislature in making informed, data driven decisions that serve the citizens of Oklahoma by ensuring accountability in state government, according to its mission statement. LOFT issued a full report about OTRD and the Swadley’s contracts to operate state park restaurants earlier this spring.
Jackson’s testimony today came hours after The Frontier reported that Swadley’s representatives and leaders of the Oklahoma Department of Tourism, which signed off on all of the restaurant contracts, were having conversations about a business arrangement even before a request for proposal had been sent out to other potential vendors for restaurant services at Oklahoma’s state parks.
Ultimately, Swadley’s was awarded the contract to manage restaurants at Oklahoma state parks. The contract eventually ballooned to $16.7 million.
But company founder Brent Swadley, and the state officials who signed off on the contract, have found themselves embroiled in controversy. Oklahoma Tourism Director Jerry Winchester resigned last month. The State of Oklahoma is also suing Swadley’s, and Oklahoma County District Attorney David Prater is waiting for the Oklahoma State Bureau of Investigation to complete a criminal inquiry into the situation.
Cheese melting machines and smokers
During his 40 minutes of testimony Thursday, Jackson outlined several aspects of the state’s contract with Swadley’s that raised eyebrows. Among them were consulting fees, as well as the cost of a cheese melter and two smokers listed on reimbursement invoices sent by Swadley’s to the state.
Swadley’s purchased two smokers costing roughly $170,000, but Jackson said LOFT staff could not find any comparable smokers that exceeded $25,000.
“We have a lack of documentation in terms of specifically knowing how much it could be,” Jackson said. “But in our cursory look at the expenses made, the closest thing we could find for smokers was about $25,000 for each of those smokers.”
Machines to melt cheese were also expensed by the company and paid for by the state.
“In one situation, we found there was a a cheese melter that was expensed for $11,600,” Jackson said. “The highest cost cheese melter we could find from the same manufacture was about $5,500. It was very common within the expenses that were made to do a cursory look in Google, and you could see that every one of those expenses — you couldn’t find anything that was that expensive just on preliminary research.”
When asked if there were other things that caught LOFT’s attention, Jackson said there was at least one example of high costs for tiling at one of Swadley’s Foggy Bottom restaurants.
“One item caught our attention pretty quickly,” Jackson said. “In this case, it was for $100 a square foot in one of the facilities, and that did catch our attention.”
‘Fee upon fee’
Committee chairman Ryan Martinez (R-Edmond) asked Jackson about subcontractor fees that were handled by Swadley’s Foggy Bottom Kitchen, which was the general contractor for the restaurants’ construction in the state’s contract.
“Most of the other contracts were in the subcontractor realm,” Jackson told the committee. “The interesting thing that we haven’t talked about yet are the subcontractor fees that were specifically charged. There were not just the fees charged by Foggy Bottom Kitchens, but also fees specifically charged by subcontractors and the Swadley’s Foggy Bottom Kitchens would then charge fee upon fee that were given to the OTRD to pay for.”
Jackson cited one the example of Premier Custom Homes, a contractor hired by Swadley’s to do work on restaurants.
“We did a case study on one vendor, Premier Custom Homes,” Jackson said. “They had a $20,000 fee they charged on $53,000 in work. Once they did that, Swadley’s billed the OTRD for the $73,000 and then charged the consulting management fees, which included $20,000 in fees from the subcontractor itself.”
When asked if Swadley’s had mixed Foggy Bottom resources with those of its flagship restaurants, Jackson said he believed that was the case.
“Based on our analysis, yes, they were involving parts of their business SERT and Swadley’s in general, as they were trying to provide these services to the state,” Jackson told the committee.
The additional food costs also raised eyebrows, Jackson said. Prior to Swadley’s taking over the restaurants at state parks, the state spent about $50,000 annually on food at the restaurants. That number ballooned after Swadley’s took over.
“This is what set us down that path,” Jackson said. “They admitted to erroneous reporting. In Fiscal Year 2021, that food jumped from a $50,000 average for 10 years prior to $5.97 million, which led us to a lot of questions. As interested citizens, we take our role at LOFT very seriously. We have a very good staff that looks at all these things, and when you see an increase of $26,000 to $20 million in engineering services or you see an increase from $50,000 to $1.4 million for a catch-all expenditure code within the core system, you start asking questions.”
OMES director Steven Harpe dinged for absence
Office of Management Services executive director Steven Harpe did not appear at Thursday’s hearing, despite having been subpoenaed on May 5 to attend. Instead, budget policy director Brandy Manek appeared briefly and answered a few questions.
Harpe’s absence drew criticism from several legislators, as he and his wife are currently vacationing in St. Thomas in the U.S. Virgin Islands on his honeymoon, according to social media posts.
According to a May 6 letter sent to House Speaker Charles McCall (R-Atoka), OMES general counsel Kathy Pendarvis informed House leadership that Harpe’s honeymoon could not be rescheduled. She requested that he appear before the committee after May 18.
“LOFT has fully complied with their subpoena, but OMES has not fully complied,” Martinez said Thursday. “Director Steven Harpe is not here. Evidently, he is on vacation.”
Rep. Jay Steagall (R-Yukon) said Harpe’s absence was egregious.
“Mr. Chairman I would also like to say you’re not the only one that has noticed Director Harpe is not with us today. I’ve recently discovered a social media post. It looks like someone is having a really good time in St. Thomas,” Steagall said. “I’ve been there before. It’s a nice place to be. But I don’t know if taking vacation, pre-planned or not, during the last two weeks of the session — this is the most critical stage of our legislative session when we finalize our budget and work through that process. It’s almost, dare I say, egregious the director isn’t here to help us answer these questions. I can’t wait to visit with him when he finally makes his way to this committee.”
