Get an insider’s look into what’s happening in and around the halls of power with expert reporting, analysis and insight from the editors and reporters of Montana Free Press. Sign up to get the free Capitolized newsletter delivered to your inbox every Thursday.
December 14, 2023
Montana Department of Commerce Director Scott Osterman resigned this week after an internal probe found that he racked up more than $26,000 in disallowed government expenses in possible violation of state law and policy, according to documents obtained by Montana Free Press and Capitolized.
Osterman spent the majority of that sum — almost $18,000 — on vehicle and lodging expenses for travel between his home in Kalispell and his office in Helena. The probe also flagged thousands of dollars in disallowed meal expenses and questioned an additional roughly $4,500 of Osterman’s reported vehicle maintenance costs, bringing the total sum of potentially improperly spent funds to more than $30,000 since Osterman took office in 2021.
Osterman resigned Wednesday evening, according to a copy of his letter obtained by MTFP and Capitolized.
As of Thursday morning, the Department of Commerce website listed Deputy Director Mandy Rambo as the department’s acting director.
“Following an internal review, the Budget Office found the director violated state policy related to travel expenses, and the governor took decisive action,” a statement from Gov. Greg Gianforte’s office said Thursday. “[Gianforte] found out about it, had the director pay the amount he owed to the State of Montana in full, and accepted his resignation.”
Osterman paid back the state about $29,700, the governor’s office said, roughly equal to the sum of the expenses the probe identified as disallowed and those identified as questionable.
The investigation into Osterman’s spending began over the summer when Chet McLean, the state internal control coordinator with the governor’s Office of Budget and Program Planning, “identified a potential internal control vulnerability at the senior leadership level,” he reported in a memo to Gianforte’s office. That led to a review of expenses for the various executive agencies, not including those led by elected officials like the Montana Department of Justice, from January 2021 to the end of June 2023, the end of the most recent fiscal year.
McLean reviewed procurement law, interviewed agency accounting staff and inspected expense reports. He identified several agencies — unnamed in an October memo obtained by MTFP and Capitolized — with comparatively minor compliance issues, such as improper classification of food expenses as office supplies or inconsistent record keeping. And he wrote that one agency director, later identified as Osterman, “charged approximately $27,000 for lodging, meals, and state vehicle usage (fuel and maintenance) when commuting to the agency’s headquarters in Helena.”
State law and policy “only permit lodging, per diem, and state‐vehicle usage when the director is in a travel status,” McLean continued, and “travel status does not include a commute from the director’s home to the department’s headquarters.”
Osterman, among that and other violations, was also using his state vehicle to commute between his home in Flathead County and Helena.
Osterman accrued about $9,500 worth of these expenses at the DoubleTree hotel in Helena, where he appeared to stay while in town. But the statute says the state only must provide for an employee’s meals, lodging and transportation when they are “away from the person’s designated headquarters,” which, in Osterman’s case, would mean away from Helena.
This distinction applied to many of the expenses in question: meals, transportation and lodging. The state is only responsible for reimbursing expenses of this nature when “travel status” applies, McLean wrote, and Osterman was, based on the fact that he made these expenditures while traveling to and from his office or staying in Helena, not in “travel status.”
The governor’s office also referred the matter to both the Legislative Audit Division and the Montana attorney general for possible further investigation, an official confirmed Thursday.
In 2019, then-Montana Secretary of State Corey Stapleton, a Republican, faced similar scrutiny after legislative auditors found that he traveled nearly 28,000 miles in a state vehicle for personal travel. The audit division notified the attorney general’s office, which in turn referred the investigation to Helena police. The Helena city attorney ultimately declined to prosecute the relevant misdemeanor charge because the statute of limitations had expired.
Osterman could potentially be legally liable under the same statute, though it’s unclear how his reimbursement of the expenses and subsequent resignation would affect the prosecutorial calculus.
Osterman is the second Gianforte-appointed department head to resign after controversy since he took office. In July, then-Department of Labor and Industry director Laurie Esau resigned a day after she was arrested in Missoula on a misdemeanor charge of driving under the influence.
—Arren Kimbel-Sannit
Verbatim
“I’ve been on study groups, a lot of the reason you can’t find employees is because the population’s decreasing — through people not having kids, having abortions, you’ve got folks that are retiring. The Baby Boomers are retiring in unbelievable numbers. So where are you going to find this person?”
Rep. Steve Galloway, R-Great Falls, arguing on Dec. 12 in opposition to a Cascade County resolution to strip Clerk and Recorder Sandra Merchant of her election duties and appoint a non-elected, nonpartisan county election administrator. Galloway served on the 2023 Legislature’s Joint Select Committee on Election Security and was one of dozens of residents from the Great Falls area who testified at Tuesday’s six-hour meeting.
Local Republicans Rep. Lola Sheldon-Galloway and Sen. Daniel Emrich also commented against the resolution, as did Montana Republican Party Chair Don Kaltschmidt. Much of the opposition hung on the argument that removing Merchant’s election duties was tantamount to stealing the votes of citizens who cast ballots for her in 2022, with numerous individuals invoking God and the U.S. Constitution in the process. Supporters of the resolution argued Merchant was not up to the task of administering the upcoming federal elections in 2024 and leveled a laundry list of allegations about how she’d mismanaged local elections throughout the past year. The resolution passed, with Republican commissioners Joe Briggs and Jim Larson voting for it and Republican Commission Chair Rae Grulkowski voting against.
—Alex Sakariassen
Battle for the Bench
Jerry Lynch, a former federal magistrate now vying for chief justice of the Montana Supreme Court, didn’t mince words when describing what he sees as the stakes of his election when he met with supporters in Great Falls last week.
“The judiciary is the last bastion against a supermajority, so to speak. And you know what I’m talking about,” Lynch said at the fundraiser.
The race for Supreme Court is non-partisan, but it’s not apolitical. It’s the Supreme Court that enforces the Montana Constitution — a document that, whether through its text or court precedent, protects access to abortion and a “clean and healthful environment.” It’s also the only branch of government in Montana that hasn’t been dominated by the GOP in recent elections.
In short, the outcome of a Supreme Court race can have huge implications for policy going forward, especially as dozens of legal challenges to laws passed by the GOP-led Legislature wind their way through the court.
Per the state’s codes of judicial conduct, candidates for the bench aren’t supposed to publicly opine on any issue that could come before their court. The standard can be a little muddy, but Lynch certainly came closer to discussing live political-legal issues — albeit ones that are currently enshrined in the Constitution — last week than most judicial candidates might.
He said the future generations “need to be assured that they will have the opportunity for a free quality public education,” that their rights to individual dignity, equal protection and privacy will be protected from government interference, “especially when it comes to reproductive rights, but in every respect,” and that they have access to a “clean and healthful environment.”
Lynch’s opponent is Broadwater County Attorney Cory Swanson. He, like Lynch, has said that it’s important the judiciary retains its independence and nonpartisan nature.
But while he described himself in an interview this week both politically and philosophically as a conservative, he said he’s not running because of ideology.
“I don’t believe it’s about the stakes of rewriting privacy laws or picking sides in the culture war,” he said. “I think it’s about the stakes of the Supreme Court focusing on judicial integrity and intellectual rigor. Decide the case before you, don’t decide the case based on the result you want.”
He was reticent to name specific cases where he felt the justices went too far.
“It’s kind of a mixed bag,” he said. “I can’t sit here and say the Supreme Court has run amok on this or that. I can read a case written by any of the seven, and I can go, ‘Brilliant, I learned a lot,’ and I can read a month later an opinion by almost any of them and say, ‘You know, it seems like they went too far here.’”
Vying for the second open seat on the Supreme Court next year are district court judges Dan Wilson and Katherine Bidegaray.
Swanson’s desire to remain non-partisan aside, conservative interests are hungrily eying a chance to remake the court, which Republicans have for years derided as liberal. The friction has only intensified as more and more GOP-backed laws face constitutional challenges. The two outgoing justices — Chief Justice Mike McGrath and Associate Justice Dirk Sandefur — are especially targets of GOP ire.
“From a conservative viewpoint, the opportunity to change two seats in one election is not something we’ve had the opportunity to do,” Jake Eaton, a GOP political advisor to both Gov. Greg Gianforte and Attorney General Austin Knudsen — and a frequent operative in judicial races — told MTFP.
—Arren Kimbel-Sannit
On Background
Commerce Department director resigns after probe into travel expenses: More on the investigation that uncovered tens of thousands of dollars in potentially illegal expenditures by (now-former) Department of Commerce Director Scott Osterman.
Cascade County relieves clerk and recorder of election duties: Cascade County Clerk and Recorder Sandra Merchant wasn’t even in office a year before the county commissioners voted to strip her of her election duties following a bevy of controversies.
The politics and philosophy behind the race for chief justice of the Montana Supreme Court: Think we’ll have a calm race for Supreme Court this cycle? Think again.
