Overseas contract: Donald Coleman, chairman and CEO of the Southfield-based advertising agency, Global Hue, and his wife Jo Coleman.

The taxpayer has shelled out around $1.8 million in overpayments to US advertising agency, GlobalHue, says Auditor General Larry Dennis.

And when Tourism's Director of Sales and Marketing began to investigate he was given a massive $440,000 severance package.

In a special report released yesterday, Mr. Dennis said GlobalHue, which was hired as Bermuda Tourism's advertising agency in 2006, was overpaying media buyer Cornerstone Media, which was getting commissions as high as 171 percent and 186 percent.

As media buyers, Cornerstone would book TV space and buy print advertising space.

A further investigation by auditors revealed the average markup was 51 percent, far higher than the normal agency commission of 15 percent.

Mr. Dennis said: "If the agency commissions on the advertisements placed and billed by Cornerstone had been 15 percent the Department would have paid approximately $1.8 million less for its broadcast media buys during 2008."

Mr. Dennis said Tourism's New York director of Sales and Marketing "resigned in 2007" shortly after he began pressing GlobalHue to obtain copies of media vendors' invoices.But GlobalHue said the director was micromanaging. He was given a severance package including unused vacation and vested pension contributions totalling $440,000.Under civil service rules if he had been sacked for underperforming he would have been entitled to $132,750."

A payment of $440,000 therefore raises questions," said Mr. Dennis in his report. Yesterday the Tourism department said New York staff had a different pension agreement to people employed in Bermuda so it was unfair to insinuate he had been 'paid off'.

In his report, Mr. Dennis said that top Tourism managers, while cooperative, had only an inkling of being responsible for the payments they were approving. Even those who raised concerns went ahead and paid

."Our audit findings indicated that they felt pressured to do so by what they viewed as the close relationship that GlobalHue has, and the influence it has, with the Minister of Tourism and Transport."In my view, the above findings 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 operated effectively at critical times."

Many of Mr. Dennis' claims were refuted by Government yesterday see separate story.

GlobalHue was first hired by Tourism in 2004 to help promote Bermuda's new Miami flight. In 2006, it replaced Arnold Worldwide as Tourism's advertising agency and was given $10 million to spend on advertising with a $1.4 million management fee.

The Auditor General's probe revealed Tourism didn't always get a refund when pre-paid advertising was cancelled."For instance, on the Minister's instructions the Department sponsored a televised basketball game in New York involving Howard University."Part of the $80,000 prepaid to GlobalHue was for two 30-second advertising slots during the game.

I was informed that a subsequent check by the Department revealed that the adverts were not shown."Whether GlobalHue received a refund is unknown, but I can find no record that the Department did."Mr. Dennis was disturbed to find GlobalHue were being paid in advance for work against Government's financial instructions.

And the arrangement did not help Government save money.GlobalHue's contract says it must keep and provide accurate record of the adverts it places for Tourism but it consistently refused to provide invoices to support its billings.

GlobalHue then blamed Cornerstone for not providing invoices.Mr. Dennis wondered how, without seeing media vendors' invoices, GlobalHue could ensure Government was not being overcharged."One would assume that was one of the services for which the Department was paying $1.4 million."When Mr. Dennis said the lack of invoices could result in a qualification in the auditor's opinion on the Consolidated Funds' financial statements invoices were suddenly provided revealing the very large markups.

Further, Mr. Dennis noted other problems with the GlobalHue set-up including the fact that it was paid in advance even though the media companies it gave work to were only paid after the adverts had run."Advance payments remain with GlobalHue and do not percolate down to the media buyer where discounts can be obtained.

"No instances were observed where the Department was the beneficiary of discounts earned by paying early."

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