JOHANNESBURG — Last week was a terrible one for local JSE-listed technology company EOH as a scandal surrounding Microsoft giving it the boot torpedoed out of control. News about an SEC complaint involving EOH further sent the company’s share price spiralling. Four board directors, including founder and chairman Asher Bohbot, also resigned in what EOH said was part of a plan to better comply with King 4 and issues such as term limits. Amid all of this, EOH CEO Stephen van Coller (who’s only been in the post since September 2018) has had to deal with a lot, and he’s already started to act by suspending staff allegedly involved with any alleged impropriety. In a letter to colleagues and stakeholders, van Coller outlines this and he also speaks of the need to start dealing with the scourge of corruption that has, at times, threatened to paralyse South Africa over the last few years. – Gareth van Zyl
By Stephen van Coller*
Dear Colleagues,
Hello again. What a week – a lot has happened.
South Africa is going through a real change. South Africans from all backgrounds are uniting against the 10 years of corruption that has halted progress in solving the terrible social inequality in this country bought about by apartheid. As a proud South African, I seek to make a difference, as I outlined in my personal letter to stakeholders. It is for this reason I accepted the CEO position at EOH.
Board changes
During the past week significant and symbolic change took place at the most senior level of EOH, the Board. About a year ago, the Board decided it required significant change to the organisation as EOH had grown very quickly in the prior three years and the systems were no longer relevant for a company that size. Given the allegations in the media, this was urgent – not only to save more than 11 500 jobs in South Africa, and another 1 000 outside of South Africa, but also because EOH is systemic to some 15 000 customers, and therefore GDP growth.
This was a bold move as it meant some senior executives would lose the roles they had held for some time, in the name of progress and to ensure compliance with King IV. Wednesday (20 February 2019) was the end of a two-decade chapter. It is the pivotal, and final, piece in the new governance structure the Board required, as the two founders (including the Chairman) stepped down from the Board after 20 years at the company. Never easy.
These board positions will need to be filled as soon as possible. EOH is relatively advanced with this process and confident of bringing fresh, independent members with a diverse skill set together to take EOH forward.
Ensuring our investigations have integrity
One of the key issues that I am currently dealing with is ensuring the integrity of the investigation process. We need to be thorough – and this takes time. Making mistakes can ruin lives and families and rushing the process will allow those that need punishment to escape or benefit through technicalities.
I am absolutely committed to zero tolerance on bribery and corruption, but I humbly ask that we respect the process. Our legal system and constitution has saved South Africa from state capture – we need to respect it and trust these processes.
We are making progress. Following intense efforts on information that has been brought to our attention to date, we are focussing our efforts on less than 6 public sector contracts deemed necessary for detailed review. Of these, ENSafrica has already concluded one investigation and is advanced with two other of these investigations. As part of the process, we have, and will continue to take the necessary action and report our findings to the relevant authorities. Our investigation, together with ENSafrica, is just the start and does not necessarily permit full disclosure of findings.
As I said previously, I'm not crazy about IT services companies, but if EOH gets cheap enough, might risk a nibble. Reasoning that public sector is tiny part of ops and Van Coller will clean up. High risk, high (potential) return on cheap enough price.
— Dave Hazelwood (@hazelwood_dave) February 19, 2019
With respect to getting more clarity on the allegations involving Microsoft, given the involvement of the US Securities and Exchange Commission, they are not able to share or confirm any details to us. However, we have agreed to manage any client and employee issues more collaboratively. The ball is in my court to make proposals on this. I will do so. Further, we have re-iterated our commitment to assist Microsoft with any investigations, as appropriate.
Notwithstanding the very limited information from Microsoft, we have continued our investigation allowing for engagement with implicated individuals. I have also now been made aware that there was a Microsoft audit initiated in September 2017 on public sector license deals that concluded around July 2018. We currently have ENSafrica reviewing all those documents.
A response to our customers
We highlight again that the allegations and investigations are isolated to a few people and largely in a public sector business unit in EOH. The implicated division represents less than 12% of EOH’s total turnover. We have either suspended or received resignations from involved employees, resulting in none of the employees currently implicated remaining in the business.
EOH continues to improve its financial controls that preventad hoc payments to individuals or companies, and we have already created a ‘blacklist’ of companies, no longer accepted by the Group.
We are able to make available, as appropriate, the ongoing process of bid reviews including the screening process of EDP‘s. ENSafrica reviews between 8 and 10 bids per week.
We have made significant progress on the various investigations. We have provided ENSafrica with the documentation and files to support its investigation, numerous interviews with related parties are underway, and the forensic accounting teams have started work investigating flows of funds and the role of third parties in public sector transactions.
Obviously, this process will take time, especially as ENSafrica will also be co-operating with the SIU as well as other law enforcement agencies and will continue pursuing perpetrators and ensure that justice can run its course.
I am committed to dealing with any findings including prosecution. We will also continue to communicate with all stakeholders, but under the ambit of legal confidentiality and process.
We are reaching out to our partners and customers to ask them to allow the ENSafrica investigation to run its course, given our commitment to taking decisive action. Due legal process must take place and we can then revert with feedback on specific allegations, as permissible. We are appealing to you to allow us to continue to work with you and support you in the furthering of your business needs as we resolve this very endemic problem in our country in a sustainable and responsible manner.
Standing together as South Africans
The ExposeIT app has launched. This was done as a public service. It is a 100% anonymous app for smartphones monitored by an independent law firm (see www.eoh.co.za). It can be downloaded free by individuals. EOH is the first customer. For a small monthly license fee any corporate can sign up and use it for whistleblowing. It has already yielded two internal potential frauds for us – so it is paying for itself. I would strongly encourage you all to implement ExposeIT and we can make it the go-to platform for exposing bribery and corruption in South Africa. Let’s stand together and fight this!
What has been most gratifying, is that several people have come forward to share knowledge on issues. In some cases, we have been given a lot of detail and ENSafrica is digging into it – on others, we have received indications of where we should look. To all those courageous, proud South Africans, I salute you.
Moreover, it is important we do not paint all 11,500 employees with the same brush as the minority who have abused their positions and the company. That would just play into the hands of the criminals. Cancelling contracts, when the business unit serving you is doing great work, really punishes innocent people and their families. Job losses cannot be afforded in South Africa right now.
Please join me against corruption and for job creation as South Africa works together to rid our country of this tumour of corruption that has set in. I can only promise to demonstrate zero tolerance for any corruption we find, whether past or future. Please hold me accountable. But I need all of our stakeholders, shareholders, employees, customers and partners not to distance themselves when the going gets tough. As South Africans we need to stand united and not allow the criminals to divide and conquer – as then we have all lost.
I look forward to engaging all of you in the future. Please do not hesitate to contact me directly should you require any assistance on any matter.
- Stephen van Coller is CEO of EOH
EOH Suspends Employees Implicated in Graft-Tainted Contracts
“We have either suspended or received resignations from involved employees, resulting in none of the employees currently implicated remaining in the business,” EOH Chief Executive Officer Stephen van Coller said in a letter to staff. The CEO confirmed that he wrote the message.
EOH shares plunged after Microsoft ended its association with the company earlier this month. The Johannesburg-based firm has hired forensic accounting teams to investigate its public-sector contracts, and has identified fewer than six deemed necessary for detailed review, said Van Coller.
The stock pared gains to trade 0.3% lower as of 10am in Johannesburg. EOH has slumped 42 percent this year, the worst performer on the FTSE/JSE Africa All-Share Index.
Last week, the company launched a whistle-blower app Expose-It, to make the process of sharing sensitive information on the company safer and easier. “Several people have come forward to share knowledge on issues,” the CEO said. “In some cases, we have been given a lot of detail and on others, we have received indications of where we should look.”
Van Coller, a former executive of lender Absa Group Ltd. and wireless carrier MTN Group Ltd., was brought in by EOH last year partly to restore the company’s reputation and boost corporate governance.
