Whistleblower Alleges Travel Promotion Entity Engaged in Kickback Schemes Fraud

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Travel Promotion Entity Engaged in Kickback Schemes Fraud

Travel Promotion Entity Engaged in Kickback Schemes Fraud

The former vice president (VP) of operations for Brand USA has filed a lawsuit against the firm alleging that the travel promotion company engaged in “kickback schemes” through its Visit California and Visit Florida promotions, and others, as well as fraud.

The former VP alleges that Brand USA inked marketing agreements with partners that depended on the company to reimburse their donations to the firm at a minimum of 130 percent through advertising and services that supported partners’ existing ad campaigns and even the partners’ own advertising agencies in order to meet budgetary goals and qualify for more federal matching funds, according to Skift.com.

Officials from Visit Philly explained to Skift.com how the arrangement typically works. Visit Philly said it contributed $100,000 to Brand USA, and Brand USA in turn purchased $130,000 in media to support a Visit Philly advertising campaign in eastern Canada.

“The campaign ending on September 30 of this year gave us a 30 percent return on our $100,000 investment and with that, we (Brand USA, us and our media buying agency) came up with the media plan specific to us,” Jim Werner, Visit Philly’s representative to Brand USA, told Skift.com. “We chose to advertise solely in eastern Canada … and used mostly our own creative, with a little bit of Brand USA creative. We also rely on Brand USA’s market research in Canada to help design the buy, saving us the cost of paying for that research.”

The question at the heart of the whistleblower lawsuit is whether such ad-buying arrangements are the norm and legal, or whether they are not. The attorney representing the former Brand USA VP says the quasi-governmental marketing arm is not engaging in cooperative advertising.

“Brand USA is not engaging in cooperative advertising,” the attorney told Skift.com. “Congress mandated Brand USA to solicit donations from the travel industry, which would be matched dollar-for-dollar by the federal government. Every dollar is supposed to be spent on marketing efforts that benefit the entire travel industry.”

Instead, she said, Brand USA’s CEO inflated the value of donations and used them, as well as the federally matched funds, in a specific way – however the donor instructs him – to save his job. Some of the biggest retailers in the country bought into the scheme, she told Skift.com.

Brand USA responded to the lawsuit by filing a complaint supporting a still-pending motion to dismiss the suit. The company fully denies the allegations and said it has broad discretion on how to utilize its funding as a private, non-profit entity established by Congress in 2009 to promote foreign travel to the United States. Brand USA argues in its response to the complaint, obtained by Skift.com, that it does not have to adopt federal policies and procedures meant to uphold program accountability and evaluation, including federal procurement regulations.

Brand USA says the “kickback schemes” the former VP is referring to are permissible cooperative advertising programs, Skift.com reported.