The Osage LLC Board unveiled a six-page letter defending its performance and assailing the Osage News for creating “misconceptions” and spreading “inaccurate information” gathered from disgruntled former employees, charges its chairman reiterated during a meeting of a congressional committee reviewing the LLC’s annual plan of operation – and its $2.7 million request for additional funding.
In the letter, LLC Chairman Frank Freeman said the newspaper had contacted him and other board members before publishing articles in June and August about allegations by former LLC leaders and managers about his leadership.
“Rather than address these matters directly with the Osage News, the Board has opted to address these issues with the Osage Nation Congress because the Board reports to the Osage Nation, not the Osage News,” says the letter dated Sept. 2 addressed to Jodie Revard, the chairwoman of the Congressional Committee for Commerce, Gaming and Land, which has jurisdiction over the LLC.
Freeman told members of the committee the letter was initially confidential but it was later declassified – apparently by the LLC board.
The letter was published by former Minerals Council member Susan Forman on Facebook on Sept. 19 with the comment the Osage News’ August article about the LLC had been one-sided and she would have reached out to Freeman to “get the history of the events mentioned.”
“I am grateful that Mr. Freeman took his valuable time to share this history of events,” Forman added. “Now we have ‘the rest of the story.’”
The letter begins by revisiting allegations two of the three former board members of the Osage Nation Ranch made in June. The letter says in March of 2022, Freeman and fellow board member Richard Perrier met with Galen Crum, the chair of the ranch board that advised the LLC after several of the Nation’s LLCs were dissolved and put under the umbrella of Osage LLC.
The letter says the three men went over financial statements from 2018 forward, and the LLC board members were concerned about the fact the ranch had “negative retained earnings every year from 2018 forward.”
“Negative retained earnings over multiple periods is a sign a business should never ignore,” the LLC letter says. “The Board could not ignore it, did not ignore it, and prudently investigated Ranch operations further …
“The profitability concerns were reported to the Osage Nation Congress in the spring. Mr. Crum, Mr. (Hank) Hainzinger, and Mr. (Ladd) Oldfield were noticeably angry toward Mr. Freeman after the report. Despite efforts to continue to meet and work together, the Board ultimately lost confidence in its working relationship with the advisors and ended it.”
During interviews with the Osage News in June, both Crum and Hainzinger discussed Freeman’s concerns about retained earnings and dismissed them as spurious. The ranch, they said, was in the process of being developed, and that meant all profits and earnings were reinvested in cattle to expand the herd, improving the land, adding bison, building fences and so forth.
“Our goal was never to have a big bank account, and that is what retained revenue is,” Crum said Sept. 20 after the Osage News emailed the LLC’s letter to him and others the newspaper had interviewed for the articles in question.
“I’ve talked to a couple of different accountants about that: ‘What do you think about using retained revenue as your only criteria as to whether a business is viable?’
“They just laughed.”
Hainzinger, a longtime rancher, responded to the letter bluntly.
“I stand by the fact that we all worked hard and handled ourselves professionally and ethically,” Hainzinger said in an email. “I’m proud of everything the ranch had achieved prior to October 2021.
“I really don’t want my name associated with anything that happened after that.”
Private cattle sale
The LLC letter also addresses the former advisors’ criticism of a decision to sell more than 700 calves privately rather than at an online auction in July at which they said the calves would have fetched a premium.
The letter says the former practice, selling at auction, involved unnecessary costs for certifications, commissions and listing “greatly reduced the net sale proceeds to the ranch.” It also said the private sale was approved by the board.
The letter repeatedly claims the Osage LLC board approved such actions as the cattle sale, termination of contracts, and personnel actions such as firing top managers of the subsidiary LLCs – that the decisions were not made by Freeman alone.
However, the cattle sale, personnel actions and the termination of a contract for an environmental study needed to put the ranch into trust – all of which occurred in 2022 – have never appeared on any LLC meeting agenda since January.
The only personnel actions listed on meeting agendas from Jan. 1 through Sept. 30, 2022, were one in August to increase the pay for the ranch manager and cowboys because they were taking on extra duties involving hunting leases, and another in April to approve appointing Richard Perrier as general manager of Osage Government Services LLC. During an emergency meeting on Oct. 4, the agenda listed six new contracts to approve, including four for employees and two for board members Frank Freeman and Perrier. A discussion about those contracts was held in closed session. When they returned to open session, the board voted to approve what they had discussed in closed session without specifying what actions they were taking.
Most boards and Congress cast all of their votes in open meetings, but Attorney General Clint Patterson said there is no specific prohibition in Osage law on voting in executive session nor any specific requirement that votes be taken in public.
“Technically,” Patterson added, “you cannot vote on, or even discuss, an item not on the agenda. However, the law allows the ‘proposed agendas’ to be amended ‘as dictated by the business of the public body holding the meeting.’ So that prohibition would be difficult to enforce.”
Osage law does, however, dictate meeting minutes must include “[a] record or summary of all motions, proposals, resolutions or other matter formally voted upon, the results of the vote and the vote of each member of the body.”
The Osage News requested copies of those minutes and other records from the Osage Nation Congress in late August but agreed to delay receipt of them because Congress was going into session and its staff was overburdened.
Congress did produce mandatory annual reports for the LLCs. The most recent is a “State of the LLCs” filed April 5 gives thumbnails of what each LLC is doing but offers few financial details. For each LLC, a page is included that says, “Current Financials” and “Cash Flow Projections.” “Insert financial information here” and “Insert cash flows here,” it says under those headings on each of the pages.
The same records request was made to the executive branch, which responded it does not have them or even the annual reports the LLC is required to file. In a letter denying the request, Patterson suggested seeking them from Osage LLC; the newspaper made the request Sept. 21. A response is due by Oct. 6.
Back to the cattle sale: Crum disagrees
Crum disputed the LLC letter’s statements about the private sale of cattle. He said based on the prices similar cattle fetched at the high-end auction in early July, the Nation would have been paid $30 more per hundredweight than it received in the private sale. Based on an average calf weight of 600 pounds – 435,000 pounds on the hoof for 725 head – that would mean the Nation would have made $130,500 more in gross sales. The auction house commissions and third-party certifications regarding humane treatment, vaccinations and other matters do come with a price tag, but even factoring those in suggests the ranch would have realized $96,500 more selling the calves at the premium auction on July 5. Crum and Hainzinger both acknowledged in June the various certifications have a price tag, but those costs are paid back three-fold because the cattle are more attractive to buyers who market high-end beef. In 2021, Osage Nation cattle fetched record high prices at the premium auction, according to the auction company.
Most concerning, however, to both Crum and Hainzinger, was the potential for hanky-panky in a private sale.
“The idea that selling our cattle from a pickup truck is better than selling them at auction is ludicrous,” Crum said after reading the LLC letter. “We advertised to cattle buyers then took the highest bid. We never made a pact with one person.
“Can you imagine the risk of self-dealing on a deal like that – with 700-plus cattle that aren’t even your cattle, [but are] the Nation’s cattle – with one guy in a pickup? That makes me shudder.”
In the letter, the LLC board denies anything untoward occurred during the cattle sale.
“No one has been or will be paid any commission, finder’s fee or other remuneration, money or otherwise, in connection with the private sale,” the letter says.
ONES: Poised for failure or success?
The letter also addresses allegations by former directors and board members about Osage Nation Environmental Resources, which was the main subject of the Osage News article that ran in August.
The letter says Congress voted to make ONES a subsidiary of Osage LLC in April 2020, but the LLC refused to take control of the company for over a year for fear “its financial condition would be a drag on Osage LLC and its other subsidiaries.”
After 18 months of balking, “[t]he Board felt pressure from the Principal Chief and Congress to absorb ONES as a subsidiary in September of 2021 at the same time Congress passed legislation making the Ranch a subsidiary of Osage, LLC,” the LLC letter says.
It was only then, the letter continues, the board began analyzing and informally auditing ONES financials and operations.
The letter denies statements by former ONES Board Chairman Eddy Red Eagle Jr., former ONES President Paul Yates and Vice President Michelle Holley, that ONES was on track to perform well financially and start paying dividends to the Nation.
“The financials revealed that ONES was not on track for profitability,” the letter says. “It had significant cash flow issues and was surviving on a line of credit with insufficient amounts available to borrow to provide for the cash flow shortages that ONES faced. Osage, LLC had to infuse additional funds for ONES to be able to make its February payroll and infuse additional cash of other purposes.”
The letter says the board cannot discuss personnel issues involving Yates and Holley but takes them to task for discussing the salary at which ONES CEO Russell Goff was hired, and other details of ONES business, including clients and “teaming partners,” an apparent reference to joint venture partners are readily identifiable online through filings with the Small Business Administration.
“Their obligations to not disclose such confidential information expressly extends after the term of their employment and ONES is weighing its legal options,” the letter says. “Furthermore, their error in judgment and clear disregard of their contractual obligations is not surprising given the way ONES performed under their management.
“Mr. Yates and Miss Holley are also quoted making a number of claims maligning Mr. Freeman and questioning management decisions. Rather than address each disgruntled claim, the Board stands on the current financials of ONES, which show improved cash flow and significantly improved profitability.”
The financials for all of the LLCs are not public record. During a meeting at which a divided Congress debated giving Osage LLC a cash infusion to hire management, perform repairs at Lost Creek Ranch, build a secure fence needed at Skyway 36, and other needs, Congresswoman Paula Stabler made that point with some passion.
Semantics: Subcontractor terminated agreement – after it wasn’t paid
During the Commerce Committee meeting, no member of Congress brought up the fact the Osage Nation itself terminated a $405,000 contract with ONES for non-performance of an environmental review at the 43,000-acre Osage Nation Ranch. The review is a key part of moving forward with putting the ranch land into trust.
A July 19 letter from Attorney General Patterson to ONES and Freeman said the Nation had paid ONES more than $266,000 and had yet to receive any deliverables. The letter also notes ONES “terminated its relationship with the subcontractor” who had been performing the bulk of the work. The Osage News later obtained copies of the two contracts that identified the subcontractor as Reagan Smith out of Oklahoma City.
The LLC letter reverses the sequence of events, saying Reagan Smith itself had terminated the contract due to a payment dispute and filed suit against ONES in Oklahoma County.
In fact, in its 1½-page complaint against the LLC, Reagan Smith does say it terminated the agreement for non-payment, noting the LLC was contractually obligated to pay about $200,000 for its services but made no payments after making the first of four incremental and equal payments of $49,982.
The LLC letter also takes the Osage News to task for having “never bothered to investigate” the lawsuit filed in Oklahoma County.
In fact, the Osage News made several inquiries about the lawsuit in federal, state and tribal court, but due to an apparent glitch in the Oklahoma State Courts Network computer system, oscn.com, could not find it until the LLC letter – which gave the case number – was declassified and made public.
ONES responded to the lawsuit in June, essentially claiming state courts lacked jurisdiction and the contract clearly states any legal dispute must play out in tribal court. No action has been taken in the case since the response was filed on June 13.
The LLC letter also says it never hired a subcontractor to replace Reagan Smith. Patterson, again in response to an inquiry from the Osage News, had identified Connecticut environmental company called TRC as the replacement contractor for Reagan Smith, but as his letter terminating the Nation’s contract with ONES noted, no replacement subcontractor was ever approved by the Nation, as required under its contract with ONES.
Nepotism allegations addressed
The LLC letter also addresses allegations made by former board members and employees regarding nepotism, questions the newspaper had asked about in writing in June but to which it never received a response. In June, Freeman referred those written questions to the LLC’s attorney, Adam Marshall, who also never addressed them.
The letter finally offers responses.
It says the wife of Russell Goff, the Chief Executive of ONES and other 8(a) LLCs, was hired by the LLC board on March 1, 2022, as an independent contractor at ONES to perform $4,000 worth of work completing the ONES employee handbook, a job Michelle Holley had been tasked with before she was fired in January.
There is no agenda reflecting board action and there was no Osage LLC meeting publicly noticed for March 1, as required by the Nation’s Open Meetings Act. There were meetings held on Feb. 22 and March 31 but neither contains any mention of hiring a consultant.
“Mrs. Goff had relevant and appropriate qualifications to support this short-term need and the Board is grateful that Mrs. Goff was available to assist,” the letter says.
Siblings working together
The Osage News had also inquired, fruitlessly, as to the employment of Freeman’s sister, Rebecca Leonard, as the office manager for Osage LLC.
The LLC letter of Sept. 2 says she was hired by former Osage LLC CEO Gina Gray and Freeman’s predecessor as chair of the board, Kay Bills, who denied hiring her and said she was brought in by Freeman. The letter says she was hired on a temporary basis in November 2018 to help clean up files for a few weeks, and that Gray and Bills continued to ask her to perform certain jobs. (As previously reported, Bills said in August that Leonard had done good work.)
The LLC letter says the Board has no reason to terminate Leonard’s employment because Freeman was appointed chairman after she was hired.
The Nation’s anti-nepotism law does not appear to have wiggle room or a grandfather clause when it comes to relatives supervising other relatives.
In fact, it not only prohibits relatives from supervising each other, it also specifically bars any official from appointing or confirming a person to a board where that person will be supervising a relative.
The law, verbatim: “No Osage Nation official shall appoint or confirm a person to a board that has direct regulatory or direct managerial or supervisory authority over a relative of said person by blood or marriage within the second degree.”
Two paragraphs earlier, the anti-nepotism law states: “No Osage Nation official shall appoint to any employment position with the Osage Nation or directly supervise any employee related by blood or marriage within the second degree of said Osage Nation official. Assignment of such persons to duties, positions, governmental offices, or other entities shall in all instances be made in strict compliance with the current provisions of the Personnel Policies and Procedures of the Osage Nation and its entities.”
To ensure the Osage News wasn’t missing something, it again turned to the Attorney General for clarification. Patterson responded he had had the same questions about Freeman supervising his own sister and had asked LLC lawyer Marshall about it. He said Marshall informed him that Freeman did not supervise his sister, Rebecca Leonard. Instead, Marshall said Leonard is supervised by Russell Goff, the CEO of ONES, Osage Pinnacle Design Group and the newly conceived Osage Government Services.
The LLC letter clearly states that Leonard works for Osage LLC, not ONES, OPDG or OGS.
Goff lives and works in North Carolina.
The migration of insurance
When the ranch advisory board was let go in June, the Osage News was informed Freeman had consolidated LLC employees’ health insurance into one policy, and that he had moved the policy to an insurance agency for which his nephew worked. The newspaper did not report that allegation at the time because it was hearsay but did inquire about it in its June letter to Freeman that went unanswered.
In August, Yates and Holley, the top two former officers in ONES, confirmed, on the record and based on first-hand knowledge, that the insurance policy had been moved; they said it was abrupt, that they had not been informed before it happened, and that it had cost ONES some trouble and money because of the timing.
The LLC letter of Sept. 2 says the insurance was moved from Dillingham Insurance in Oklahoma City to Loftis & Wetzel, based in Ponca City, in October 2020 – as those former executives had told the Osage News.
The nephew “is not and never was an agent of record or ‘Producer’ for any of the Ranch policies,” the LLC letter says. He “once worked for an agent affiliated with Loftis & Wetzel. However, he no longer works for this agent or any other person or company affiliated with Loftis & Wetzel or with the Ranch’s insurance.”
Loftis & Wetzel’s website contains a photo of the nephew and describes him as a producer in its Edmond office, called Sterling Management Group. Sterling also lists him as a producer, but his LinkedIn profile says he left that job of six years in July 2022 – the month after the Osage News asked about the insurance transaction in a private letter to Freeman that never received a response and a month before the former ONES executives discussed the policy move. The newspaper called the nephew while reporting the August article that centered on ONES but never received a response.
The LLC letter says both Dillingham and Loftis & Wetzel policies are with Tribal First Insurance, but that the latter insurance agency is owned by an Osage, Bill Wetzel.
“Both before and after the transfer, the policies covering Osage LLC and its subsidiaries are the same,” the letter says, “however, the premiums for those policies has decreased (sic) because of the Board’s decision to adjust deductibles to decrease premium costs. Additionally, the transfer to the new agency allowed the Board to continue the exact same policies of insurance under an agency that is Osage-owned.”
Wetzel and Freeman are also related, although not within the second degree; they share a set of great grandparents, Frank and Cora Lessert. Freeman, his brother, and four brothers-in-law served as pallbearers for Wetzel’s aunt, Nancy, when she died nearly 20 years ago.
Suggestion that friends or family benefitted is “not only offensive, but false.”
The LLC letter, which is six pages, concludes: “It is unfortunate, but not surprising, that the disagreements with former advisers and officers of the Ranch and ONES and the resulting allegations concerning the Board and Mr. Freeman made their way into the press and the Nation’s politics. The suggestion that any Board member, their families, or friends benefitted personally from their service to Osage, LLC is not only offensive, but also false.”
“… What is perhaps most unfortunate, is the potential damage the Osage News articles could do to the success of the Nation’s businesses. The public reputation of a business in the market means a great deal. If the intent of those quoted in the article is to harm the Nation’s businesses, they may have already succeeded by publically (sic) airing their petty and biased grievances the way they have.
“We trust this letter will result in removing the unsubstantiated rumors and innuendoes associated with the recent operations of Osage, LLC, the Ranch, and ONES. The Board will continue to report to the Osage Nation as it has, however, the Board does not intend to respond to every biased allegation reported in the media.”
