Investigation: Illegal spending at the Hattiesburg Tourism Commission

Investigation: Illegal spending at the Hattiesburg Tourism Commission
Published: Aug. 28, 2018 at 7:05 PM CDT|Updated: Aug. 28, 2018 at 10:48 PM CDT
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HATTIESBURG, MS (WDAM) - Every restaurant and hotel bill in the city of Hattiesburg comes with an additional 2 percent sales tax. That money is handed over to the Hattiesburg convention and tourism commissions.

They are two separate organizations with separate boards, which combined spend millions of tax dollars every year. It's the tourism commission's spending on bonuses and back pay though, that's the focus of a demand from the state auditor's office.

"Folks want to make sure that the money they're paying to the government is being spent wisely and used in the right way because they don't have a lot of it to give," said Mississippi State Auditor Shad White.

Laid out in a report from the state auditor, the Hattiesburg Tourism Commission is years behind on making it right with taxpayers. Letters, which are now court documents, were sent to seven former and current Hattiesburg tourism commissioners back on November 17, 2016, about misappropriated tax dollars.

Those commissioners are Marshall Bell, Sandra Foster, Frank James, Cathie Price, James Ratliff, Chris Rowell and Bonnie Warren. One of those former commissioners, Ratliff, has since died.

According to a confirmation of receipt WDAM requested from the auditor's office, the commission got those letters the next day. The acting director at the time noted the tourism commission paid out $251,951.80 in unauthorized bonuses and retroactive payroll payments.

The years in question stretch over six years, from 2008 to 2013. WDAM requested a list of who got the money and how much.

According to the breakdown we received from the auditor's office, seven people walked away with the money. Almost 90 percent of it went to Rick Taylor, who was the executive director of the commission at the time and is currently executive director of the Hattiesburg Convention Center.

Over those six years, Taylor made $217,763.05 alone in what the auditor calls misspent money.

"What you saw is spending that should not have happened in that way," White said. "When you give out bonuses like that, for instance, you violate the Mississippi Constitution."

White said while he sees no intent to misspend, he said the money must be paid back. Since it was board members who voted to give out the money, they're the ones liable for paying it back.

That means Taylor can keep his money and so can the other six employees who pulled in $34,188.75 combined. According to court documents, factoring in the interest of $182,125.10 and investigative costs of $6,474.66, as of September 2017, the tourism commission owes $440,551.56.

When asked about whether misappropriation of funds is illegal, White said it was.

"It is illegal. Misappropriation is illegal and that's what we're in charge of identifying and pointing out," White said. "Those are the situations where we have to get the money back, but not every misappropriation, not every instance of misspending is criminal."

Getting the money repaid is a legal battle though. The Hattiesburg Tourism Commission filed a lawsuit last week against its insurance company, United States Liability Insurance.

The commission claims the insurance company should be responsible for paying the money, but the insurance company doesn't see it that way. Court documents show tax dollars were used to pay $4,215 a year in coverage, partly to cover liability for errors and omissions.

According to the lawsuit, during the years in question, the commission didn't have legal representation and claims the board operated on the belief the payments were legal.

"The mistakes that were made and they were made, I think they were not made maliciously and they were not made with bad intent," said Hattiesburg Mayor Toby Barker.

All of this comes as Barker pushes for an additional 1 percent sales tax on hotels and restaurants. Combined with the existing tax, you'd pay an additional 3 percent every time you eat out or pay for a hotel room in the city.

According to legislation, which makes the tax possible, that additional 1 percent would be split between the city and the University of Southern Mississippi. The university would use the money to upgrade athletic facilities and the city would use it for promoting tourism and parks and recreation.

When asked if any of the money generated from the 1 percent would be handed over to the tourism commission, Barker said it would not.

"No, and one other thing that needs to be said is the tourism commission is funded by the hotel tax, not the restaurant tax," Barker said. "What we're going to put forward to the people is the projects they have asked for."

WDAM asked for a list of those projects. The mayor's spokeswoman sent us an email saying the city is still getting feedback and once a date is set to vote on the tax, a list will be released.

Of those seven commissioners on the hook, three still serve on the board. Those members are James, Bell and Warren.

Board members are appointed by the mayor and approved by the city council, although none of the seven responsible for the payments were appointed by Barker. Although not appointed by him, Barker believes they should keep serving.

"I think they showed great leadership in finding out their problem and changing course," Barker said.

Although changing course and getting in compliance, White said the tourism commission must figure out how to repay the money.

"Really the taxpayers are the ones who get hurt in situations like this," said White.

Tourism commissioners released a statement Monday saying they were shocked by the auditor's demand, adding they were misguided and are disappointed. The commission ended the practice of bonuses and retroactive pay and has since brought in legal counsel to guide them.

The auditor's demand for repayment now sits with the Mississippi Attorney General's Office as that legal battle with the insurance company continues.

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