Bermuda's Experiment With Ad Agency Cronyism Ends in Failure

Globalhue won't get another term as Bermuda's tourism ad agency, following a decline in tourist arrivals at the island's airports, illustrating how no-bid contracts are as bad for business as they are for ethics.

Globalhue won the $28 million, two-year rolling contract in 2006, in what was allegedly the repayment of a favor owed by Bermuda Premier Ewart Brown to Al Sharpton. Michigan-based Globalhue funded one of Sharpton's U.S. presidential bids, and Sharpton had helped settle an industrial dispute on the island for Brown in 2004, according to the now defunct Mid-Ocean News. The contract was awarded without competitive bids, in violation of the Bermuda government's finance rules.

In 2009, an audit found that Globalhue and its media-buying agency, Cornerstone, overbilled the government by $1.8 million and made dubious ad buys, such as $200,000 on a gospel music TV channel that no one watches but only $44,983 in bridal magazines (where the honeymoon market is).

Brown and Globalhue were so intertwined -- the premier was also the tourism minister, and Globalhue CEO Don Coleman is a "longtime friend" of Brown's -- that at one point the agency issued its statements through Brown's press secretary.

Brown responded to critics by repeatedly calling them all racists.

Unsurprisingly, Globalhue's efforts for Bermuda tourism -- on which the entire island's economy is dependent -- were unsuccessful. In 2009, the island reported the lowest level of airport arrivals in 30 years. Of course, the recession had a lot to do with that.

But in 2010 the economy picked up. Fourteen more cruise ships arrived on the island than the year before, bringing a 4.7 percent increase in total ship visitors. Airline arrivals continued to decline, however, sinking another 1.5 percent. The differing trends are interesting because tourism ads have no effect on the decision of cruise lines to add ships or stops in Bermuda. Airline passengers, by contrast, are entirely open to the influence of advertising.

By amazing coincidence, Globalhue decided not to pursue a third renewal of its contract just a few weeks after Brown's term of office came to an end.

This is why there is such a push for transparency in business today: It's not just about fairness. It's that cronyism is fundamentally inefficient because it diverts resources to the least qualified people.

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