Wasted Pennsylvania Taxpayer Dollars: The Independence Visitor Center Corp. ("IVCC") is not a "Tourism Promotion Agency" ("TPA")

Millions of Taxpayer Dollars Spent by The IVCC May Have Violated Permitted Uses of TPA Funds Including For Patronage Pay To Politically Connected "Key Employee" Who Now Works for The IVCC

In an effort to reduce budget shortfalls, Pennsylvania Governor Tom Corbett released a proposed 2011-2012 budget that "includes a 70% reduction in state funding for tourism marketing and promotion." On May 27, 2011, the Philadelphia Business Journal reported,

"Facing a $1 billion budget shortfall, Corbett hopes to save $5.5 million by eliminating the so-called Tourism Promotion Assistance distributed through 49 regional tourism-promotion agencies statewide. The money is used for television-and-print advertising, digital communication and other marketing."

As sacrifices are being made across the board to adapt to reduced funds, hopefully the Commonwealth's limited tourism promotion resources are not being used to continue supporting the unjust actions undertaken by the Independence Visitor Center Corporation ("IVCC"), a taxpayer supported public charity which operates the Independence Visitor Center, a Federal facility.

Tourism Promotion Agency Funding to the IVCC
From 2002 to 2009, the IVCC has received approximately $2.9 million of state taxpayer dollars from Tourism Promotion Agency ("TPA") funds allocated under the Tourism Promotion Assistance Grant Program to the Philadelphia Convention and Visitors Bureau ("PCVB"). Disconcertingly, such redistribution of tax dollars to the IVCC may have violated the permitted uses of those TPA funds and could therefore have potentially constituted the illegitimate and wasteful appropriation of public money.

Guidelines from the Pennsylvania Department of Community & Economic Development
The Pennsylvania Department of Community & Economic Development (“DCED”) published detailed guidelines entitled "Pennsylvania Tourism Office Grant Programs for Destination Marketing Organizations" ("Grant Program Guidelines"). According to the March 2010 release of these Grant Program Guidelines, the Tourism Promotion Act “establishes two grant programs that focus on local and regional marketing – the Tourism Promotion Assistance Grant Program and the Regional Marketing Partnership Grant Program.”

As a Tourism Promotion Agency, PCVB likely receives funds from the Tourism Promotion Assistance Grant Program, while the Greater Philadelphia Tourism Marketing Corporation (“GPTMC”) appears to be the Philadelphia recipient of the Regional Marketing Partnership Grant Program.

Appendix F of the Grant Program Guidelines lists Eligible and Non-Eligible Expenses for the grant funds (pages 39-40). While the reallocation of grant funds is not expressly covered, the delineation of Eligible Expenses emphasizes marketing-related expenditures. The Grant Program Guidelines repeatedly stress this marketing focus for the Grant Program funds.

In the “Introduction,” the Grant Program Guidelines state, “While we face significant economic challenges in 2010 the grant programs for Destination Marketing Organizations [i.e., PCVB] will continue to invest in tourism marketing and product development.” In Section I, Point A: Purpose of the Tourism Promotion Act, the Grant Program Guidelines explicitly state, “The purpose of the Tourism Promotion Act (Appendix A) is to support local and regional Destination Marketing Organizations in their efforts to market and promote tourism.”

As per the Grant Program Guidelines, eligibility to receive TPA funds is limited such that “only designated TPA’s may receive grants under the Tourism Promotion Assistance Grant Program.” “Pennsylvania has 49 designated destination marketing organizations that are eligible to participate in the Tourism Promotion Assistance grant program.” PCVB is a designated TPA. However, the IVCC is not, and has never been, designated as a Tourism Promotion Agency!

The Independence Visitor Center Corporation & TPA Funding
In filing its 2004 annual IRS 990 Form, the IVCC – a public charity – listed its Statement of Primary Exempt Purpose as, “To develop & operate the Independence Visitors [sic] Center, information relating to the park, the surrounding historic district, the city & greater Philadelp [sic]”.

Despite the IVCC lacking a marketing mission and operations that meet the eligibility criteria and purposes of the Tourism Promotion Agency Grant Program, the PCVB has regularly channeled large portions of the Commonwealth’s TPA grant funds that PCVB has received to the IVCC. According to the June 30, 2009 Audited Financial Statements of the Independence Visitor Center Corporation,

“In a Memorandum of Understanding (MOU) dated May 12, 2005 between the Philadelphia Convention & Visitors Bureau (“PCVB”), Greater Philadelphia Tourism Marketing Corporation (“GPTMC”) and IVCC [Independence Visitor Center Corporation], whereas PCVB is designated as the Tourism Promotion Agency (“TPA”) by the City of Philadelphia and as such is entitled to receive from the Commonwealth of Pennsylvania certain funds disbursed by the Commonwealth of Pennsylvania to the TPA to conduct comprehensive destination marketing and advertising to stimulate travel and tourism within its locale, PCVB shall pay IVCC payments equal to 21.2% of the TPA money received each year. The President of the IVCC serves on the Board of the PCVB. For the year ended June 30, 2009, IVCC received $424,540.00 under this MOU.”

According to the Report on Audit of Consolidated Financial Statements for Philadelphia Convention and Visitors Bureau's and Philadelphia Convention and Visitors Bureau Foundation, for the years ended June 30, 2005 and 2004,

"A Memorandum of Understanding (MOU) dated May 2005, which will be effective in July 2005, establishes responsibility and the allocation of Tourism Promotion Assistance (TPA) Matching funds between GPTMC, PCVB and IVCC. The Commonwealth TPA grant funds received by PCVB for the year will be allocated between the parties as follows: PCVB 12.1%; GPTMC 66.7% and IVCC 21.2%." (emphasis added)

Curiously, PCVB sub-grants almost twice as much TPA funding to the IVCC than it retains for PCVB’s marketing efforts. While GPTMC's use of the TPA funds seems much more in line with the intended purposes of TPA grant funding, the question is why PCVB would provide the IVCC with so much of PCVB's TPA funding.

The Grant Program Guidelines do not address the allocation of funds to third parties such as the IVCC, but the Grant Program Guidelines do provide for the spending of grant funds on information centers:

“Remote information centers may be eligible for reimbursement provided that they are used exclusively for welcoming visitors and distributing information to travelers and are not part of the office headquarters. Eligible expenses include rent, utilities, brochure racks, and insurance. However, maintenance costs such as repairs to the facility, and snow plowing, grass cutting, and trash removal are excluded.” (emphasis added) (page 40)

Based on this description of a “remote information center,” it appears that the IVCC should not be eligible for state funds for the operation of such a (Federal) facility. The IVCC operates the Independence Visitor Center (“IVC”), located at 525 Market Street in Philadelphia, Pennsylvania. The United States Federal Government, through the National Park Service, owns the Independence Visitor Center building and the land on which the IVC is constructed. The National Park Service has then sub-contracted with the IVCC, a taxpayer supported public charity, to manage the IVC. The IVC is not PCVB’s remote information center as discussed in more detail below. On information and belief, PCVB has not operated its own remote information center since November 2001 when the IVC officially opened at Independence National Historical Park, and PCVB shuttered its remote information center at LOVE Park (formerly known as JFK Plaza) at 16th & JFK.

The IVC does not exist “exclusively for welcoming visitors and distributing information to travelers.” The IVCC is very focused on “maximizing” revenue at the Independence Visitor Center which is a Federally owned facility that is subject to National Park Service laws and regulations governing concessions and commercial activity. For example, this is supported in the Operating Agreement between the NPS and the IVCC:

"The [National Park] Service and the IVCC acknowledge that it is their mutual intention that a primary role of the IVCC in operating the Visitor Complex [the IVC] is to conduct the revenue producing activities..." (emphasis added)

To that end of conducting revenue producing activities, the IVCC has allocated a large portion of the space at the IVC to generate revenue for several for-profit corporations. For example, Ride the Ducks and Philadelphia Trolley Works — two for-profit corporations — lease, operate and staff (with their own employees) dedicated ticket sales concession booths at the IVC and use the IVC as a means of marketing and selling their specific tour products and concessions, not for marketing the general Philadelphia region. The IVC also features multiple gift shops operated by the for-profit corporation Event Network and multiple cafes operated by the for-profit Max and Me Catering (owned by GuestCounts Hospitality, formerly known as Libre Management). The reign of commercialism at the IVC with the IVCC, coupled with the NPS willfully not adhering to various Federal laws and regulations including those regarding concessions management and commercial activities on NPS property prompted United States Congressman Robert A. Brady on April 27, 2009 to remark on the transformation of “the taxpayer-supported IVC into a federally subsidized sales and staging area for large corporations.”

Additionally, the IVC does not constitute a “remote information center” (emphasis added) for PCVB. PCVB maintains its office headquarters at 1700 Market Street in Philadelphia, approximately one mile away from the IVC at 525 Market Street. While the IVC therefore may be “remote” in relation to PCVB’s headquarters, the IVC is not an information center of or for PCVB, based on the Grant Program Guidelines. As previously discussed, the Independence Visitor Center building and the land on which it is constructed is owned and operated by the Federal government, which has then sub-contracted with the IVCC, an independently incorporated taxpayer supported public charity, to manage the IVC. While one to two executives of PCVB have served on the IVCC’s Board of Directors over the last several years, the notable corporate separation and operation between the IVCC and the PCVB renders the IVCC an entity independent of PCVB, but for the TPA funds which have been by sub-granted by the PCVB to the IVCC.

Additionally, even to the extent that the IVCC is allowed to receive TPA sub-grants from the PCVB, the IVC may violate the Grant Program Guidelines provision dictating that the remote information center be “not part of the office headquarters.” The IVCC — which, unlike PCVB, actually manages and operates the IVC — maintains its office headquarters within the IVC building itself at One North Independence Mall West, 525 Market Street (6th and Market Streets) in Philadelphia, further preventing the IVC itself as existing “exclusively for welcoming visitors and distributing information to travelers.”

Accountability and oversight disappear when the Commonwealth's limited funds are redistributed and sub-granted, enabling organizations like the IVCC — which do not serve the intended purpose of the taxpayer funds — to divert the taxpayer dollars towards purposes for which the funds were not intended. This is coupled with the fact that the taxpayer supported IVCC has proven litigious, clandestine and defensive when information is sought under the Pennsylvania Right to Know Law and Freedom of Information Act about its operations. As well, requests for a copy of this TPA funding Memorandum of Understanding (MOU) dated May 12, 2005 between the PCVB, IVCC, and GPTMC have been denied.

PCVB's loss of control of the funds was announced by The Philadelphia Inquirer when it covered the IVC's grand opening on November 18, 2001:

"The [2001] opening of the new center means the Convention and Visitors Bureau loses control of a $425,000 annual state grant. The bureau has used that money to operate the city's visitor center - the future of which has not yet been determined - but now the money will be funneled to the Independence Visitor Center, said Sue Schwenderman, the [PCVB] bureau's communications director." (emphasis added)

The Independence Visitor Center Corporation and Frank Friel
On May 27, 2011, the Philadelphia Business Journal reported on the ways in which the IVCC is adapting to current reduced state funding. The article revealed a striking waste of Pennsylvania taxpayer dollars:

"At the Visitor Center, the state grant helps fund safety-and-security initiatives, including the position of head of safety and security, held by Frank Friel."

'Under the proposed budget, we’d have zero for that,' said [Jim] Cuorato [President and CEO of the IVCC]. 'We consider safety and security of paramount importance, so we’ll make other changes.'"

While safety and security certainly are very important, the IVCC's funneling of public dollars to fund Mr. Friel's position seems strikingly wasteful. This apparent waste of public dollars is only amplified by the provision in the Grant Program Guidelines that lists the following under "Non-Eligible Expenses for Tourism Promotion Assistance Grants":

"Consultants / Contractual Services - includes legal and accounting costs, and specialized consultants hired on a project basis from an outside agency, institution, or organization that are not directly related to promoting the destination." (page 40)

First, a head of safety and security is clearly "not directly related to promoting the destination." Second, Mr. Friel may even be providing a "contractual services" since he is listed in the IVCC's 2006 IRS 990 Form as one of the "Five Highest Paid Independent Contractors for Professional Services." Regardless of whether or not Mr. Friel provides non-eligible "contractual services," it appears evident that his position does not focus on the marketing and promotion goals for which Tourism Promotion Assistance grants are specifically designed.

Moreover, according to the IVCC's Operating Agreement with the National Park Service,

"The [National Park] Service shall be the primary law enforcement authority on the Mall (the City of Philadelphia Police Department has concurrent jurisdiction and provides support) including, but not limited to, all of its interior and exterior spaces, including, but not limited to, the Visitor Center, Cafe and Great Room."

The Operating Agreement makes the IVCC's role in security explicit: "The IVCC shall have no responsibility for providing security or law enforcement for the Visitor Center Complex or the Mall." (page 21) (emphasis added)

The IVCC's Operating Agreement could not more clearly state that the IVCC is not responsible for security. Given that, using scarce, public, Tourism Promotion Agency dollars to pay for a Director of Security seems absolutely absurd and beyond wasteful. Furthermore, the IVCC pays Mr. Friel substantially to fulfill what is apparently a redundant role provided by the Federal government. According to the IVCC's 2007 IRS 990 Form, the IVCC paid Frank Friel $120,261 in the fiscal year of July 1, 2007 to June 30, 2008 (the most recent time period for which reliable data on Mr. Friel's salary exists).

While the possibility may exist that Mr. Friel's role is useful for the protection of the IVCC's satellite visitor centers and booths at Philadelphia's City Hall, the Fairmount Park Welcome Center at LOVE Park, Free Library of Philadelphia (Central Branch), and the Pennsylvania Convention Center, any such possibility seems incredibly slim. In the License Agreement between the IVCC and the City of Philadelphia for the City Hall Visitor Center, the following term is explicitly included: "The City shall, at its sole cost and expense, be responsible for security at the Premises and throughout the City Hall complex."

In the License Agreement between the IVCC and the City of Philadelphia for the Fairmount Park Welcome Center, the following term is explicitly included: "The City shall, at its sole cost and expense, be responsible for security at the Premises and throughout the Welcome Center." (emphasis added)

Given that the City of Philadelphia, and not the IVCC, has assumed sole responsibility, cost, and expense for security for the City Hall Visitor Center and Fairmount Park Welcome Center, Mr. Friel's security services are clearly not needed at these locations. Furthermore, the other two satellites of the IVCC are part-time staffed booths or tables at the Free Library of Philadelphia (Central Branch) and the Pennsylvania Convention Center. Both of these are public buildings owned by the government, both of the buildings pre-dated the IVC, and both facilities are open and operational when the IVCC has no visible on-site concierge presence at those buildings. Moreover, the written agreements with both the Free Library and Pennsylvania Convention Center Authority expressly limit the scope of services that the IVCC provides to just "concierge services."  As such, it would be very out of scope of their written agreements if Mr. Friel and the IVCC provided any security at these satellite locations.

It is curious that as recently as May 27, 2011, Mr. Cuorato told the Philadelphia Business Journal that faced with the elimination of TPA funding, the IVCC will "make other changes" to fund Mr. Friel's position which has been funded with TPA dollars.  This stance by the IVCC to maintain at all costs the position of Director of Security is strikingly ironic since on or about March 10, 2011, the IVCC had a "Reduction in Force" and eliminated the position of the IVCC's "Director of Marketing and Communications."

Additionally, according to the IVCC's IRS 990 Form for 2009 (which was signed by Mr. Cuorato on March 15, 2011), the IVCC responded that it had just two "key employees" (as per the IRS's question): Mr. Cuorato and Mr. Friel. 

Curiously, Christine Keates, the IVCC's Vice President and General Manager, was not listed as a "key employee" by the IVCC.  Additionally, the IVCC reported that Mr. Friel worked 40 (forty) hours per week, and the IVCC paid Mr. Friel $129,808.00 from July 1, 2009 to June 30, 2010.  During that same period, the IVCC reported that Ms. Keates worked 50 (fifty) hours per week, but the IVCC paid Ms. Keates $122,959.00 ($6,849.00 less than Mr. Friel).  As such, Ms. Keates (who serves as on a "vice president and general manager" level) is not considered by the IVCC as a "key employee," However, Ms. Keates worked ten hours per week more than Mr. Friel, was compensated at a lower level than a Director-level position which appears to be a subordinate title to a VP & GM level position, and Ms. Keates has worked at the IVCC for a longer period of time than Mr. Friel.  Note that in classifying Mr. Friel as a "key employee," the IVCC has represented that Mr. Friel met various compensation and management authority level tests set forth by the IRS including the IRS's "Responsibility Test" (See page 25 of 2010 Instructions for Form 990 Return of Organization Exempt From Income Tax).

Regardless of whether the IVCC has compensated Mr. Friel in whole or in part with state tax dollars - TPA funding, for example (or even Federal tax dollars) - it still appears that the services of a highly compensated director of security and safety are not needed based on the contractual obligations that the IVCC has with the National Park Service, the City of Philadelphia, the Free Library of Philadelphia and the Pennsylvania Convention Center.

Cronyism: Frank Friel & Governor Ed Rendell 
Prior to becoming head of security at the IVCC, it appears that Mr. Friel had been the subject of controversy with regards to his appointment by Pennsylvania Governor Ed Rendell as Chairman of the Pennsylvania Gaming Control Board. As reported by the Pittsburgh Tribune-Review on September 16, 2004:

"Frank Friel, the governor's embattled choice to lead the gambling board [Pennsylvania Gaming Control Board], stepped down yesterday -- a little more than a month after he was appointed. A series of newspaper reports had raised questions about Friel's past, and Republican legislative leaders urged Gov. Ed Rendell to reconsider his choice."

On September 16, 2004, The Philadelphia Inquirer reported,

"Friel admitted in a Sept. 2 [2004] interview with The Inquirer that he misrepresented his academic credentials when testifying under oath at a Connecticut hearing."

On September 4, 2004, the Philadelphia Inquirer Editorial Board wrote,

"Gov. Rendell should rescind his appointment of former Philadelphia police officer Francis [Frank] P. Friel to head the new Pennsylvania Gaming Control Board...It's a shame, but Friel and this vital, high-profile job are not a good match."

As also reported by the Pittsburgh Tribune-Review on September 16, 2004, "The gambling board chairman [Mr. Friel] will be paid $150,000 a year." Therefore, once Mr. Friel stepped down from a Commonwealth position in which he would have been paid $150,000, Mr. Friel later took a job with a public charity -- the IVCC -- which uses Commonwealth tax dollars to help pay Mr. Friel's salary, which appears to have exceeded $120,000 annually. 

Not only does Governor Rendell have connections to Mr. Friel, but the former Governor also has had close ties to the IVCC. In fact, since being personally appointed by Governor Rendell on March 18, 2003, William Graham, IV has served on Board of Directors of the IVCC in the role of "Governor's Representative." Thus there is a clear nexus between Governor Rendell, the IVCC and Mr. Friel that has existed for some time, including when Mr. Friel was nominated as Chairman of the Pennsylvania Gambling Board and when Mr. Friel became head of security for the IVCC.

Frank Friel's History with Independence National Historical Park and the First Amendment
Further, prior to becoming head of security for the IVCC, it appears that Mr. Friel also had past affiliations with Independence National Historical Park ("INHP"), where the Independence Visitor Center is located. In 1987, it appears that Mr. Friel was Captain Francis Friel of the Philadelphia Police Department.  In 1987, protesters were barred by security officials protecting Independence Mall, including Captain Friel, during events honoring the Bicentennial of the Constitution of the United States. In response, the protesters took the case to Federal Court (Case: Pledge of Resistance, et al., (Plaintiffs) versus We the People 200, Inc., et al., (Defendants), Civil Action No. 87-3975, United States District Court for the Eastern District of Pennsylvania), citing a violation of Constitutional rights. A New York Times article on the We the People 200 Court case reported,

"A Federal district judge, declaring that the officials [Captain Friel] who control Independence Mall 'may not fully appreciate the reach of the First Amendment,' found today that they had violated the free-speech rights of protesters at a ceremony honoring the Constitution's bicentennial." (emphasis added)

In fact, along with the Defendants, City of Philadelphia, Police Commissioner of the City of Philadelphia, Regional Director of the U.S. [National] Park Service, Superintendent of the Independence National Historical Park, Robert Mitchell and Walter Donahue, Frank Friel was permanently enjoined individually on November 28, 1988 by Judge John P. Fullam, United States District Court for the Eastern District of Pennsylvania,

"a. from denying to Plaintiffs, or any other person permission to lawfully distribute leaflets and other printed matter or to wear, display or carry signs, placards, or insignia, by reason of the message contained therein and sought to be conveyed;"

"b. from preventing plaintiffs, individuals or groups from distributing literature, assembling or soliciting signatures in Independence National Historical Park or on streets, sidewalks, parks or other areas open to the public, so long as such activities do not involve breaches of the peace, and do not ,actually interfere with similar activity by others, or with public events in progress."

Even in 2011, some 24 years after Judge Fullam's 1988 decision, the officials controlling Independence Mall, which is the centerpiece of Independence National Historical Park, still lack an appreciation of the First Amendment.

Through its past actions and its apparent failure to truly qualify as a Tourism Promotion Agency, the IVCC has clearly demonstrated that it lacks the trustworthiness necessary to be the recipient of public dollars. As such, government leadership should refuse the release of any future funds that will go to support the IVCC until its entire IVCC Board of Directors is replaced along with all of the IVCC's senior management including Mr. Cuorato.

Calls to Investigate the Independence Visitor Center Corporation
Based on the foregoing analysis, government officials including the Pennsylvania Auditor General should investigate the Independence Visitor Center Corporation to determine whether or not the IVCC has been in full compliance with various regulations, including the TPA's Grant Program Guidelines.  This forensic accounting investigation should include, but not be limited to, the receipt and use of millions of Commonwealth of Pennsylvania tax dollars designated for Tourism Promotion Agencies, which the IVCC is not, and the use of those TPA funds to fund security services for what appears to be patronage pay to a politically connected crony and for services that seem outside of their clearly stated intended TPA purposes.
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Exhibits:
"Tourism Industry Rallies at Capital," PA Tourism Equals Jobs, 3-24-11.

*Van Allen, Peter. "Independence Visitor Center trying new revenue sources." Philadelphia Business Journal, May 27, 2011.

*Chart showing funds received by IVCC from PCVB in TPA funds, using data collected from IVCC's Audited Financial Statements.

*Audited Financial Statements of the IVCC, 2003-2004.

*Audited Financial Statements of the IVCC, 2005-2006.

*Audited Financial Statements of the IVCC, 2007.

*Audited Financial Statements of the IVCC, 2008.

*Audited Financial Statements of the IVCC, 2009.

*Grant Program Guidelines, Pennsylvania Tourism Office Grant Programs for Destination Marketing Organization, March 2010.

*Philadelphia Convention and Visitors Bureau (PCVB) and Philadelphia Convention and Visitors Bureau Foundation, Report on Audit of Consolidated Financial Statements, for the years ended June 30, 2005 and 2004.

*IVCC's IRS 990 Form for 2004.

*Marcia Gelbart. "Long-awaited Visitor Center set for debut: The $38 million building at Independence Mall will open Tuesday. With tourism down, officials expect a slow start." The Philadelphia Inquirer, November 18, 2001.

*Operating Agreement between the Department of the Interior, National Park Service, and the Independence Visitor Center Corporation, April 26, 2010.

*Letter from United States Representative Robert Brady to Secretary of the Interior Ken Salazar, April 27, 2009.

*The IVCC's 2006 IRS 990 Form.

*The IVCC's 2007 IRS 990 Form.

*The IVCC's 2009 IRS 990 Form.

*2009 Instructions for the IRS 990 Form.

*License Agreement between the IVCC and the City of Philadelphia Department of Public Property for the City Hall Visitor Center, June 13, 2007.

*License Agreement between the IVCC and the City of Philadelphia Department of Parks and Recreation for the Fairmount Park Welcome Center, June 11, 2010.

*Letter from Jim Cuorato, President and CEO of the IVCC, to Siobhan A. Reardon,Free Library of Philadelphia, July 28, 2010.

*Agreement between the IVCC and the Pennsylvania Convention Center Authority, September 2010.

*Letter from Governor Ed Rendell to William Graham, IV, March 18, 2003.

*William K. Stevens. "Judge Says U.S. Officials, Honoring Constitution, Violated Protesters' Rights." The New York Times, July 11, 1987.

*Pledge of Resistance, et al., (Plaintiffs) versus We the People 200, Inc., et al., (Defendants), Civil Action No. 87-3975, United States District Court for the Eastern District of Pennsylvania, Permanent Injunction, November 28, 1988.