Houston to Pay Back State

Agency Chairman Also Announces a New Direction
BOSTON–Doug Houston last week vowed to leverage his troubled shop’s experience on the Massachusetts anti-smoking account and reposition Houston Herstek Favat as a “social issues agency.” The shop will actively seek out local and national health-related assignments as a means of future growth, he said.
The agency founder and chairman also attempted to lay to rest some ghosts of the past, agreeing to pay the state nearly $66,000. The money covers lost interest on advanced payments his shop collected in fiscal years 1995 and 1996 for work it later undertook for the Massachusetts Office of Travel & Tourism.
Houston underscored his commitment to the “social issues” repositioning by announcing an assignment from the Food and Drug Administration in Washington, D.C. The shop will develop a pilot advertising program urging retailers in Arkansas and Florida to comply with federal laws requiring customers who wish to purchase tobacco products to produce identification proving they are at least 18 years of age. The assignment is part of an existing consulting contract between Houston Herstek and the FDA, said agency official Barbara Reilly. The ad strategy is being worked out and a campaign will likely break in November, Houston said.
The FDA assignment is the agency’s first significant new-business gain following a tumultuous spring and summer. During that time, the shop lost the ad accounts of Fidelity Investments and NEC Computer Systems, precipitating a round of layoffs and leaving the future of Houston Herstek in question.
The agency’s relationship with the Office of Travel & Tourism also came under fire from the state Inspector General’s office [Adweek, May 16], which this spring issued a strongly worded report blasting the tourism office for advancing Houston Herstek $5.5 million in 1995 and 1996. In both years, the shop retained public funds for six months or more before placing ads in broadcast or print media, the report said.
“In addition to forfeiting the interest that the Commonwealth would have earned had it retained this money until it was actually needed for advertising . . . the Commonwealth’s taxpayers have provided unsecured, interest-free financing to Houston . . . This practice is imprudent and appears to violate state finance rules,” the report said. The tourism office’s advance payment policy was in effect for all six years Houston Herstek handled the account but was discontinued earlier this year. The tourism account has since been assigned to another Boston shop.
In a letter to the agency which Houston subsequently faxed to Adweek, the director
of the Massachusetts Office of Economic Development David Tibbetts said, “In order to remove any lingering questions about the question of billing and payments . . . Houston Herstek Favat has volunteered to pay the Commonwealth.” Tibbetts also noted that during its six years on the account, the agency “performed the [advertising] services pursuant to its contract.” He invited the shop to participate in future state pitches, closing, “we look forward to your company participating in future competitive procurements with the Commonwealth.”
One such procurement may be an eventual defense of Houston Herstek’s flagship account, the Massachusetts Office of Public Health Tobacco Control Program. The agency retained that business in a 1996 review, but the Office of Public Health can call a new search at any time. Houston’s concern about keeping that account was a major motivation for him to write the check, sources said.
The agency paid the state lost interest for 1995 and 1996 because those were the specific fiscal years audited by the Inspector General’s office. Houston has written a check for $65,834 following negotiations with the state Department of Economic Development, the body that oversees the tourism office, Houston said.
There is no plan to pay back lost interest that may have accrued from other fiscal years, nor has the matter ever come up, Houston said. Economic Development official Alex Sutton said the payment closed the matter for good.