U.S. District Judge Joe Heaton issued a ruling Tuesday dismissing allegations made by Gov. Kevin Stitt.
The lawsuit was originally filed in 2022 by former Attorney General John O’Connor against Kleo, the parent company of ClassWallet. It alleged ClassWallet failed to prevent the mismanagement of $1.7 million in COVID-19 relief dollars intended for educational expenses through the Governor’s Emergency Education Relief (GEER) Fund.
According to a state audit, nearly 40,000 items purchased through the Bridge the Gap grant program with the federal funds had no educational value, such as Christmas trees and gaming consoles.
A joint investigation by Oklahoma Watch and The Frontier broke the story in May 2022. It found that then-Secretary of Education and former State Superintendent Ryan Walters gave “blanket approval” for all items purchased.
The decision allowed families to purchase items from approved ClassWallet vendors, such as Office Depot and Staples. Families also purchased items from Home Depot, although it was not on the vendor list.
The case highlights the long-running feud between Stitt and current Attorney General Gentner Drummond, who is running for Oklahoma governor.
After Drummond took office, the case was dismissed. Stitt asked Drummond to refile the case, but Drummond refused. The Oklahoma Office of Management and Enterprise Services instead filed the lawsuit through private attorneys in January 2024.
The next month, Drummond assumed control of and then immediately dismissed the suit. The case was stayed pending a decision by the Oklahoma Supreme Court on whose authority — Stitt’s or Drummond’s — should command the state’s case. It was then removed to federal court, and Drummond withdrew his appearance in the case.
According to the court order, the state’s allegations were ultimately not sufficient to warrant its breach of contract claim.
Oklahoma alleged ClassWallet breached its contract by authorizing payments for items out of the scope of the Bridge the Gap grant program, failing to “properly educate and advise” program applicants of the terms and conditions, failing to maintain information and records and failing to submit reports to the U.S. Department of Education.
It gives the state 14 days to refile an amended complaint. The governor’s office did not return a request for a response.
The situation has drawn widespread attention, including an audit by the U.S. Department of Education Office of Inspector General, which found questionable expenditures and processes of $31 million through GEER. An Oklahoma grand jury also blamed Stitt and Walters in a scathing report in October 2024 for mishandling the funds.
Drummond, who has long pointed the finger at “state actors” for the mismanagement, lauded the court’s decision in a Tuesday press release.
“The lawsuit was baseless from the outset and nothing more than a waste of taxpayer dollars,” Drummond said. “Overwhelming evidence has shown that Gov. Stitt and his administration rejected internal controls and oversight as well as failed to use ClassWallet’s available controls, leaving his administration responsible for the payout failures that occurred.”
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