GlobalHue Accused of Overbilling Bermuda Account; Agency Plays Race Card

Don Coleman’s GlobalHue is accused of ripping off the government of Bermuda by overbilling its $13 million tourism advertising contract. In a report by Bermuda auditor general Larry Dennis (pictured), GlobalHue is accused of:

• Overbilling the account by $1.8 million.
• Prebilling the government in violation of its own rules.
• Not keeping invoices and billing records.
• Not returning discounts and credits to the client.
• Using a media buyer, Cornerstone, that charged commissions of  up to 181 percent.

Cornerstone’s average commission charged was 51 percent, the report says, and the average media industry commissions tend to be about 15 percent.

GlobalHue has responded by playing the race card. Jacqueline Reynolds, GlobalHue’s executive vice president, said in a statement issued through the Bermuda premier’s press secretary (!) that the contract was:

… a testament to the vision of the Premier and our desire to be part of a country that has a majority of citizens of colour and a black government.

… We feel that any innuendo of impropriety is slanderous, libellous and has absolutely no place in business.

So that BNET readers can decide for themselves whether the Bermuda auditor general’s report is libellous (or whether it simply raises a lot of reasonable questions about why GlobalHue’s billing is so murky), you can download a copy of the report here.

For those of you who can’t be bothered to read it, here’s a digest:

Cornerstone does not provide GlobalHue, and GlobalHue does not provide the [Tourism] Department, with copies of media vendors’ invoices. The Department is, therefore, unable to verify that the amounts it is billed are correct. It also makes a mockery of the contractual right of the Government of Bermuda or its authorized representative to inspect and audit the books, accounts and records of GlobalHue.

GlobalHue has consistently refused to provide media vendors’ invoices to support their billings. In a written response to an earlier Department request, it stated that we do not require Cornerstone to provide us with copies of invoices … from media outlets, that’s their business.

GlobalHue informed the Department that Cornerstone was refusing to provide the requested media vendors’ invoices. Without seeing media vendors’ invoices, I have to wonder how GlobalHue could ensure that its client (the Department) was not being overcharged.

The media vendors’ invoices show that Cornerstone’s markups during 2008 varied considerably. On some it was minimal and for others it was as high as 171% and 186%. A Cornerstone representative informed my auditor that the 171% and 186% mark-ups represented Cornerstone’s profit margin but should not be viewed in isolation. She said the average markup for the year was more like 30%.

To test this assertion, at my request the Department prepared a schedule of all Cornerstones’ invoices for the year, and the mark-ups charged. Overall, the mark-up for all services billed by Cornerstone averaged 51%. I understand that a more normal industry agency commission is 15%. In my view, a 30% mark-up would be high. A 51% mark-up is excessive and raises suspicions.

… the above findings and conclusions combine to cast considerable doubt on the relationship between the Department of Tourism and GlobalHue and the value for money obtained by the Department of Tourism for its advertising dollar. They also cast doubt on the ability or willingness of some Department officials to ensure that key internal controls operate effectively at critical times.

There’s also some gossipy stuff about how a Director of Sales & Marketing at the client “resigned” in 2007 after pressing GlobalHue for accurate copies of its bills. That official received a $440,000 payoff, which, as the report states, “raises questions.”

Note that GlobalHue’s response came via the prime minister’s office. (You can read it here.) The government is extremely defensive of GlobalHue. Why would that be?

One clue can be found if you look at how GlobalHue got this account. When opposition politicians questioned the selection of GlobalHue, the race card was played at that time, too. The Royal Gazette, in 2006:

The Ministry of Tourism denied that a recently hired advertising agency had not gone through a proper tendering process as suggested by two members of the Opposition at the Senate last week.

Director of Tourism, Cherrie Whittier, said the comments made by Opposition senators were “unfortunate” because many people were celebrating the fact that the agency is black-owned.

Sen. Bob Richards also questioned the tender process which resulted in the hiring of GlobalHue. He added that he was surprised that GlobalHue had won the bid because they have no experience in resort tourism. The comments made by Opposition members did not sit well with the Government senators.

So, to sum up: GlobalHue gets the contract under controversial circumstances, and the client says it is “unfortunate” to criticize the agency because it is black-owned. The contract is then billed under controversial circumstances, and GlobalHue’s client once again frowns upon those who do not celebrate the agency’s blackness.

This behavior is repugnant. Clients and taxpayers have every right to examine agency books; they should not be implicitly accused of racism when they notice that an agency’s numbers don’t add up and the shop happens to be owned by a black man.

Lastly, Coleman and GlobalHue need to pray that Dennis’s report is completely wrong. (And let’s be clear — Bermuda is obviously a political cesspit so the report may indeed be a work of fiction.) But if the report has any shred of truth, and if U.S. authorities pay any attention to it, then the Foreign Corrupt Practices Act comes into play and GlobalHue will find itself in a world of trouble far worse than anything Larry Dennis can conjure. Those, of course, are big “ifs” …

• See previous BNET stories on questionable agency antics:
  
• News America Marketing Group Wins Summary Judgment Against Whistleblower Robert Emmel
• Is the TV Networks’ Upfront an Antitrust Violation?
• Publicis Q4: $15.5M Army Fraud Settlement Not Noted in Its Numbers
  
• Trial: Did News America Marketing Group Break Into Floorgraphics’ Computers?
• Leo Burnett CEO Bernardin Oddly Silent on $15.5 Million Fraud Case
• Lamar Advertising Manager Guilty of Embezzling $200,000
• Rita Sanders Advertising employee took $40K in agency credit card scam
  
• The Scale of the Stupidity at Leo Burnett
• Leo Burnett Pays $15.5 Million to Settle Allegations It Defrauded the U.S. Army
• Tom Seifert Made Chairman at Ogilvy; His Ex-Con Wife Is Still in Business
  
• Lamar Advertising Still Embroiled in Pittsburgh Ethics Scandal
• American Apparel Eyed By SEC Over “Almost Bankrupt” Emails
• WPP’s In-House Commercial Production Shop Courts Controversy With Clients
  
• Levi’s Asks for Transparency and Media Buyers Balk
• The Cost of Valassis’ Suit vs. News America Is Eating Its Profit