Feds probe L.A. airport agency's allocation of $40 million to visitors bureau
FAA tentatively concludes that the transfer of the funds was illegal. The L.A. agency says it is examining its records but believes it followed the law. Such money cannot be used for general promotion of the city as a tourist destination.
Federal authorities are questioning whether the agency that manages Los Angeles International Airport has illegally provided more than $40 million in revenue since 2002 to L.A. Inc., the city's convention and visitors bureau.
The Federal Aviation Administration, which began a routine audit of airport expenditures in July, has tentatively concluded that Los Angeles World Airports allocated the money in apparent violation of federal laws that restrict how airport revenue can be spent.
L.A. Inc., a private, nonprofit corporation, has received up to $6.8 million a year in airport funds for marketing and promotional campaigns designed to bolster tourism in the region and encourage travelers to fly into LAX, LA/Ontario International Airport and Palmdale Regional Airport.
"The FAA notified us that the expenditures involving L.A. Inc. need to have more documentation to make sure they comply with FAA policies," airport director Gina Marie Lindsey said Tuesday. "We are scrambling back into the boxes to get that documentation."
Lindsey said she was confident that the airport would be able to show that most, if not all, of the money sent to L.A. Inc. involved a legitimate use of airport funds.
She added that the law involved is "very general, with lots of gray areas subject to interpretation."
FAA auditors, who have the power to challenge expenditures dating back six years, notified airport officials of their preliminary findings last week. Los Angeles World Airports now has until the end of the month to prepare a challenge to the initial conclusions. The government will weigh those arguments before reaching a final decision on how much -- if any -- money may have been misspent.
Under federal law, advertising, marketing and promotions designed to increase air travel at an airport are permissible as long as the efforts specifically relate to an airport's amenities, airlines and advantages for travelers. In addition, the expenditures cannot exceed what the FAA determines to be the "fair and reasonable" value of the services provided to an airport.
General promotions of a region's tourist attractions, while likely to increase air travel, are not considered specific enough to comply with federal diversion laws.
If airport officials cannot refute the FAA's findings, the federal government can seek civil penalties of up to $50,000, treble damages in federal court and order L.A. Inc. to return the $40 million, plus interest, to Los Angeles World Airports.
