Posted on: Friday, June 27, 2003

State audit criticizes visitors bureau spending

Advertiser Staff and News Services

The head of the Hawai'i Visitors and Convention Bureau said yesterday that the agency will address issues raised in a scathing state audit, which revealed questionable spending, inadequate fiscal controls, conflicts of interest and a lack of strategic focus.

Tony Vericella, the president of the HVCB, was among those criticized in the audit, which found that state money was used to pay for his parking and speeding tickets, travel for family members and other prohibited expenses.

"Inadequate oversight by the Hawai'i Tourism Authority provided the Hawai'i Visitors & Convention Bureau with a blank check to spend state funds for self-serving purposes," the audit said.

Vericella said he would not comment on the audit until it is officially released and would not answer questions about the points raised in the report.

In a written message to bureau members yesterday, he said, "regardless of the size or scope of any issue, we will address any problem areas immediately."

"From the beginning, we have taken this seriously and have viewed this as a constructive effort that will help (Hawai'i Tourism Authority) and HVCB to further clarify roles, to further delineate policies, to determine appropriate processes and procedures, and to identify specific areas for improvement," he said.

The visitors bureau had been bracing for the report, which is to be released next week by state auditor Marion Higa. A draft copy of the audit was obtained by the Honolulu Star-Bulletin, which summarized its findings yesterday. Confidential copies were sent to the governor's office, Legislature leadership and the tourism authority.

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.

• HVCB used state money to pay for other state agencies' expenditures under questionable circumstances.

• State money was used to pay 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.

• 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 "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 portray a general environment of abuse of taxpayer dollars, the audit said.

The HVCB is contracted by the Hawai'i Tourism Authority to run its overall tourism marketing operation. The present contract is worth $33 million

Vericella said he requested and received a draft of the audit to review it, but was not on the original list of people to receive it.

"We felt that we should at least have a chance to start looking through all of this," he said.

Vericella is paid about $360,000 a year in salary and bonuses, which are privately financed.

Rex Johnson, executive director of the Hawai'i Tourism Authority, said he would not comment on the audit until it has been finalized.

The authority has scheduled a special board meeting July 16 to discuss the audit. The authority's board last year approved a $75,000 expenditure for the audit as required by the Legislature.

The release of the audit comes as the visitors bureau is under scrutiny in a competition for the state's tourism marketing contract that begins Jan. 1. The tourism authority is expected to make a decision next month.

Some tourism executives who are supporters of the visitors bureau are concerned about the effect a negative audit will have.

"I just have confidence that if something is raised by the auditor, it's going to be fixed," said Chris Resich, president of destination management firm Mary Charles & Associates.

"Do they have problems? Sure, everybody does," said David Carey, chief executive of Outrigger Enterprises Inc. and a former Hawai'i Tourism Authority board member. "Is it going to be as bad as the auditor paints? My guess is probably no."

But he said the audit would probably hurt the reputation of the visitors bureau.

"You shouldn't throw the baby out with the bath water, but there needs to be some performance adjustments," Carey said.

Advertiser staff writer Kelly Yamanouchi and the Associated Press contributed to this report.