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Is the
Price Right?
By Michael Alan Hamlin
March 31, 2003
I heard from Tom Price, president
of EWETC-iTBF and winner of the P250 million Government E-Procurement
System (G-EPS) bid, this week (Full Disclosure: Some of my clients
participated in this bid, lost for various reasons, and are unhappy
about the outcome.). His e-mail apparently was provoked by a 79-page
document authored by David Hite, who is chairman and CEO of a defunct
company called Veronex Technologies, which came to my attention
during the week. Price was previously president & COO of Veronex,
and had a falling out with Hite.
Like many tech startups in the late
90s, Veronex appears to have fallen on hard times when the tech
bubble burst and it experienced difficulty selling its software.
Hite accuses Price of contributing, however, to Veronex's demise,
and has filed a number of complaints to that effect with the U.S.
Securities & Exchange Commission (SEC). A quick check of the
SEC website showed that the complaints have indeed been filed, and
are public documents. What action has been taken as a result of
the complaints is unclear.
Price wrote to me to say three things.
First, to accuse me of slandering his reputation in my columns and
threatening litigation if I comment on Hite's document "without
further investigation." Apparently, one of my earlier columns
wound up on the Raging Bull website as a critique of EWETC-iTBF,
causing some discomfort. This was news to me. Second, to refute
the allegations by Hite that Price purposely contributed to the
demise of Veronex. Third, to assert that Veronex has no legal right
to the EWETC-iTBF technology which Price and his partners have apparently
sold or licensed to the Philippine government.
The allegation of slander and Price's
threat, in my view, were notably ill-advised, and certainly not
the best way to make a point. I would have been happy to consider
Price's arguments even without the threat. But it is well known
in media circles that Price has - until last week - refused to comment
on the company's G-EPS bid, its outcome, and the dismay of the other
bidders. And he's never tried to contact me in the months that I
have been writing on the G-EPS bid. But now that I've undertaken
"further investigation," what about the other two issues
he raises?
Price and Hite blame each other for
the demise of Veronex, and neither set of allegations has been ruled
on in a court of law, either in the U.S., or Canada where Veronex
is headquartered. Hite asserts that Price engaged in a set of activities
in contravention to his fiduciary responsibility that ultimately
caused or contributed in a significant way to Veronex's demise.
The specific allegations, as I have indicated, are contained in
complaints filed with the U.S. SEC and Hite's summary. The latest
of the SEC complaints was filed in May of 2001.
Not surprisingly, Price hotly denies
Hite's allegations. But in contrast to Hite's extensive 79-page
summary, Price offers just one reason for the controversy, and that
is that Hite is attempting to deflect blame from himself to Price.
In his message, Price said, "Mr. Hite intended to file false
financial statements to the shareholders of Veronex," and as
a result Price opted, in disgust, to leave the company. Now, Hite
is attempting to make Price the scapegoat, and to buttress his claim
Price says that a lawsuit has been filed against Hite by Veronex
shareholders in California. However, Price admitted having no information
on the lawsuit other than that he isn't involved either as a plaintiff
or a defendant.
But when I asked Hite about the lawsuit,
he said, "To the best of my knowledge, at this time, there
is not a lawsuit against me or Veronex." Hite also challenged
Price to refute his claims that Price acted inappropriately as a
top executive of Veronex point by point. There is a "rather
large difference between his version of the story and mine,"
Hite said. "It is very easy to check out the facts in my 79-page
story since I name people, dates and present descriptions of documents
as evidence."
Regardless of who is right about
the demise of Veronex, the issues that are important in the context
of the G-EPS are two: First, was the Inter-Agency Bids and Awards
Committee aware as a result of its due diligence that a significant
conflict exists between Price and his former employer; and if so,
was its potential impact on the capacity of EWETC-iTBF to fulfill
its obligations to the government considered?
Price's third point is that regardless
of what happened with Veronex, EWETC-iTBF on its own "authored
the concept of a customized web-based solution specific to Executive
Order 40, RA 9184 and the needs of the Philippine government. The
iTBF-Philippines technology does not use I/NOVA nor is it a proprietary
solution owned in any capacity at all by Veronex." I/NOVA is
a technology developed by Price and owned - both Price and Hite
agree - by Veronex.
For Hite, however, it's not the technology,
but the opportunity that is in dispute. "The business opportunity
is the issue," he said. Hite alleges that the EWETC "business
opportunity" was generated by Price in his capacity as a top
Veronex executive, and that the opportunity to sell the technology
therefore belongs to Veronex and its hapless shareholders, even
if EWETC-iTBF took two or three years to develop and refine the
technology it has offered to the government.
What this argument implies, therefore,
is that the rights to the EWETC-iTBF technology is under challenge
and its ownership may be in question. Whether that challenge eventually
stands up to SEC scrutiny or in a court of law or not, it has important
implications for the Philippine government now, and its implementation
of the G-EPS. If government is to own the G-EPS, it must make sure
that it contracts with the rightful owner. To do that, government
must know who the rightful owner is.
Price may not be happy with my commentary
and other published reports on his disagreement with Hite and Veronex.
In his position, frankly, I wouldn't be very happy either. After
all, he's ready to sign an agreement and go to work. And it may
turn out that he is right and well-intentioned; on the other hand,
maybe it won't. Whatever, to be fair he must acknowledge the legitimacy
of concern for the broader implications of this dispute on the Philippines,
and what's best for his client.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001), and he is currently
at work on High Visibility: The Making and Marketing of Asian Professionals
into Celebrities. Write him at mahamlin@teamasia.com.).
Copyright © 2003 Michael Alan
Hamlin. All Rights Reserved.
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