As head of the U.S. pavilion at last year's World Exposition in Portugal, Vice President Gore's campaign chairman, Tony Coelho, approved "questionable payments" to contractors and oversaw an operation marked by overspending, lax management, and hiring of relatives, according to a State Department audit.

A report by the Office of Inspector General cites improper use of free airline tickets, luxury cars and apartments provided for the taxpayer-funded exposition; the hiring of Coelho's niece and of two stepsons of Ambassador to Portugal Gerald McGowan; and approval of excessive payments on contracts.

The Center for Public Integrity, a non-profit watchdog group, released both the audit and its own report on Coelho's tenure. The center said, for example, that Coelho stayed in an apartment in Portugal that cost $18,000 a month.

Coelho is not mentioned by name in the IG audit, which refers to him instead as the "commissioner general," a title that gave him rank as an ambassador. On one occasion, the audit says, the commissioner general spent $800 for a chauffeur-driven Mercedes-Benz for himself--an "especially troublesome" expenditure, the report said, because "the U.S. pavilion had a fleet of six vans, which were underutilized."

It detailed how Coelho pressed to have a contractor reimbursed $26,000 for travel, relocation, and other expenses even though the contract didn't call for such payment and government officials found no basis for the reimbursement.

Coelho, a Portuguese American former California congressman who now oversees Gore's campaign, was tapped by the Clinton administration in 1996 to head the U.S. pavilion for Expo '98 and to raise private funds to build and run it. The expo ran during the summer of 1998 on Lisbon's river front and drew 8 million visitors.

The audit report noted the American exhibit opened on time and was popular with visitors. And it blamed officials at the U.S. Information Agency for failing to give Coelho adequate guidance for planning and managing the exhibit. The IG report added that when Coelho was unable to raise enough private funds, he turned to government agencies, which paid $6.7 million--82 percent of the cost.

The IG report did not recommend seeking reimbursement of any of the taxpayer funds. It said "specific culpability" for some of the deficiencies it uncovered "could not be readily determined because we were hampered by, among other factors, the destruction of certain records and the unavailability of some officials."

In a letter in April responding to a draft of the report, Coelho said that it contained some "inaccurate" details and that he hadn't been interviewed by investigators--though the audit report says he was interviewed. His letter did not address any specific points the inspector general's office raised about his actions.

Gore campaign officials have not seen the report and will have no comment on it, a spokesman told the Associated Press. But spokeswoman Kiki Moore, in a statement, extolled the "tremendous contribution" Coelho makes as general chairman of the campaign.

Coelho did not return phone calls. Stanley Brand, his attorney, said it is "unfair" for the report to "paint someone with a broad brush and not recommend further action. . . . Maybe he used the wrong-sized stamp or something not in total conformity with the regulations." But, he said, Coelho served two years without pay and spent personal funds that weren't reimbursed to help the expo.

"Tony Coelho is perceived as a can-do, very capable person, who people turn to when a project isn't working," Brand said.

He said Coelho checked with USIA officials "every opportunity he had. . . . If USIA had told him not to do it that way, he wouldn't have." He said Coelho did not recommend his niece for a job, but gave her resume to his deputy and longtime associate Fred Hatfield, who hired her after checking the propriety with USIA officials.

The IG audit challenged USIA's approval of the hiring of Coelho's niece, saying it was a violation of anti-nepotism regulations. The niece's salary was $2,500 monthly--$900 a month more than the office manager was paid.

The center said Coelho ordered many of the exposition's records destroyed before it closed in September 1998. Its reporting also found that Coelho "typically traveled to and from Lisbon on first-class tickets" donated to Expo '98 by Continental Airlines. Coelho "arranged for other first-class tickets donated by Continental to be used by his wife, Phyllis, and on one occasion . . . attempted to bill the Expo '98 accounts for a limousine he'd sent to the airport to pick her up," the center added.

The IG audit also cited a "personal" loan of $300,000 to Coelho by a Portuguese bank for a foundation he created to build an 80-by-60-foot stainless-steel wall commemorating Portuguese immigrants to America. The loan was carried on the pavilion's books as a liability, and Coelho "may have exposed the [U.S. government] to a potential liability if the loan is not repayed," the report states.

"Combining this endeavor with the U.S. pavilion . . . was inappropriate," the audit concluded. U.S. officials improperly gave the foundation some of the free airline tickets to which they had access, and paid for foundation employees' housing "although this organization had no official connection to the U.S. pavilion," the report said.

Brand said Coelho repaid the $300,000 loan, so the government faces no liability. He cited it as an example of Coelho advancing his own funds to help the expo.

The audit also described "deficiencies" in hiring practices, including "employment agreements with vague or no statements of work." One example was the hiring of McGowan's two stepsons as operations assistants--despite some officials' initial concerns about conflict of interest. They were paid considerably more than others hired for similar posts.

Jeff Murray, a U.S. Embassy spokesman in Lisbon, said yesterday that McGowan told him his stepsons had been hired by Coelho and that "they were paid very low salaries and worked long hours." He said McGowan was unaware of the audit. McGowan, a telecommunications lawyer who was a college classmate of President Clinton's and a top Democratic fund-raiser, has been ambassador to Portugal since late 1997.

This is not the first time government auditors have criticized the financial management of U.S. exhibits at international fairs. The U.S. pavilion at Expo '92 in Seville, Spain, had a $2 million cost overrun, and later Congress said the government couldn't spend funds on such projects without express approval. Congress didn't authorize such spending by USIA, the agency responsible for U.S. pavilions at world fairs, for the '98 expo.

When Coelho couldn't raise sufficient private funds for the Lisbon exhibit, he turned to the Navy and the National Institute for Environmental Health Sciences, part of the Department of Health and Human Services, for most of the funding.