The Hawai‘i Tourism Authority is back in the hot seat with state legislators and the public as it undergoes more leadership shake-ups while dealing with allegations that procedural deficiencies allowed for inappropriate freebies at the Hawai‘i Convention Center.

Mufi Hannemann resigned Thursday as chair of the Hawai‘i Tourism Authority board, saying he wants to end distractions after allegations surfaced during a discussion of a state financial audit that two of his nonprofits, the Hawai‘i Lodging and Tourism Association and the Pacific Century Fellows, received Hawai‘i Convention Center freebies.

Hannemann, a former Hono­lulu mayor who is also the longtime president and CEO of HLTA and founder of the Pacific Century Fellows, told the board Thursday, “The best thing for me to do is to step down as chair, and then I will have to think whether I want to stay on the board, because the reputations of those incredible, important organizations have been put into question.”

The allegations emerged Tuesday during a special HTA board meeting to discuss the findings of a financial audit of HTA’s fiscal year 2024 by Accuity LLP, a firm contracted by the state auditor’s office. Accuity’s audit determined that there were procedural deficiencies that allowed for free food and rent for events at the convention center, but did not issue a finding of fraud.

The audit did not name the events in question, but they were the Hawai‘i Lodging & Tourism Association’s public safety conference, which was held at the convention center on Dec. 6, 2023, and a meeting of the Pacific Century Fellows, which was held May 15 in an HTA boardroom at the convention center.

The board did not take any action on the allegations about comps during the HTA special board meeting, which was continued until Thursday. At Thursday’s meeting the HTA board discussed the issue for about an hour and a half, with many members expressing concerns about public perception and trust.

Ultimately, the board voted to move further discussion to the next HTA Administrative & Audit Standing Committee Meeting. The committee is expected to make a recommendation to the board — which is likely to be well scrutinized by the public and could determine how well HTA fares as the state Legislature winds down.

The timing of HTA’s latest drama comes as the House Finance Committee is slated at 2 p.m. today in Room 308 to hear Senate Bill 1571, which would give the state Department of Business, Economic Development and Tourism more power over HTA by downgrading the HTA board to an advisory board.

House Majority Leader Rep. Sean Quinlan (D, Waialua-­Haleiwa-Punaluu) said lawmakers have varying opinions on the bill.

“One argument is that if you make the board advisory, that would make people less likely to want to serve on the board because it’s a big-time commitment, especially for a neighbor islander. I really do love the board members. I think they are wonderful people — sometimes they don’t always get along,” Quinlan said. “You could make another argument that the board hasn’t been able to quite figure things out lately. I think it’s a discussion that is going to involve a lot of people. They need to really think about what is the future of the board and what responsibilities should they have.”

State Rep. Adrian Tam (D, Waikiki), current chair of the House Tourism Committee, said HTA’s current issues also could determine how lawmakers weigh their budget requests.

“I think that the HTA board needs to sort itself out and focus more on tourism. All this infighting only hurts this industry and makes us dysfunctional,” Tam said. “We are going through a session right now and they have presented their budget. And this is not helping their case on whether or not they have have the confidence of Legislature.”

The job of convincing the state Legislature that HTA is up to the task now falls to former Honolulu City Council Chair Todd Apo, whom the board elected to replace Hannemann as HTA chair, and HTA Planning Director Caroline Anderson, who was recently appointed to serve as interim HTA president and CEO and interim HTA administrative officer after the March 21 resignation of Daniel Naho‘opi‘i.

Gov. Josh Green appointed Apo to serve on the board in October. Apo is CEO of ‘Iole, a nonprofit focused on sustainability and resilience. He also served in senior roles at the Hawai‘i Community Foundation and Howard Hughes Holdings Inc.

HTA board member James McCully, chair of the HTA Administrative and Audit Standing Committee, said, “I think this is a watershed movement for this board, and I enter into it with great optimism and I thank member Apo for being willing to serve.”

Hannemann, who was a Green appointee to the HTA board, was largely credited in 2024 with helping HTA to make a comeback in the state Legislature when it emerged from session with a recurring $60 million lump sum budget — no small feat for an agency that had endured cutbacks, organizational changes and the threat of repeal or defunding over several earlier sessions.

However, legislators showed that some lingering doubts about HTA’s capabilities remained when they passed Senate Bill 3364, which went into effect July 1, and repealed HTA’s exemption from the administrative supervision of boards and commissions.

The exemption from the administrative supervision of boards and commissions was the last one HTA had since it was founded in 1998. The Legislature also took away its procurement exemption in 2021, and in 2022 the agency lost its special fund status.

Since the exemption’s removal, the Hannemann-led HTA board and James Kunane Tokioka, director of the state Department of Business, Economic Development and Tourism, have had some very public disagreements over HTA’s budget, HTA’s use of its crisis funding and the top salary threshold for a new president and CEO.

Tokioka said removal of the exemption, which was instituted by legislators who had lost confidence in HTA, makes it “an attached agency that needs approval for expenditures, the budget and (spending categories).”

Naho‘opi‘i, who had been HTA’s 11th top leader since the state Legislature created the agency in 1998, indicated in a resignation letter seen by the Honolulu Star-­Advertiser that the HTA/DBEDT leadership structure was hard to navigate.

“I have had the privilege of working alongside dedicated colleagues and passionate stakeholders who recognize the delicate balance between tourism, culture, and the well-being of our residents,” Naho‘opi‘i said. “However, my time in this position has also been marked by increasing discomfort due to the actions of some board members and the persistent political interference from external agents. Instead of fostering an environment where HTA can operate with the stability and strategic clarity needed to fulfill its mission, I have found myself endlessly navigating a landscape dominated by conflicting political agendas, inconsistent direction, and decisions that often appear driven by external pressures rather than the long-term interests of Hawaii’s people and place.”

Tokioka said he wishes Naho‘opi‘i well, but added, “There were things that I thought he should do and not do.”

It’s still unclear whether Hannemann will have the option of choosing to remain on the HTA board, but if he does, Tokioka said he is confident that there will be a path forward.

“I can work with everybody. It’s never been personal for me. I have 10 other boards that fall under DBEDT, and not on one of them do I have any conflict with the chair or executive director,” he said.

The HTA Administrative Audit & Standing Committee has much to unpack from the meetings on Tuesday and Thursday, and there were some inconsistencies in how HTA applied its policies.

Hannemann told the HTA board Thursday that it was only that morning that he had been presented with a bill from the convention center for $14,000 in relation to the two events. Convention Center General Manager Teri Orton told the HTA board that Hanne­mann’s organizations were not billed sooner for the events because they were reserved as HTA space.

Hannemann said he did not expect a bill for the Pacific Century Fellows meeting since he had planned to hold it in another location and moved it there at Naho­‘opi‘i’s request to make it more convenient for the HTA staff who were participating. He added that he believed the HTA space request for the HLTA Visitor Public Safety Conference was appropriate as it was an HTA-sponsored event.

The forms reserving the events as HTA space were unsigned. Now the HTA board must try to determine who approved the events as HTA space and whether that approval was out of character or the result of undue influence.

Tokioka said once the billing issue emerged in the financial audit, HTA’s policy was tightened to require the signature of the HTA president and CEO and the HTA vice president of finance before any comps for HTA space are approved.

State Auditor Leslie H. Kondo told the Star-Advertiser, “We didn’t find any evidence of fraud. If we had found evidence of fraud, we would have reported it immediately to the board and to management.”

“Based upon the information that we were provided, it appeared that there were organizations that were receiving complimentary or discounted use of the facility that did not seem consistent with HTA’s use policies,” Kondo said. “We didn’t look at the records themselves, so I don’t know the total. But I can tell you that there were more than the two organizations that Mr. Hannemann is associated with that appear that they were able to use the facility without having to pay or at a discounted rate.”

John Cole, state deputy attorney general, told the Star-Advertiser that the matter had been referred to the Attorney General’s Office, but it determined that there was not enough information to open an investigation.

The State Ethics Commission told the Star-Advertiser that state ethics investigations are confidential, and it could not comment as to whether an investigation had been opened.