State to probe HVCB's books
By Kelly Yamanouchi
Advertiser Staff Writer
The Attorney General's Office will investigate issues raised in a critical state audit of the Hawai'i Visitors and Convention Bureau, Gov. Linda Lingle said today.
Lingle called allegations in the audit "very serious." She said Attorney General Mark Bennett will investigate whether invoices were properly submitted to avoid lapses in funding.
Lingle also said there is a "high probability" that the tourism authority will award portions of its contract to an organizatiom other than HVCB.
Also today, the Hawai'i Tourism Authority said it is concerned about some of the findings and is trying to address the issues.
The authority said it was surprised by many of the findings and will investigate.
"We're taking it very, very seriously," said tourism authority executive director Rex Johnson. "We still have to do some more things to prevent those sort of things from happening."
The audit blamed the authority for inadequate oversight of HVCB, its major contractor, and said HVCB violated accounting principles.
The tourism authority did not dispute many of the audit's charges of inappropriate use of state money by the HVCB.
The audit said inadequate oversight by the authority "provided HVCB with a blank check to spend state funds for self-serving purpose," including use of state contract funds for "exorbitant bonuses and unnecessary severance packages for its employees who were already highly compensated."
The audit also said the bureau used state contract money for "inappropriate or questionable expenditures" including paying for an employee's parking and speeding tickets and family travel expenses.
"Furthermore, we question the propriety of HVCB using its consultant law firm, paid with state funds, to perform legal services that sought to undermine the authority and the state," according to the audit.
State auditor Marion Higa recommended that the authority's board of directors and executive director improve oversight of its contracts and asked state officials and the Legislature to assess how much HVCB violated generally accepted standards.
The tourism authority said it agrees with recommendations outlined by the auditor and is planning to implement the changes. Tourism authority chairman Mike McCartney and Johnson said the authority may require restitution from HVCB for inappropriate spending, require further management and financial audits of HVCB, appoint a special master to review HVCB's operations and seek support from the state Ethics Commission and attorney general's office to advise it on the audit findings.
The audit found:
• An HVCB vice president also served as president of a Taiwan public relations company that was awarded a $242,000 HVCB contract.
• One employee's severance pay was $141,000, nearly equal to the employee's annual salary.
• The bureau used state money to pay for other state agencies' expenditures under questionable circumstances.
• State money was used to pay HVCB president Tony Vericella's parking and speeding tickets ($137), travel for family members ($174) and in-room hotel movies ($359), an inappropriate use of state dollars and a violation of the bureau's own policies.
Vericella said he has since has reimbursed the bureau for about $600 in personal expenses.
• The salary of an HVCB vice president in Japan was partially paid by his former employer, Japan Airlines, creating a possible conflict of interest because the vice president was supposed to work with every Japan-based carrier.
• Bureau employees inflated mileage and parking expense requests, demonstrating that "there appears to be an operant culture of taking advantage of the funding source — state funds."
Several of the alleged indiscretions detailed in the audit involved relatively small amounts of money. But taken as a whole, the problems hint at a general environment of abuse of taxpayer dollars, the audit said.
The HVCB was hired by the Hawai'i Tourism Authority to run its overall marketing operation. The present contract is worth $33 million
McCartney and Johnson said the tourism authority is making some changes, including a request for proposals for tourism marketing "to ensure that Hawai'i had the best, professional expertise to develop and execute programs."
The Hawai'i Visitors and Convention Bureau has long held the state's major tourism marketing contract, and the tourism authority is to decide at a board meeting later this month who will market Hawai'i starting Jan. 1. The request for proposals for the contract or parts of the contract attracted 14 bidders.
"This audit will obviously be in the back of people's minds when awarding contracts," Johnson said.
