The state's major tourism marketing agency, led by president Tony Vericella, is the target of a highly critical report issued by state auditor Marion Higa earlier this month and now faces an attorney general's investigation into allegations contained in the audit.

The audit and investigation hangs heavily over the embattled visitors bureau as it tries to put forward its best face to win a $25 million contract from the Hawai'i Tourism Authority. A decision by the Hawaii Tourism Authority on the winner or winners among 10 competing organizations is expected July 24.

HVCB's grasp on the state's marketing dollars may be growing more tentative as officials including Gov. Linda Lingle have suggested that the visitors bureau will not get the entire annual marketing contract.

The visitors bureau, with its staff of nearly 100, has already lost the right to market the Hawai'i Convention Center and is at risk of losing significant portions of the visitor promotion agreement, including the lucrative $6 million slice covering the Japanese market.

Even as controversy and uncertainty swirls, HVCB is still charged under its current contract with marketing Hawai'i as a tourism destination to the world. The health of the state's nearly $10 billion tourism industry rides heavily on the effectiveness of its marketing agents, and HVCB is the biggest among them.

The Key Players
Marion Higa State auditor who filed a critical report on the spending practices of HVCB.	Tony Vericella President of the beleaguered HVCB, the state's major tourism marketer.
Donna Mercado Kim State Senate tourism committee chairwoman suggested an investigative panel with subpoena powers.	Linda Lingle The governor has suggested strongly that HVCB may not get the whole marketing contract for the next year.
Marsha Wienert Lingle's tourism liaison and former head of the Maui Visitors Bureau, an arm of HVCB.	Rex Johnson Executive director of the Hawai'i Tourism Authority, the state panel that approves tourism marketing financing.

"Certainly it's a distraction," said Rex Johnson, executive director of the tourism authority. But he said "the marketing of Hawai'i has got to go on."

It is unclear how long the attorney general's investigation will take. Attorney General Mark Bennett said he expects to receive recommendations from his staff this week on an investigation into HVCB. And on Friday, Senate tourism chairwoman Donna Kim said a legislative committee with subpoena powers may be necessary to look into HVCB's operations as well.

Separately, the HVCB's executive committee is examining all of Vericella's expense reports for the past three years. The effort is expected to take seven to 10 days, according to Tony Guerrero, chairman of HVCB's board.

After Higa's report revealed Vericella's use of state money to pay for $137 in parking and speeding tickets, $174 for family travel and $359 for in-room movies at hotels, the HVCB head apologized and paid back the more than $600 in personal expenses.

"It's a learning curve we're going through," Guerrero said.

Chuck Gee, dean emeritus of the University of Hawai'i's School of Travel Industry Management and a former HVCB board member, said Vericella should have "his chance to explain."

"I would certainly hope that Tony is given every opportunity, because he is very knowledgeable so far as his marketing abilities go," he said. "But this does not exonerate the board from making a tough decision if they are forced to." That could include asking Vericella to step down if that is warranted.

Vericella's use of state money for personal use, although serious, may have the least long-term impact for the state. The larger concern is how the current controversies will affect HVCB's tourism marketing efforts now and in the future.

"It is a serious situation and made more so by the governor's statement that HVCB may not be getting as big a contract from the HTA," Gee said.

"If they lose that public funding for marketing, then the most vital role of HVCB is all but over."

Vericella said the visitors bureau is used to scrutiny and continues to carry out its responsibilities under its state contract.

He said the organization was occupied by continual requests for information from Higa's office from December through June and he said the visitors bureau plans to cooperate fully with the attorney general's office in an investigation.

"The audit focused on things that had occurred or happened in the past," Vericella said. He said he is "keeping everybody working" and the visitors bureau continues to carry out marketing programs.

"We have to keep focusing on moving ahead for Hawai'i," Vericella said. "Hawai'i's doing very well compared to lots of other destinations. Better than any U.S. destination, that's for sure."

But the effort needs to be sustained.

"Tourism is a 24-hour-a-day business," Vericella said. "Whatever it takes in terms of hours of the day and night to still do our job and to deliver on the initiatives that HTA has set out there for us, that's what we'll do."

Vericella acknowledged that HVCB's staff members are probably anxiously awaiting the decision on the next marketing contract that begins Jan. 1 and lasts at least four years; Lingle's statement that HVCB likely will not get the entire contract no doubt caused some worry.

"Everybody feels that when people look at the whole picture and all the aspects of marketing they'll feel that HVCB is the best choice for all Hawai'i," he said. "I believe that's what our employees actually believe."

Gee said the staff carrying out day-to-day marketing business at the visitors bureau is experienced and needs little daily supervision. However, "executives will be under the gun," he said. Dealing with responses to an investigation could be time-consuming for the HVCB board, he said.

If board meetings are spent "on how to handle the press, or how to handle the attorney general's office, then you're not dealing with the business of the people and that is marketing the state of Hawai'i," Gee said.

Dave Erdman, president and chief executive of local marketing firm PacRim Marketing Group Inc, said "it's important to keep our eye on the ball, which is to bring our visitors back." But he said "knowing the folks there, they're probably working 24 hours a day."

Marsha Wienert, Lingle's tourism liaison and a former executive director of the Maui Visitors Bureau, a branch of HVCB, said the success of last week's Japan trip led by Lingle and sponsored by HVCB proves that although the agency faces some challenges as raised by the audit, "they're still understanding what their main purpose is, which is to market Hawai'i."