Audit of LVCVA’s use of airline gift cards questioned by police

An audit that cost taxpayers $186,000 has come under fire from police, who question the thoroughness of its examination into the misuse of Southwest Airlines gift cards bought by the Las Vegas Convention and Visitors Authority.

The audit, ordered by the LVCVA board, lacked documentation for its findings, did not record and prepare written reports of witness interviews, left out names of key people who used the gift cards and ended without determining what happened to the majority of the cards, an unsealed police affidavit stated.

Las Vegas police submitted the 61-page affidavit to obtain a warrant to search the LVCVA offices on March 27 in an ongoing criminal investigation into the mishandling of $90,000 in Southwest gift cards. A judge made the affidavit public on Wednesday at the request of the Review-Journal.

Police said in the affidavit that they needed more evidence than what the audit provided to build a potential criminal case that LVCVA executives had participated in a conspiracy to steal the gift cards.

The audit, performed last year by the accounting firm Eide Bailly, took place after convention authority officials learned that staff, including former CEO Rossi Ralenkotter, had used Southwest Airlines gift cards for personal travel. The discovery was made while officials were responding to a Review-Journal records request.

For nearly three years, the newspaper has been investigating excessive spending and lax accountability of gifts to staff and board members at the LVCVA, most of which occurred during Ralenkotter’s 14-year tenure at the helm. A 14-member board of elected officials and gaming and business executives oversees the tax-funded agency, which has a $251 million annual operating budget to bring tourists and conventions to Las Vegas.

In their affidavit, detectives expressed frustration with Eide Bailly’s disorganized delivery of more than 54,000 pages of emails involving the gift cards that had no search feature. Some attachments were not included with emails, some were provided separately, making it difficult to match with emails, and other attachments could not be opened.

“It is your affiant’s opinion that to obtain the best evidence, data evidence must be collected from the LVCVA directly and not provided second hand from Eide Bailly,” the detective who wrote the affidavit told the judge.

Police ended up seizing seven years’ worth of emails and other electronic records related to the gift cards during the search.

Documentation lacking

Eide Bailly’s final audit report in June 2018 found that staff used roughly $20,000 in Southwest cards on personal trips and $20,000 on business trips.

But the accounting firm did not give police sufficient records to back up that finding.

“No documentation establishing personal vs official business travel could be located in the Eide Bailly provided files,” the affidavit said.

Auditors said in their report that they could not account for the remaining $50,000 in cards, and they were never given a chance to find them.

Attorney Todd Bice, who oversaw the audit for the LVCVA board, recommended ending the inquiry without pursuing the missing gift cards. He told the board it would cost more than $50,000 to locate the cards, and the board took his advice and ended the audit.

The board in July 2018 approved spending up to $200,000 for Bice, who hired Eide Bailly to perform the audit.

Bice declined to comment on the police affidavit, saying he had not read it. Chris Wilcox, who runs the Eide Bailly office in Las Vegas, also would not comment.

Despite the concerns raised by police, the audit produced stunning results and put more pressure on Ralenkotter to retire last August, three years ahead of schedule.

The audit publicly revealed the agency’s deceptive purchase of the gift cards, Ralenkotter’s use of $17,000 in cards on personal travel and the use of $1,400 in gift cards by then-board chair Lawrence Weekly on a trip with his daughter. The audit also disclosed a lack of internal controls over the cards and recommended tightening accounting procedures.

Clark County Commissioner Larry Brown, who now chairs the board, said the audit accomplished what the board wanted.

“The important thing from our standpoint was to have the facts in front of us with the two priorities — to implement policies to prevent this from happening again and do the best that we could to make sure the gift cards that were used for personal use were reimbursed,” Brown said.

Flawed interviews

In March 2018, auditors interviewed about a half-dozen LVCVA employees and executives about the mishandling of the Southwest Airlines gift cards. Those interviewed included Ralenkotter, Jean Burdett, the LVCVA’s longtime travel coordinator who retired in April, former Business Partnerships Director Brig Lawson and former Chief Marketing Officer Cathy Tull.

Auditors told police that they did not record the interviews and provided only notes in the form of a “personalized shorthand,” which was hard to decipher, according to the affidavit. The notes did not contain all the details of the interviews, and, when pressed by detectives, auditors had trouble answering questions, claiming they could not remember exactly what was said.

Lawson, who purchased the Southwest cards for the LVCVA between 2012 and 2017, requested that Tull be present during his interview with auditors, the affidavit said. Tull, one of Lawson’s supervisors, approved most of the purchases.

Auditors did not ask Tull if she used gift cards for personal trips, but police later uncovered records that showed she bought airline tickets for herself and family with $6,000 worth of cards. Tull resigned in April and paid back the tourism agency for her personal trips.

One auditor’s notes of an interview with Ralenkotter did not point out that Ralenkotter had used the gift cards on personal trips for himself and family, the affidavit said.

Auditors also did not give detectives any records confirming that both Ralenkotter and Weekly had paid back the agency for the gift cards they used for personal travel, the affidavit said.

An earlier draft of the audit report given to police listed a number of people who used the gift cards for personal use. Those included Ralenkotter’s wife and children, his assistant Sheila Christensen and other LVCVA staff. The list also included Phil Reynolds, the longtime life partner of Lawson.

An auditor told detectives that Bice had instructed the firm to keep the names out of the final report, “claiming that (the people) had no knowledge of wrongdoing and did not want to tarnish their names.”

Instead of identifying the people, the final version of the audit refers to “additional travelers” and “Ralenkotter family members and office staff.”

The auditor “could provide no corroborating evidence that Bice may have given to justify the omission of the names,” the affidavit said.

Police later learned that Reynolds bought 29 Southwest tickets with more than $9,200 in gift cards. Some of those tickets were for Lawson and friends and family members, the affidavit alleged.

Reynolds, a manager and booking agent, had entertainment contracts with the LVCVA for years and showed up in agency records as accompanying Lawson on international business trips. The LVCVA terminated its dealings with Reynolds after it learned about his personal relationship with Lawson.

Reynolds did not respond to a request for comment.

Prosecutors expect to file criminal charges against “one or more persons” by Aug. 27. That would include possible charges against Lawson, who police allege was at the center of the conspiracy to steal the Southwest gift cards. Police allege he hid the purchase of the cards in convention authority financial records and distributed the cards to Ralenkotter and others.

Lawson, who police arrested in March, has denied wrongdoing through his lawyers.

The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson. Las Vegas Sands Corp. operates the Sands Expo & Convention Center, which competes with the LVCVA-operated Las Vegas Convention Center.

Contact Jeff German at jgerman@reviewjournal.com or 702-380-4564. Follow @JGermanRJ on Twitter.