NPRI’s Transparency Project on the LVCVA: Feb. 4, 2009 update

• Original Dec. 3, 2008 report
• Feb. 16, 2009 update
• Apr. 9, 2009 update
• Apr. 20, 2009 update
• May 19, 2009 update

R&R Partners Advertising Agreement in Limbo

The Las Vegas Convention and Visitors Authority's 14-member board of directors will face a crucial decision at its next meeting on Feb. 13: Whether to extend R&R Partners' $87 million-a-year advertising contract for another five years.

The LVCVA has the option to extend the advertising agreement expiring June 30 for another five years, but it must do so in writing by March 1. The LVCVA will post its agenda for the Feb. 13 meeting on Thursday, Feb. 5.

If the LVCVA board doesn't extend the contract by March 1, indications suggest that the lucrative advertising contract R&R Partners has controlled since 1980 will go out to public bid for the first time in 10 years. Over the last five fiscal years the LVCVA has paid R&R $398 million to manage advertising.

The LVCVA's relationship with R&R Partners has come under intense media scrutiny the last two months after the Nevada Policy Research Institute obtained and published an internal LVCVA audit of R&R Partners' advertising agreement that found serious violations of the contract.

The Sept. 12, 2007 audit discovered "actual or likely violations of laws, regulations or control deficiencies that could result in significant financial loss to the Authority or result in bad publicity."

NPRI published its report on Dec. 3. One day earlier, an NPRI public records request revealed, the LVCVA sent a draft contract to R&R Partners to extend the advertising agreement another five years. In a Dec. 2 e-mail to R&R attorney Morgan Baumgartner, LVCVA attorney Luke Puschnig said he had attached a "very rough draft of an agreement to extend the R&R contract."

Puschnig suggested that the two parties "get the legal aspects done then we can get the business people to draft the other part later." Puschnig indicated that the business side of the agreement would be "coming up in about two months."

Puschnig's e-mail gave no indication that any other party was under consideration for the advertising contract. The draft contract expands the scope of service beyond advertising to also include "branding and communications."

On Jan. 21, 2009, however, Puschnig sent another e-mail to Baumgartner attempting to remove any impression that the LVCVA had made a decision to extend the R&R contract.

"My previous (Dec. 2) e-mail in no way indicates that R&R will be awarded the contract," Puschnig states in the e-mail. "The draft of the advertising agreement is a general template that may be used for advertising contracts regardless of the vendor," Puschnig explained.

The cover page of the draft agreement, however, identifies the vendor as "R&R Partners, Inc." rather than leaving the space blank so that it could be circulated to other prospective bidders.

Puschnig's subsequent Jan. 21 e-mail put R&R on notice "that neither Rossi (LVCVA president Rossi Ralenkotter) nor the LVCVA Board of Directors have made any decision regarding the advertising contract."

LVCVA records confirm Ralenkotter accepted payment of travel expenses by LVCVA client

LVCVA president Rossi Ralenkotter's acceptance of travel expenses from one of the authority's major vendors appears to violate the state Ethics in Government law.

Ralenkotter accepted airfare, hotel and professional football tickets from mega-builder HNTB when he visited the firm's headquarters in Kansas City, Kan., in October 2007, LVCVA travel expense records show.

HNTB Nevada, Inc. signed a $56.6 million contract with the LVCVA on July 10, 2007 to provide architectural services for the remodeling and expansion of the Las Vegas Convention Center. HNTB Nevada is an affiliate of HNTB.

The state Ethics in Government law (NRS 281A.400) prohibits a "public officer or employee" from accepting any "salary, retainer, augmentation, expense allowance or other compensation from any private source for the performance of his duties as a public officer or employee." (emphasis added)

The statute defines a public officer as a person appointed or elected to a position established by the state Constitution or statute and which involves the exercise of "public power, trust or duty."

Ralenkotter appears to fit the definition of both a "public officer" in his role as president and chief executive officer of the LVCVA, and of a public employee. The LVCVA is a political subdivision of Clark County and was created by state statute as the Clark County Fair & Recreation Board. The LVCVA is primarily funded by a hotel room tax that generated about $220 million for the authority last year. The LVCVA board has delegated to Ralenkotter the authority to approve up to $100,000 in LVCVA expenses without board approval.

Ralenkotter's trip to Kansas City was for official LVCVA business. In a Nov. 2, 2007 internal memo, Ralenkotter states that the purpose of his trip was "to review our project and meet with the LVCVA/HNTB design team."

Ralenkotter's expense report-released in response to NPRI's Dec. 12, 2008 public records request-states that the "client provide (sic) airfare & lodging."

The expense report differs from an earlier copy of the report that the LVCVA provided to NPRI after a July 3, 2008 public records request. The earlier version of the travel expense report did not include the statement about the client paying certain expenses but did indicate that Ralenkotter incurred no charge for airfare and hotel.

According to the latest expense report, HNTB paid for Ralenkotter's $188 roundtrip airfare on Southwest Airlines and for two nights in the Sheraton Hotel in Kansas City. Ralenkotter's only meal expenses charged to the LVCVA were for breakfast on Oct. 13 and 14. It is unknown who paid for Ralenkotter's other meals.

Ralenkotter also received a ticket to an NFL football game. He states in an internal memo that "HNTB hosted me at the Kansas City Chiefs football game" on Oct. 14.

The LVCVA redacted portions of seven pages of e-mails between HNTB and the LVCVA discussing plans for Ralenkotter's trip to Kansas City. NPRI has requested that the LVCVA provide the complete e-mails between Ralenkotter's secretary and an administrative assistance for HNTB.

Ralenkotter has denied violating any laws related to receiving improper travel expenses from LVCVA clients.

The state Ethics Commission can impose civil penalties not to exceed $5,000 for the first willful violation of the law and can institute court action to remove an official from office if more than three willful violations have been committed. The commission rarely initiates an investigation unless it first receives a formal, written complaint.

Ralenkotter approved LVCVA payment for his wife's airplane ticket on junket to Denver

LVCVA president Rossi Ralenkotter approved authority payment of his wife's $189.50 roundtrip plane ticket to accompany him on a trip to Denver last year to tour the National Jewish Medical and Research Center.

The April 10-11 Denver trip came a month before Ralenkotter and his wife, Mary Jo, were honored by National Jewish as its 2008 Humanitarians of the year at a gala dinner at the Four Seasons Hotel in Las Vegas.

Ralenkotter approved an LVCVA donation of $25,000 to National Jewish Hospital as part of the event that honored the couple. The LVCVA contribution was the largest single donation received by National Jewish during its 2007-08 fundraising campaign in southern Nevada.

The hospital has no direct business with the LVCVA.

The LVCVA "travel authorization" form Ralenkotter signed directing the LVCVA to pay for his wife's plane ticket requires the attachment of an "approved spouse/companion travel memo." However, none was attached.

The LVCVA paid $1,125 in expenses for the Ralenkotters' trip to Denver including: $379 for two airplane tickets; $486 for other transportation of which only $175 is accounted for with receipts; $355 for a room at the Denver Ritz-Carlton, $54 for in-room dining; and $175 in miscellaneous expenses with no receipts.

The state Ethics in Government law (NRS 281A.420(7)) prohibits a public officer or employee from using "government time, property, equipment or other facility to benefit his personal or financial interest."