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POLITICS

Report: Taxpayer-funded tourism promotion agency plagued by cronyism, waste

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Politics,Beltway Confidential,Sean Higgins

Sens. Jim DeMint, R-S.C., and Tom Coburn, R-Okla., released an investigative report of Brand USA, alleging that the little-known taxpayer-funded tourism agency is rife with cronyism and shells out lavish amounts of money for travel and entertainment for its officials.

“It’s sad, but not surprising, to find the government’s newest tourism venture is just as wasteful and mismanaged as we feared,” said DeMint in a statement, adding, “Only Washington could think that taxing tourists will increase tourism.”

The agency replaced the U.S. Travel and Tourism Administration, which had been abolished in 1996. The new agency was created in 2010 by Congress to promote the US as a tourist destination. The agency was funded in part by a tax of $10 on all foreign travelers to America.

The money was put into a fund that the agency could drawn from, up to $100 million, provided that every $2 in public money was matched by $1 in private donations. There was an odd caveat though: the law said that up to 80 percent of the private money could be in the form of “in-kind” i.e., non-monetary, donations.

This apparently created a bad situation where all manner of activities would be “donated” to the agency so as to open the federal funding spigots. The report notes:

Charges for submitted in­-kind donations range from pricey first class plane fare, bloated taxi fares, luxurious hotel rooms, compensation for articles run in newspapers (earned media), and pricey private car services. Further, Brand USA is counting time spent by their volunteer board members as a donation to the Corporation at a rate of $258 per hour.

Essentially, the set-up allowed the Brand USA officials engage in lavish travel and lodging through their own companies and then submit that to the agency as a contribution. That in turn resulted in federal funding for these same activities. Such activities included: $6,180 for Nationals baseball tickets, $10,037 for travel to London (though the government balked at some of the charges), and $215,106 for a single party at a London museum.

Brand USA even submitted as in-kind contributions time and money they spent on lobbying Congress, despite the fact that the Travel Promotion Act expressly forbids the agency to lobby:

Documents obtained by the Senators detail numerous occasions when in violation of the  clear language of the act creating the corporation, Brand USA and its attorneys spent time and money formulating a strategy on how to lobby Congress. The documents disclosed by  the Department of Commerce, detail at least $8348.75 in legal fees paid by Brand USA for formulating a lobbying strategy. That amount does not include the salaries of Brand USA’s legal staff who were discussing the proposed strategy.

Compounding the problem, these documents were included in an application for federal  matching funds submitted to the Department of Commerce. In spite of the clear direction for Congress against lobbying the Department approved Patton Boggs’ donation of work on lobbying. Additionally there is no indication that the Department undertook any effort to address this clear violation of the intent of the legislation or question Brand USA on why  they were discussing lobbying.

Brand USA paid Patton Boggs $84,865.75 for their legal work and received an in kind donation of $28,282.62 from the firm.

Perhaps most surprising was that the Brand USA officials submitted as in-kind contributions media coverage for their organization – that is, independent “free media” – and put the value of that at more than $5 million. The chairman of Brand USA also donated his time in speaking to reporters, about five hours total, at $1,290.

Brand USA is governed by an 11-member board, all of whom were picked by the Commerce Secretary. The members were drawn mainly from the hospitality industry and were donating their time. All were major Democratic donors.

The Senators are demanding further documents from Brand USA and the Commerce Department regarding its activities.

“Brand USA has been stonewalling us for months.  For the last month at least we’d get a weekly call saying that we promise to get you the documents next week. Staff went to their offices in person to ask for the documents, yet they refused to provide them,” said Wesley Denton, spokesman for Senator DeMint.

UPDATE: A spokesperson for Brand USA released the following statement to The Examiner:

We appreciate the oversight responsibilities of Congress, and we appreciate the importance of operating at a high public standard.   The reality is that Brand USA enjoys strong industry support and is working with more than 260 partners.  We have received approximately $59 million in cash and in-kind contributions from private businesses and organizations across the country.  In-kind donations are vetted scrupulously ­ first by Brand USA, then by an independent accounting firm, before receiving a final review by the government.   Brand USA has been committed to holding administrative and overhead expenses to under 15% - ensuring that at least 85% of spending goes directly toward attracting international visitors to create jobs and economic growth.   The private sector ­ including members of the board ­ have donated countless hours, dollars and other resources because of their commitment to creating jobs and economic growth for America.   We have and will continue to work with the Senator and his staff to address any further concerns they have.

 

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