State auditors in a report are accusing Anaheim’s Chamber of Commerce of improperly using public tourism dollars – given through the city’s tourism bureau – to advocate for laws, lobby elected officials and financially support Disney-resort friendly candidates in Anaheim.
Peril of Promotion
State auditors accuse Anaheim’s tourism bureau and the local chamber of commerce of improperly spending some tourism dollars on lobbying instead of promoting the Disneyland resort area in the latest chapter of OC’s largest corruption scandal in recent history.
The auditors’ conclusions last week are part of the latest investigations into public corruption in Anaheim – including sworn FBI affidavits and a city commissioned probe – that detail Disneyland resort interests undue influence on city hall.
[Read: CA Auditors Lambast Anaheim’s Tourism Bureau, Find Improper Tax Dollar Spending]
The latest findings by state auditors are prompting questions on whether it was legal for the chamber to spend tax dollars to lobby officials and whether city officials will take legal action against the chamber of commerce or Visit Anaheim the city’s tourism bureau.
State auditors say the spending on political advocacy was improper because it was specifically prohibited in Visit Anaheim’s contract with the city.
Mike Moodian, a public policy professor at Chapman University, said in a Tuesday phone interview he can’t speak to the legality of the spending, but said a number of public entities hire lobbyists to lobby elected officials in Sacramento.
“It certainly screams of a potential larger ethical issue,” he said. “The big issue here is that the City of Anaheim is the number one case study in the United States, for everything that’s wrong with big money in politics.”
Moodian is not alone.
Jodi Balma, a political science professor at Fullerton College, said this type of behavior by the chamber is indicative of a culture of corruption in Anaheim that has been detailed in three different investigations since 2022.
“For a tourism agency to be using that money in an incestuous merry-go round of cash is unethical and possibly illegal,” she said in a phone interview Tuesday.
Not everyone agrees.
In an unsigned statement last week to the Voice of OC, chamber officials pushed back against auditors’ allegations that talking to elected officials constitutes “political activity” but did not deny meeting with politicians.
“According to this logic, any communication with a government official is construed as a political act and therefore an unallowed activity by a publicly funded entity,” reads the chamber of commerce statement.
“This expansive definition would seemingly prohibit nonprofits and local government entities from taking positions on legislation in Sacramento or Washington when utilizing public funds.”
Visit Anaheim, the city’s tourism bureau, gets about three quarters of its funding each year from a 2% tax the city imposes on hotel rooms in the Anaheim resort area as part of the Anaheim Tourism Improvement District the city established in 2010.
According to state auditors, that’s about $5-15 million a year between 2012-2021.
How Tourism Dollars Were Used to Influence Elected Officials
State auditors found that the city gave over $100 million of tourism funds to Visit Anaheim between 2012 to 2022 and the tourism bureau gave Anaheim Chamber of Commerce over $4.4 million of it to promote tourism as part of a subcontract without the city’s consent.
Auditors said the tourism bureau’s contract with Anaheim required written consent from elected officials to subcontract out work to promote tourism, as well as monitor the subcontractors.
The chamber spent some of the money to lobby local elected officials and support resort friendly candidates through their political action committee – spending specifically prohibited by the contract between the city and Visit Anaheim, according to the auditors report.
“The tourism district assessment contract specifically prohibited Visit Anaheim and, by extension, its subcontractors from using these funds for other unrelated purposes such as political donations, contributions, or other activities,” reads the report.
State auditors say chamber leaders also used the money to advocate for or against federal, state and local laws.
“The Chamber’s subcontract work plans and deliverable reports indicate that the Chamber used these funds for numerous services that involved political advocacy and influence, none of which fall within the allowable services,” reads their report.
In the report, auditors provided a table showing how the chamber inappropriately spent tourism funds on lobbying from 2012 to 2022, including meeting with city council members, state legislators, a county supervisor, a member of congress and district attorney.
The auditors don’t specify who was lobbied during this time period with tourism dollars and city lobbyist reports don’t show anyone registered as a lobbyist for the Chamber of Commerce.
Auditors say a lack of oversight by the city allowed this type of activity to go on for years.
“Because the city did not have a meaningful process for contract monitoring,” reads their report. “Visit Anaheim was able to pay the Chamber for unallowable services that involved political advocacy and influence.”
Will Anaheim Take Legal Action?
In response to the report’s findings, city officials say they will adhere and follow recommendations laid out by auditors to improve oversight of tourism dollars in the city.
It’s unclear if the city will take legal action against Visit Anaheim or the Anaheim Chamber.
When asked if the city is considering legal recourse, city spokesman Mike Lyster said in an email Tuesday that officials are still trying to get more information.
“We are seeking more documentation, as the audit report does not go into detail. We look forward to seeing more information,” he wrote. “From there, we would need to consult with our City Council. Beyond that, any additional comment would be premature.”
City Councilman Carlos Leon said in a Tuesday text message that he wants to get money that was improperly spent back.
“I’m open to exploring all of our options in terms of recouping public funding that was not appropriately spent. I also look forward to working with my colleagues on implementing the recommendations of the audit so that we have accountability and oversight of these funds moving forward,” he wrote.
The rest of the city council did not respond to requests for comment Tuesday.
Former City Councilman Jose Moreno said in a Wednesday phone interview that the city council should direct the city attorney to launch a criminal investigation into the alleged improper spending of tax dollars.
But Moreno said he doesn’t think it’ll happen.
“We don’t have a mayor and city council who seems to want to address this,” Moreno said. “I’ve not heard them announce anything on any forums to discuss or to learn the public’s thoughts about the State Auditor’s report.”
The State Attorney General’s office did not respond to questions Tuesday if they would seek legal action against the chamber or Visit Anaheim.
Can You Lobby With Tourism Dollars?
Anaheim Chamber of Commerce’s CEO Laura Cunningham pushed back on auditors’ findings that this type of activity was improper and argued that it helped promote tourism in Anaheim.
“We respectfully disagree with this assessment, as these services and activities have demonstrably benefited the tourism and convention industries in Anaheim,” reads Cunningham’s response to the audit report.
But former city officials question if the money could be spent that way.
Moreno said it’s not legal to use the tourism dollars to lobby and others in the community raised concerns about investments and contracts with Visit Anaheim and the Anaheim Chamber of Commerce when he was in office.
Former Anaheim City Manager Chris Zapata both publicly and privately, according to records, was also against giving $6.5 million in public funds to bailout Visit Anaheim at the onset of the pandemic recommending the city loan them the money instead.
Zapata was fired shortly after by resort-backed city council members.
[Read: Anaheim City Council Sacks City Manager]
“It wasn’t clear to us whether that money was going where it was supposed to go and whether that money was going into political activities,” he said.
Former Mayor Tom Tait said the chamber shouldn’t have used the money to lobby.
“Any money that would have gone to the chamber, at the very least, should have been used strictly for promoting tourism and supporting local businesses,” he said in a Tuesday phone interview about the auditors findings.
Tait said he routinely pushed back on his council colleagues giving the chamber money during his time in office and successfully stopped the chamber of commerce from hosting the State of the City.
The Chamber took back sponsorship of the State of the City under Mayor Harry Sidhu – who would later plead guilty to obstruction of justice for lying to federal investigators about trying to ram through the Angel Stadium land sale for $1 million in campaign support from team officials.
The Chamber of Commerce supported the stadium sale.
Were COVID Dollars Used Illegally?
The audit also raises questions as to whether the city misused federal COVID dollars and broke the law doing so.
In the report, auditors say city officials unnecessarily dished out $6.5 million to Visit Anaheim – the city’s tourism bureau – during the start of the pandemic. The money was later backfilled with federal bailout dollars.
Last year, independent investigators in the city’s own commissioned probe found that $1.5 million of the bailout money sent to Visit Anaheim was diverted to a chamber-run nonprofit.
Balma said it’s unclear if backfilling the money with COVID dollars was illegal and the federal bailout came at a time when people were trying to prop up the economy amid mandated business shutdowns across the country.
“Government is not used to being agile. They do not move quickly. It was an emergency situation and I just don’t know if anyone wrote down the words that would make this a violation. However, it’s a huge misappropriation of funds by any other metric,” she said.
Now Congressman Lou Correa is calling on the U.S. Attorney General and the Secretary of Treasury to find out if the city, the chamber and Visit Anaheim illegally used federal funds.
[Read: Will the U.S. Attorney General be Next in Line to Probe Anaheim?]
Moreno said he hopes the U.S. Attorney General and the state will further investigate the alleged corruption in Anaheim because local officials don’t seem interested in doing so.
Hosam Elattar is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at helattar@voiceofoc.org or on Twitter @ElattarHosam.
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